Buyer's Market or Seller's Market?

I recently read an article in a local business magazine that struck a chord.  The article asked business brokers whether business buyers currently have an advantage or whether the power rests with sellers.  One line in particular really made sense.  It said, "if you have a good business, one that is growing profitably and in a good solid industry, you're always going to be able to get top dollar in that industry."

o a certain degree, that same concept translates into aircraft ownership.  If you have a desirable airplane model, keep it updated, avoid damage, and have not skimped on maintenance, you should be able to get top dollar for that airplane.  Of course, everything is relative and if the market has dropped 30% you're probably not going to recoup that loss.  You should however, be able to net a much better price for your asset than your peers who have not paid the same attention to their airplanes.


If you'll oblige, let me share with you several strategies I've seen that have worked the best for the people we help.

1.  Begin With The End In Mind

First, and you will recognize this if you are a Stephen Covey fan, you have got to begin with the end in mind.  f you are going to buy an airplane, your first thought should be, "How will I fare when it's time to sell?"  If you are buying a model that has a terrible history of retaining any value then you should not be surprised that there is still no marketbable value when you get ready to sell.  If you are putting little to nothing down and have a debt-to-equity- ratio nearing 1:1, you probably ought not be shocked when you find yourself upside down on your loan when it is time to sell.  Take an objective look at the plane you are considereing before making any commitment.  Often, this involves asking a third party for their opinion.  In any case, do your homework before you set your heart on aspecific bird.  Allowing emotions to enter the equation at this stage almost always means you are gong to lose more money than you should.  

2.  Proper Maintenance & Necessary Updates

Second, maintainyour airplane properly and keep it updated.  You do not have to go overboard, but insisting that your 20 year-old panel does not need a facelift is delusional.  Buyers want to see some upgraded avionics.  Updated radios, fresh engine overhauls, and thorough annuals will do more to retain the value of your plane, and hence create ore of a sellers market for you r plane, than will new paint and interior.  Most buyers prefer to spend money on things that will customize the plane for them rather than on things to bring the airplane up to date.  Naturally, keeping your paint and interior in first rate -- or like-new -- condition will help the cause.

ere is a good example.  WildBlue sold a Beech Bonanza for Don.  Don's airplane was nearly 20 years old and, on the surface, looked it.  The paint and interior were original.  They were not in bad condition, but they were not great either.  Don flew his plane regularly and made the decision to spend his money on things that mattered.  For instance, he swapped out one of his old King radios for a new Garmin GPS, added an Aspen primary flight display, and upgraded his engine to one with higher horsepower (which, as a result, increased his useful load too).  Don's maintenance program was routine and thorough and his logs were well organized and easy to read.  Besides the outdated cosmetics, the plane was in top notch condition.  If you are one who tracks "book" values, this is an airplane that "booked out" at 2-3% less than the sales price.  While that number might not sound impressive, consider that at the time of the sale, most planes in his category were selling for 5-7%below book value.  In essence, Don got a 7-10% premium on his plane.

et me contrast this with another client we'll call "Steve."  Steve had a similar, yet slightly newer aircraft that he bought new.  During his 15 years of ownership, other than very good maintenance, he had done nothing to keep the airplane up with the times.  The radios were original and the engine time was approaching the high range.  His paint was still in very good condition as was the interior (although it was cloth, not leather).  Steve's airplane ultimately sold for well below book value.  Why?  Because when the new buyer factored in the cost of needed upgrades, the price he was willing to pay was the highest amount that would keep him from owning an airplane that was worth far less then the amount he had invested in it.

3.  Manage Your Expectations

Finally, my last bit of advice to buyers is to not expect the plane to retain its value.  Sure, some airplanes will increase in value and some will hold their own, but most airplanes are a depreciating asset.  Any broker, dealer, or owner who tells you otherwise is shooting for a quick sale.  You are not buying a plane as an investment; you are investing in a tool that provides other tangible and intangible benefits.  The true cost of ownership should take those items into consideration too.  

The popular and contemporary position is that it is a neutral market -- neither favoring the buyer nor the seller of high-quality piston singles and twins.  However, good airplanes with solid backgrounds and routine care should have a much better chance of netting top dollar than those that have been ignored by their current owners.


What is an Offer?

Think you’re ready to buy an airplane?  Want seller’s to take you seriously?  Then don’t waste everyone’s time with an “offer.”  Make a real offer.   Let me explain the difference.

