Business Model

[deltafox]

A 29 year old systems engineer for a Fortune 500 company walks into a flight scholl and asks about flying their Cessna 162 SkyCatcher. "Why do you want to fly that?" He is interested in eventually getting his Private Pilot so they give him a sales pitch for their G1000 C172. He is still interested in the C162. The "instructor" isn't sure if he can get his ASEL in Light Sport but will look it up later. After a brief check of his logbook the prospective customer is given a preflight checklist and told to do it while the "instructor" watches him while distracted with his cell phone. The customer feels that the "instructor" is getting impatient as he carefully goes over each step. A towered airport, the "instructor" makes all the radio calls. He allows the customer to take off and transit to the training area, and gets distracted again by his cell phone. Back to the pattern, 3 successful laps for a total of 0.9 hours. Customer doesn't feel he accomplished anything. (He wasn't impressed with the C162.)

Charged 2.5 hours ($80/hr) for "instructor" time plus 0.9 hours ($135/hr) for the C162. Customer is then asked to consider buying new headset and sign up for King Schools online ground school. Another pitch was made for the C172 as it is only $5/hr more, but "instructor" failed to mention the $30/hr fuel surcharge.

Business Model #1: Charge for every minute the instructor talks to the student. Move student to the most expensive A/ as soon as possible.

Business Model #2: Fixed cost per lesson.

Business Model #3: Fixed cost per lesson for CFI, Hobbs time for A/C

Business mode #4: ???

Customer was advised not to return to this Flight School. He is having difficulty finding an LSA to rent in his geography.

[FlyingForFun]

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[drseti]

fixed cost per lesson or fixed cost for the instructor is not how it's done. Both plane and instructor are charged by the hour as well they should be.

I beg to differ. Maybe at most schools, but Business Model #3 is precisely how my flight school operates. Hobbs time for the plane, and a flat $100 per lesson for the instructor. A typical lesson (including ground instruction, flight instruction, pre-flight and post-flight briefings) runs 3 hours, but could be more (or less) depending upon the student's needs. Rationale behind the flat-rate CFI is that, if the clock is running, the student may be hesitant to stick around and get all his or her questions answered. And, a truly dedicated educator (as opposed to an hours-builder) won't mind sticking around and giving the student whatever he or she really needs to succeed.

[FlyingForFun]

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[drseti]

I never said or implied that. I merely differentiated between educators and hours-builders. That distinction stands regardless of how the flight school bills for lessons.

[FlyingForFun]

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[Jack Tyler]

"Many professionals such as doctors and lawyers charge based on time, not a flat fee."

Incorrect. Doctors slice up their in-office hours to 15 or 20 min segments and you could argue either that the patient is charged for that time block (the per-hour approach) -or- you could argue the cost of that time block is determined by what it costs the practice to offer that service. However, when a doctor performs a procedure, it's almost always tied to a fixed fee (with the actual cost to a given patient being determined by their network & specific insurer). If an attorney meets with a client - let's assume it's to initiate a divorce or write a will - there could be an initial fee involved based on an hourly charge...but more typically, it's a flat fee for the entire requested service. When more unique or complex services are needed, that shifts into the hourly fee structure.

My point is that many service fees are assessed using a combo of these two approaches, and both can be applied in a given school to best suit the nature of the service. E.g. at the flight school where I fly, a PPL or SPL program - soup to nuts - has a fixed price. This is done to bring financial certainty to the transaction for the customer (potential student), and to demonstrate a (claimed, at least) better commitment to the training process than the standard model (flat rate per hour, open ended) which is more typically used in my area. But other training services at this flight school are based on a per/hour structure, e.g. a Flight Review and/or Instrument Proficiency Check.

My assumption is that Paul's approach works well for Paul's flight training business because he works off a carefully developed curriculum that integrates in-flight with pre- and post-flight instruction, and because it fits the reality that some students are quicker at learning the skills and content than others (so for him, the time involved averages out while for the student it fits their needs). IME most schools work off what they claim is a standard curriculum of some origin (e.g. the Cessna program) with a flat per/hr fee but the individual instructor is allowed great leeway in how s/he delivers the instruction and therefore the cost experienced by the student. In those settings, the idea of a fixed fee for the entire SPL/PPL program would seem ruinous.

I just ran into 'Bob' at Saturday's EAA meeting, who initially wandered into our group some time ago after paying for 54 flight hours (PPL program) and had not yet soloed. He was very discouraged and thought it was his lack of ability, whereas in truth he was being grossly abused by his two instructors. This was occurring at the largest flight school at KCRG which claims to be the most professional in its approach. At the time I referred him to the school at our smaller recreational airport (KHEG mentioned above) and I learned on Saturday that he soloed within a few hours of starting at KHEG and now had his PPL and had started an IR. I believe that illustrates the difference in types of instruction that Paul was describing.

