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 Sky's the limit after aeronautical entrepreneurs gain property foothold

 

 Location-sensitive businesses, usually retailers, often find themselves at the mercy of landlords who are aware of the fact that the business is dependent on the specific spot in which they trade. If the landlord refuses to renew the lease, the business can lose millions.

Business co-owners Pieter Viljoen and Jaco Kelly keenly felt this stranglehold when they tried to buy the premises from which their aeroplane instrumentation business, Dart Aeronautical, operated at the rand airport near Germiston.

“In our business, our premises needs to be accessible from both the runway and from the street. There are very few such places available,” says Pieter.

That is why he and Jaco were determined to secure the two-storey premises, the airport’s old fire station, which their business had been leasing since its inception.

The owners of the building, however, knew the value of its unique position and Dart’s dependency on it, so their asking price was sky-high - so high that the banks were only prepared to finance 40% of it.

Pieter and Jaco’s Dart Group, which consists of four related companies, was doing very well, but there was no way that they could finance the other 60%. Their experience with their landlord and the reaction of the banks convinced them even more of the necessity of securing ownership of the property.

Looking around for other finance options, they came across Business Partners Limited, the only financial institution that was willing to look beyond the mere brick value of the building. BUSINESS/PARTNERS considered the building in the context of the whole enterprise, the potential of the business, as well as the track record of the two entrepreneurs themselves. They agreed to finance a much greater proportion of the selling price so that Pieter and Jaco were able to reach the selling price.

Pieter rates the purchase of the building as one of their biggest achievements, which says a lot. Since taking over the business from its founder in 2008, they managed to grow it from 10 to 22 workers, adding a division called Dart Airpart Electrical which focuses on servicing the electrical systems of aircraft, and another called African Alliance Airparts, which specialises in the procurement of aeroplane instruments and electrical parts.

Their growth took place despite a major setback in the form of the closure of the airline 1Time which sent shockwaves through the aeronautical services industry at the time. 1Time brought in lots of work for Dart, albeit indirectly through another aeronautical servicing company.

Pieter says they had to adapt quickly by focusing on private aeroplane owners, flying schools and regional airlines.

Another big achievement for the two co-owners was their ability to buy out the founder within four years instead of the agreed-upon seven years.

Pieter and Jaco were both young technicians who had studied together at the state-owned entity Denel’s school for aircraft mechanics when they were recruited by the founder of Dart who was looking for managers to take over his business as he immigrated to Australia.

Pieter says he worked for an intense year under the tutelage of the founder until they took over the business in 2008. It was a difficult year, but also the greatest learning experience of his life. The founder had laid down precise business systems that they follow to this day and which had helped them to grow.

For the first five or six years, especially when they were paying towards the buy-out agreement, Pieter and Jaco hardly took any money out of the business.

Pieter mainly focuses on the finances and administration of the business, while Jaco mainly takes care of the operations.

The most difficult aspect of their business, says Pieter, is managing cash flow. Unlike an automotive garage, where the client has to pay before taking back the car, the convention in the aeronautical industry is that the client flies away with the serviced aircraft and only pays afterwards, sometimes much later.

Another longer-term problem is that modern aeronautical instrumentation is becoming increasingly difficult to service as the technology is moves towards total replacement of old instruments rather than refurbishing.

But while two entrepreneurs are aware of the trend, the upside of their industry is much greater, with lots of opportunities opening up in the rest of Africa, not only in the servicing of aircraft, but also in building their own fleet of charter planes.

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