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cosmicgypsy

Financing for dropzones

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(edited)

It took a great deal of effort to avoid busting out laughing in the middle of the shop reading this. But then I stopped and thought about it and there are some very successful DZ owners. I am not one of them. This is just my perspective from observing this for close to thirty years. There seems to be a formula for being successful in this industry. Oddly it seems to be to not try to make money running a DZ. As far as I can tell most of the real money is made in other side operations. Running, leasing, buying, and selling aircraft for example. And even then unless you are very smart about it you can lose your ass. It's hard for me to imagination a busyness plan that you could walk into a bank with that would not make them cringe. Such people are extremely risk adverse, and I'm just talking about finance. I can't imagine how they would react to the liability. I'd try to couch it in the form of a aircraft deal supplying services to another company with whom you have a signed contract... etc. And it's hard for me to imagine being successful with the payments for a busyness loan hanging over your head. People finance aircraft and the payments kill them. Banks want a lot of insurance on some thing like an aircraft. Insurance companies ether will not let you use them for skydiving, or want a good/expensive pilot, or want a lot of money. Some people self insure which basically means you don't need a loan to begin with. 

 

If you want to look at an example, look into how Roger Nellson started his Chicago drop zone after he got out of jail. If he was still around he would straight up tell you how to do it. Maybe his family will tell you the story.

 

If I was going to try to make money in that field... I wouldn't do it, not directly. I'd buy a plane. I'd start an independent aviation service supplying service to drop zones. Be careful with you contracts. If they can't make the payments or supply the busyness move some where else. Be a snow bird. I would fly the plane my self, or hire a very good pilot. I'd self insure. And I would not take out a lone. If you can't do that, buy a smaller plane or don't do it at all. You need to be a pilot, A+P, I. 

 

Why on earth would you want to buy a dropzone? Is it making so much money, are the books so good that it is actually attractive as an investment? There have got to be way better investment opportunities out there with better and more certain ROI then a dropzone. This smells passion motivated. If that's the case, then if you don't have the money to do it then you don't have the money that you will lose supporting it. No loan for you.

 

Lee

Edited by RiggerLee

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Well, I was part of a DZ that had a line of credit from a bank. 
We used that money for 'big' expenses, like rebuilding the engine on one of the planes. Or a new tandem rig (actual purchases when I was part of the club). We had a steady tandem business (maybe 20 every weekend), and a fairly active S/L first jump class (maybe averaging 5 every weekend). 2 182s. The bank had no problem, in part because we had 2 planes for collateral. 
The LoC would get extended, then slowly paid off. The bank understood we shut down in the winter and would accept 'interest only' payments when we were on winter hiatus. 

Also, after 4 years of no DZ near me, one started up again this year. The old Green Bay Skydivers reopened as "Skydive Freefall Adventure" on Memorial Day weekend. One of the TIs from the old operation and his wife, who worked manifest at the old place rented the same hangar, leased the same plane and got a pair of tandem rigs from one of the area DZs.
I have zero clue what sort of start up money they already had or how much it took, but I know they took out at least some of the money as a loan. 

Have a business plan. Have projected income (if its already an operational DZ, show the numbers of jumps, each type and the income from them), projected costs, all of that. 
You can get around the liability question by showing them the waiver and how many successful lawsuits have been pursued against DZs. 

Do you have any/much experience as a DZO or DZ manager? 

If you haven't already done this, it's a ton of work. Plan on doing everything, from checking in the cute students to mopping out the toilets.
And the standard phrase 'you make a small pile of money in aviation by starting with a big one' is often true. Expenses can be brutal. One way around it is to be as many of your own 'employees' as you can.
Do you have a rigger ticket? Commercial piliot? A&P? 

Those can take a huge bite out of expenses (the bank would like that).

I would call this 'difficult but not impossible'. 

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If you’re asking for drop zone financing advice here, you’re not ready to buy a drop zone. IMHO

Do you have a good DZO friend that has been around a while that can mentor you through the process?

 

There are about 101 things to review before purchasing, or starting a DZ from scratch.

A nicely run DZ in a good location can be very lucrative.

Signed,

recovering dzo

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