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Entries in FBO Success Seminar Series (7)

Thursday
May242018

Strategic Fuel Purchasing: Time Your Fuel Purchase to Maximize Your Margin

Time your fuel purchase to maximize your margin. We teach strategic fuel purchasing at our NATA FBO Success Seminar. The technique is a process of knowing how aviation fuel is priced in your region and when to make the fuel purchase.

Click to read more ...

Friday
Aug122011

When Negotiating the Best Fuel Supply Agreement, Preparation Is as Important as Price

“You hit home runs not by chance but by preparation.” – Roger Maris

Your fuel supply agreement is one of the most important contracts in operating a successful FBO. Your lease with the airport authority is what puts you in business, but your fuel supply agreement is what keeps you in business.

Because your fuel supplier agreement regularly comes up for renewal, do not just go out and get a “free” dinner with a fuel supplier and sign on the dotted line! If you want to know whether or not you have a competitive agreement, you’ll need to prepare, do some research and maybe invite several suppliers to submit proposals. As Roger Maris said, preparation will help you hit that home run.

There is a lot more to a fuel supplier relationship than just purchasing fuel. You are dealing with substantial costs that affect operating expenses and have an impact on your:

  • Cash flow
  • Balance sheet
  • And, most of all, the profitability of your business

Yes, profit is great. That’s why you are in business. Don’t forget your fuel supplier is in business to make a profit too. You need balance in your agreement to ensure a winning contract for both parties.

In our NATA FBO Success Seminars, we teach a course about negotiating a favorable fuel supplier agreement. In this course, we also discuss how and when to buy aviation fuel. Here is an overview of some of the elements to address in a fuel supply agreement.

Be Prepared with Platts Oil Price Data

First, of course: What is the fuel going to cost? In order to answer this question we need to understand how world fuel markets work.

No doubt you hear all the time on the news what the price of crude oil is doing. As you know, it has been all over the place but mostly up, up, up — with an occasional downward correction. The price of crude drives jet fuel prices, but it is also affected by supply and demand, speculators, inventory, etc. So how do all the world buyers keep track?

The Platts Oilgram Price Report published daily by McGraw-Hill includes the Platts Jet Fuel Index. The fuel price indices are published worldwide with nine regional segments in the United States alone. There are also indices for Europe, Middle East and the Far East.

For general aviation, each week, the daily U.S. Jet A index prices are averaged. The change in the average price for the week generally is posted on a Tuesday, and your Jet A fuel price changes are calculated by the change in the average change for the week. You may purchase a  subscription to this information from McGraw-Hill. (It is expensive.) A free source of Jet A pricing information and changes is the IATA web site, which maintains the Jet Fuel Price Monitor and Fuel Price Analysis.

Making the Numbers Work

Because jet fuel is priced based upon a Platts index, ask your potential supplier to quote a fuel price based upon a nearby index. For example, we can choose the Gulf Coast, New York, Los Angeles or another available index.

Given that the fuel supplier needs to make some money, it will quote a price based upon a Platts index, plus a differential (the supplier’s profit margin). Ask several suppliers to quote a price based on the same Platts fuel price index for a specific date, plus a differential. Now you can measure each quote on an apples-to-apples basis.

Say your business is doing $5 million per year in fuel sales, and you are paying anywhere from $125,000 to $185,000 per year in credit card fees that can range up to 4 percent or higher. How would you like to save $10,000, $20,000 or even $30,000 per year on these credit card expenses?

Believe it or not, you can realize this kind of savings when you negotiate your new fuel supplier agreement. Yes, you may negotiate the best arrangement for credit card fees paid vs. payment terms. We like to call this free money! This savings goes right down to your profit line.

In addition, did you know that until recently, you were paying on average $0.41 per transaction for each debit card transaction? This fee just dropped to $0.21 in July!

When you ask various suppliers for a fuel proposal, credit card fees and payment of due amounts are part of the competitive nature of your agreement. By getting better rates on your credit cards and educating your employees on the best card to use, you can save substantial money for this expense. Again, free money!

