Profit margin

EdFred said:
Only to you Tom. Only to you.

When *I* dropped my plane off at the A&P, he charges me for parts and labor and everything, just like I would at the car mechanic. It's rare that I ever buy anything and then say put this on my plane.

You ask a wildly general question which you did not specific only labor. Then you chastise people for not saying specifically labor.
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Where did I chastise anyone?
When you hire an Independent A&P to over haul your engine would you expect them to put 15-20k on the work order then hit you with it?
I don't know any A&Ps that will do that. because 1 guy that would stick them with the bill would bankrupt them>
 
Tom-D said:
Where did I chastise anyone?
When you hire an Independent A&P to over haul your engine would you expect them to put 15-20k on the work order then hit you with it?
I don't know any A&Ps that will do that. because 1 guy that would stick them with the bill would bankrupt them>
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While I haven't had a full overhaul done, I have done exactly that with my A&P. I think the biggest bill I got from him was $8000ish.

Maybe not chastise but your condescending "finally an answer." Maybe your first post should have said only for labor what would you pay.
 
EdFred said:
Only to you Tom. Only to you.

When *I* dropped my plane off at the A&P, he charges me for parts and labor and everything, just like I would at the car mechanic. It's rare that I ever buy anything and then say put this on my plane.

You ask a wildly general question which you did not specific only labor. Then you chastise people for not saying specifically labor.
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He said "profit" in his original post. That clearly does not include parts cost.

He also said this question was vague in his original post.

I guess a certain group on here just like to bash Tom, no matter how benign his post is.
 
Bell206 said:
Net profit is very subjective to the industry. But when you talk "investors" then that is an entirely different level than your average small business. 7% would be on the extreme low end for a service based small business. Depending on industry the average SBs run at 13%-18% net profit with food businesses lower around 3%-4%. Most retailers don't track net profit as much as gross profit. For my small aviation maintenance business I shot for a 18% net profit across the board which put me slightly above the average small service business per the SBA. I wouldn't take on a job that provided less than 15% net. As I mentioned above, many years ago I was told by several successful airplane clients that anything less than 15% net profit would be considered a paid hobby vs a business venture. But to each their own.
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@Bell206, I do small business mentoring with SCORE. Here is a way that I suggest my clients look at their businesses:

There should be two cash streams from the business. First, the owner(s) should be paid market rate for the job(s) that they are doing. In the case of an A&P what would he/she expect to be paid if they went out in the job market and got hired? Second, the owner(s) should be paid a fair return on their cash investment in the business. For investment in land and buildings, if any, a return of maybe 9% would be appropriate. The rest of the investment a small business is a fairly shaky proposition so the investment should earn based on its risk, maybe 25%.

We tell people that if they only get what they'd get as someone else's employee and they do not get any return on their investment is that they've "bought themselves a job."

Note that this model does not consider revenue or net profit directly, but of course you have to have both in order to generate the owner's income. Also, in cases where the business cannot generate the cash to pay both streams, the difference should be considered and booked as a loan from the owner to the business or as an equity contribution to the business. That loan or equity should in the long run generate a return to the owner as well. (Cash shortages in small businesses are not uncommon. investments in plant & equipment and increasing accounts receivable are common things that eat cash.)
 
EdFred said:
Maybe not chastise but your condescending "finally an answer."
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No It is starting to sound like you take every thing said as an insult.
You blame me for being condescending and chastising. And I never did either.
 
airdale said:
I do small business mentoring with SCORE.
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Thank you for taking the time and supporting SCORE. I've had a number of SCORE mentors over the years as I dabbled in different ventures. And being able to sit down, face to face, with a "titan" of industry was the best decision I ever made. But I was lucky as I had a day job that paid good and provided a lot of free time to pursue (and fund) my side ventures. I was also lucky that 2 of my mentors were aviation oriented which really helped. My answer above was merely a summary to the general discussion.

