The Hidden Dangers of Shopping Price Alone for an Aircraft Broker
What do I look for in an Aircraft Broker – Should I shop price alone?
Occasionally, I find myself having this conversation with a prospective client; “Well, so and so offered to work for half the price you quoted. Can you match that price?” My answer is frankly, no I can’t. Let me explain why.
When you encounter someone quoting radically lower than market rates, there is always a reason for that. There are a few things you should consider when selecting the right agent to sell/ purchase an aircraft. This is what I have learned.
What leads someone to charge radically less than the leading players in any given marketplace?
Are they worth more than they are charging? Likely not. They are charging what they need to charge to get business from a broker who offers (and invests in) a superior product. You will never see long standing, industry leading brokerage houses selling themselves short to buy market share. It’s a fool’s errand and a short road to failure. There is usually another explanation.
Many times, you will find that aircraft sales/ brokerage is a secondary business for people quoting low. Their strength is in other areas, and you will see that in those areas of strength they are commanding top rate for their services. A maintenance shop that sets its eye on the sales business will often be charging $175/ hour or more for their shop rate. Why? Because they are a professional maintenance organization and that is the industry standard rate. It’s worth paying this rate for a good shop because they stand on their reputation and people do business with them based on the quality of their work. A training organization that charges over $1000/ day for training will quote to sell or buy your airplane for a song. Why? It’s not what they know how to do well, nor have they invested themselves in the business of aircraft sales. You won’t find these people in the member roles of industry leading sales organizations. You will often find reputable brokers refusing to do business with these organizations because of their lack of experience and their questionable tactics. In addition, these brokers often run rough shod through the delicate process of negotiating the inspection and sale of an airplane.
Are there good reasons for charging significantly less than the pros?
Not if you’re a pro yourself. Think about it. If a broker cannot command the industry standard rate when they are negotiating their own value, how can they negotiate a fair market value for your airplane? Will they suddenly become better at negotiating a price for you than they have negotiated for themselves? Nope. They will underperform on the sale of your airplane as they have perhaps done in the sale of their services. A second possibility is that they are not investing nearly as much into the marketing and sale of your aircraft as are their professional counterparts. A third possibility is that they are making hidden profits on the sale of your aircraft that you don’t know about. They may offer to flip your airplane where you sell it to them first and they sell to the client. They may also work both ends of a deal where they get a kickback from another dealer or shop (which comes out of your pocket). They may make their profit over bringing your airplane into their maintenance shop and capitalizing there. Sadly, there are some questionable characters in this industry of ours.
What should you look for in a good broker?
- Good Reputation. The respect of others in their industry. If nobody outside the organization speaks highly of them, there is usually good reason.
- Market Share. If they are doing it right, they will be doing it a lot. This does not mean focusing exclusively on number of airplanes sold. I would prefer a broker who sells similar planes for more money, rather than someone who simply transacts more but at a lower price per unit. There may be advantage to a broker who is widely focused on markets surrounding your airplane (upstream and downstream) because many buyers come from upstream or downstream products. Make sure you get the big picture.
- Global Presence and Saavy. You need someone who knows the ins and outs of doing business globally and who has experience in this potential mine field. There are a lot of deals being conducted outside the US currently, and it’s important to be prepared to entertain buyers from abroad. Brokers with presence outside the US have added credibility with international buyers.
- Experience/ Durability. Find someone who has stood the test of time. How many years of sales experience does the organization, or the sales team (combined) have? This is critical when a deal hits some turbulence. Having some gray hair is a good thing in this case. An experienced broker can keep a deal on track that would otherwise derail. This is especially important in a fragile marketplace.
- Relationship. You want a broker who has good credibility with other dealers, shops, training organizations, and manufacturers. These things will all work greatly in your favor and a good broker will cost far less than they gain you through the course of the sale/ purchase of your aircraft.
Find the right one, and not the cheapest one. Save yourself a lot of stress and a lot of money in the long run. If you align yourself with a good broker, you will end up well ahead in the cost benefit analysis every time.
This article was written by Gordon Ramsay, Vice President of Aircraft Sales at Lone Mountain Aircraft.
