Advice to Wannabees about paying up front -Stickie [Archive]

Ds3

2nd Sep 2011, 08:04

I would strongly recommend that anyone thinking of paying up front runs a credit report on the school in question before doing so, or at least the limited company that operates the school.

They can be obtained from the likes of Experian for what is a very nominal amount in comparison to what you risk to lose, and will show a lot of pertinent information such as whether the company has made a profit or loss in the last few accounting periods, what their net worth is, whether they've incurred any court judgements etc.

This will give you a very good indication of the future prospects of the school. For instance, I ran checks on a number of places I was considering and one in particular showed heavy losses and a net worth of minus £200k. Didn't stop me considering learning at that school, but I certainly wouldn't give them a penny until services or goods had been received.

If anyone wants any assistance interpreting a credit report then I'm more than happy to help!

IO540

2nd Sep 2011, 08:26

Credit reports are practically worthless.

I have seen so many.

Only idiotic companies attach much value to them. I have just had a case of one supplier refusing credit to my company (est. 1991 and paying all creditors on 30 day terms, on the dot) because Experian decided we are about to go bust. How did they work that out? Firstly, being under £4M (?) turnover I file only abbreviated accounts. (This is sure to be the case for nearly all flying schools). These show no turnover figure so Experian have to make wild extrapolations from almost no data. They show year-end assets, but those are prone to wild gyrations according to whether e.g. I happen to draw out a big dividend just before or just after the year end. In 2010, I drew one just before, depleting the cash position, hence all this hassle. I got onto Experian but the scammers want £75 to take the phone call. I wrote to them and got back a boilerplate bollox reply.

The only way to do this is to speak to the people behind the company and use your instinct to get a feel for them. If you are happy with that (and there are many many "no" indicators e.g. them pressing hard for a credit account) then you give them a small facility so if they go down you don't lose much.

Unfortunately just about everybody new to flight training isn't going to have such a business instinct, and most of the many young people doing PPLs won't be clued up at all.

Also nearly all flying schools are bound to look extremely dodgy on paper.

You could also have one school which has no assets (because they lease everything in, enabling them to weather downturns etc) which is run by smart decent people, and another school showing substantial assets which are just massively overvalued rotting aircraft hulls, which is run by crooks.

The only advice is to never pay up front.

dublinpilot

2nd Sep 2011, 08:34

Credit reports are practically worthless.

I agree totally. Most flight schools will be small businesses, and therefore credit agencies have access to very little information on them.

Any that I've seen have been based on very very little data, and where it's based on info in the companies office (companies house in the UK) it was never based on the most recently available financial statements. Often the data was years out of date. And in any case, thety try to put the information available into a standardised form which for small businesses, ends up being a square into a round hole.

I wouldn't waste my money on a credit report.

Go and get the most recent financial statements from the companies office/house if you wish. You might be lucky and there are fairly recently, but in all likelyhood they will be at least a year old, and in the current climate, that is achient history.

benppl

2nd Sep 2011, 08:54

I pay for 10 hour blocks upfront.

Its £12 cheaper per lesson and I can stomach losing a grand worse case..but I've been running businesses since I was 17 and generally get a vibe if in dealing with a bad egg (touch wood)

I would never lay £7000-£8000 out for lesson, two reasons one of them is if they did go bust then it’s a lot of cash to loose, the other reason would be..they have all your money for the course..are they going to be that interested in getting you up/working with/around your diary!

SDB73

2nd Sep 2011, 09:23

Giving anyone your money in advance for anything is a financial risk. If you've assessed the risk, against the reward for the advance payment, then all you're doing is making a judgement call, and that's for the individual to make.

There is nothing special about flight training in this.

For every person who loses their money in this way through a flight school, countless others get exactly what they've paid for.

Making a blanket statement that you would be a fool to give you money in advance (based on the fact that some people lose it), is in many ways the same as saying as saying that only a fool would get into a light aircraft (based on the fact that some poeple crash).

There are many reputable companies who's business model relies on advance payments (by this I don't mean they would go bankrupt otherwise, I mean that their business model is designed for it), and they will be negatively affected if everyone just warns against giving your money in advance.

It would be a shame to destroy the good work of many successful and reputable businesses, just because a few unsavory / unsuccessful ones fail to deliver.

A more valuable solution would be a well conceived and managed league table / feedback system for flight schools to help people decide. But that carries with it it's own complications.

IO540

2nd Sep 2011, 10:19

There is nothing special about flight training in this.

Actually there is: a well above average % of aviation businesses are dodgy. The business seems to attract all kinds of characters. You find them running schools, maintenance companies, you name it.

For every person who loses their money in this way through a flight school, countless others get exactly what they've paid for.

True but when a school goes down, a whole load of students lose their money all in one go. It's a bit like saying it's OK to give all customers credit for £20k because, on average, most won't go bust right away.

There are many reputable companies who's business model relies on advance payments (by this I don't mean they would go bankrupt otherwise, I mean that their business model is designed for it)

Can you please elaborate on the "business model" which relies on borrowing large sums from customers? I am quite interested.

Ds3

2nd Sep 2011, 10:37

Sorry but your comments about credit reports are completely unfounded. I work at a senior level in credit and risk management and therefore have a very in depth knowledge of the contents of such reports and their application.

They should never be used as a sole reference and are worthless if you do not know how to interpret the data correctly, but in the right hands they can still provide very valuable information and guidance. Small limited companies aren't a problem, they only really fall over when you're looking at sole traders. Abbreviated accounts are also fine you can still extract plenty from the information they provide - they don't show turnover or profit but you can still see net worth, working capital, acid test ratios etc, along with public data such as court judgements, winding up petitions, length of time in business etc.