Since my situation was unique as I had a cash flow from the day job, I tended to pursue niche markets that most A&Ps or small shops didn't offer which tended to be riskier, but more profitable...provided they worked. In my aviation work, it was easier for me to track net profit as some of the cash investments (mostly specialized equipment) were difficult to turn into a direct return due to the nature of the business. However, I ran my non-aviation business close to what you have suggested as it was more conventional.

It worked out in the end and I had a great time doing it. Had the cost of insurance not went through the roof, I'd probably still tinker on aircraft since I retired from the day job 5 years ago. But with everyday Saturday now, it's tough to get back into the groove.:)
 
EdFred said:
While I haven't had a full overhaul done, I have done exactly that with my A&P. I think the biggest bill I got from him was $8000ish.
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I would hope that 8k bill was not a surprise.

would you pay $5k labor fee half up front and half when completed?
plus any costs that the A&P occurred in your behalf will be added to the last half payment.
and you buy all parts on your CC
 
Tom-D said:
Its only worth what a customer is willing to pay, thus the conversation.
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No, no, no, no Tom, customers can really suck. You need to figure out what you need to make to not lose your shirt and to make it worth your while. Then communicate the conditions of your price or rate and estimate of what it will cost. If the customer wants to haggle, that's up to you. Sometimes it's better to let a problem walk away. If you are fair, you'll get the work, except from the jerks, better to weed them out up front.
 
PaulS said:
No, no, no, no Tom, customers can really suck. You need to figure out what you need to make to not lose your shirt and to make it worth your while. Then communicate the conditions of your price or rate and estimate of what it will cost. If the customer wants to haggle, that's up to you. Sometimes it's better to let a problem walk away. If you are fair, you'll get the work, except from the jerks, better to weed them out up front.
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That's kinda what I do already,, this is more of what the market will bare.

I don't have sucky customers, they are too easy to spot.
 
Tom-D said:
Its only worth what a customer is willing to pay, thus the conversation.
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Since you don't (I assume) have a business, shop, etc. with overhead, it would be by an hourly rate of what local A&P's charge per hour or are paid per hour, not shop rates......

You should be used to being the ball by now;)
 
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Tom-D said:
I would hope that 8k bill was not a surprise.

would you pay $5k labor fee half up front and half when completed?
plus any costs that the A&P occurred in your behalf will be added to the last half payment.
and you buy all parts on your CC
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Not a surprise. Knew it was coming. And I have paid some up front in the past. Not on that one but when the A&P was getting started and wasn't as liquid as he is now.
 
EdFred said:
Not a surprise. Knew it was coming. And I have paid some up front in the past. Not on that one but when the A&P was getting started and wasn't as liquid as he is now.
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You didn't answer the question.
 
Tom-D said:
When an A&P does your engine overhaul, how much money should they make?
I know. this is vague, but how much money would you pay any good A&P to do your overhaul.
that's to, remove, disassemble, clean and send all the repairable out to machine shops, then reassemble, reinstall, and return to service?

simple question, what do you think is fare
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Didn't you say you were giving it all up...and retiring? o_O
 
Tom-D said:
You didn't answer the question.
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Yes I did. Read slower.

I would hope that 8k bill was not a surprise.
Not a surprise. Knew it was coming.

would you pay $5k labor fee half up front and half when completed?
And I have paid some up front in the past. (Since my AP continued to accept work from me, any sane person would assume that I paid the entire bill)

How is that not answering the question?
 
EdFred said:
Yes I did. Read slower.

I would hope that 8k bill was not a surprise.
Not a surprise. Knew it was coming.

would you pay $5k labor fee half up front and half when completed?
And I have paid some up front in the past. (Since my AP continued to accept work from me, any sane person would assume that I paid the entire bill)

How is that not answering the question?
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I didn't see a "Yes" in there anywhere.
 
EdFred said:
How is "I have" not an answer in the affirmative?

