I am continually asked about our industry and ethics. In fact, as I participated on a panel at a Corporate Jet Investor conference in Miami last month, Alasdair Whyte asked me directly if our industry has an ethics problem. My short answer was no. I went on to be more specific about what we do have, which is in certain instances a lack of transparency among some players.
It is not just the players in the transaction side of our business by the way. The MRO and repair side of our industry has a few bad apples as well. In fact, when the NBAA created a statement of ethics this year it was generated to address specifically the MRO side of the business. Reputable maintenance and overhaul facilities were tired of some less scrupulous shops offering fees for business. Money, gifts and trips offered to those who could bring big jobs to their shops.
As I began to get more specific about the problem, I segmented our industry across a timeline. In the early days when the concept of brokerage was less prevalent and the dealer side of the transaction segment was more the methodology, the lack of transparency fell along the fee paid to someone to buy one dealer’s plane over the other dealer. This left the value or lack of value of the aircraft less in the crosshairs than did the fee paid.
As time went on and the methodology of the transaction fell more to the brokerage side the advent of the back-to-back transaction came along to add what could be a lack of transparency. That being said, not all back-to-back transactions take place to hide the financial side of a transaction. Some are created to legitimately handle a trade-in.
As I continue to talk to industry players about this topic we keep coming back to the same place. No real barrier to entry for our industry, especially as a consultant or broker. That means anyone who claims they can perform the transactional side of the buy/sell can put up a shingle, or even less, and solicit business. For those who are the end user please beware of those that hold themselves out to be capable of helping. As business gets more difficult it seems more people try to enter our profession.
They offer the exact same services that those of us who have been doing this for years offer. Remember, no barriers to entry. As I used to say anyone with a stack of quarters and a business card can say they are consultants and brokers. Today with cell phones and the internet one does not even need the stack of quarters or the business card.
So, what may be an acceptable barrier to entry? Number of years in the business, number of transactions, and the very best references that can be checked and validated? If you are the prospect, I suggest that one does not bypass this critical due diligence. Remember, if you are about to buy or sell you only get one chance to get it right.
Fee is another area that should be considered. If something sounds too good to be true it probably is. If you think you can really get the service offered by those of us that come to work each day with a capable and knowledgeable team around them to deliver a service that can be relied on stop and think about your own business. Can someone really provide all those promised parts of a successful transaction at a low discounted fee? Doubtful. After all, every cost basis in a transaction has gone up. Airline travel, hotels, meals and salaries. How can anyone who really gets from behind their desk, travels, puts in actual time on a project, and can afford to employ the best do it for less.
This does not mean one should overpay because one of us does not know how to add efficiency and legitimate cost savings to a project. No one needs to reward poor business acumen. The take away of this article is be smart. As a shopper for these services that are vital to a transaction listen, ask questions, check references. Create your own barrier to entry for the person you hire. This is not a buyer or seller beware. This is a great industry. Back to the original question, we do not have an ethics problem. Yes, there may be a very small percentage of people, like in any industry, that do have problems with ethics. If you forget my advice on due diligence, you gets what you gets!