Filed accounts can certainly be well out of date and obviously you take then in to account when reviewing the report, but even then if the trend in previous years is showing losses every year it's unlikely to have turned around massively in the current year and therefore still represents a higher risk. The remaining data will all be accurate to within a few days.

For instance, if you are looking at paying a school £6k up front and they come across as very professional and friendly, however you run a credit report that tells you they are losing vast sums of money each year and have recently incurred a number of county court judgements - are you really still going to risk your money with them? You're a fool if you do, and you can only get that sort of information from the credit report - they aren't going to tell you that when you go and visit!

Let me give you an example from one of the many schools I considered;

Oct 2007 - Net Worth - £(70,000)
Oct 2008 - Net Worth - £(125,000)
Oct 2009 - Net Worth - £(200,000)

Ok so the last accounts filed are nearly two years out of date. However, this shows two things. Firstly in recent years the company has been losing around £60/70k per year - this isn't a sustainable model therefore unless something does or has changed it's likely decisions will need to be made. Yes it may have turned around in the last year or so, but given the economy that's probably unlikely. It also tells me they are now a month late filing their accounts with Companies House therefore will be incurring fines and potentially a Notification to Strike Off will be issued if they do not file asap. I wouldn't provide this company any credit facilities, and I certainly wouldn't give them £6k of my own money, despite the fact the people are lovely and the school seemed excellent.

The500man

2nd Sep 2011, 10:47

SGC,

It seems many threads descend into the toxicity of the paying up-front debate, so I can see why it could be benefitial to have a sticky for wannabee-PPLs. The most sensible thing would be to avoid excessive detail and just make the sticky informative so that the issue is raised and the wannabee can go away and do their own research or analysis on their chosen flying school. I don't think there should be a sticky with horror stories or reasons why flying schools are all cowboys for offering discounts or advice on how to research company accounts.

If you are going to include advice on how to protect monies paid to a flying school up-front, then you really need to research it thoroughly and make damn sure your advice is correct.

If you are just planning on making a sticky that says don't pay up-front, don't bother. There are plenty of posters on pprune that only come here to post "don't pay up-front" in big red letters at every opportunity!

P.S. I doubt the mods will give it a sticky when they didn't give this (http://www.pprune.org/private-flying/458546-pictures-your-planes.html) thread one! :)

znww5

2nd Sep 2011, 11:07

I'm with IO540 on this one. For the majority of 'newbies' starting their PPL, aviation is a totally alien environment. They won't be tapped into the pilot grapevine and will probably assume that any flying club/school will be a) good and b) financially secure. Otherwise they wouldn't be allowed to operate, right?

The only safe solution for Joe Bloggs is to either a) pay with a credit card and/or b) pay no more than they are prepared to lose if the company folds.

In my view, any company which predominantly bases its 'business model' on assumed block pre-payment income is precisely the sort which I would avoid like the plague. That's not a business model - it's a forlorn hope that things will work out OK.

The sticky idea is an excellent one, but it absolutely must contain a reasonable financial-risk health warning, otherwise it is entirely pointless!

IO540

2nd Sep 2011, 11:07

DS3 - I think you, like so many in the accountancy profession, do not understand that that more or less the only thing which really matters in business is cash. Cash is king, everything else is conjecture (as they say). All the various ratios etc are just fancy figures. Of course what really matters are the intentions and competence of the people behind it all, but you won't get that from abbreviated (or any other) accounts.

Obviously if there are CCJs then you don't touch the company with a 20ft bargepole (unless the CCJ record is a mistake, which is easily done; in fact my company got one of those some years ago as a result of some illiterate court employee mis-spelling the company name and then looking up the co. reg # from the mis-spelt version; took me 6 months to sort that out with the credit ref agency morons).

But all the smart crooks avoid CCJs. You always pay up just before :)

Also there are many smart honest businessmen who run very lean companies which generate loads of cash but always look terrible on paper (mine sure does).

It is anyway a sensible strategy to run a bleak asset position because it protects you from frivolous litigation ;) The companies which fatten up their accounts are ones who have borrowed money from dimwits (banks) who like to see pretty accounts, but one ends up paying a ton of extra corporation tax by retaining profits, overvaluing assets, etc. Aviation is a prime area for overvalued assets, with most aircraft owners being in total denial as to how much their hardware is really worth.

Not paying up front also prevents being tied to a bad school. When I started (2000) I had been in business for 22 years but was totally clue-less about aviation. I ended up in a school which ran such poor maintenance practices that I walked out after 20hrs. I did not pay up front but the change of aircraft type still cost me a big packet.

despite the fact the people are lovely and the school seemed excellent. in which case why not use that school but not give them money up front?

Ds3

2nd Sep 2011, 11:38

IO, please don't associate me with accountants ;) Credit management is a far cry from bean counting and has a far more commercial view point. My department are responsible for around 4,000 accounts covering approximately £20m at any one point, so I am very familiar with the phrase 'cash is king'!

Certainly the intentions and competency of the individuals involved are very pertinent, however if their accounts show they are losing money each year the business cannot be sustainable regardless, and therefore despite the best intentions remains high risk.

There are definite benefits to running a lean business and keeping the cash away from the tax man, however if you chose to operate like that you have to accept that you will struggle to get credit facilities with companies who do not have a trading history with you.

I work in the construction industry so most of the credit reports I look at show very poor figures and £0 credit limits, yet with careful analysis and consideration we still extend considerable credit facilities, manage a profitable turnover of £70m and have very, very minimal bad debt in comparison to turnover and industry averages.

in which case why not use that school but not give them money up front?

