Evaluating the Business

Evaluating the Business Independent assessments of FBOs, other businesses are on the rise as owners look to sell or expand BY Michael L. Dye, Senior Analyst/Consultant, Airport Business Solutions August 1999 With an increasing...

Evaluating the Business

Independent assessments of FBOs, other businesses are on the rise as owners look to sell or expand

BY Michael L. Dye, Senior Analyst/Consultant, Airport Business Solutions

August 1999

With an increasing number of ownership changes going on in the industry, independent management or operational assessments of airport-based businesses are on the rise. Such assessments look at identifying and solving problem areas within a company which could affect its value or inhibit internal growth or acquisition of additional locations. They are also a method by which an owner may measure the performance of specific lines of business.

Independent assessment can take on greater urgency when a company is being examined through the eyes of a prospective buyer or investor, a lending institution, or even by family stockholders, and when specific issues which can negatively affect the company's value are present.

Inhibitors to Value
In many cases, the job of owning and managing a full-service fixed base operation can be likened to that of a spinning top: delicately balanced, requiring almost constant attention. On a daily basis, the person in charge (whether owner, general manager, or president) may encounter a full spectrum of issues relating to the company's personnel and customers, its marketing, sales, accounting, and other financial issues, and various types of personnel training for line service, mechanics, and pilots. Other issues, such as banking and loan procurement, facility management, airport and lease negotiations, asset and equipment procurement, environmental, FAA regulations, etc. can be lurking near the forefront.

Value is determined through an analysis of an FBO's ongoing concern. The effectiveness of the management style of the owner/manager plays a role here. For many non-chain FBO's, issues which may affect the upside business potential (personnel, accounting, training, facilities, equipment, airport matters, customer concerns) are sometimes overlooked or ignored completely, due to a focus on day-to-day matters.

As time goes on, certain issues become more difficult to confront or correct. In situations where a small-to-medium sized company is positioning for sale, or in which ownership is contemplating a significant expansion to new locations, it may be too late to counteract the effects when significant issues involving management practices, personnel, and financial issues, or inadequacies in training rear an ugly head.

Conversely, a company analysis can provide a renewed sense of gratification and validation for past accomplishments. In many cases, the results help to facilitate a renewed sense of focus and purpose throughout the organization for tackling and addressing aspects and issues which are long-overdue for attention. Many times, owners, partners, managers, and other participants breathe a sigh of relief when it becomes apparent that they are not alone and that others within the organization have unknowingly shared some of the same frustrations.

Generally, the more common problems which affect value involve management style or accounting and training procedures — usually centered around people and their habits.

Typical Management Issues
There's an old saying: Business is business and personal is personal. In the FBO business, one is well served to understand the differences between the two. Frequently, in independent family-operated FBOs or those that are managed by an owner and/or partners, the fine line between business and personal issues can become virtually indistinguishable regarding job responsibilities, management style, or chain of authority.

This can be especially debilitating for subordinate managers or supervisors who may be vital to the success of the organization. Some operators error by underestimating or ignoring the strength of a well-defined organizational structure that fosters ongoing performance expectations with respect to management, supervisory, and other key personnel, especially where family or close friends are involved in the operations.

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