Acquisitions Anonymous - #1 for business buying, selling and operating - Make $2.3M/yr owning a Flight School - Acquisitions Anonymous episode 163

Episode Date: February 1, 2023

Michael Girdley (@Girdley) and Bill D’Alessandro talk about an aircraft service center and flight training school. Why are we SO excited about hobbyists as a customer base? What is needed to succeed in this business? The business has some exciting numbers for anybody interested in a lifestyle-type business in this space. Company:   Aircraft Service Center and Flight Training School, $2.5M list priceLocation:   New JerseyStated Financials:   Annual Revenue $ 2,322,000Asking Price:   $ 2,450,000-----Thanks to our sponsors!CloudBookkeeping offers adaptable solutions to businesses that want to focus on growth with a “client service first” approach. They offer a full suite of accounting services, including sophisticated reporting, QuickBooks software solutions, and full-service payroll options.-----Show Notes:(00:00) - Introduction(00:41) - Our Sponsor is CloudBookkeeping.com(02:08) - Is Bill finally okay after his anger from the last episode?(04:13) - Deal & financials: Aircraft Service Center and Flight Training School(07:31) - What pieces of information are worth noting?(11:23) - Why do you need to love the line of business for this deal?(12:56) - Buyer-business fit: The owner has been in the aircraft business for decades(16:21) - Why do they have a gravy train as a marketing funnel?(16:47) - What is so particular about intense hobbyists as a customer base?(19:51) - What do we forecast for this industry’s future?(21:15) - Why is this such a fantastic lifestyle business?-----Additional episodes you might enjoy:#162 - Cleaning up crime scenes for big money! #161 - How to spot red flags in eCommerce listings?#160 - Should we buy this drag strip... for the land?#159 - Make Millions Moving Dirt in Michigan#158 - $1.2mm revenue Court Maintenance Company for Sale!#157 - Make a $1mm/yr with a Language SchoolSubscribe to weekly our Newsletter and get curated deals in your inboxAdvertise with us by clicking here Do you love Acquanon and want to see our smiling faces? Subscribe to our Youtube channel. Do you enjoy our content? Rate our show! Follow us on Twitter @acquanon Learnings about small business acquisitions and operations. For inquiries or suggestions, email us at [e-mail]

Welcome to Acquisitions Anonymous, the internet's number one podcast about small business, buying, investing, and thinking. And by the way, I changed that every week. But that's pretty much what we do. We do a case study of a business each week. And then we talk about it and make jokes. So it's great radio as far as I'm concerned. Today's episode is super fun. We did a flight school and repair center located in the middle of nowhere in New Jersey. And we went all kinds of places in the general aviation world. And it was super fun. And it's a great way for you to consider. or maybe, just maybe, being the one crazy person this year who moves to the middle of nowhere in New Jersey and decides to make a million dollars a year talking about and working on airplanes. And here it is. Hey, Michael here. Want to talk to you about today's sponsor for the episode, which is cloudbookkeeping.com. So cloud bookkeeping is actually run by my neighbor, Charlie. So I've met him in person and can attest that he's a real human being and a good person.

And what cloud bookkeeping does is offer a full suite of, of bookkeeping services all in the cloud for you around QuickBooks and other technologies that you're using as a small business owner. So if you're interested in getting the bookkeeping part of running a business off of your plate and focusing on running your business, Charlie and his team are one to call. They can put together a bunch of other stuff in terms of helping you manage and grow your business besides just bookkeeping, sophisticated reporting, definitely helping you get your QuickBooks online set up in the right way, and a number of things around payroll as well.

So definitely know them and recommend them. If you want to find out more about Cloud Bookkeeping, you can go to their website at cloudbookkeeping.com, reach out to Charlie. I know many of you have and see if he can help you, make running your business easier and more fun by letting them help with a lot of the bookkeeping solutions. And when you call, mention this podcast, it would help us and help Charlie know that we're supporting him as well. So thanks a bunch and cloudbookkeeping.com as the sponsor for today's episode. Bill, I have a question for you. Yes, hit me.

