Calculate your Start Up Costs

With your business plan in place, you should be able to start calculating/estimating your startup costs.

How much money do you need to get this thing going?

A key part of your planning on starting the school is figuring out how much money you will need to both get your school ready to open the doors and how much you need to be able to sustain operations (especially during your first year). When making these estimates it might be wise to underestimate your revenue projections and overestimate your expected costs to help you be better planned for actual operations. The Small Business Administration has a great webpage that can help you do this analysis (https://www.sba.gov/business-guide/plan-your-business/calculate-your-startup-costs ) The notes below are some suggestions on the flight school specific costs you may want to consider. 

Costs:

While one might think that it would be better to find a location without many certificated pilots for better market potential, remember that a significant number of pilots come from families with pilots in their background. Additionally, finding a location with a lot of initial pilot certificate holders could mean that you could tap into a market that would be interested in advanced training and certificates.

Fixed Costs
These will stay the same each month regardless of how many flight hours or other services you provide per month.

• Hangar rental – typically $100-500 per month

• Office space (depends on airport space available and size of your school)
  • Ex. 3000 square feet of office space at $2.083 per square foot per month = $6,250 per month
• Staff
  • How will you compensate your office staff and your CFIs?
  • If they are on salary, this will be a fixed expense. Even if they are hourly employees, you will likely .ave them scheduled for set periods each week that may not be affected by the number of flight hours you are providing
• Property and Liability Insurance
• Aircraft Insurance (commercial insurance typically with $1000 deductible)
  • Consult with you aviation insurance representatives
  • Assured Partners Aerospace insurance can help you shop around for a policy and rate that can suit your school.
    • https://www.assuredpartners.com/aerospace/

Variable Costs

These will depend on how many flight hours or number of other services you provide using the applicable resource. You can think of these as things to help build your hourly rate.

• Airplane (classify for taxes) $150,000 (ex. C172)
  • How will you pay for your aircraft fleet?
    • Purchase?
      • Finance the aircraft
      • Pay it all upfront
    • Lease back (wet vs. dry)?
      • Will you try to get the owner to pay for insurance while you take care of the maintenance?
      • Maybe a 1-year exclusive agreement with 60 days notice to back out?
• Instructor Wages 
  • Most schools pay their instructors based on the amount of instruction time they provide to your customers. If you pay them on salary instead, you would want to count their salaries as a fixed expense instead. 
  • Remember that if you want to provide a uniform program of training, you will need to hire your CFIs as employees rather than a 1099 contactor. Read more here: https://www.aopa.org/training-and-safety/flight-schools/flight-school-business/newsletter/2011/march/25/are-your-cfis-employed-as-independent-contractors
• 100-hour inspections (based on Tach Time vs. Hobbs
  • One school owner suggested using lower rpm settings for cruise to help maximize the time between inspections
• Fuel (8 gal/hr @ $7/gal = $42/hr)
• Maintenance fees ($50-60/hr)
  • Part of this is the engine reserve fund. Costs for a typical engine overhaul can cost upwards of $30-35,000.
    • Depends on TBO left (e.g. 1000 hrs left on 2000hr TBO engine = need to save 2x as much /hr)
    • Ex. $12.50/hr

Revenue

• This will mostly be generated by aircraft rental and instructor fees that you charge during training
  • Be sure consider both aircraft operating costs and a maintenance fund when determining what you plan to charge for your aircraft
• You might consider having a pilot supply shop where you can sell supplies like textbooks, charts, headsets, etc. that could be a source of revenue for your business. Looks for deals from the manufacturers and suppliers that are offered to flight schools in particular.
• Determine the break-even point (e.g. 1 year)
  • Ex. How many hours of rental and instruction will you need to sell for your school to break even?