The smell of industrial-strength floor wax combined with the scent of overcooked chicken breast usually signals the beginning of a state aviation association dinner. There is a specific, metallic clang that occurs when a folding chair is snapped shut in a high school gymnasium or a municipal community center.

This sound echoed through the hall as the presentations ended and the networking began. My jaw ached because I had recently bit the side of my tongue while eating a particularly tough piece of sourdough bread. The sharp, rhythmic pulse of that minor injury made me less inclined to engage in small talk, but it also made me a very attentive listener.

The Secret at Table Fourteen

At table fourteen, between the raffle for a handheld radio and the clearing of the dessert plates, Harold Benning leaned toward Carl Matsuda. Harold had the posture of a man who knew a secret that the rest of the room was too loud to hear.

He mentioned the place in Amarillo, an FBO that had changed hands six months prior. He did not talk about the fuel volume or the condition of the fuel farm. He simply stated a number, followed by a decimal, followed by the word “times.” He claimed the business sold for 7.2 times its EBITDA.

Carl Matsuda nodded as if he had just received a transmission from a GPS satellite. He did not ask Harold where the number came from or whether it included the real estate or just the leasehold interest. A leasehold interest is the legal right to occupy and use a specific piece of land for a fixed term, usually granted by an airport sponsor.

Carl took the number 7.2 and stored it in his mind. He repeated it to his wife in the car on the way home. He told his lead mechanic the following Tuesday. Within a month, the “Amarillo Multiple” had become a localized law of physics. Because the general aviation market is relatively small, information does not travel through formal channels as often as it travels through these quiet, authoritative whispers.

The Anatomy of a Market Fact

The process of a rumor becoming a market fact follows a predictable chronological sequence:

The cause of this phenomenon is a lack of transparent data, and the effect is a market anchored to a fiction. When Carl Matsuda eventually received a serious offer for his own FBO, he turned it down almost immediately. The offer was based on a 5.8 multiple of his normalized earnings.

Normalizing is the process of adjusting financial statements to remove one-time expenses or owner-specific costs so that the true earning power of the business is visible. Carl rejected the offer because it was “below market,” but his definition of the market was a ghost. He was comparing a real, documented offer for his specific business against a rumor he heard while eating dry chicken.

The Leasehold Term Variable

The danger of the “Table Fourteen” wisdom is that it ignores the fundamental drivers of FBO value. A multiple is not a static number that belongs to an industry; it is a mathematical output of a specific set of risks and rewards.

If an FBO in Amarillo has a remaining ground lease of forty years, it is significantly more valuable than an FBO in a similar market with only twelve years remaining. This period of time is often referred to as the leasehold term, which dictates how long an operator has to recoup their investment before the assets revert to the airport.

Furthermore, the composition of revenue lines changes the risk profile of the business. An FBO that derives 80% of its income from a long-term hangar lease with a flight department is a real estate business. An FBO that derives 80% of its income from retail Jet-A sales to transient traffic is a commodity sales business.

A buyer will apply a different capitalization rate to each of these income streams. A capitalization rate, or cap rate, is a percentage used to estimate the return on an investment based on the income the property is expected to generate. When you blend these different rates, you arrive at a multiple that is unique to that specific FBO, not a universal constant like the speed of light.

I spent years editing transcripts for aviation podcasts, a job that requires listening to the same sentences four or five times to ensure every comma is in the right place. Finley P., a colleague of mine in that industry, once remarked that people quote multiples because they are easy to remember, whereas discounted cash flow models are difficult to explain.

“A multiple is just a shortcut for people who don’t want to do the math.”

– Arthur Vance, Veteran Pilot & Board Member

Arthur Vance, a veteran of three decades in the stickpit and the boardroom, identified exactly what leads owners like Carl to make decisions that cost them millions of dollars in liquidity. This reliance on shortcuts is a systemic vulnerability in FBO management.

Breaking the Hangar-Talk Cycle

When an owner decides to rely on Griffin Towers, they are usually looking for a way to break free from the hangar-talk cycle. The firm does not start with a multiple and work backward.

They start with the fuel flowage fee, which is the per-gallon charge paid to the airport sponsor for the right to sell fuel. They look at the flowage trends over the last thirty-six months. They examine the tenant concentration, which is the risk associated with having a large percentage of revenue tied to a single customer.

If one flight department leaves, does the FBO’s value drop by 20%? A blanket multiple of 7.2 does not account for that vulnerability, but a sophisticated buyer certainly will.

The Mirror Image Process

The chronological steps of a professional valuation are the mirror image of the rumor-mill process. It begins with the collection of three to five years of profit and loss statements. Then, the advisor identifies add-backs, which are expenses the owner paid through the business that a new owner would not incur.

This might include a personal vehicle, a club membership, or a salary that is significantly above the market rate for a general manager. Once the earnings are normalized, the advisor looks at the grant assurances of the airport.

Only after all these factors are weighed does the advisor look at recent transaction evidence. They do not look at rumors; they look at deals where the price, terms, and conditions are known and verified. This allows the owner to see where they sit in the actual market.

The result is often a range of value rather than a single, hard number. This range provides the owner with a “margin of safety,” a technical term for the difference between the intrinsic value of an asset and its market price. Knowing this range allows an owner to enter a negotiation with a position of strength rather than a position of hearsay.

Carl Matsuda’s mistake was not just believing Harold Benning; it was his failure to recognize that his business was a collection of unique variables.

He had a ramp fee structure that was 15% lower than the neighboring airports. A ramp fee is the charge an FBO levies for an aircraft to park on its apron. These specific details are what a buyer’s due diligence will uncover.

Due diligence is the comprehensive appraisal of a business undertaken by a prospective buyer to establish its assets and liabilities and evaluate its commercial potential. If the owner has not already accounted for these issues in their asking price, the buyer will use them as a hammer to beat the price down during the closing process.

The pain in my tongue eventually faded as the dinner ended, but the memory of that conversation stayed with me. It reminded me that in niche markets, the scarcity of information creates a vacuum. That vacuum is often filled by the loudest voice or the most convenient number.

Harold Benning was not trying to deceive Carl; he was simply repeating what he thought was true. However, the cost of the “Amarillo Multiple” was the opportunity Carl missed to exit his business at a fair price and move on to his next chapter.

If you are an owner, you must decide whether you want the comfort of a hangar conversation or the clarity of a market-oriented analysis. One will make you feel wealthy at a dinner table, and the other will actually make you wealthy at the closing table. The difference between the two is the difference between a rumor and a transaction.

The Final Realization

The final realization for most owners comes too late in the process. They wait until they have already signed a Letter of Intent before they realize the buyer’s math looks nothing like Harold’s math. By that point, the owner has already mentally spent the money. They have looked at beach houses or new aircraft.

When the buyer’s due diligence team reveals that the EBITDA was overstated or the leasehold was misinterpreted, the price drops. This is why the preparation phase is the most critical part of the entire lifecycle of a business owner. Without a grounded understanding of value, you are not selling an FBO; you are just participating in a very expensive game of telephone.