Understandably, buyer’s want to find out how low a seller is willing to sell.  And the most relied upon question they tend to ask is, “What’s the bottom dollar on this thing, anyway?”  (As if a seller is going to just spill the beans right there on the first call and say, “you know, $X is my bottom number.”)  Anyone who has ever sold so much as a skateboard knows this is a terrible question to answer.  Why?  Because the next thing you’re going to hear from a buyer is an offer for an amount less than that so-called bottom number.  A savvier buyer will resort to the next tactic of “offering” a number, which is to casually throw out a number.  “Think he’ll take X dollars, they’ll say.”  Trouble is, there’s no commitment behind this “offer.”  It’s a fishing expedition.  Or knowledge they’ll leverage against the next guy.  That’s what an “offer” is – it is a number proffered to the seller with no contractual or monetary commitment.  When they’ve heard the sellers response, as often as not, they disappear to never be heard from again. 

An offer, on the other hand, is a bona fide bid backed up by a commitment of some sort.  Most of the time this involves a written proposal or contract.  Many times it involves a deposit to show good faith.  This type of offer establishes all of the parameters of the deal that go beyond the dollar amount to include things like the type of inspections to be conducted, who pays for what repairs that are needed, where the inspection is to be performed, how funds will be transferred, who is responsible for taxes, what contingencies exist, and so forth.  These scenarios all come at a cost and are important for a seller to consider when evaluating the overall proposal.  This type ofoffer is also equitable and allows for the buyer to be released from the contract and the deposit returned if the terms of the deal are not followed by the seller or if the airplane being sold isn’t as represented.  Unless you’re trying to buy a low-end airplane, think of an aircraft purchase as being more like a real estate transaction and less like an automobile purchase.  

Want the seller (or his broker) to take you seriously?  Then take the time to make a real offer.   A good aircraft broker or dealer can make this process easy and will help establish a sold relationship that all parties can feel good about.



Man Up

Life sometimes presents us with uncomfortable situations, doesn’t it?  Usually, these events involve telling someone “no.”  And often, these situations could – or should – have been handled at an earlier time if it were not for our own unwillingness to handle them.  Such dilemmas range from telling someone we don’t want to date them anymore to telling a boss we don’t want to work for them (or vice versa) to firing a vendor.

How do you handle them?  Do you pick up the phone, or even better, make a point to tell the person face-to-face?  Or, do you slink around the issue by sending an email or text.  Worse yet, do you refuse to do anything and just hope it all goes away?

A friend and sales coach of mine, Dan Stalp, taught me that one of the key philosophies of a good sales person is to handle the most uncomfortable things up front…and to do it in person (or over the phone if distance is a real issue).  This is not only a good sales tactic that treats others with dignity and respect, it is a good life philosophy as well.  Yet, some of us never seem to learn this basic lesson, do we?  Some of us (and I mean you, me and everyone else) have at times taken the chickensh… approach by sending a “Dear John” email or text instead of confronting the issue head-on.

Is it easy to do?  No.  Absolutely not.  But, like I tell my teenage son, you don’t have to like doing it, you just have to DO it.  In other words, as I tell him, don’t hide.  Just man up.  The other person deserves at least that much from you.



Trust, but Verify

When it comes time to purchase an airplane, whether new or used, it's very important to do your own due diligence.  It's good to trust others about what they have to say about the plane and it's history, but it's far better to validate that information on your own.

No airplane is perfect, especially a used one.  If you're in the market for a "perfect" used airplane, then you're going to be looking a long, long time.  All used aircraft will have imperfections; either with the cosmetics, older avionics, possible damage history, vague log entries, etc., etc.  And most will have had instances in their history that will bear a deeper look.  For example:

     - Why does one cylinder continue to have compression problems?
     - A major alteration was done but there is no FAA Form 337 to be found.
     - Does the new interior have the proper flame retardant certification?

Cast a skeptical eye on anything that seems out of the ordinary.  Make phone calls and ask for work orders or a more detailed description of the maintenance performed if necessary.  Listen to your mechanic but get a second opinion.  Most of the time there will be a sensible explanation.  Sometimes not.  And just because a major shop (or one with a well-known reputation) did the work don't always assume it was done correctly.  People are human and mistakes are made.

Good luck in your search!



It's the Training, Dummy

We've seen both ends of the spectrum, from aircraft owners who do minimal training and fly questionable aircraft to those who invest heavily in training, equipment, and maintenance.  Naturally, economics have some role to play in how an aircraft owner treats their training and equipment, but most of the time the primary driver is the their philosophy and attitude.