Absolutely, no reason at all not to use them if you aren't paying any money up front - worst case is you will have to transfer your training elsewhere if they do go under. My reference to credit reports and the associated implications was purely related to making large up front payments.

dublinpilot

2nd Sep 2011, 12:36

Let me give you an example from one of the many schools I considered;

Oct 2007 - Net Worth - £(70,000)
Oct 2008 - Net Worth - £(125,000)
Oct 2009 - Net Worth - £(200,000)

Certainly the intentions and competency of the individuals involved are very pertinent, however if their accounts show they are losing money each year the business cannot be sustainable regardless, and therefore despite the best intentions remains high risk.

That's all very fine, and I accept that you can spot a hopeless case from such a report.

But what if each of those years showed a steady "balance sheet total" of £125K or there abouts? (I didn't use the term "Net Worth" because financial statements are not designed to give a company's net worth. The assumptions and conventions in them are not designed to show a net worth.)

Such a business could be making a profit of £500K pa, with the directors taking it all out as salary (as most small businesses in that position would do to avoid paying Corp Tax as well as Income Tax).

Or it could be the case, that the directors haven't take a salary for the past two years, the aircraft are included in inflated values, and there is little chance of the company surviving very long at all.

A good bet is much harder to find through such reports, but I accept a hopeless case is much easier to find.

SDB73

2nd Sep 2011, 13:11

Come on IO540.

Actually there is: a well above average % of aviation businesses are dodgy. The business seems to attract all kinds of characters. You find them running schools, maintenance companies, you name it.

Is this another case of "what I personally perceive is what the world is" syndrome?

For example. What IS the "avereage % of dodgy businesses" that you are referncing? And what is the percentage of aviation businesses that are dodgy? Have you normalised these statistics by region, sector, age of business, turnover, etc, etc? Have you also refernced credit reports and normalised your statistics against those results?

Unless you have some actual facts to share about this, it's important not to make over-confident statements which may affect people's judgement.

True but when a school goes down, a whole load of students lose their money all in one go.

Again.. when you say "a whole load", what statistics is this based on, and how does this refute or counter the point that more people get what they paid for than don't? And finally how does that statement differentiate the aviation industry / flying schools from countless other businesses?

It's a bit like saying it's OK to give all customers credit for £20k because, on average, most won't go bust right away.

Not at all. Your above quote is the equivelant to saying "Always give your money to flying schools in advance", which I haven't said AT ALL.

Can you please elaborate on the "business model" which relies on borrowing large sums from customers? I am quite interested.

Sure. Any business model which uses the benefit of positive cash-flow to make their USP work. For instance a company which competes in a difficult marketplace by offering discounts to customers who pay in advance. They are effectively passing on the cash-flow savings (capital costs / finance / whatever your business uses as a metric).

This is one of the many reasons why drop-ship-based online shops are able to beat the highstreet as they don't need to keep stock, or arrange credit.

Do you ever buy anything online? Do you know the statistics of online fraud / bankrupcy? How do you mitigate against that when you buy online? Are you a fool for parting with your cash in advance? Do you recomend to the world that they would be nuts to do it? If not, how do you justify slating one without the other?

Ds3

2nd Sep 2011, 14:59

dublinpilot

If a company's balance sheet has remained steady for a number of years I wouldn't have any issues with that. Obviously there's still a risk, but my recommendation of viewing a credit report was more designed to spot the obvious hopeless cases.

If a school is on the brink of going under, there's a good chance (although obviously not in every case) that it will be reflected in the credit report. Assuming your average PPL takes a year to obtain which is quite a short time in terms of business, checking for obvious indicators of financial hardship is a no-brainer for me.

SDB73

2nd Sep 2011, 15:02

Totally agree with DS3

I don't think anyone would say that a credit report is ever a reliable way of assessing that there is no risk. But they're sometimes a very good indication that there is high risk.

This, along with some of the more sensitive research you can do - such as the one suggested by IO540 - should be used whenever paying in advance, should you personally decide that you are borderline on the risk you're taking.

Each case has to be taken on its own merit. Blanket "don't pay in advance" statements are just as worthless as blanket "pay in advance" statements - it all depends on the individual circumstance.

Gertrude the Wombat

2nd Sep 2011, 15:28

Do you ever buy anything online? Do you know the statistics of online fraud / bankrupcy? How do you mitigate against that when you buy online? Are you a fool for parting with your cash in advance? Do you recomend to the world that they would be nuts to do it? If not, how do you justify slating one without the other?
Well, we each form our judgements, don't we.

Personally I will buy online from Amazon using a credit card[#], but I will touch neither eBay nor PayPal with any sort of barge pole.

[#] Unless and until they start demanding Verified by Visa, which puts all the risk of fraud onto the punter (as explained on Light Blue Touchpaper for anyone who doesn't believe this).

SDB73

2nd Sep 2011, 15:31

GtW

Precisely! Hence the context of my original post on this. It's all about judging the individual organisation. You mitigate your risk online by going with reputable sellers, you don't instead just blanket refuse to buy online.

So a way of working out whether flight schools are reputable - or anything that even helps decide this - eg. a rating / feedback system would be a useful tool to students.

IO540

2nd Sep 2011, 15:43

The problem, as I keep saying, is that aviation is not like "normal business".

I have run my present business since 1991. Turnover since starting is around very low 8 figures, at a guess. Total bad debts under £2k. Yet I use a very simple formula: trading 10 years plus, and 10 employees plus, and no obnoxious behaviour (telling me that they are entitled to an account, etc) automatic £500 credit. Or any "big" company (e.g. BT) gets a £10k-20k credit. But nobody gets credit unless they confirm 30 day terms in writing. I never get references or credit reports.

It works because most customers are industrial B2B stuff. ~10% is done on CC but CC fraud is zero - under £30 over 20 years (we never used the 3 digit code until forced by our bank). We ship to any address, unlike so many morons who ship only to cardholder address.

Once you go out of this scene, things change.