[drseti]

Then why make the comment in support of your fixed fee billing? The implication was made.

OK, four things will clarify this.

(1) Unless he or she happens to own the flight school, this is not a decision the individual CFI gets to make. Hourly vs. flat billing is a business decision the flight school makes -- and that was, I believe, the topic of this thread.

(2) I mentioned "educators" vs. "hours-builders" without defining either, so I'll attempt to do so now. I consider an educator as someone whose first priority is teaching. I consider someone an hours-builder if his or her first priority is accumulating those required 1500 hours toward an airline career. So, it goes to motivation, which may not be obvious on the surface.

There's a huge financial incentive for a future airline captain to start out instructing. To buy those 1500 hours out of pocket costs, let's say, $200,000. Teaching those same hours, the student pays for the plane, and the CFI gets paid (let's say) $50,000. That means the future jet jockey is actually earning a quarter of a million. Of course, either type of flight instructor needs (and deserves) to make a living.

(3) In raising point (2) above, I am guilty of thread drift. So...

(4) Back to the original topic. When I started my flight school four years ago, I spent seven months in research and business-plan formation stage, so I gave this matter a lot of thought. Here's how I came up with my model:

Figure a CFI wants to work 5 days a week. We get about 40 weeks a year of flying weather here. That means 200 days a year of teaching (just the same as a public school teacher). My goal was to attract professional educators, so I need to pay about what the public schools do. Assume lessons (ground, flight, briefings) take, on average, three hours. That means a CFI can get in two lessons a day, if on a par with public school teachers. If each lesson pays $90 (that is, the $100 the student pays, less the 10% overhead the school retains for providing office, classroom, and support services), then the CFI can make on the order of 36,000/year (which is toward the upper end of our local public school system's salary schedule). Of course, we can't begin to offer the kind of benefits a school district does (no health insurance, for example), because we don't have the power of taxation that a school district enjoys. So, I will admit, our instructors would be taking a hit there. That selects for CFIs who have benefits through another job (or a spouse), which is why I ended up with only part-time CFIs. But they are professional educators (and I believe they can make a fair wage without having to stretch out a student's hours).

[deltafox]

Thanks for the open discussion. Its just what I had hoped.

Clarification: He was charged instructor time from moment he said "Hello" until he asked "How much do I owe you?" (2.5 hrs)

Also, he didn't like the control system on the C162. The yoke/stick felt uncomfortable.

Most of my civilian training has be handled the same way. In this case, that business model failed as the potential customer will not be going back to that school. As a newly minted CFI I'm searching to find a better way of doing business, one that is fair to the instructor as well as the student.

[FlyingForFun]

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[drseti]

I prefer a model that tailors things around the student, not around the school or instructor.

I believe the flat rate model, if done properly, does tailor things around the student. Consider that a student reserves a three-hour block, knowing that the instructor time for that block is a fixed $100 fee. No sticker-shock surprises there. Now, if the student wants or needs extra flight time, more of those three hours can be spent in the air. If he or she needs or wants more individualized ground instruction, the bulk of those three hours can be spent in the classroom. If the student wants supervised simulator time, the instructor can provide that. If the student wants to leave early, that is his or her right (and the instructor still gets paid for showing up and being available). If the student needs clarification on something that goes beyond the three hour block, there is enough slop built into the schedule that the student can stick around for an extra hour, at no extra cost, and get all of his or her questions answered.

Before committing to lessons under this model, the student has a chance to sample different instructors essentially for free. That is, a 1-hour Introductory Lesson is priced at $120 (the actual hobbs time for the airplane, including fuel surcharge and sales tax), so the instructor is free. My CFIs are willing to contribute this free lesson to earn a new student.

This is a student-driven model (within the limits of the published syllabus, which the student has in hand). And, I believe it's fair to the instructor (as employee) as well as to the student (as customer). More important, my students believe it's fair.

[FlyingForFun]

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[drseti]

There is no right or wrong answer here.

Absolutely true! Just as food for thought, let me volunteer what has, IMHO, been a problem with hourly instructor rates (I've worked with flight schools that do it that way). Say you charge hourly for both flight and ground instruction. Say a student has a bunch of questions after a lesson, that lead to a two-hour discussion (not an exaggeration, but an actual experience). So, you charge two hours for the ground instruction. Next time, the student is going to think twice before asking questions, hence may not get the kind of lesson closure he or she needs. That's the kind of sticker-shock surprise I'm trying to avoid with flat-rate pricing.

BTW, congratulations on having soloed in under 8 hours. That shows that whatever instructional model was being used years back worked well for you!

I believe your most important contribution to this discussion is:

each student is different and has different needs

Which too few instructors seem to realize.