Do you have undisclosed cognitive deficiencies?
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Don't try to blame me for your reluctance to answer the question.
Would you or would you not pay the 5k labor fee?

An old Saying,, "Try to be cute, end up looking stupid."
 
So....what does it profit a man to gain the world?.....yet lose his soul? ;)
 
Tom-D said:
Don't try to blame me for your reluctance to answer the question.
Would you or would you not pay the 5k labor fee?

An old Saying,, "Try to be cute, end up looking stupid."
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I already answered the question in the affirmative. I can't help that you don't understand the concept that "I have already done that" is a past tense answer of yes.

It's like asking a currently married person "would you ever get married?" and them answering "I have."

You have some serious cognitive issues if you can't figure out that "I have" is an answer that not only affirms "yes" but that's it's already ****ing been done.
 
Tom-D said:
Its only worth what a customer is willing to pay, thus the conversation.
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Sometimes customers pay, are ****ed off on the price, say nothing and never return.

Looks like someone guessed 30-36 hours earlier. Multiply by the amount per hour for your area, and you have your answer (looks like 4-5 k or about 250k a year if you can do an engine a week).

We have mobile A&Ps in my area, so no overhead costs
 
Tom-D said:
Its only worth what a customer is willing to pay, thus the conversation.
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As a relative newbie here, this looks like the most direct way to look at it. I’ve always kinda figured what a man makes is his business.

Coming from a construction background, it seems to me like an equitable arrangement would be agree on a price up front, pay for the parts on arrival, and the balance on completion. I would not expect the AP to be stuck with any unforeseen conditions that he couldn’t, or shouldn’t, be expected to take into account on his original estimate.

I’ve always thought that over time, when dealing with honorable people in what’s hopefully an ongoing relationship, the best value is received by being a good customer. To me, in a very real sense, if I’m trusting someone with the lives of loved ones, it seems foolish to trap him in a job that’s bad for him. I would expect to be told what was found that was unknown, get his recommendations, and come to a mutual decision on what needs to be done and the cost.

Is it unreasonable to expect him to handle his labor costs until the job is done? And am I being terribly naive as I’m trying to educate myself?
 
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Volitation said:
As a relative newbie here, this looks like the most direct way to look at it. I’ve always kinda figured what a man makes is his business.

Coming from a construction background, it seems to me like an equitable arrangement would be agree on a price up front, pay for the parts on arrival, and the balance on completion. I would not expect the AP to be stuck with any unforeseen conditions that he couldn’t, or shouldn’t, be expected to take into account on his original estimate.

I’ve always thought that over time, when dealing with honorable people in what’s hopefully an ongoing relationship, the best value is received by being a good customer. To me, in a very real sense, if I’m trusting someone with the lives of loved ones, it seems foolish to trap him in a job that’s bad for him. I would expect to be told what was found that was unknown, get his recommendations, and come to a mutual decision on what needs to be done and the cost.

Is it unreasonable to expect him to handle his labor costs until the job is done? And am I being terribly naive as I’m trying to educate myself?
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When you are facing large maintenance work it is difficult to nail down what the end cost will be, because in many cases the bigger the hole gets, the bigger it needs to be.
A simply alternator change can be the cause of finding a chipped tooth on the engine drive gear.
So the accessory case must be removed, which shows us the mag impulse couplings are a mess of corrosion, so while you got the mags off might as well get them overhauled.

And we still haven't found the chipped tooth of the gear.
 
Tom-D said:
When you are facing large maintenance work it is difficult to nail down what the end cost will be, because in many cases the bigger the hole gets, the bigger it needs to be.
A simply alternator change can be the cause of finding a chipped tooth on the engine drive gear.
So the accessory case must be removed, which shows us the mag impulse couplings are a mess of corrosion, so while you got the mags off might as well get them overhauled.

