S ixty-four percent of independent aviation service business owners in North America do not record a market-rate salary for themselves on their annual income statements. This financial omission is not merely a matter of personal accounting preference or tax strategy. It represents a fundamental disconnect between the perceived profitability of an enterprise and its actual transferable value in a competitive market.
When an owner-operator subsidizes the operation with their own uncompensated labor, they create a phantom margin that disappears the moment they attempt to step away from the stickpit of the business.
The Night Shift at the Ramp
The sun has long since set over a regional airfield in Kansas, but the lights in the main hangar remain bright at Dale Huebner is still at the facility, standing on the ramp to meet a late-running Citation that radioed ahead for a quick turn and 300 gallons of Jet-A. His daughter has sent several text messages asking if he called the insurance broker back, but he has not yet found the time to respond.
Dale is currently the only individual at the airport who knows the specific sequence for the fuel farm gate, the preferred greeting for the airport manager’s spouse, and the exact physical pressure required to close the south hangar door when the temperature drops below freezing. He has performed these tasks for without ever drawing a paycheck that reflects what it would cost to hire a professional general manager to replace him.
Every Fixed Base Operator, or FBO, functions as a service hub providing fueling, hangaring, and maintenance for general aviation aircraft. In many small to mid-sized markets, these businesses are the lifeblood of local commerce, yet they often suffer from a lack of structural separation between the owner and the entity.
When a founder handles the line service, the accounting, and the tenant relations simultaneously, the arrangement appears efficient in the short term because it reduces the visible cash outflow of the company. However, it creates a significant liability for any future transition because the operational knowledge is stored in a human brain rather than in a documented system.
The EBITDA Deception
The most common metric used to evaluate these businesses is EBITDA, which stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. This figure is intended to provide a clear view of the operational cash flow generated by the assets of the business.
When Dale looks at his year-end reports, the EBITDA looks robust because there is no line item for a manager’s salary of $145,000. He sees this “saved” money as profit that enhances the value of his life’s work. A sophisticated buyer, however, sees this same figure as an incomplete data set that must be adjusted downward to account for the reality of future operations.
The “Invisible Adjustment”: How a $145k market-rate salary reclassifies owner profit as an operating expense.
To understand how a buyer views this, one must look at the process of normalization, which is the act of adjusting financial statements to show what the business would look like under new ownership. A buyer will examine the trailing twelve months of activity and immediately identify the roles the owner is currently fulfilling.
If the owner is acting as the general manager, the fuel coordinator, and the primary point of contact for the airport authority, the buyer must project the cost of hiring at least two people to cover those responsibilities. The “profit” that the owner thought he was building is immediately reclassified as an unrecorded operating expense.
Lessons from 1978
This dynamic is not new to the aviation industry, as evidenced by the historical shifts following the Airline Deregulation Act of . During that period, many municipal airports moved away from direct management of their fuel farms and transitioned to private-contract models.
The operators who thrived were those who built scalable systems, while those who relied entirely on the “one-man show” model found themselves unable to compete when larger networks began to consolidate the market. These early founders often felt that their personal sacrifice was a form of “sweat equity,” but they discovered that sweat does not have a high trade-in value unless it has been converted into a repeatable process.
A buyer will typically request a list of add-backs, which are expenses that are unique to the current owner and will not recur after the sale. Owners often try to include their personal vehicle or travel expenses as add-backs to increase the reported earnings.
They are often shocked when the buyer counters with a “negative add-back” for the owner’s uncompensated time. If the owner is working eighty hours a week and drawing a salary of fifty thousand dollars, the buyer will subtract the difference between that amount and a true market wage from the bottom line. This adjustment can lower the enterprise value by hundreds of thousands, or even millions, of dollars depending on the multiple applied to the earnings.
The Danger of the Ego
“The most dangerous ingredient in any product is the ego of the maker, because it masks the flaws in the recipe.”
– Pierre M.-L., Quality Control Taster, Lyon
In the context of an FBO, the owner’s ego manifests as the belief that their personal presence is the only thing keeping the business afloat. While this may be true, it is also the very thing that prevents the business from being a sellable asset. If the business requires a specific individual to function, it is not a business; it is a high-stakes job.
Calculating Replacement Cost
Replacement cost is the technical term used to describe the total expense required to hire and train a new employee to perform a specific set of duties. When an owner-operator sells, the buyer is purchasing the future cash flows of the business, not the owner’s historical work ethic.
If those cash flows are dependent on the owner working 300 days a year, the buyer will calculate the replacement cost of that labor with a high degree of conservatism. They will assume that a professional manager will require a higher salary, better benefits, and more support staff than the founder ever allowed for themselves.