Retail (public) facing businesses are much worse. Selling to Joe Public is not an easy business (many people are thick or aggressive, etc; a fact not helped by many shops being staffed by thick people) and most retailers are run by fairly "sharp" individuals. 1978-1991 I had another business and we sold a lot to big City computer dealers. Never saw so many shysters - until I got into flying.

Flying (GA) is another level..... I see this as an aircraft owner of nearly 10 years. The % of people who are quite simply dishonourable is definitely above 50%. (In industrial B2B it is probably under 1%). On top of that you get the starry eyed but honest people whose businesses fail simply because they would.

SDB73

2nd Sep 2011, 16:04

:)
The problem, as I keep saying, is that aviation is not like "normal business".

I know you keep saying it, but if I keep saying "the sky is pink with yellow stripe"s it won't make it true. You haven't qualified this repeated statement with any facts or evidence. It just appears to be your opinion.

The rest of your post seems to indicate that due to running two businesses, one of which for the last twenty years, you know about all other businesses and what is classed as "normal" in business (a veritable and qualified business expert) and have met and been able to assess the honesty of a significant proportion of people operating in aviation around the world (enough to be able to form meaningful statistics), and that way over half of them - you have been somehow able to detect - are dishonest based on some measurement you haven't described.

This is a pretty big statement, and one you literally cannot, under any circumstances corroborate, so becomes meaningless.

The reason I'm responding passionately and beligerantly about this, is that (with genuine respect) highly opinionated people (which I'm sure you couldn't argue, you are) are often charaterised on forums with spouting cast iron statements with no factual backing whatsoever, sometimes on important topics which the unsuspecting newbie can sometimes take as gospel, leading them to make illinformed decisions.

I'm sure you mean no harm, but that doesn't make it OK.

To clarify, I don't think anyone has an issue with statements like "I firmly believe that over 50% of the people I have dealt with in aviation are shysters." Or "I would never even consider giving money in advance to a flight school, as I've heard too many stories of people losing money". But there is a gaping chasm between these kinds of statments and the cast-iron "facts" you've stated in this thread.

To avoid us going round in circles - as we're not really getting anywhere - I'll butt out now, and so to anyone reading who is actually considering paying in advance, I would simply say :

1) Not all advance payments end in loss
2) Not all companies who ask for advance payments are con-artists
3) You are taking a risk when giving ANYONE money in advance, so do your research and make a decision about whether the reward is worth the risk
4) But at the end of the day - only YOU can decide if you are willing to take the risk, and just because someone else would / wouldn't doesn't mean you're foolish for making up your own mind.

Most of all.. don't listen to ANYONE on a forum who says you're a fool for paying in advance, or one that tries to tell you "do it, it'll be fine". Make up your own mind.

dublinpilot

2nd Sep 2011, 16:50

If a company's balance sheet has remained steady for a number of years I wouldn't have any issues with that. Obviously there's still a risk, but my recommendation of viewing a credit report was more designed to spot the obvious hopeless cases.

If all you are saying is that credit reports can help you spot hopeless cases, then I can agree with that.

But I have seen many 'false negatives' in these too, where companys were listed as extremely risky, simply because there was little information available from them. Yet the data that the report was based on was out of date too, and having personal knowledge of the company, I knew that it was quite successful. The credit report was simply wrong.

And in terms of being a good credit report, a stable balance sheet total (a totally meaningless figure if you understand financial statements) which is 12-24 mouths old isn't really much use in indicating today's position. The world is changing fast, and so are businesses. I appreciate that things in the UK might not be as bad as they are here, but things can change very quickly in the space of 12 months.

By way of example, no bank here will make any decision anymore based on last year's audited accounts. They want management accounts which are right up to date, because they know that last year's could tell a very different story.

Deeday

2nd Sep 2011, 19:10

1) Not all advance payments end in loss
2) Not all companies who ask for advance payments are con-artists
3) You are taking a risk when giving ANYONE money in advance, so do your research and make a decision about whether the reward is worth the risk
4) But at the end of the day - only YOU can decide if you are willing to take the risk, and just because someone else would / wouldn't doesn't mean you're foolish for making up your own mind.

Most of all.. don't listen to ANYONE on a forum who says you're a fool for paying in advance, or one that tries to tell you "do it, it'll be fine". Make up your own mind.

Hear, hear... After years of

patronising hysteria about advance payments

on the pages of this forum, finally someone says something sensible. That could be made sticky, as far as I'm concerned.

IO540

2nd Sep 2011, 19:46

I suspect a few people in this thread are involved in running flying schools ;)

The problem with somebody with (pick a figure) £200k in the bank can go for a 10% discount on an hour block bought for £6k. If he loses the £6k he will hardly notice. He probably lost 2x that on the FTSE100 last week ;)

But the majority of wannabbee PPLs are pretty broke. Most can barely afford the next lesson, and have to save up before they can have it. Some do have the £6k or whatever, but often they got it as a gift, so it is all they have.

It is these people, who were most keen to get a discount precisely because they haven't got much, who are most likely to lose all they had.

There is almost no honourable business model which requires up front payments. The only honourable reason I can think of for them is to raise working capital, and for that the proprietor should go to a BANK.

SDB73

2nd Sep 2011, 20:04

To be completely clear, I have absolutely no affiliation or interest in any aviation ventures, companies, business, etc. If you were insinuating I was, then that would be another misjudgement.

And while I'm here! :)

But the majority of wannabbee PPLs are pretty broke

Here we go again! What percentage is that? Where did you get that figure from? :)

Just a sliver of evidence would really help back up these sweeping statements.

The only PPLs I know are fairly wealthy - they for instance have enough money to pay for a PPL. I wouldn't however say that the majority of students are wealthy, and I don't have the facts or figures to back that up.

There is almost no honourable business model which requires up front payments. The only honourable reason I can think of for them is to raise working capital, and for that the proprietor should go to a BANK.