And we still haven't found the chipped tooth of the gear.
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That example seems to be 3 different jobs. The alternator change is the first one. Doing whatever needs done about the engine drive gear is the second job. The magneto overhaul is the third job. This happens in auto repair shops, too. As each job is "uncovered", the shop and the customer need to have a conversation.
 
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Cap'n Jack said:
That example seems to be 3 different jobs. The alternator change is the first one. Doing whatever needs done about the engine drive gear is the second job. The magneto overhaul is the third job. This happens in auto repair shops, too. As each jobe is "uncovered", the shop and the customer need to have a conversation.
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Auto shops are not required to be airworthy. Even if you do consider them separate jobs, they usually end up on one bill.
OBTW, mag impulse couplings are not included as part of a mag, and they aren't usually overhauled, just replaced. (and they aren't cheap)
 
Tom-D said:
Auto shops are not required to be airworthy. Even if you do consider them separate jobs, they usually end up on one bill.
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The jobs end up as separate line items on the bill. Airworthiness or not of autoshops doesn't matter, at least in the context of this discussion. It does happen that starting a job on a vehicle exposes other problems. You may give a discount for the jobs discovered after the alternator replacement since doing whatever needs to be done to the engine drive gear requires alternator removal/replacement, but that is already covered as part of the original job.

Tom-D said:
OBTW, mag impulse couplings are not included as part of a mag, and they aren't usually overhauled, just replaced. (and they aren't cheap)
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You said they were, in your earlier post. I'm just going by what you wrote:
Tom-D said:
So the accessory case must be removed, which shows us the mag impulse couplings are a mess of corrosion, so while you got the mags off might as well get them overhauled.
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Cap'n Jack said:
The jobs end up as separate line items on the bill. Airworthiness or not of autoshops doesn't matter, at least in the context of this discussion. It does happen that starting a job on a vehicle exposes other problems. You may give a discount for the jobs discovered after the alternator replacement since doing whatever needs to be done to the engine drive gear requires alternator removal/replacement, but that is already covered as part of the original job.


You said they were, in your earlier post. I'm just going by what you wrote:
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the Mags are off, get them overhauled, not the impulse couplings.
 
Tom-D said:
Or your reading ability
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Nope. You know that the mag impulse couplings, although part of the magneto, are replaced and not overhauled. Someone who doesn't work with these devices wouldn't know it. Since magnetos don't drive themselves, it is reasonable for someone to think the magnetos are on the engine drive gear somehow, which you are now removing. As you are removing the accessory case, you are apparently removing the magnetos as well.

While the line of reasoning above may be incorrect, someone with small amount of mechanical knowledge may well go down that track. Someone who may be new to this board, for example. Or some Just a couple of words would make the intent of your comment clearer, in the context you intended, and help you to be the resource you wish to be. You need to remember not everyone has your knowledge, and so do not know the context of what you are trying to convey as you do.
 
Cap'n Jack said:
Nope. You know that the mag impulse couplings, although part of the magneto, .
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Nope you are wrong, they are not a part of the mag. If you don't believe this try buying a mag with them installed
 
Cap'n Jack said:
Nope. You know that the mag impulse couplings, although part of the magneto, are replaced and not overhauled. Someone who doesn't work with these devices wouldn't know it. Since magnetos don't drive themselves, it is reasonable for someone to think the magnetos are on the engine drive gear somehow, which you are now removing. As you are removing the accessory case, you are apparently removing the magnetos as well.

While the line of reasoning above may be incorrect, someone with small amount of mechanical knowledge may well go down that track. Someone who may be new to this board, for example. Or some Just a couple of words would make the intent of your comment clearer, in the context you intended, and help you to be the resource you wish to be. You need to remember not everyone has your knowledge, and so do not know the context of what you are trying to convey as you do.
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I believe you are carried away with my scenario of how a job can get more involved than anticipated. Nit pick it for all you are worth, It won't make it go away. stuff happens
 
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