Spring Training Highlight: FBO Finance Fundamentals

“One of the great things about our industry is that we frequently see people work their way up through the ranks from the line to management positions,” said Phil Botana, president of Tampa International Jet Center. “It’s the American dream writ large across the general aviation industry, but it also presents a challenge: These are good, hard-working people who deserve to be promoted, but they are frequently also people with no real financial management training. How do you give them opportunities to learn about the business side of things and give them the tools to empower them to be better managers? I made the mistake one day a few years ago of saying I might have some answers to that question, and here we are.”

Botana and Mark Chambers, managing partner at Aviation Resource Group International (ARGI) in Colorado, will present their FBO Finance Fundamentals seminar March 6-7, 2012 during NATA’s Spring Training in Las Vegas. The seminar places emphasis on understanding financial reporting, business flows, key ratios, and metrics, as well as business planning, budgeting and accounting, allocating costs, negotiating, and developing operating and capital plans.

Over the last eleven years Botana and Chambers have trained hundreds of new and seasoned managers from FBOs across the country, helping them better understand the key financial metrics of the business.

“The seminar was originally geared towards people at FBOs who have just been promoted or are in line for a promotion but just don’t have any background in finance and business fundamentals, but what we’ve been finding is that everybody in management  can benefit from the sessions,” Botana said. “We’ve had several hundred people come through this seminar, from CEOs and finance people to line managers and folks who are just getting into the charter or FBO business and want to understand it more. Our goal is not to make them all into accountants, necessarily, but to help them understand the numbers, what the numbers tell them about the business, and how they can use that information to make the business better.”

Botana and Chambers draw a distinction between financial accounting and what they call “management accounting,” the process of identifying, measuring, reporting, and analyzing information about key business metrics, understanding those numbers and where they come from, and using those metrics to develop solid business plans to improve business performance. And while the seminar focuses on timeless tips and tools, Botana believes those business fundamentals are even more important in a down economy.

“Before you price your product you really need to know what the true cost structure of that product is,” Botana said. “It’s absolutely shocking to me how few people really understand cost structures and total operating costs, you know, ‘What portion of the sale of a gallon of fuel goes to pay my people, my rent, my insurance, my facility costs and so forth?’ It’s key to know that information before you’re negotiating with a customer so you don’t end up selling it for less than it actually costs you to provide it. And it’s even more critical now, when there’s less business out there and you need to size your business appropriately.”

It’s critical for anybody in a management position to be exposed to the practical side of financial management.

“This course is really aimed at people in our industry, and there a lot of them, who have been working in line positions and are moving up to management positions that put them at the table with other managers, talking about all things financial,” Chambers said. “The line manager wants to know, to the degree that he can control things, how much money he is making, how to read a financial statement and how to talk intelligently in a management meeting. When the president of the company turns to you and asks you a question about profitability – ‘Why is it high? Why is it low?’ – you need to be able to answer that with confidence, and to do that you need to be able to speak the language. You need to understand the metrics involved. Our seminar is a pretty intense couple of days, but you’ll come out of it knowing how to talk intelligently in a management meeting and knowing how to read a financial statement.”

It is also important, to learn how to use the numbers in a financial statement to move the business forward.

“The way a lot of managers learn to read financial statements is like learning to drive a car using the rear-view mirror,” Chambers said. “There’s a real tendency to look back and lament the numbers, and then keep heading in the wrong direction. The leap we try to get them to make – and admittedly they’re drinking out of a firehouse during our two-day seminar – is to start talking about how you practically manage your business going forward using some basic rules of thumb and some key metrics that are the targets you want to hit as a manager on a day-to-day and week-to-week basis.”

Fundamentals are just that: Fundamental.

“Yes, the economy is down and the business landscape is always changing, but the fundamentals stay the same,” Chambers said. “In the summary description for this seminar the title is ‘FBO Finance Fundamentals for New and Seasoned Managers Responsible for the Bottom Line in Aviation Services,’ but for the line manager it’s really the middle line that we’re trying to hit. The manager of the line department shouldn’t be worried about larger business decisions he has no control over, but he can learn to understand his revenue line and his cost of sales line and focus on producing enough gross profit in his department to make it make sense. What we’re asking of these managers doesn’t vary a lot in up or down economies: Give us the middle line and let the president of the company manage the rest of it. These middle-level managers have to be in there watching the middle line on a deal-by-deal basis, they have to have the financial tools to talk about it and make a compelling argument. They’re the heart of our business and they should be empowered to improve it.”

Submitted by Guest Blogger: Colin Bane (article first appeared in the Q4 2011 issue of ABJ.)

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