Creating Cash Flow

When you have to purchase a load of jet fuel, you either need to have cash in hand or, in short order, the cash to pay for the load. That’s $25,000 or more.

If you have collected your accounts receivable and reconciled your credit card payments, then you’re in pretty good shape. However, if it happens to be Friday, the payroll is due, and your insurance payment is due, then, all of sudden, you’re short on cash.  

As part of your fuel supply agreement, you need to negotiate favorable credit terms. Of course you need to provide financial statements to support a credit line, which is no different than when you apply for credit from your local bank.

These are just a few of the terms that affect your profitability. You should also prepare to negotiate these other components that are part of a comprehensive fuel supply agreement:

  • Marketing support
  • Equipment leasing and maintenance
  • Incentives to make a change in suppliers
  • Pricing for 100LL fuel
  • Transportation fees
  • Contract fuel and other issues vital to your success

All these issues affect the cost and benefit to you and your fuel supplier. As the FBO owner, you should evaluate proposals from various suppliers to get the best agreement. Remember Roger Maris. Preparation is the name of the game when working toward a balanced fuel supply agreement.

If you would like more information or assistance in developing a favorable fuel supplier agreement, please let me know. In addition, the National Air Transportation Association (NATA) is a great resource. We will be covering this subject in detail at the next NATA FBO Success Seminar: Fuel Summit 2011, Nov. 8-10, Atlanta.

We would like to hear from you. Give us your comments. You can call me at 404-867-5518, email me at jenticknap@bellsouth.net, or go to our web site for more information: www.absggroup.com.

John Enticknap

John Enticknap founded Aviation Business Strategies Group in 2006 following a distinguished career in aviation fueling and FBO management, including as president of Mercury Air Centers. He is the author of 10 Steps to Building a Profitable FBO and developed NATA’s acclaimed FBO Success Seminar Series.

Tuesday
Jun072011

Coaching Provides Valuable Seasoned Advice

At some point in our lives, we all need a little coaching to get through the task ahead of us.

I remember when my dad took the training wheels off my bike and encouraged me to keep the handlebars straight as he ran alongside on my first solo ride.

High school football and baseball coaches shaped the way I performed on the field and taught me valuable lessons about life along the way.

As a student pilot, my instructor coached me through turns and stalls and built up my confidence for the eventual solo flight.

After a couple of decades of developing marketing plans for companies such as Cessna and Fairchild Aircraft, I had the opportunity in the year 2000 to create a public relations campaign for the grand opening of a Mercury Air Center location in Burbank, Calif. My client was John Enticknap, who served as president of the 21-location FBO chain. 

I didn’t have a lot of experience in the FBO business back then, but under John’s tutelage, I’ve been spending the last 11 years soaking up his vast knowledge of the FBO business.

When John and I discussed starting an FBO consulting business together, I knew I had a partner that had a lot to offer the FBO community. So in 2006, John laid the groundwork for Aviation Business Strategies Group by outlining his vision for the fledgling company.

Vision of Helping FBOs

He told me he wanted to start a business that would help aviation service companies, FBOs in particular, become more profitable. His vision was to provide an affordable resource to the FBO industry through sharing, teaching and coaching.

As a basis for the new business, I suggested we put together a list of initiatives that would help FBOs run their businesses better and ultimately become more profitable.  There were several marketing projects that John and I worked on together for the Mercury Air Center chain that would make great white papers and teaching strategies.

The result was what we called 10 Steps to FBO Success. It was way more than “FBO Business 101.” It was the essence of years of real-life experience seeking solutions to problems that arise from operating an FBO.

One problem we attacked was the high cost of FBO insurance. After the Sept. 11, 2001, tragedy, insurance companies began dramatically raising FBOs’ premiums. Mercury’s insurance premiums for the 21 FBO locations were escalating exponentially.

We decided to create a strategy for lowering the insurance premiums by developing a better insurance story for the insurance brokers to evaluate. (This is one of the 10 Steps to FBO Success and a subject of one of the sessions we teach at the NATA-sponsored FBO Success Seminar.)