On a scale of 1 to 10, how anger are you compared to last episode? I've meled out after I took out some of my wrath on the prior deal. I've meled out, but it's been a week. You know, it has been almost a whole week since our last episode. And if by week, you mean we just finished recording the previous one. So listeners, here's part. of our secret to, I will tell you right now, the secret we have to being consistent on getting two of these out a week is we actually, we actually have two one hour recording sessions per week.

There is no prep required except Mirko does some and then we record two each one, two each session. So even if we miss a session, we record two episodes. And then there's three of us. So sometimes two of us make it and we record an episode. So that's how we manage to say consistent and deliver, I guess, 100 episodes a year. Now, Bill, that feels a little crazy compared to when we start. Yeah, Michael, you're pulling back the curtain on all of our podcast production secrets. All except for one, I think it's obvious there's no prep. No prep.

Well, look, the more important one, if you start a podcast, I tell everybody this, like, it needs to be fun. Because unless you're Joe Rogan or Bill Simmons or one of those guys, it is almost impossible for it to be super lucrative. And so you just need to make sure it's fun when you do this. And hopefully the cool thing about making it fun is that. that goes through the microphone. That's the other thing I've learned. Like when you do a podcast, if you have fun recording it and you like your co-host, people understand that. And so like, Bill and I think, and it mills the same way, like I show up and I look forward to these because it's a ton of fun. And that's like, do whatever you're doing is fun. If it feels like work,

it will definitely feel like work because you're not going to earn enough money doing it to make it worthwhile. Facts, although we have a goal to significantly increase our revenue this year. Yes, please give us money. We're desperate. We did make some money last year, though I did the math and I made 30 bucks per hour, which is not great. So I might as well become an aircraft pilot. Do you know a place I could become an aircraft pilot? I might have one for you, Michael. Would you like to hear about it?

Yes. So in our showcase today, we have actually a pretty cool deal. So it is an aircraft service center and flight training school. It's SBA approved. It has $1.1 million of annual revenue. and $810,000 of annual cash flow. This might take the cake for maybe best margins we've ever seen on the pod, 80% plus here, pretty solid.

They want $2.45 million for it. So 3X, not too shabby. It is located in Mercer County, New Jersey. So it seems like it's split into kind of two businesses. One is the aircraft service center. priced both of these separately. So I guess you could buy each or the other, not sure, but the aircraft service center does $1.2 million of revenue and $350k of cash flow, while the flight training school does $1.1 million revenue and $460,000 of cash flow. The thing that is weird

is that the cash flow numbers add up, but the revenue numbers do not. So I actually think, I actually think the gross revenues of this business are $2.3 million. And it's it earns $810,000 of cash flow. So revoking the title of Best Martins Ever on the Pod. Still pretty good, though, 800K of cash flow on $2.3 million of revenue, and they want $2.45 million for it. So this is the industry's premier East Coast service center for aircraft. The company is a one-stop aircraft service center conveniently located at Central New Jersey's

airport. The company is known for its high-quality work and knowledge. The business has been serving customers annually as far north as Maine and as far south as Alabama. The company is a factory authorized Mooney Service Center. Mooney is a brand of airplane. And his continued growth of the years is largely the result of its reputation with Mooney owners. Over 50% of the business focuses on its loyal following of Beechcraft, Cessna, and Piper owners.

Services include annual inspections and maintenance, pre-purchase evaluations and inspections, major airframe structural and sheet metal repairs, aircraft new weight and balance calculations, glass and speed modifications, upholstery and carpet refurbishment, custom instrument panels and upgrades, fuel tank repairs, and ferry slash recovery. The flight school has been in business for 14 years and services students and renters in the tri-state area. There are two full-time dispatchers and a total of 12 instructors who communicate, educate, and provide high-quality flight instruction.

They have long-standing partnerships with the Flight School Association of North America, Republic Airways and Piedmont Airways have keep our company extremely busy. They are hyper-focused on client retention and acquiring new students with little advertising other than social media platforms. I don't know where else one advertises these days anyway, but okay. And the excellent support staffs in place to assist students, renters, and future pilots during their aviation journey. They are selling for retirement reasons.

