One of the reasons aviation-related and other luxury service startups have failed in recent years is underestimating the costs. Those going into the industry for the first time might get carried away when they realize they can afford the plane (or, in the case of “Uber for X” models, realize that they don’t even have to own a plane in order to sell charter flights) that they neglect the other costs – a mistake that could ultimately spell the collapse of the business.
Use the list below as a guideline to create a realistic budget for your operating expenses.
1. Fuel
Fuel can make up nearly a third of your operating costs. When including fuel in your budget, make sure to make allowances for price fluctuations.
2. Staff salaries and benefits
Apart from the routine costs of pay and healthcare, make room in your budget for incentives as well as administrative costs such as hiring new staff members through a job website or HR agency when someone leaves.
3. Maintenance
There are ways to save on maintenance without compromising the safety or luxury of your aircraft. Still, don’t be tempted to skimp too much on preventive maintenance – neglect will eventually catch up to you in the form of repair costs and loss of profits while grounded.
4. Damages and repairs
While the need for repairs might not always come up, it’s important to set aside a certain amount regularly. Unspent amounts from your repair budget can be put into an emergency fund for when you need to replace more expensive parts.
5. Cabin supplies, cleaning, and maintenance
Jet charters are most often a luxury purchase, so your interiors need to be in perfect condition as well. Apart from cleaning services and supplies, reserve an amount for repairs and replacements for interior items such as upholstery, lighting, and flooring.
6. Catering
Your food and beverage offerings can play a significant part in how your customers rate your service, so this needs to be an important consideration in your budget. Determine whether it would be more cost-effective in your case to hire a chef full-time or just purchase meals from a caterer or restaurant.
7. In-flight entertainment
This would include internet access, subscriptions to on-demand TV and movie services, and magazines.
8. Taxes and insurance
Have your accountant crunch the numbers to find you the best possible deals for your insurance, and determine all the possible tax exemptions.
9. Office expenses
The amount would depend largely on how many full-time in-office workers you have versus freelance contractors. This includes rent, utilities, cleaning services, office supply consumables, and replacements or repair of office equipment.
10. Advertising
An advertising budget is a necessity for your business and shouldn’t be an afterthought. Try to find lower-cost options for promotion such as targeted Facebook ads, and ads in local papers.
11. IT services
Apart from your office internet subscription, you might also need various software licenses, cloud-based storage and computing services, and website or app management costs.