You clearly haven't been involved in many different business models then, as I could probably spend four hours listing dozens. I also mentioned some valid reasons in a previous post on here. Business take many forms, and I've run a number of businesses over the years which have offered incentives for upfront payment and/or fast settlement. This has never been in order to raise working capital - certainly not in the way you appear to be insinuating. They're fairly standard practices in a vast array of businesses. And I can assure you that, in business, honour is something in which I am certainly not lacking.

silverknapper

2nd Sep 2011, 20:19

Deeday:
Will people here please stop patronising newcomers with that sort of red capitals shouting?

You should listen to your own advice.
Starting to sound like someone with a vested interest in people paying uo front.

IO540

2nd Sep 2011, 20:28

PPLs who are some years down the road and who fly all over the place do indeed have more money. They need it...

But the PPL training scene - and we are talking of the earliest stages of one here - has a lot of young people in it.

Most of these people drop out pretty fast after getting their PPL, but that doesn't alter the argument about not risking their money.

SDB73

2nd Sep 2011, 20:29

Most? What percentage?

I give up :)

Deeday

2nd Sep 2011, 21:23

silverknapper, I was taking the mick out of the recurrent red capitals-"Never pay upfront"-shouters, but irony is notoriously tricky in the written word (or maybe everybody else got it :E).

By the way, I have no vested interests in flying schools. I'm just a PPL who was once called mad on this forum for expressing the intention of paying in advance for my course, which I did and - needless to say - worked out without a glitch.

Pilot DAR

2nd Sep 2011, 21:28

Being a pilot, and having excess money, to me, are unrelated. Some do, some don't. Being a young student pilot perhaps raises your chances of being finacially stressed, but still no certainty.

That being said, being a person or organization who has at least custody of an aircraft (if not ownership), and having the financial wherewithall to sustain a business in aviation, are also not always related. It is possible that there are people in the aviation business, who allow the aura of aviation to make them to appear more "sound" than they might otherwise appear. I don't know for certain, I just suspect - from observing some aviators and aviation busnesses for the last 35 years.

So, prospective pilots, what do you want to be? Obviously, you want to be pilots! Welcome to our pastime, our passion, and our industry. Pease expect to pay fairly and promptly, for the services you ask to have provided to you.

Would you also like to be a banker? Please do! Employ all of your skills in the business of finance, and extend credit where you deem it appropriate. If it works out, how nice for everyone. If it does not work out, don't complain here - this really is a pilot forum, not a banking forum!

I can tell you that most well funded pilots and owners I know, happily pay for the services they consume. Getting a deal is nice, though they are unlikely to pay in advance to get it.

What other business have you heard of that wants money up front? You talk to the Maitre'd, and he tells you that if you pay for 20 meals in advance, you get 10% off? The barber offers a discount if you pay for a year's haircuts in advance? Not that I've heard of!

For those of us in the group who are experienced pilots, we can assume some duty of care to newcomers, to mentor them through learning to fly safely. If people here have additional skills in finance (certainly not me!) I suppose that is mentoring too, but this is a piloting forum!

My feeling about using this anonymous forum to identify a troubled business relationship, would be that if this is to be done, the PPRuNe member would really have to publically identify themselves too. To hide behind anonymity while calling someone else out, is just not honourable...

There is no answer to the question posed, just the same unqualifiable observations over and over.....

The Old Fat One

2nd Sep 2011, 22:22

IO540

Having read many of your posts...and frequently agreed with them, I find your knowledge of business to be out of kilter with your frequent claim to be businessman.

Credit reports are like everything else..part of the jigsaw. A decent credit report will take great store of the longevity of the company and most businessmen and women recognise this an essential component of company data. Of course there is risk. Such is the nature of commerce. But making sweeping claims about the people who run flying schools is at best founded purely on your personal experiences and at worst nothing more than scuttlebutt...which most true business people avoid like the plague.

I take it you company does not trade in the public sector. If it did you would know that any company which wins a public sector contract has had its finances stress tested ad nauseam before winning the contract. A flying school not 4 miles from where I type has had just such a contract for 18 plus consecutive years. It has traded without loss to any supplier or customer for nearly fifty years. It's credit score is 93 out of 100 and it is part owned by one the region's most reputable businesmen.

No doubt there are shysters in the aviation business...as there are all in all businesses. But tarring them all with the same brush just ensures that the shysters benefit because the punters cannot sort the wood from the trees.

There are good flying schools are there are bad flying schools. Punters needs to be taught how to distiguish the two. Telling them that they are all dishonest shysters is wrong, misleading and ultimately increasing the problem, not solving it.

And for the record, I have no assocation with any flying school or aviation business whatsoever.

I have run businesses however...five of them. I have never flipped a business, gone bust, not paid a bill or short changed a customer. In my experience the people that do such things are quickly found out and nowadays, information about them is quickly disseminated.

Pprune could help the aviation business by making sure this happens...as it has done in the past. But it needs to deal in specifics and facts. Not scuttlebutt.

PS

Just to show that some people will post any old nonsense without rhyme, reaon or research...go back to the post where EBay is mentioned. Does that poster honestly know the first thing about trading on EBay. I doubt it. Yet they will bash away any old nonsense, without stopping to think how completely stupid they look to those that do know something about it.

Pilot DAR

2nd Sep 2011, 22:37

It has traded without loss to any supplier or customer for nearly fifty years. It's credit score is 93 out of 100 and it is part owned by one the region's most reputable businesmen.

That sounds very reassuring. Just to keep things in context with this thread (and simply 'cause I'm curious), would this be a flying school which offers discounts for advance payments? I would wonder that probably one of the region's most reputable businessmen, would not need to employ such a business tactic?