Under John’s coaching, I absorbed what insurance underwriters were looking for in terms of safety and security of all FBO operations. We took this information and built a comprehensive safety audit program. Part of this initiative raised awareness among FBO employees for the need for two wing walkers, especially for aircraft movements inside hangars.

We created some large banners and posters for display in the hangars and then conducted safety classes for employees on a regular basis. One of the banners exclaimed, “Don’t Get into a Tow Jam!” and a supporting poster listed all the steps to safely tow an aircraft.

As a result of this industry coaching initiative, hangar rash went way down, the level of safety went way up, and customers actually liked seeing the banners and posters as a reminder of how carefully the FBOs were treating their aircraft. And, by the way, insurance premiums started to come down.

The business coaching John gave me helped me in understanding what I needed to do to get my job done. It also helped FBO employees improve and FBO owners control insurance costs.

Who Can Benefit from Business Coaching?

Over the past several years, business coaching has come to mean a lot of different things. What I’m talking about is not a personal life coach, which is different from what a savvy business coach can offer an FBO.

FBO owners, operators and managers can benefit from a little or a lot of FBO business coaching. The best candidates for such coaching services are:

  • Those seeking to improve FBO business performance and earn a better return on their capital investment.
  • Those who are committed to improving the FBO operations and are thus unsatisfied with the status quo.

Working with a coach is normal for many. Musicians, tennis players and golfers, to name a few, work regularly with coaches to improve their performances. In the mainstream population, hiring a personal trainer is not uncommon.

Business coaching can be found through various channels. Find a mentor in your business you can bounce ideas off of, attend seminars and workshops, or even hire a professional coach. The goal is to improve the way we manage and to seek solutions to problems that plague the efficiency of an FBO operation.

Learning Opportunities

If you are interested in some seminars specifically for FBO owners, operators and managers, here are some opportunities:

Florida Aviation Trades Association Annual Meeting

On June 14, John will be a guest speaker at the annual convention for the Florida Aviation Trades Association (FATA) in Sarasota, Fla. Working pro bono, John will be teaching two sessions:

  • Session 1: Risk Management & Claims Avoidance Through Better Operating Practices
  • Session 2: Developing Your Own Third-Party Fuel Pricing Strategy

FBO Success Seminar

Those seminars are also part of the three-day FBO Success Seminar we will be teaching Nov. 8-10 in Atlanta during the NATA’s first FBO Fuel Summit

If you can attend either or both of these seminars, I would encourage doing so. These are opportunities to get some good advice from a seasoned professional.

If you would like to share a teaching or coaching story, please email me at Ron@thejacksongroup.biz.

Ron Jackson

Ron Jackson is co-founder of ABSG and president of The Jackson Group, a public relations agency specializing in aviation and FBO marketing. He has held management positions with Cessna Aircraft and Bozell Advertising and is the author of Mission Marketing: Creating Brand Value and co-author of Don’t Forget the Cheese!, the Ultimate FBO Customer Service Experience.

Thursday
Feb242011

Building Long-Term Profitable Customer Relationships, Part 2: Do You Feel Lucky?

While my business partner, John Enticknap, reveals in his blog posts the methods and tools used in building a more profitable FBO, I’ll be writing about the often overlooked but equally important process of building long-term profitable customer relationships.

My first blog on this subject, Part 1: Are You the Restaurant Owner? was published on Feb. 10.

The following is the second installment:

Part 2: Do You Feel Lucky?

We’ve all seen Clint Eastwood’s Dirty Harry scene when he aims his seemingly empty .44 Magnum, “the most powerful handgun in the world,” in the face of the bank robber and taunts, “You’ve got to ask yourself one question: ‘Do I feel lucky?’ Well do ya, punk?”

FBOs shouldn’t have to feel lucky when putting together their marketing plans to attract new customers, yet during our NATA FBO Success Seminars, I often sense the frustration FBO owners and operators verbalize when we discuss this very subject.  

