FBO Purchase worth it ?

[Toño]

Hi all,

I have a friend that is about to purchase a small FBO. Now we all know
that owning a small FBO is a labor of love at the very least. However,
he is wondering if it is really financial suicide given the trends of
today's laws, governmental regs, legislation, TSA, etc.

His (my) question is: Do any of you have any general or specific
thoughts that you might offer him before he signs on the dotted line?

Thanks,

Toño

[Bob Noel]

In article >,
Toño > wrote:

> Hi all,
>
> I have a friend that is about to purchase a small FBO. Now we all know
> that owning a small FBO is a labor of love at the very least. However,
> he is wondering if it is really financial suicide given the trends of
> today's laws, governmental regs, legislation, TSA, etc.
>
> His (my) question is: Do any of you have any general or specific
> thoughts that you might offer him before he signs on the dotted line?

It depends on where the FBO is and why it's for sale. For example,
it could easily be financial suicide to buy a failed FBO where at the
same airport with a very good one (or two). Or buying an FBO near
DCA/IAD/BWI, BOS, JFK, LAX, etc would be crazy.

--
Bob Noel
looking for a sig the lawyers will like

[Earl Grieda]

"Bob Noel" > wrote in message
...
> In article >,
> Toño > wrote:
>
> > Hi all,
> >
> > I have a friend that is about to purchase a small FBO. Now we all know
> > that owning a small FBO is a labor of love at the very least. However,
> > he is wondering if it is really financial suicide given the trends of
> > today's laws, governmental regs, legislation, TSA, etc.
> >
> > His (my) question is: Do any of you have any general or specific
> > thoughts that you might offer him before he signs on the dotted line?
>
> It depends on where the FBO is and why it's for sale. For example,
> it could easily be financial suicide to buy a failed FBO where at the
> same airport with a very good one (or two). Or buying an FBO near
> DCA/IAD/BWI, BOS, JFK, LAX, etc would be crazy.
>

Or buying an FBO at an airport that is constantly under threat of closure.

[Toño]

Earl Grieda wrote:
> "Bob Noel" > wrote in message

>>
>>It depends on where the FBO is and why it's for sale. For example,
>>it could easily be financial suicide to buy a failed FBO where at the
>>same airport with a very good one (or two). Or buying an FBO near
>>DCA/IAD/BWI, BOS, JFK, LAX, etc would be crazy.
>>
>
>
> Or buying an FBO at an airport that is constantly under threat of closure.
>
>

Bob and Earl...

The FBO is under sale because the owner is no longer physically capable
due to health problems. It has been in continuous operation for 20 years
or so and operates slightly in the black under poor management.

The nearest class B is 50 miles away and the airport in general seems to
not be in threat of closure. There are two other FBO's on field that
seem to be doing OK. They have been in operation for a number of years.
The area is modest in population (maybe 100,000)with a viable economy
that seems to be booming at the moment.

I believe that the local infrastructure will support the business but it
is my concern (as well as his) that the general trends in aviation will
adversely affect the small FBO in the near future.

Take for example the cost of insurance, or even the ever-increasing
governmental programs supposedly designed to increase security at
airports. I was told today that an FBO was fined heavily when and FBI
agent was able to walk freely onto the tarmac and take a picture of an
aircraft in the class D airspace.

Another example was a small FBO that was co-located with a part 135
operation that was required to install two $10,000-- metal detection
gates at their entrances.

Anyway, I was just testing the water to see if anyone had any strong
feelings about taking on the purchase of an FBO in today's climate.

Thanks to both of you for your responses,

Toño

[Nathan Young]

On Sat, 02 Apr 2005 18:50:44 -0800, Toño
> wrote:

>Hi all,
>
>I have a friend that is about to purchase a small FBO. Now we all know
>that owning a small FBO is a labor of love at the very least. However,
>he is wondering if it is really financial suicide given the trends of
>today's laws, governmental regs, legislation, TSA, etc.
>
>His (my) question is: Do any of you have any general or specific
>thoughts that you might offer him before he signs on the dotted line?
>


It is probably more difficult than ever to make it as a small GA FBO.
Rising costs will continue to deter flying and flight training.
Increased government regulation could hamper GA significantly (just
look at the DC area for examples).