24Carrot

3rd Sep 2011, 05:38

The summary in post #23 gets my vote.

IO540, one example of reputable businesses offering large discounts for large advance payments are railway companies. I think season tickets are offered pretty much worldwide.

High ticketing costs, high fixed costs, and perhaps seasonal demand make it a natural option.

I don't run a Flying School, and so I can't say how well schools fit that pattern, but I can see that some might a bit.

A and C

3rd Sep 2011, 06:52

IO540

3rd Sep 2011, 07:41

I take it you company does not trade in the public sector. If it did you would know that any company which wins a public sector contract has had its finances stress tested ad nauseam before winning the contract. We do sell to various PS companies but our products are not anything mainstream (specialist datacomms interfaces) and most of the big firms that buy them buy them on an ad hoc basis. I prefer that; I don't like getting too close to any customer, for obvious reasons.

A flying school not 4 miles from where I type has had just such a contract for 18 plus consecutive years. It has traded without loss to any supplier or customer for nearly fifty years. It's credit score is 93 out of 100 and it is part owned by one the region's most reputable businesmen.That's excellent, and I never said there aren't any.

No doubt there are shysters in the aviation business...as there are all in all businesses. But tarring them all with the same brush just ensures that the shysters benefit because the punters cannot sort the wood from the trees. I didn't tar them "all" with the same brush. Read again what I wrote. I said more than 50%.

There are good flying schools are there are bad flying schools. Punters needs to be taught how to distiguish the two. How? If you can summarise it in a useful way for a 17 year old kid who has just been given £7k for xmas, it would be most useful.

Telling them that they are all dishonest shysters is wrong, misleading and ultimately increasing the problem, not solving it.I didn't say that.

I have run businesses however...five of them. I have never flipped a business, gone bust, not paid a bill or short changed a customer. In my experience the people that do such things are quickly found out and nowadays, information about them is quickly disseminated.That's more true today than say 30 years ago, and a Director is more likely to be disqualified today, but there are still well known methods for doing a runner and getting away with it. Not owing anybody more than a few k is one component, not owing HMRC anything is vital of course, and not p*ssing off anybody with determination and resources is another one :) There are some proven geographical methods too which do not apply to this context (e.g. basing a business in Scotland and buying only from firms in the South East :) ). Another popular method is to have a number of brothers :)

PPRuNe could help the aviation business by making sure this happens...as it has done in the past. But it needs to deal in specifics and facts. Not scuttlebutt.Indeed, otherwise it will get sued.

Just to show that some people will post any old nonsense without rhyme, reaon or research...go back to the post where EBay is mentioned. Does that poster honestly know the first thing about trading on EBay. I doubt it. Yet they will bash away any old nonsense, without stopping to think how completely stupid they look to those that do know something about it.Ebay and Paypal (which I am closely familiar with) are a great resource but they also provide a useful venue for scammers. Ebay's recent policy change which prevents giving bad feedback to a buyer has dramatically increased the number of badly behaving buyers (mostly ones which don't bother to pay so you have to re-list). Paypal is a more complex thing. In complaints, they side with buyers in nearly every case, and this facilitates some obviously easy scams (which I won't detail here). I have had a lot of my time wasted and I know others who have lost quite a lot of money. However, for the right kind of stuff, presented in the right kind of way, and offered to appropriate geographical areas only (unless you insist on a bank transfer, not Paypal, which is then a breach of Ebay's Ts&Cs), Ebay is a great way of getting rid of old stuff.

But funny you mention Ebay. In front of me I have a video card which is going back to the seller. It was advertised with a false photo and false description. The actual one is a cheap version which runs at about 1/3 the clock rate. This is not uncommon.

thing

3rd Sep 2011, 08:08

The only PPLs I know are fairly wealthy - they for instance have enough money to pay for a PPL. I wouldn't however say that the majority of students are wealthy, and I don't have the facts or figures to back that up.
I may be missing something here but doesn't that statement contradict itself? How can a PPL be wealthy and be able to afford a PPL and then be a student who isn't wealthy?

I have to disagree with the PPL's being wealthy, I don't know any and I'm willing to concede I don't fly from the 'right' clubs. All of the PPL's apart from two I know give up an awful lot to be able to do their three hours or so a month. I find that perception a little annoying TBH, I've had that comment in the short time I've been flying powered (even get it as a glider pilot which is less expensive than going fishing regularly with good kit which I also do). Joe Public doesn't seem to understand that if he didn't buy a new Beemer every two years and stuck to a cheaper car/insert saving of choice then flying would be well within his/her reach too. You gets your money and you takes your choice.

stickandrudderman

3rd Sep 2011, 08:55

Al last, an interesting discussion on pprune!:D

SDB73

3rd Sep 2011, 09:15

may be missing something here but doesn't that statement contradict itself? How can a PPL be wealthy and be able to afford a PPL and then be a student who isn't wealthy?

Yeah, I can see how you read my sentance wrongly.

I said : "The only PPLs I know are fairly wealthy - they for instance have enough money to pay for a PPL. I wouldn't however say that the majority of students are wealthy, and I don't have the facts or figures to back that up."

This means :

1) The only PPLs I know are fairly wealthy.

2) I don't have enough information on the MAJORITY of PPL Students to make a judgement about the MAJORITY of PPL students.

3) Due to the above, I wouldn't therefore make the statement that the MAJORITY of PPL students are wealthy.

Poorly worded on my part. Hope that's clear now though.

I have to disagree with the PPL's being wealthy

I don't think anyone has said that "PPLs are wealthy". I simply said that all the ones I know are relatively wealthy, and stated that I don't have enough information to make a judgement on the majority.

thing

3rd Sep 2011, 10:24

All is clear. I suppose it depends on the club/area you fly from. Being from 'It's grim oop North' then I dare say the balance of club pilots aren't wealthy (define wealthy?) compared to their South Eastern brethren. But then that's probably a sweeping assumption on my part and doing a lot of hard up but still flying pilots in the SE a grave disservice.