Over the years, FBOs have tried all sorts of things to attract customers. Wine, steaks, bobblehead dolls, free this and free that. Sometimes they get lucky, but mostly they’re just shooting blanks!

Many FBOs, when facing seemingly stiff competition, have done the unthinkable to attract customers. They resort to lowering their price of fuel beyond reason. Yikes! 

To be sure, an FBO should always manage its fuel price in order to be competitive and as a component to provide a customer value proposition (CVP). However, nothing good happens when you subjectively lower the price of fuel just to attract customers.

Attracting the Wrong Customer

Besides messing up your profit margin when you arbitrarily lower your price of fuel, you ultimately attract the wrong customer.

Are there really wrong customers in this trusty world of general and business aviation? You bet your .44 Magnum there are.

In my first blog, I wrote that the lifeblood of any FBO is building loyal customer relationships. The success of these relationships can be measured in two ways:

  1. Are they long-term, and
  2. Are they profitable?

When you randomly lower fuel prices you get neither long-term customers, nor profitable customers. What you get are bottom feeders, looking for the deal of the day. They tend to flit from one deal to the next. Sure, you may increase your fuel volume for a short period of time, but over the long haul, you’ll be scratching your head, wondering where these newfound customers went.

If you divide your available customer base into thirds, you’ll probably find the following:

  • Upper third: Extremely loyal, likes your FBO, knows a good value and pays a fair price for fuel.
  • Middle third: Although loyal, is value-conscious, wants a good deal and keeps you on your toes to make sure this value is received.
  • Lower third: Bottom feeders. Price is everything. Complains about everything. Flits from one FBO to the next. Famous catch phrase: “What have you done for me lately?”

So where should your focus be? Which piece of the pie do you want?

First of all, getting Loyal customers to leave their present FBO is probably not going to happen in the short term. You may flirt with them a little, but getting a loyal customer to try something new is very difficult. An FBO competitor would have to stub its toe pretty hard to get a loyal customer to leave.

(Note: If you currently have a core of loyal customers, make sure you don’t lose them. Remember why they came to your FBO in the first place, and do everything you can to take care of their needs, wants and desires. Be the restaurant owner.)

Second, more than likely, you’ll get most of your customers from the Somewhat Loyal group. If you are looking to expand your loyal customer base, go fishing in the green pond, not the Bottom Feeder pond.

The Customer Value Proposition (CVP)

So how do you attract these Somewhat Loyal customers to your FBO? Give them a sense of delivering a real customer value proposition (CVP). Done properly, the CVP is the right combination of clean and attractive facilities, fair fuel prices/fees, and good old-fashioned knock-your-socks-off customer service. (We’ll further explore the CVP in another blog post.)

Lastly, it’s critical you get the word out about your CVP. And the way to do that is to deliver it consistently to every customer with whom you have contact. Let them soak it up and remember it, and they will faithfully spread the word.

The general aviation industry is relatively small compared to other industries. Word-of-mouth is a very strong channel of communications, and if you are “lucky” enough to have a customer recommend your FBO to another potential customer, you’re on your way.

Someone once told me you create your own luck, that luck is really the result of working hard, of doing something right consistently over the long haul.

I think that’s pretty good advice.

Next Blog: Building Long-Term Profitable Customer Relationships, Part 3: Don't Forget the Cheese!

Ron Jackson

Ron Jackson is co-founder of Aviation Business Strategies Group and president of The Jackson Group, a PR agency specializing in FBO marketing and CSR training. He is the author of Mission Marketing: Creating Brand Value and co-author of Don’t Forget the Cheese!, the ultimate FBO Customer Service Experience.

Wednesday
Feb092011

Building Long-Term Profitable Customer Relationships, Part 1: Are You the Restaurant Owner?

As part of the FBO Success Seminars we conduct for the National Air Transportation Association (NATA), we discuss how to attract the right kind of customers and how to keep them coming back. 