The market rate for a qualified FBO manager at a regional field is a data point that many owners prefer to ignore. They justify their lack of salary by telling themselves that they will “get paid at the end” when the business sells. This is a logical fallacy. By not paying themselves a market wage now, they are artificially inflating the earnings that a buyer will use to calculate the purchase price.
The “Naked” Pro-Forma
In a pro-forma financial statement, which is a projection of future earnings, the owner’s role is completely erased and replaced by a professional management structure. This document reveals the “naked” version of the business.
It shows whether the fuel margins can actually support the necessary headcount to run a safe and efficient ramp. If the business only looks profitable because the owner is doing the work of three people, the pro-forma will show a much smaller margin than the historical tax returns. This discrepancy is the primary reason why many FBO deals fall apart during the late stages of negotiation.
The complexity of a charter operation adds another layer of difficulty to this valuation puzzle. If the FBO also manages aircraft or runs a Part 135 certificate, the owner is often deeply involved in pilot scheduling and regulatory compliance. These are high-skill tasks that cannot be easily offloaded to a junior employee.
A buyer looking at a combined FBO and charter business will be even more aggressive in their labor adjustments. They know that if the owner-operator leaves, the risk of a regulatory “reset” or a mass exodus of pilots is high. Sometimes the only way to stabilize such a business is to turn it off and on again under a new management system, which is a costly and risky endeavor for any acquirer.
Fuel Drivers vs. Strategic Planners
Fuel flowage is the volume of fuel moved through the airport’s infrastructure, and it is usually the primary driver of revenue for an FBO. An owner who spends their day in the truck or at the fuel farm might feel they are staying close to the “money,” but they are actually neglecting the higher-value tasks of business development and strategic planning.
A buyer does not want to pay a multiple of earnings for a fuel truck driver; they want to pay for a market position. When the owner acts as the driver, they are effectively pricing their time at fifteen dollars an hour while simultaneously devaluing their multi-million dollar asset.
Similarly, the ramp fee is a simple transaction, yet many owners waive these fees for “friends” or long-term acquaintances without recording the lost revenue. A buyer will not see a “friendly” business; they will see a leaky one. They will assume that if the owner is letting revenue slip away on the ramp, they are likely letting it slip away in other areas of the operation as well.
Maintenance Debt & Leaseholds
Capital expenditure, or CapEx, refers to the money spent on maintaining fixed assets like fuel trucks and hangars. Owner-operators often defer these expenses to keep their cash flow high, performing “patch-up” repairs themselves. While this keeps the bank balance healthy in the short term, it creates a “maintenance debt” that a buyer will discover during the physical inspection.
The leasehold agreement is the most critical asset the business owns. An owner who has managed this relationship through personal favors and handshakes for decades is often surprised to find that a buyer wants a formal, arm’s-length contract. The “value” of the owner’s personal relationship with the airport board is essentially zero to a buyer, because that relationship is not transferable.
The Indispensability Paradox
During due diligence, all of these shortcuts and uncompensated hours come to light. When accountants see that the owner is the only one with the keys to the kingdom, they will increase the “risk premium” associated with the deal. A higher risk premium leads to a lower valuation multiple. The more indispensable you make yourself to the business, the less valuable the business becomes to anyone else.
The final piece of the valuation puzzle is goodwill, which represents the intangible reputation of the business. In a founder-led FBO, the goodwill is often tied directly to the person of the founder rather than the brand. If the customers come to the airport because they like Dale, they may not return when Dale is replaced by a corporate entity.
Experienced advisors like those at Griffin Towers specialize in helping owners untangle these personal threads before they go to market. They work to normalize the earnings and identify the true cost of replacement labor, so the owner can see the business through the eyes of a buyer before the first offer is even made.
The fuel farm remains an expensive pile of steel to a buyer who cannot find the owner’s shadow in the payroll.
Building a Terminal Legacy
Ultimately, the goal of any FBO owner should be to build a business that can run without them. This requires hiring competent staff, paying them market wages, and documenting every procedure from fuel testing to hangar lease renewals. It means the owner must stop being the “cheapest” employee and start being the most strategic one.
While it may feel uncomfortable to see the reported profit drop as payroll expenses rise, this shift is actually an investment in the business’s terminal value. A business that can function perfectly while the owner is on vacation is a business that a buyer will pay a premium to own.
Dale Huebner may feel like a hero for staying at the airport until to pump gas, but in the cold light of a valuation report, he is simply an unrecorded expense that is slowly eating away at his own legacy.