Avionics News October 2022 - 18

THE VIEW FROM WASHINGTON
Continued from page 17
Customer lists
You may have been in business for decades and have a
lengthy list of repeat customers. You may have compiled
a list of aircraft owners in your geographic area you
market to on a regular basis. This information is valuable
to the next ownership team. It allows them to get started
and " hit the ground running " much earlier. As such,
there is a value to this information, if, of course, the new
owner intends to continue with the business you started.
Along with customer lists is the reputation and repeat
customers of the business. The value of your reputation
can vary from business to business. Keep in mind that it
is the business you are selling or buying, and as such, it
is the business' reputation that needs to be considered.
The AEA has many small shops whose reputation
is with the owner. They have been in the business
for decades; they are the local go-to person for
troubleshooting and repair, and they offer the best
value when the aircraft owners are shopping for new
equipment. However, when they sell the business and
retire, their reputation retires with them. At the other
end of the spectrum, the AEA also represents extremely
large maintenance organizations with a reputation built
on a quality management system where no one person
is dominant. In this case, purchasing that repair station
is simply a change in senior management, which usually
has slight change in reputation.
Dealerships
As we know, dealerships can run the entire spectrum,
from simply ask and you can receive a dealership
to extremely controlled, geographically managed
dealerships. As such, each dealership the business holds
should be evaluated. And like valuing any item, scarcity
and importance to your customer base will increase or
decrease the value. Generally, light general aviation
dealerships are easier to acquire for a new shop and have
less value in a sale. Medium to heavy general aviation
dealerships tend to be more geographically controlled,
and as such, have a greater value to include in a repair
station sale.
Staffing (experience)
Your business is your people, and your people are
the accumulation of their experiences. Your business
is successful because of the talent of your technicians.
I talked with one shop that was sold several years ago
1 8 AVIONICS NEWS * OCTOBER 2022
where the buyer purchased the repair station solely for
the dealerships (medium to heavy GA dealerships) and
their people. As we know, there is a defined shortage
of experienced technicians; your technicians are your
business. A business that offers an established, retained
workforce has much more value than just the " brick and
mortar " of the business. This also translates to how your
business operates. Many AEA member shops are singleperson
repair stations, and as such, when the owner sells,
they are selling the " brick and mortar " of the business
without staffing.
Transition
For many of the smaller repair stations where the
owner is an active technician, salesperson or manager,
the seller might consider what transition they are willing
to offer as a function of the sale. The transition can take
multiple forms. In some cases, the previous owner may
retain a minority ownership interest for a period, then
sell the remaining interest at retirement. In other cases,
the previous owner will stay on, under contract, for a
specified period as an employee. There is no specified
form this may take; it is truly what the seller is willing to
accept and what the buyer is willing to offer.
The certificate
One of the most-complicated valuations for a repair
station is the certificate itself. I consider two elements to
the certificate when considering its value: First, what it
would cost to apply for a certificate and to generate the
requisite processes and manuals; and second, the time to
certification. Each has a unique value.
The most basic task of a repair station, such as an
altimetry system (14 CFR § 91.411) and transponder
(14 CFR § 91.413) check and inspection, usually takes
about 80 hours to complete. That equates to 40 hours
to develop the documentation and 40 hours to confirm
conformity to the regulations and negotiate the approval.
This equates to a range of $12,000 to $20,000 depending
on the hourly rate of the consultant. This cost will go up
with each additional functionality (rating) you add to the
application.
14 CFR § 145.5 7 tells us that the new owner must
apply for an amended or new certificate. The time to
market of the purchased repair station can be as short
as a few days with preplanning and an early application
for an amended certificate, while a new certificate could
take a year or two. The value of the buyer's ability to
minimize their time to market is a consideration to the
seller as well.
Avionics News October 2022

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