So another school on the pod, what do you think, Michael? There's a lot to like about this. And I know, I don't know if you guys have noticed as our listeners, The new thing we're trying is not to start pooping on the deals immediately. So we save the poop for later because we're getting a reputation. But there's a lot to like about this. So I think a couple facts worth noting. Republic Airways and Piedmont, those are airlines that are very big, but people don't know about those things.

Because like Republic, for example, when you fly, let's say you fly United, right? And it says you fly on a plane that says United, it could be run by, you. United Airlines or it could be run by another airline for United Airlines. And so like United Express gets run by somebody like this Republic company. Like they run, they run the down market kind of stuff. Very often you can see it on the fuselage or even on your ticket, like by by Republic airways. American Airlines outsources a ton to Republic. Ton of stuff. So like, yeah. And generally the way to tell is if you're in a small ass airplane, probably it's being run by Republic. It has a propeller or like, you know, busted up stuff or one of these guys like they're low cost. And,

they run the small planes on behalf of American. And a lot of those pilots are in there getting their hours so they can eventually go run the flagship stuff. Right. And like there's a whole, there's a whole unique kind of world of the way seniority works and how you get the best routes. And like you can go and kind of tell when you're flying an airline, like let's say you go overseas, the most desirable routes, you'll go in there. And I've gone on some with like American and the flight attendants and pilots are all like in their 60s and 70s because they're the most senior routes, right? And you think about it, like the people working for these airlines, they only get paid when the airplane is flying. So do you want to do San Antonio to Houston, which is a 35-minute flight

over and over again, or do you want to do Paris to L.A., which, by the way, you get to lay over in Paris and L.A. Like, those are, so you kind of deal with that kind of stuff. So anyway, so a lot of times what drives these little schools like this are people who want to be professional pilots. So they will start as students and then they will oftentimes become instructors because that's, I believe that's another way you can get your flight hours. And then once you get a certain number of flight hours, only then can you go get your commercial pilot license. And it's this whole kind of like thing that you do. But you start oftentimes at these kind of schools like this. So look, I think the thing, by the way, that was just a huge rant. So I will pause now, Bill. Go ahead.

I love this because, and by the way, let's just start with buyer business fit. I have Googled it. And I think I have figured out who it is. It operates, and I don't know if I feel like we should drop their name on the pot or not, but it operates out of Central New Jersey. It is obvious from their website that the founder, the guy who's retiring, I believe him. He is retiring. He looks like he's older now, but he has been in aircraft like forever, for decades. Like there's a picture of him.

Is it the right brothers? Yes. It's owned by the Wright brothers. But like he is there's a picture of him like getting out of a small prop airplane like on the picture in the hangar. like it's clear like this is his whole world right like he lives probably nearby like man if you're an aviation dork this has got to be the coolest business to own i can imagine right totally by the way by the way i don't know if you could tell but one thing i've learned about myself as of reach middle age is routinely i will be the person at a dinner and somebody will somebody will ask a question like you know what happened with southwest airlines or why did the what is a collateralized debt obligation

And then I realize I'm prepared to give a 20-minute lecture on how it all works. True thing I've learned in middle-age bill. True thing I've learned in middle-age bill. No, I'm still the middle of a shaggy dog. Sorry, please. But true thing I've learned is some people don't want to hear 15-minute lectures. They're just asking rhetorically to start a conversation. So anyway, so now routinely somebody will say like, what happened to Southwest Airlines?

And I'll go, do you really want to know? My wife's eyes will get like saucers. She'll be like, they know. You got to make sure you really want to know because you're, you're, they know. They're going to figure it out. Anyway, so yeah, I think this is like, like if you're going to get into a business like this, like this is precisely one where you need to love all of this general aviation stuff, right? Like I have buddies that are into it and I don't know if I told you, Bill,

I actually went and considered getting a private pilot license and did the whole tour and like hung out in places like this, cost it out. I mean, the cost is fine. I mean, I ended up not doing it because I realized when you try to become a private pilot, there's this inflection point where you need to make sure you spend a minimum amount of time flying and developing yourself and making sure your plane isn't going to fall out of the sky. Or you run a very high risk of killing yourself. And that's what I realized.

