What It's Worth
By Ralph Hood
Ifit is difficult for airport landlords and tenants to determine a fairlease, it is even more so to arrive at a selling price for an airport-basedbusiness. The typical FBO, for example, may embody decades of thelife, love, and efforts of the owner, but what is it worth? (Karl Marx theorized that anything is worth the value of the labor “embodied” within it. Many FBO owners would gladly sell at that price.)
Mark Chambers of Denver-based Aviation Resource Group International (ARGI) helps FBO owners sell their businesses. I asked Mark over breakfast in Denver about selling an FBO, but we actually spent our time — then and later — talking about getting ready to sell an FBO.
The FBO owner is often so emotionally involved with the business that arriving at a realistic selling price is difficult. Mark helps the owner arrive at a more objective, less emotional price by evaluating the FBO in a “strictly business” fashion. Stressing that no two FBOs are alike, Mark typically considers some 75 different factors for each FBO, including access, appearance, competition, market potential, profit potential, and the lease.
Many (most?) successful FBO owners are skilled and experienced operators, but totally inexperienced sellers of businesses. Just as a used airplane must be “detailed” in order to bring top dollar, the FBO itself must be prepared for a sale and the owner must be prepared to recognize a good offer (Mark calls it a good selling opportunity) when it arrives.
He sees three preparation steps. First, the owner must be certain that he is emotionally ready to sell. Many selling opportunities “look better going than coming.” In other words, they look better after you have turned them down. This happens when the owner has irrational dreams or a “see what we can get” attitude instead of a firm, rational idea of what the FBO is really worth. It is possible to turn down an early offer only to recognize in retrospective that the offer should have been accepted. An important part of the prior evaluation is its acceptance by the owner — not just as a fair price, but as a price the owner will accept if offered. (I can relate. A good friend spent months trying to sell his business, then turned down an offer that met his every demand. He just couldn’t walk away from his baby, his business.)
Second, Mark cites the importance of what he calls “providing a home for the business.” A very large part of the value of the FBO lies in the lease. The wise seller will make sure that airport management is friend rather than adversary. If there are problems — or just unresolved issues — with the lease or the relationship with airport management, clear them up in advance. Mark says half of the sales job is selling a buyer, the other half is selling airport management.
Third, get your financial house in order. It's not enough that the FBO owner understands the financial statement, it must be "crisp" enough that the buyer can understand it. Financial numbers should be a plus, rather than a source of suspicion.
Ralph Hood is a Certified Speaking Professional who has addressed aviation groups throughout North America. A pilot since 1969, he’s insured and sold airplanes at retail and distributor levels and taught aviation management for Southern Illinois University. Reach him at email@example.com
Ground Clutter Property Values By Ralph Hood May 2004 Ralph Hood Ralph Hood is a Certified Speaking Professional who has addressed aviation groups throughout North...
Determining FBO multiples A business valuation veteran looks at what FBOs need to consider By Michael A. Hodges, President & CEO, Airport Business Solutions June 2000 A business...
Eye on Multiples What they mean in the buy/sell process, from an FBO analyst's point of view BY Greg Ross, executive vice president/coo, aviation resource group Int'l September...