It's just the same in gliding. The clubs I've belonged to would have a membership indistinguishable from the guys in shop doorways you give your loose change to (that was only a semi joke by the way) but I've been to other clubs that will remain nameless where the fleet and the general affluence of the place would make your jaw drop. Not that there's anything wrong with that in the slightest, if you're loaded best of luck to you, I hope to be there one day myself. Although I must admit the chances are looking slimmer as the years go by...:}

Deeday

3rd Sep 2011, 12:28

Your attitude to paying up front is totaly correct in your case..............unfortunatly there are a lot of people who have lost a lot of money by paying up front.

Just because you have been fortunate the opposite may be true for the next person that takes your advice on these forums.

Where exactly would I have advised anyone to pay in advance regardless?

What I'm saying is: would you guys please treat people as intelligent adults, give them relevant information when they ask for advice (if you have some, otherwise don't bother) and let them make their own decisions?
Instead, what you normally get on this forum is

Newbie: I'm starting my PPL, my school offers this package for x grand; should I take it?

Average PPRuNer: Never pay upfront! [typeface 24 red]

Nw: why? is it a scam?

PPRu: a lot of people have lost all their PPL money when their club went bust.

Nw: what, at my school? I've asked around and it seems a reputable establishment.

PPRu: trust me, I've been flying / an instructor / in the business for X decades. Never give a penny upfront.

Nw: I cannot believe that everyone who buys a package ends up losing his money. Surely a lot of people will be paying in advance without any problem. Any idea of a ballpark figure for that?