Like, oh, you know what? I should just be riding bicycles where the biggest risk I run is running into a tree, which is much different than, hey, I just ran out of gas over the Gulf of Mexico, which is definitely a girly problem that could have. But the guys that hang around these places, you have to be wanting to be part of this whole thing. You have to love to talk about aviation. You have to be very excited to deal with the difference between a Cessna, 172 Aleron and the 172B and should you turbocharge it?

What kind of paint should you use, like, aircraft weight and balance calculations? You have to love that stuff to get into this business. But it has the best thing about it, which is, like, people die or live based on how well that airplane performs. And that causes them to spend money to make sure it's done very, very right, both from an operation standpoint and from an equipment standpoint. Yep. Yep. Now, I also love about this business, you know, it seems like they've got some certification from Mooney and some reputation out there. I mean, it's been open for decades, you know, and people that are in this industry, you know, private pilots, they're almost like

intense hobbyists, too. Like, they're probably used to stopping here. They gas up. They know if they got a problem. I'll just go over to to these guys in Central Jersey and they'll take care of my aircraft. On their website, they're brokering lots of aircraft for sale. It's clear that they've got their fingers in every little thing in kind of the Northeast or the East Coast around, you know, aircrafts this size. There is. And you're, you're in a good place. You're halfway between Philly and New York, you know, in Central Jersey. Great place to stop away from the very crowded airports. So anyway, sorry, start to talk over you again with a gridly dinner lecture. Unlike the prime. episode that we did where I could just call the franchisor and get another franchise,

it's very hard for me to open up an entire airport next to you and compete, right? Like there's definitely some lock in here. There's a moat, I would think. Now, not there aren't other airports, but they're probably not making a lot of new airports. I mean, I even wonder like when the most recent airport in the entire United States was built. It sounds like a zoning, an environmental nightmare. So I think there's probably about as many of these things that are going to be. Is that right?

it's actually super it's super easy actually really like yeah yeah yeah yeah you i you just get enough land you can store an airport anywhere i mean i'm being reasonable within f a regulation all and stuff but like literally like um you know there's you you just go build an airstrip and there's people that do this too like you um you can build basically an air strip out the middle of nowhere and then you like you can build houses around it so people have these like fly-in cottages one of my old bosses used to do that. He would fly from San Francisco up to Oregon. And it was really super neat. And our buddy who owns, owns freight waves, he's doing precisely that in terms of his development. Craig and his team doing it out in Tennessee. They're like building at like a 200, 200 acre complex

where you can like have an airport and fly in and hang out with the other airport nerds. He owns Flying Magazine too, which is like super cool. But I think you bring back this point, which is like, it ties back to like, why do, like, the guys who own the Toyota dealerships, why do they own NBA teams and the guys who are doing like the used car sales on the side of the road? Why do they, like, drive jolopies? And the reason is, is because of this, the nature of this branded stuff, like, they're a deal, these guys are theoretically a dealer for Mooney parts. So if you own a Mooney plane and you don't want your engine to stop when you're out over the Gulf of Mexico

or in this case, the Atlantic Ocean, are you going to save $3 to buy a slightly cheaper part from an OEM who made it off the shelf, are you going to go buy an authorized Mooney part? And like, that gives you so much margin. If you're the only place that's selling Mooney parts in the area, like, it's just great. And it's the same reason why the Toyota dealers are rich and I'm not, right? Yeah. Because of precisely that. Like, you don't want your Toyota to run into a, to run, you know, to run into a brick wall.

Like, you're definitely going to buy the factory made like Toyota, you know, eyesight equivalent type thing or steering wheel. And same thing goes here. in terms of this service center, which I think is, you know, if you look at it like cash flow wise, like pretty darn good in terms of what they're doing, right? $350,000 in cash flow for an $850,000 price, like, solid. I like that. Yeah.