Take, for example, the owner who does little training but invests heavily in every new gizmo that comes on the market.  This person tends to convince themselves that technology will keep them safe.  On the other hand, there are those who are frugal investors in new technology but will spend the time and money necessary to ensure their skills, decision-making, and knowledge of their craft are always up to par.  Which pilot would you rather fly with?

Here's my two cents.  If you have the means -- and ability -- to equip your aircraft with (and properly use) the latest equipment and take advantage of excellent training opportunities, then you should absolutely do so.  But, if you need to make a tradeoff between a rapidly depreciating piece of avionic equipment and the chance to make yourself a better pilot, my money is on training...every time. 



We'll Find You a Place to Sit

My wife and I were recently invited to a seminar held at a local business.  The sponsors are friends of ours -- great people -- and have an honorable reputation.  The seminar, which lasted about an a hour and a half, included dinner.  We wanted to support them and, in the end, decided to do business with them after the presentation.  Had we not known them however, I doubt we would have engaged them in a professional relationship.


We were told to arrive at 6:30 pm.  When we got there, precisely at 6:30, the seminar had already started and most of the other invitees had already finished their meals.  Clearly, there was a mix-up with the start time.  Yes, there was food left over, but there was no where for my wife or I to sit together.  Not wanting to interrupt the presentation, we decided to stand at the back of the room.  I found it surprising that none of the other invitees offered to make space, remove their belongings from empty chairs, or make any other effort to accommodate the newly arrived guests.  Nor was there an offer made by the hosts to move available chairs to allow us to sit.

Now, don't get me wrong.  I am not one of those people who expects to be accommodated everywhere I turn.  The concepts of "accommodation" and "entitlement" are often synonymous and have gotten out of control in today's society.  What I am saying is that, from a customer service standpoint, I found it interesting that simple and easy gestures were not made to prospective clients to make them feel more welcome.  And, because the continual improvement of customer service is something I think about a lot, I found my self not paying attention to the seminar but rather thinking about how I -- and my company -- can do a better job with our customers and prospective clients.

So let me finish with this thought.  Whether you're working with us for the first time or the tenth time, we want you to know that you're respected and valued and will extend the most basic of common courtesies and old-fashioned manners.  Figuratively speaking, we will look you in the eye and return a firm hand shake.  We will hold the door open for you.  And we will find you a place to sit.



Should Damage History Scare You Away?

It’s inevitable that some airplanes will experience some form of damage during their lives.  It could be as benign as accidentally pushing a plane into the back end of a hangar and causing some minor rippling of the elevator skin to a full-fledged gear-up landing that caused a prop strike, bent firewall, and substantial damage to the underside of the aircraft.

Following the event, assuming the aircraft wasn’t written off, repairs will begin. Obviously, the shop you choose for this task is of ultra-importance.  How much experience do they have?  Have they fixed this type of damage before?  Do they know how to work on the subject airplane?  What kind of documentation will they provide?  These and other questions must be asked and satisfactorily answered before committing to one shop over another. 

General aviation repair stations are not created equal.  Some shops do fantastic work and well, there are the others.  Some provide extensive documentation while others minimize the write-ups and just cover the basics.  In many cases, as an aircraft owner – and future seller – how the aircraft log book write-up is made should be as important as the actual work itself.  Ask for thorough and complete documentation so that there is no question as to how the repair was performed. 

If you’re a buyer you should look at repair documentation carefully too.  But – because many airplane buyers are a little gun shy – they often look at the repair documentation in the wrong light.  They believe short log entries equate to minor damage and repairs and that extensive documentation means the plane suffered substantial damage.  Nothing could be further from the truth.  Let me repeat that – nothing could be further from the truth.  In fact, I would go as far as to assert that if the write-up is short and leaves out detail the shop may be trying to hide the extent of the damage.  And, if they take the time to give a lot of detail to the work performed, materials used, and processes followed, they are showing that they believe in the quality of the repair and have nothing to hide.

So, if you’re looking a plane with prior damage history, make no assumptions about the quality of work performed.  Read the documentation carefully, call the shop that made the repairs and ask lots of questions, and have the mechanic you’re using for the pre-purchase inspection spend quality time reviewing the repair and documentation.  And should you come across a well-documented repair be thankful that the shop performing the work paid attention to the details.

What do you think?