PPRu: Go on you fool, get your discount package, but when the school folds don't say that I didn't warn you!

~~~~~~~~~~~~~~~~~

Such attitude is as pointless as it is irritating. This thread is the first time that the subject is being discussed in a refreshingly intelligent manner.

Gertrude the Wombat

3rd Sep 2011, 12:43

I don't think anyone has said that if you pay up front you will lose your money.

What is said that if you pay up front you are taking on a risk that has already been declined by the banks, so you have the choice of

(1) doing lots of due diligence and coming to a different conclusion from the banks, which will be the right answer if and only if you are better at this stuff than the banks are (you might be, I don't think I am)

(2) taking a punt (reasonable if £8k is peanuts to you perhaps, it isn't to me)

(3) in the simplest case, if you don't fancy (2) and don't have the resources to do (1), following the advice in the big red letters.

The500man

3rd Sep 2011, 13:35

What is said that if you pay up front you are taking on a risk that has already been declined by the banks

I assume you have been to every school/ club/ FTO in the world to confirm that this is the case?

Gertrude the Wombat

3rd Sep 2011, 13:45

Go on then, if a bank loan is availble, make the business case for paying several times as much to borrow the same money from the punter?

The500man

3rd Sep 2011, 14:37

You are assuming that the organisation is poor and that they have been to the bank and been refused a loan.

It may be the case that the organisation could pay all its bills for the next 3 months without taking payment of any kind. That isn't a likely scenario but there is no reason to assume every flying school has to borrow money to continue to conduct its business.

Don't assume schools are losing money on pay up-front packages either. The discounts offered may reduce profit margins but they do also tie students into the school which keeps aircraft off the ground and their fixed costs covered. A reduction in profit for providing reasonable certainty of future business isn't very surprising, is it? Most pay up-front packages also have attached conditions, which may include expiration dates, or limted refunds. I think we've all heard about schools making large profits on trial lessons due to the vouchers expiring (which they can then use to reduce the cost of their trial lessons to make them more attractive to students).

I don't claim to be an expert but posting bold facts that you haven't confirmed doesn't seem very smart to me.

Pilot DAR

3rd Sep 2011, 16:19

tie students into the school

Is it not better business to "tie students to the school" by offering good service, which makes them want to stay? Rather than them feeling that they are bound to continue unhappily, or abandon their money?

The500man

3rd Sep 2011, 16:28

Is it not better business to "tie students to the school" by offering good service, which makes them want to stay?

It is.

EDIT: Actually maybe it isn't since so many schools offer pay up-front packages. Successful business men aren't nice people after all!

IO540

3rd Sep 2011, 21:46

Successful businessmen don't have to be nasty people (though many are).

However I think PPL training is a tough business - in most locations. You have to compete with the clapped out 1970 C150 operator who works for nothing. Etc.

SDB73

3rd Sep 2011, 21:51

Gertrude, I'm afraid, has missed the point entirely, and 500 Man and PilotDar have completely got the point.

It's not just about NEEDING money and therefore an alternative to borrowing, having MORE money has a value - but not as high a value as lending money (hence if you're already in the black, you would obviously not borrow money in order to have more) - but most importantly as already pointed out, the advance payment creates a far higher chance of the student continuing to fly with the school.

Note that one of the three mention above was issuing statements as though they were fact, yet the other two were clearly offering opinion. It's a fascinatingly common thing on forums.

A and C

4th Sep 2011, 08:46

As you seem to say it is all about risk vs return, most flying clubs offer a discount for staying in credit with them and more of a discount for paying up front.

These discounts are likely to be IRO 5% however keeping you money in a savings account is likely to yeald around 2% so the real "up front" discount is only 3%, or £ 210 on a £7000 PPL course.

You are unlikely take even double these odds at a bookmakers so why take them from a flying club that is going to be under all sorts of pressure over the coming year or so, Cessna parts have increased in cost by about 150%, fuel is on the increase and the government both local & national are tapping business for for money.......... Oh I forgot add the new employers pension contribution from 2014.

On the whole I think I would take the discount for staying in credit ( by a few quid) but keep the bulk of my money under my control.

So the foundation of the advice stays the same, don't pay up front!

IO540

4th Sep 2011, 09:29

the advance payment creates a far higher chance of the student continuing to fly with the school.

Would you put this on the school's website?

No I didn't think so.

SDB73

4th Sep 2011, 09:31

What's your point IO540?

Do you have "We don't want to get too close to a customer, for obvious reasons" on your website?

(A statement you made about how you conduct your business, in another post)

These discounts are likely to be IRO 5% however keeping you money in a savings account is likely to yeald around 2% so the real "up front" discount is only 3%, or £ 210 on a £7000 PPL course.

Your logic is incorrect, I'm afraid.

The banks pay the (say) 2% over 12 months. So to get your 2% you would have to keep the ENTIRE £7K in the bank for 12 months - and not spend any of it (therefore not be training).

Instead if you get your 5% discount over (say) three months, you're getting a WAY better return than the bank, which would have been something in the region of the equiv of, say, 0.3% if that. Instead you would have got the equivelant of around 30+% of the money you would have had in your account (which would have been reducing over the period you were training), had you just kept it in a high interest account.

So the foundation of the advice stays the same, don't pay up front!

So, still, I would say the above is simply your opinion of what YOU would do, based on - as we can see above - not grasping the financials properly.

Ask any investor if he'd like to beat the banks by a multiple of 60 for a three month investment, and he'll ask you "what's the risk?".

When you tell him "A regulated flight traingin company which has been trading for 20 years, needs to stay in business for three months longer" you'll have bite marks in your hand!

IO540

4th Sep 2011, 09:44

Do you have "We don't want to get too close to a customer, for obvious reasons" on your website?That's true, but I don't utilise restrictive practices which make it more difficult for customers who want to stop using my products because (for example) they are crap or they are unhappy with my customer service.

Not getting close to one's customers is merely a standard scenario in today's internet oriented way of doing business. If you go back say 30 years, you had to visit practically every customer and buy him a lunch, to get an order for just say £1000. 20 years ago, a visit was necessary for a £10k order and most business comms were done by fax. Today, we do 5x that with customers we have never seen, purely by fax and email, and that is accepted all around as normal nowadays.

This sea change in attitudes wiped out hordes of fat-bellied travelling salesmen driving around in their Mk 4 Cortinas (the really fat ones who had to do serious lunching had Granadas) so I guess a lot of people don't like that. But it has enabled countless people to start businesses in their spare bedroom/loft/etc which they would not have been able to get off the ground 10 or 20 years earlier because they would have spent their life on the road.

If you want a debate on how a school could keep people coming back, especially post-PPL, legitimately, that can be done, but it has been done to death here already.

As regards your "investment advice", I think I will pass on that one :) A flying school is somewhere south of Greek bonds.

A and C

4th Sep 2011, 09:50

You assume that you can get a PPL in 3 months, well with luck you might , most people take a lot longer and so the advantage of paying up front falls away, just as the risk is increasing.

I have no interest in taking large chunks of people's money for something I don't have to deliver until next year, do you?

SDB73

4th Sep 2011, 09:57

That's true, but I don't utilise restrictive practices which make it more difficult for customers who want to stop using my products because (for example) they are crap or they are unhappy with my customer service.

You're assuming that the upfront fee is non-refundable. I wasn't. I was simply saying that someone who pays upfront and takes the OPTIONAL BENEFIT it delivers is more likely to continue to fly with that same company.

From the adverts I've seen, this generally seems to work by offering a discount, but then if you cash in, you lose the discount.

If the customer was unhappy, they can simply put themselves back to how they were by losing the discount. Job done. Nothing lost.

Not getting close to one's customers is merely a standard scenario in today's internet oriented way of doing business.

Again.. Where do you get this "standard" from? I run (and have run) a number of internet based businesses (As well as real-world businesses) and in some of them, our entire main focus is to get as close to the customer as possible. Helping us to understand them more, and for them to understand us more. It makes our win-win situations far more mutually beneficial.

I'm not saying that YOUR business is suited to this touchy feely business model, your business may be structured to be more distant and stand-offish. I would never be so bold as to attempt to tell you what your business needs as you will know that far better than I. But your statement is telling me and everyone else who runs internet businesses that the standard is to do as you do.

If you want a debate on how a school could keep people coming back, especially post-PPL, legitimately, that can be done, but it has been done to death here already.

I'm happy with any DEBATE. I'm just not into blanket, illinfored, and unsupported statements in a tone of fact. And please tell me you don't still think that after everything you've read on hear you haven't learnt a single thing about the fact there can be legitimate models which offer incentives for advance payment?

If so, I think I'm going to have to say this. If it's just IO540 who still believes this, after reading all this, feel free to post, otherwise I'm going to just assume it's one individual's strange opinion that will not be shaken under any circumstances. It's extremely curious that you haven't accepted a single point on this thread, and so I think I have to take it on the chin that you're just not going to, regardless of the reason behind them.

You assume that you can get a PPL in 3 months, well with luck you might , most people take a lot longer and so the advantage of paying up front falls away, just as the risk is increasing.

On the contrary, I don't ASSUME anything. That's the point I'm making in this thread. I was merely disproving your point that you should compare 2% with 5%. Do you agree?

If it takes you 12 months, you're still up. If you it takes you two years, it starts getting close to the 2% / 5% comparison. In which case I totally agree that your underlying point then stands, and it is at THAT point that people need to make their own judgement, and I personally would make exactly the same judgement as you in almost all cases. But that doesn't mean you or I should dictate what others should do. So I certainly wouldn't offer the advice "don't pay in advance!" as willingly as you would.

I have no interest in taking large chunks of people's money for something I don't have to deliver until next year, do you?

I don't currently have a business model which would suit that, no.