Let's touch on not just the service center, but the flight school because I think there's a lot to like here, especially at the bottom of the listing where they talk about how they are partnered with Republic and Piedmont Airways. and they've just got a steady stream of new students showing up to take their flight school. Like that is the gravy train right there. Yeah. Well, and then some of these schools are credited if memory serves. So you can actually do Title IV funding, which is kind of the government back loans for this stuff.

So that can be really interesting. Then there's a never-ending, like, just like stream of middle-aged dudes mostly. I mean, I know there's ladies, but this is mostly a male-oriented hobby who are coming in dropping $500,000 or more on a plane, and they need to learn how to not kill themselves and totally nerd out about it. And that could be $25, $50 or more $100,000 in terms of, you know, training that you need to buy to go through all of ground school, you know, your basics, instrument, dual engine, if you decide to do that kind of stuff. Like, those are all things where people can spend some real money on it. And then the other interesting

side of it, Bill, I think, is they talk about having 12 instructors. Like, they're a bunch of old grisly dudes who have been instructors forever. And like they know they don't make much money doing this. But man, they love just getting in there and helping people become, you know, a flyer like them. And it's just really interesting when you see it happen. What, Michael, what do you think, where do you think this industry kind of hobby, private aviation is going?

Because you, you mentioned it's a bunch of young middle age to older guys. You know, I don't hear of a lot of 25 to 35 year olds, you know, getting their, their flight license. Like, where do you think, like, does this, is it a dying industry? Is it a growing industry? Is it flat? I don't know how to really forecast, you know, the future hobby aviation. Are you, so you're saying millennials are to blame for this too? Is that where you're saying? Millennials are killing private aviation. This is ridiculous. Look, I mean, here's, I think there's, there's some reasons to be pessimistic about a business like this, which is like, just like you said, like there's a lot of boomers, their pilots, they own planes, you know, who's going to step in and do it?

It's kind of like the classic, you know, an antique car hobby. Have you ever, have you kind of seen what's happening with that? No. Gen X, which is my generation. Are you a millennial or did we cover you at X? Don't let me in with that. Sadly, I am. So I'm 37, which puts me like, you know, two to three years.

I was a millennial before they had invented the term. I'm technically, I'm like an elder. Okay. So you know what you're supposed to do? You're supposed to call yourself a zenial or geriatric millennial. Yeah. Which, by the way, if you insist on doing that, it totally qualifies you as a geriatric millennial.

It's the people born 80 to 85. That's me. Which you just, I think, barely qualify. Yep. Yeah. And you, it's, you can tell somebody's a geriatric millennial or an old millennial because you say, hey, are you a millennial? And the initial thing is that every geriatric millennial says is, don't let me in with

those people. Yeah, there you go. Exactly. That's what you all say. That's exactly. That's exactly right. It's just, you got, yeah, don't, don't love me with those losers. I do, I work for a living, which is by the way,

your best generation because you were born early enough to have like a social media free childhood, but late enough to be technologically savvy. Like we were, we are like the last ones where their child, our childhoods were not like completely ruined by the internet and social media. I hear you. Anyway. So, okay, so you got all these boomers that own planes and like they're, they're doing their thing. And then Gen X is pretty small.

And I have a lot of my friends, you know, are pilots and are messing around. with this stuff, which is totally there. And I think it's remained pretty consistent there. And then the great thing I think for this industry is millennials are just getting to a point right now where you guys are starting to make a bunch of bunch of money. I can't believe you just you guys, me. Yeah. Lumped me in. You know about there. There are judgment-free zones. This is not one of them. Yeah, this is whatever a judgment-free zone is, you ain't in it. Anyway, so anyway, You're terrible generation of lazy people is, but it's really big.

Like there's a bunch of you, there's a bunch of you, like you're the second biggest generation behind the boomers. And you're getting ready to have a bunch of money and more time, right? Your kids are pretty young right now. You're going to start looking like me where like I will go out and bike ride for four hours in the morning and come back and my kids will still be asleep, right? Because it's like they're teenagers. That's what they do.

