Mesinger Pulse – Setting a Selling Price That Means Business

I know you all have seen the same banner headlines that I have: “Next to Sell!”, “Owner wants this plane gone!”, “Drastic Price Reduction!”. They go on and on with catchy one liners. Is there a rule that first a plane must be put on the market, then some number of days later the seller lowers their price if not once then many times, then the plane gets attention and then and only after all of that it sells? No, there is no rule written or spoken. The only rule seems to be that when the price is right the plane sells. Granted there are now consistently higher inventory levels due to weaker markets in much of the world, however, North America is still active and vibrant. In fact, with many categories of aircraft, the monthly units sold equals those of years ago.

So rather than find oneself seemingly chasing a market with price, why not lead the market? Why not come out first with a smart, thoughtful price rather than following that up with catchy one liners? Sounds so easy. There are many layers of complexity to setting that thoughtful price and have the outcome be a success with a maximized sale price. The first and foremost is confidence established between the selling broker and the seller. Without this confidence a seller may feel as if the selling broker is just trying to make a quick sale based on price. Believe me if it were that easy to sell a plane the seller would not need their trusted professional selling partner. In order to gain that confidence, the sales professional must create a market update that allows the seller to place themselves in the position of the buyer. Laser focus cannot just be on the direct market of the selling aircraft. It must also include attention to the left and right of competitive markets that may have an impact. Another factor to consider is that today’s buyers do not have the same product loyalty as before. It is now price, price, price. But on top of that, the offering must also represent the best plane at the best price. Setting the comparative analysis is vital in this pricing process.

Many buyers right now are pulling out all the usual distractions like having to wait until after the election, or needing to make sure the stock market highs are not just a bubble. As I have said for years, there are buying distractions and there are real game changers. I have also mentioned in past speeches and articles that sometimes I wish I were in the fence building business so that when prospects say they are just going to sit on the fence, I could at least be making a sale! Remember that real buyers look for smart reasons to buy rather than crazy reasons to delay.

So what must a seller do when developing a pricing strategy? First believe the numbers. The market is trending down. Not falling, but in fact really shedding between 7-10 % annually, or unfortunately even more in some markets, which has now been universally recognized by lenders, owners and valuation guides. If you, as a seller, will embrace that as a fact then you will realize that using the famous one liners such as, “I am not willing to give it away” or “I am in no hurry” will translate to, waiting now will cost you more money later.

Buyers are watching this normal residual loss rate with keen eyes. The real buyer just wants to be sure they are not leaving anything on the table. Funny enough, that is the same thing sellers are trying to avoid. Both sides are watching the same market space and trying to protect their positions.  Ultimately both sides can and must come away with a good feeling about the sale/purchase price.

The seller must work to set a price that encourages the buyer to act now, not later. Speaking of later, I hear all the time from sellers that they are afraid to put an ask price out publicly and instead want to go with “Make Offer”. In my opinion this is a huge mistake often founded on the belief that the aircraft market is positioning itself for a rebound and it is harder to raise a price to capture that when it occurs. My response to potential sellers when confronted with that statement is to remind them of two things: First, the market is still going down so rebound from where? Second, those that do not put an asking price and only have “Make Offer” are really demonstrating they are probably not a real seller today and/or do not correctly understand where their airplane fits in the market. If we can agree as I said before that waiting to sell will only mean selling for less later, then coming out of the gate not looking like a real seller is a wrong strategy.

I wish that we had more sophistication in our industry. I wish I could say that there was a traditional spread between an asking price and a selling price. There is not. My only guidance here is to not set a number much higher than what you will ultimately take. Sure, this does not give much sport to the negotiation, however it does declare to a buyer, look here now!