However, if the FBO is a bit larger, and caters to biz jet types,
business is probably up and to the right... I know the local area
charter ops are doing great business. A lot of execs won't tolerate
the airlines any longer.

-Nathan

[William W. Plummer]

Toño wrote:

> Hi all,
>
> I have a friend that is about to purchase a small FBO. Now we all know
> that owning a small FBO is a labor of love at the very least. However,
> he is wondering if it is really financial suicide given the trends of
> today's laws, governmental regs, legislation, TSA, etc.
>
> His (my) question is: Do any of you have any general or specific
> thoughts that you might offer him before he signs on the dotted line?

Read all the regs carefully. About 10 years ago I thought about
becoming a partner in a 135 operation. Then I read about the staff you
were required to have, etc. The fantasy lasted about 10 minutes.

[Chixfly2]

A great old timer who we lost a few years ago used to tell me that:

"If you want to make a small fortune in Aviation - start with a large
fortune and know when to stop!"

(Thanks, Uncle Vern!)

[C J Campbell]

"Toño" > wrote in message
...
>
> His (my) question is: Do any of you have any general or specific
> thoughts that you might offer him before he signs on the dotted line?

What are the assets of the FBO? Does it have the fuel concession? What are
the terms of the lease? What is the projected revenue -- realistically? What
are the real costs? Are there any environmental concerns (underground fuel
tanks, etc.)? What is the internal rate of return? Does your friend have a
business plan? Are there any hazardous materials, such as asbestos and lead,
in the building materials? Is the building up to code? Is there room for
expansion? What is the competition like?

A lot of guys are trying to sell an FBO, but in fact they don't own
anything -- everything is leased. If all they have to sell is an empty box,
why buy it?

[Martin Hotze]

On Sun, 3 Apr 2005 15:51:18 -0700, C J Campbell wrote:

>What are the assets of the FBO? Does it have the fuel concession? What are
>the terms of the lease? What is the projected revenue -- realistically? What
>are the real costs? Are there any environmental concerns (underground fuel
>tanks, etc.)? What is the internal rate of return? Does your friend have a
>business plan? Are there any hazardous materials, such as asbestos and lead,
>in the building materials? Is the building up to code? Is there room for
>expansion? What is the competition like?

all good points.

and: does he have the money and the dedication for running an FBO? will his
family join in?

#m

--
<http://www.hotze.priv.at/album/aviation/caution.jpg>

[Toño]

C J Campbell wrote:

> What are the assets of the FBO? Does it have the fuel concession? What are
> the terms of the lease? What is the projected revenue -- realistically? What
> are the real costs? Are there any environmental concerns (underground fuel
> tanks, etc.)? What is the internal rate of return? Does your friend have a
> business plan? Are there any hazardous materials, such as asbestos and lead,
> in the building materials? Is the building up to code? Is there room for
> expansion? What is the competition like?
>
> A lot of guys are trying to sell an FBO, but in fact they don't own
> anything -- everything is leased. If all they have to sell is an empty box,
> why buy it?
>
>
Great points and questions, CJ. I will pass all of this onto my friend.
I especially like the last question!!

Thanks!

Toño

[Toño]

Nathan Young wrote:

> It is probably more difficult than ever to make it as a small GA FBO.
> Rising costs will continue to deter flying and flight training.
> Increased government regulation could hamper GA significantly (just
> look at the DC area for examples).
>
> However, if the FBO is a bit larger, and caters to biz jet types,
> business is probably up and to the right... I know the local area
> charter ops are doing great business. A lot of execs won't tolerate
> the airlines any longer.
>
> -Nathan
>

Yes. The point you make about "increased government regulation" is
especially troublesome to my friend. The port here (which owns the
airport) is not especially friendly toward the smaller FBO's. They
constantly solicit the bigger FBOs and offer them incentives to move in.