So, like, I think that there's a lot of reason to be very optimistic about this. The rate may not be very high for millennials wanting to get into aviation, but you guys are starting to hit the time in which this generation is going to have a bunch of money and is going to have a bunch of time to spend on this, which is the biggest problem with general aviation. You have to spend hundreds of hours of year to make sure you don't kill yourself, which is kind of the calculus that I did. And why I didn't do it?

I was like, oh, this is terrible. Yeah, no, me too. But, like, the convenience, though, I mean, so, like, I have friends. that own their own plans makes them sound very douchy, but like we're talking about like these things cost less than 100 grand. They're like flying tin cans, right? But it's so convenient. Like you can be like, do you want to go to DC for lunch? You know, and you can just go. And you're there in an hour or so. Like it's amazingly convenient. You can go to rural places where there's without good airports. You can live in a rural place and like take a take your own plane to a to a larger airport.

it, I mean, it seems like a freaking cheat code for life, except occasionally you die. And sadly, one of my friends did die in a private aviation air. He crashed his airplane. So it totally happens. Totally happens. That's why I didn't do it. Yeah. That's a problem for this.

Like, super dangerous. Okay. So there is a solution for this, but you have to throw a little bit of money at the problem. Here's the solution. You own one of these planes, okay? But you see those 12 instructors that this school has. those people are happy to get paid to fly. And it is legal for you to pay them to fly you and your plane to wherever you want to go.

And so I know a guy here in San Antonio, listen to this story, Bill. You'll appreciate this quality of life. He owns a plane here in San Antonio. It's a twin engine prop plane. And he lives here in San Antonio. Well, guess what? He wants to make a bunch of money. So he owns a law firm in Dallas.

He has somebody, one of a, one of a, one of, the instructors at one of these schools flies him up in his plane, 45 minutes, drops him off at the Addison Airport or the Dallas Love Field Airport. He has a car there. He drives to his office, spends a night in his apartment, four nights a week, and then flies back on Friday morning because the guy who's his instructor flies him up there, drops him off, flies the plane back, parks it, and then does the same thing again twice week. So he basically spends probably three times what he would spend if he was doing that on Southwest Airlines without all the delays and mess. But he basically saves like 80% of the time and 100% of the convenience.

So like that's the hack. And I know people that do this, including this guy. And it doesn't seem that expensive. Like, because these planes can cost, you know, less than 100 grand easily. And it's a crazy thing about planes. Oh, I'm sorry. And so what? Then you got to buy a used car on the other end.

So like you can set this thing up for probably $100,000. And then it's just the cost of the guy's time and gas. 100%. Yeah. I mean, the crazy thing about planes is you can get one for 25 grand or you can get one for 25 million and everything in between. It's not like, it's not like cars. Like, it's just this crazy thing. Like, you go on some of the listing sites for these planes and you're like, how is this $25,000? It's because it's a 195 Piper Cub and it hasn't been updated since then. So good luck.

Good luck with whatever you're going to be flying it. But yeah, it's not as stupid as expensive as people think. But it's not, I mean, it's not nothing. Yep. Sweet. Well, I like this one. I mean, I think for the right person, if you're in aviation and you live in New Jersey, you want to make a million dollars a year nerding out about airplanes. This is SBA pre-approved. It's probably stable. Rock and roll. Super fun. I mean, except for the fact you've got to live in rural New Jersey. It sounds great. That's why I qualified. You already live in New Jersey. Oh, oh, yeah. All right. Cool. Well, let's wrap this one up. This one will be in the newsletter if you want to check it out. It's located in Mercer County, New Jersey. If you enjoyed this podcast,

including me insulting Bill for being a millennial, please do me a favor and open up your podcast app and leave us a review, hopefully something that rhymes with Jive Stars. And please consider shopping with or telling somebody about our sponsor for today, which is Cloud Bookkeeping. They have been a great super duper supporter of us. They pay for a lot of the production we're doing so you don't hear us, you know, sneezing into the microphone. and stuff. So anyway, review, cloud bookkeeping, and we'll see you next week.