Is your FBO leaking money?
Here are 5 easy ways to get your spending in check now.
Prior to the COVID-19 pandemic of 2020, the aviation industry was experiencing some of its most prosperous years in its youthful history. From commercial airlines to general aviation, the industry was booming with growth in nearly every sector until the world came to a screeching halt. Billions in assets suddenly became works of art parked neatly in the desert patiently waiting for their return to service. Private terminals once buzzing with passengers, catering, and flight crews became ghost towns and infrastructure that once seemed stressed, now appeared void of life.
While it paints a gloomy picture, the good news is that aviation is resilient and will no doubt return to its peak and beyond. In the meantime, this presents the perfect opportunity to perform a much-needed health check on your FBO spend and ensure your operation didn’t spring any cash leaks while running at its peak.
1. Review subscription services annually.
If you are like most people you have those monthly subscriptions that hit your bank account and go unused month after month. Now is the time to take a hard look at your expenses but especially your subscription services. Subscriptions may not seem like a big expense but if you add up all the money you spend each month on these services you would be surprised at how much they are costing you. Any money spent at your facility should be treated like an investment and should provide some return or benefit. Now we aren’t telling you to go out and cut all subscription services but instead be selective of the services to you choose to pay for at your FBO. Assess what subscriptions provide your FBO with real value and determine which of those do not. If those magazines in your lounge go unread month after month and attract more dust than readers maybe it is time to mix it up and change to a new service that will bring you value. Or just cut that cost out altogether. It is up to you to take the time to determine what subscriptions your FBO spends money on but really focus how each one adds value. If there is no value added then it’s time to cut that cost.
2. Eliminate time sucking tasks by creating or developing automated processes
The automation and streamlining of processes should be the focus of any good operation. Using valuable time to perform sometimes menial tasks can be tiresome but the tasks must get done. When you’ve heard the pitch from vendors that “Our product streamlines this…our product automates that…” it is difficult to know which way to go.
Constantly looking at ways to improve your team’s efficiency can be a true game-changer and competitive advantage for your operation. One of the biggest money leaks FBO’s experience on an annual basis is something that is rarely tracked and those are your soft costs. Soft costs aren’t directly tied to FBO operations but are a result of inefficient operations. For example, if you find your team constantly doing the same work two, three or four times these are costs to your FBO that can’t be tracked. How much time is being spent? How much do you pay your team for that time? What other work should they being doing that will have an impact on your business? All of these questions should be asked and once you come up with the answer you then need to ask yourself is there a better way for your team to do their daily tasks? What can you create or purchase from the market that will make your FBO more efficient? The challenge with buying/creating systems is that those purchases are usually viewed as an expense. However, if you look at the soft costs related to each task and run the numbers many times you will find adding the automation will not only save your FBO money but will boost productivity. Here is an example:
Your CSR is spending 5 hours per week chasing down information taking them away from their normal daily work and away from your customers at a base hourly rate of $15.
5 HR/week x $15/hr = $75/wk
$75/week x 4 weeks = $300/mo
$75/week x 52 weeks = $3,900/Yr
In this example your CSR wastes 260 hours / year and cost your FBO $3,900. Now let’s assume that the perfect product exists that can solve this problem for your CSR at a cost of $200/mo. Had this FBO not gone through the exercise above this expense wouldn’t make the cut and most GMs would easily say this falls under the current spending freeze. However, taking the time to calculate soft costs and improving inefficiencies proves that this product does what it claims and can achieve savings of at least $100/mo for the FBO. Taking into account the additional productivity you get from your CSR the savings increases. Right now is the time to review your processes, talk to your staff and find out what their pain points are. Find out where you are leaking money and then determine if there are ways to automate. It is extremely valuable to go through your operation and find these hidden costs, calculate your money leak and find ways to fix the problem. Revisit this every quarter to stay on top of it and you will find your FBO becoming more profitable and more efficient!
3. Keep vendors on their toes – seek competitive offers on your highest spend categories regularly
Every business has preferred suppliers, vendors, and partners that help it to carry out its daily operations. For an FBO, these vendors can be the lifeline of the operation by providing fuel, equipment, and marketing to ensure their facility offers the most visible, competitive service on the field. Some of these vendors have been providing their service or product since the doors opened. While some view a competitive bid process as extra work or a gesture of distrust towards current suppliers, it is a critical process to ensuring your costs remain competitive. Suppliers and vendors are just as susceptible to cost creep as FBO’s and regularly evaluating your options helps your partners work hard on your behalf to continue to offer competitive prices for their products and services.
Don’t forget, you don’t have to change vendors after every bid but let the numbers speak for themselves and you’ll be surprised at what the process can do for you!
4. Don’t skip the scheduled maintenance.
This may seem counterintuitive in a time where every possible cost cutting action needs to be considered but skipping scheduled maintenance today can cost much more down the road. Whether it’s vehicle maintenance, building and groundskeeping, or fueling facilities, it is critical to the safe and efficient operation of your FBO to ensure these assets are maintained and monitored no matter what the activity levels are on the flight line. While regulated checks and inspections must be done as required, other tasks that have been put off should be considered to ensure your facilities and equipment are ready the minute the ramp starts buzzing again!
5. Evaluate outsourcing and consider insourcing.
During times of prosperity, it’s easy and also sensible to have service providers to take care of sometimes simple tasks so you can focus your team on the customer and their aircraft. But lower traffic numbers create the opportunity to get some of these tasks done with the team you have in place. Do you have a Line Supervisor that enjoys tinkering on cars and trucks? Let them get that fuel truck running like a top and back into service with a tune-up rather than calling in an outside mechanic. Does your office manager build websites on the side? Have them revamp your site by getting fresh photos and polishing up the copy to ensure the site climbs to the top of the search engines. You will be surprised at some of your team’s skills and abilities outside of their day jobs and allowing them to expand their roles will create a noticeable sense of pride within the organization.
Boosting morale, developing a deep sense of ownership all while saving money for the company is a win-win for everyone during an extremely challenging time.
FBO’s are complex operations with higher costs than many businesses due to their physical locations, bureaucratic landlords, and clients that expect perfection in the care of their multi-million-dollar assets.
When many costs are fixed regardless of the flight activity on the field, it is imperative to regularly check for leaks and hopefully this list provided some good opportunities to do so.