This particular FBO has some biz jet biz. However, the facilities are
such that the business from the big jets is mostly "pity motivated"--the
old folks that own the place now seem to illicit that from their
established customers. I doubt that the jets would be loyal to a new
owner when there are others on field that could serve their needs within
a better environment, with newer equipment, etc.

No. The business, as it sits, would surely be a labor of love.

Thanks for your insights!

Toño

[Toño]

Martin Hotze wrote:

> all good points.
>
> and: does he have the money and the dedication for running an FBO? will his
> family join in?
>
> #m
>
Dedication....yes. Money.....hmmmmm. ;-)

Toño

[Robert M. Gary]

I thought student starts were up. You seem to be implying they are
down.

-Robert, CFI

[Kevin Dunlevy]

Your friend needs to do what a bank would do before giving an FBO a loan.
The bank is going to look at the value of the accounts receivable,
equipment, inventory and general intangibles (which is mostly the "blue sky"
or going concern value of the business). The blue sky value of the business
has lots to do with the business reputation. I would inquire with other
business owners and A/C operators on the field to get an idea of the
company's reputation. When you buy a business, a car or an airplane,
evaulating the seller is very important, including the seller's honesty,
charactor and organization. Your friend will also want to size up the
employees to get an idea of whether they are honest, happy, capable and so
on. If the employees appear unhappy, your friend should think again. Your
friend also needs to check with the vendors to make sure the business has
been paying its bills and that it has a good reputation.

Definately get a lawyer and an accountant involved. Start a check list of
items which need to be considered and documents to be prepared. Do not make
the deal and then have the lawyer paper it up. First talk to the lawyer and
the accountant about how to structure the deal for the best tax
consequenses, then make the deal. Generally what is good for the seller
taxwise, is bad for the buyer.

Kevin Dunlevy

"Toño" > wrote in message
...
> Hi all,
>
> I have a friend that is about to purchase a small FBO. Now we all know
> that owning a small FBO is a labor of love at the very least. However,
> he is wondering if it is really financial suicide given the trends of
> today's laws, governmental regs, legislation, TSA, etc.
>
> His (my) question is: Do any of you have any general or specific
> thoughts that you might offer him before he signs on the dotted line?
>
> Thanks,
>
> Toño

[Toño]

Kevin Dunlevy wrote:
> Your friend needs to do what a bank would do before giving an FBO a loan.
> The bank is going to look at the value of the accounts receivable,
> equipment, inventory and general intangibles (which is mostly the "blue sky"
> or going concern value of the business). The blue sky value of the business
> has lots to do with the business reputation. I would inquire with other
> business owners and A/C operators on the field to get an idea of the
> company's reputation. When you buy a business, a car or an airplane,
> evaulating the seller is very important, including the seller's honesty,
> charactor and organization. Your friend will also want to size up the
> employees to get an idea of whether they are honest, happy, capable and so
> on. If the employees appear unhappy, your friend should think again. Your
> friend also needs to check with the vendors to make sure the business has
> been paying its bills and that it has a good reputation.
>
> Definately get a lawyer and an accountant involved. Start a check list of
> items which need to be considered and documents to be prepared. Do not make
> the deal and then have the lawyer paper it up. First talk to the lawyer and
> the accountant about how to structure the deal for the best tax
> consequenses, then make the deal. Generally what is good for the seller
> taxwise, is bad for the buyer.
>
> Kevin Dunlevy

Kevin,

The people that currently own this business are scrupulously honest and
well known in the community. The business has good employees, poor
equipment, good vendors, an generally run-down building that has a lease
that will expire in a few years. The last time the port renewed the
lease (about 5 years ago) they doubled it. The port has earned the
reputation of being somewhat "aviation unfriendly".

Though my original post was admittedly general, I think that I have
collected some valuable advice from you and the others here.

Thanks to everyone who took the time to respond. I will let you know
the outcome and maybe some of you can drop by for a real old school FBO
experience one day. ( You know...the kind of place with the bad coffee,
poor furniture, lots of half-finished restorations, and old timers
talkin'bout the good ole'days of flying.

Take care,

Toño