While my business partner, John Enticknap, reveals in his blog posts the methods and tools used in building a more profitable FBO, I’ll be writing about the often overlooked but equally important process of building long-term profitable customer relationships.

The following is the first installment:

Part 1: Are You the Restaurant Owner?

The lifeblood of any FBO is building loyal customer relationships. The success of these relationships can be measured in two ways:

Are they long-term, and are they profitable?

Studies on consumer behavior show a loyal customer:

  • Keeps coming back
  • Is willing to pay more, thus providing better margins
  • Loves your FBO and tells other pilots, aircraft owners/operators
  • Lowers your customer “churn” rate — you don’t have to replace a satisfied loyal customer
  • Boosts your long-term revenue and prevents profit erosion so you outperform your competitors

In the end, the effort we put into building these kinds of relationships will pay high dividends year after year, so let’s examine the process.

Company Culture and Service Deliverables

Every FBO is unique in its approach to delivering its own brand of customer experience. You should have an idea of your company culture, which is the tone and demeanor by which your customer service is delivered.

Are you warm and fuzzy; cold and unapproachable; or somewhere in between?

Your customer service deliverables are the things you do every day to ensure a great customer service experience, including a provision for the safety and security of the customer and its aircraft.

And it’s not just having these policies and procedures in place. It’s how you choose to carry out the delivery to your customers. Thus, your corporate culture dictates how you deliver services to your customer.

Draw from Your Own Experience

Observe the workings of your favorite local restaurant — not the chains. If you frequent one particular restaurant, chances are the host or hostess knows your name, and the server knows your favorite drink and meal. “The usual, Mr. Jones?”

Chances are the owner or manager is on site and makes the rounds to the tables, checks on the quality of food and service, and personally thanks the customers for their loyalty.

And chances are you have a consistent dining experience and recommend the restaurant to your friends.

Another experience to draw from is when someone moves into your neighborhood. Chances are you or someone will recommend the following:

  • Favorite barber/beautician
  • Favorite car mechanic or service station
  • Personal doctor/hospital system
  • Favorite grocery, hardware store or clothing store
  • Plumber, electrician, pest control company
  • Church or social club

Why Do We Recommend?

Never underestimate the power of recommendation. We do it all the time without really paying much attention to the impact it has on our lives and the decisions we make.

For most of us, when we recommend a product or service, it’s really a way of validating our own process of selection. We all think we make good choices, and having someone else follow our recommendation is affirmation — it boosts our ego, makes us feel good!

We recommend product and service providers because:

  • Their product or service is excellent
  • We’ve always had a good experience
  • We trust them; they offer good value
  • They boost our ego; they know our name
  • They may even know our children’s names, their birthdays
  • We might even consider them a friend

That’s how we should view and nurture every FBO customer relationship we cherish. Know each customer has the power to cast a vote, the power to recommend.

An Investment in Time

Building long-term customer relationships is a process. It’s an investment in time. It’s hands-on customer care and a commitment to understanding a customer’s needs, wants and desires.

At the end of the day, ask yourself, are you the restaurant owner?  Have you made the rounds to the customer lounges, asked if everything is all right, thanked the customer for the business? Have you taken the time to check your FBO for cleanliness, listened to how your employees treat a customer and walked the flight line?

Lead by example. If your employees see you do this, then chances are they will also take ownership — ownership of the customer service experience — thus helping build long-term profitable customer relationships.

Ultimately, you should be able to go up to any customer and ask the question, “Would you recommend our FBO to other pilots, aircraft owners/operators, and schedulers and dispatchers?”

If the customer is hesitant to answer the question and doesn’t say yes right off the bat, you have some work to do.

Next Blog: Building Long-Term Profitable Customer Relationships, Part II: Do You Feel Lucky?

Ron Jackson

Ron Jackson is co-founder of Aviation Business Strategies Group and president of The Jackson Group, a PR agency specializing in FBO marketing and CSR training. He is the author of Mission Marketing: Creating Brand Value and co-author of Don’t Forget the Cheese!, the ultimate FBO Customer Service Experience.