We’ve spent a lot of time studying the private charter industry in Europe and watching it evolve. In doing so we’ve watched a lot of people learn valuable lessons about making a profitable business out of it. In today’s blog we want to share 5 things that stand out to us that entrepreneurs should think very carefully about if they’re going to enter this market.
- Avoid wishful thinking. Any business start-up needs to look at the financial requirements of the business and measure that against a realistic sales forecast. Key word: REALISTIC. There’s an old saying “Figures can fool and any fool can figure” and it’s true if you’re not careful. We’ve seen many charter owners driven by financial plans that they hope will work despite signals to the contrary. In most cases this is wishful thinking taking over rational measure. There’s nothing wrong with seeing the possibilities and reaching for them, but you must also be prepared for a more likely reality. Your plan needs to have three potential scenarios: Worst Case, Most Likely and Best Case. Most importantly everything you plan for needs to be viable even in the Worst Case scenario. Don’t make Best Case your only case. Even with the worst outcome, it has to be something that will keep you from becoming insolvent and we think a little pessimism goes a long way in this kind of planning.
- Don’t overestimate potential flight hours. This is closely linked to the wishful thinking concept. You need to base your thinking on good data and industry averages that make sense. Even the most frequently used private jets fly under 1000 hours, but most are closer to 500 or less. That’s less than 10 hours a month, can your business model work in such a scenario?
- Beware the membership model. You’re probably aware of the challenges faced by recent players who have offered what appears to be amazing membership deals that include a lot of free flight opportunities. No one has really figured this out successfully. In order for the model to work it needs many members and more importantly, it needs a LOT of them who won’t actually use the service as much as they thought they would. You can protect yourself with contract clauses that allow you to change what membership services are offered, but that won’t protect you from the bad press and customer dissatisfaction that will surely spread like wildfire.
- Word of mouth won’t get you there. In order to succeed you need clients. In a competitive environment the only way to get customers is through strong sales efforts and marketing. Don’t look at marketing as an expense, look at it as a megaphone that can spread the word. Without it your growth trajectory will be minimized and you’ll be back to point 1 – wishful thinking. Budget for it, plan and execute. Advertising and marketing takes time to work so that potential clients can go through 4 stages: Awareness (they learn that you are out there), Interest (your message is something that makes them want to find out more), Desire (now that they know more about you and may even have engaged with a sales rep, they are thinking about giving your service a try) and finally, Action (they book a charter). That’s marketing’s job. Bring customers to the door. The rest is up to you to deliver a customer experience that they will want to repeat.
- Make sure you have the right team. Sounds simple, but it is truly hard to find people who have the expertise and the chemistry to work together and be willing to stick it out even when things get challenging. When you hire or partner with someone, sell the dream but also make sure you have frank discussions about the worst case scenario we mentioned earlier.
This is a complicated, exciting business with more moving parts than most entrepreneurs can fathom, but if you’re up for it using these 5 points as a guide will help you create a successful business model.