Advice to Wannabees about paying up front -Stickie
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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...
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...
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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.
Just because you have been fortunate the opposite may be true for the next person that takes your advice on these forums.
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.
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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.
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.
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What is said that if you pay up front you are taking on a risk that has already been declined by the banks
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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.
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.
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tie students into the school
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Is it not better business to "tie students to the school" by offering good service, which makes them want to stay?
EDIT: Actually maybe it isn't since so many schools offer pay up-front packages. Successful business men aren't nice people after all!
Last edited by The500man; 3rd Sep 2011 at 16:41.
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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.
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.
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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.
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.
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Deeday
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!
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!
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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)
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, 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!
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.
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!
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!
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Do you have "We don't want to get too close to a customer, for obvious reasons" on your website?
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.
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SBD73
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?
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?
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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.
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.
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.
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.
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?
