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...

Typically, during an assessment of management's practices for these types of operations, many of the following items are absent from the organizational checklist:

• A written document which specifically depicts and defines the structure of the company; identifies ownership, management, and supervisory personnel; and, accurately depicts the chain of command within the organization.
• Written (and updated) descriptions for each job within the organization which specifically state the duties and responsibilities of the position, reporting structure, dress code, pay scale, and other pertinent information. (It is typical that when such documents are available, updated versions are non-existent or have not been reviewed with employees.)
• Formal management meetings that are conducted on a regular basis, either weekly, biweekly, or monthly, during which all management personnel are required to participate.
• Infrequent presentations or informational "employee" meetings by the owner or general manager to address the state of the of the company, share ideas, explain changes, policy, procedures, or to discuss personnel-related issues.
• Formal periodic written and verbal evaluations for all employees which are conducted by the attending supervisors or departmental managers, and which are reviewed by the company president or owner.
• Company policy and procedures manual.

From an outsider's point of view, when these inadequacies are present, the perception is that there is an absence of structure within the company, that lines of communication are unclear and management's actual control is questionable. The effects may be witnessed in any number of ways including high turnover, low morale, service issues, and customer complaints. In other cases, the problems may be more subtle and visible through the interaction between departments. However, when a company just can't seem to "get it together", the aforementioned checklist might be the first place to start.

The Importance of Financials
From a buyer's point of view, the basis for measurement of a company's worth begins with an analysis of accurate and regular monthly financial statements, which must include complete profit and loss results for all operating departments.

From the operator's point of view, the ability to review and analyze the company's ongoing financial performance and to make informed predictions about the lines of business, expansion, or acquisition is critical to success and to the company's value to customers, buyers, or lenders.

Essentially, if you can't produce the numbers, you have no power over your company or your future. Therefore, with respect to a company's financial operations, there are three interrelated issues that typically surface in one form or another during an assessment:

1) Although the general aviation industry has been the benefactor of continuous improvements and enhancements in computer hardware and software-related products for accounting, inventory control, and asset management, it is still common to find operators who have concentrated little or no resources on producing internal financial statements for all departments on a regular monthly basis. Where some sort of financial tracking is attempted, it's not uncommon to find that accounting personnel are sometimes months behind in production of the P&Ls.
2) In closely held FBO businesses and other general aviation service organizations, supervisors or departmental managers charged with operation of key areas within the organization have never been trusted with the responsibility to review and assess their department's P&L statement. And, despite years of experience in running their segment of the operation, some have no real specific knowledge of the department's financial performance, or the bigger company picture and how they actually affect it.
3) The absence of an annual budgetary process is common; or, when present, it is confined to the owner and the CPA down the street.

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