Sweating the Small Stuff: Minor Budget Items with Major Perceptions
By Jeff Agur| VanAllen
Among all the uncertainty created within the last 7 months, it is no surprise that we have received a variety of inquiries about cost management strategies. Regardless of the state of the economy, the answer remains the same: focus on the largest levers that yield the greatest impact within your organization and fine-tune the smaller items.
When we begin to discuss major cost management options related to fuel, maintenance, or staffing, it is easy to brush off trivial expenses. But what if we told you that a line item as small as a daily newspaper budget changed the entire perception of a flight department?
It is just as imperative to evaluate your small levers as it is your large levers.
Before diving into potential collateral consequences of your small-ticket items, it is important to mention that effectively managing the three elements that commonly account for over 50% of your total budget will yield the greatest monetary impact.
Before depreciation or financing, fuel, maintenance, and staffing costs are at the spending forefront. We have expertly navigated our clients to considerable cost savings within these areas. Though extremely important, managing cost is not the only thing you need to consider when reviewing your budget.
Though the buckets are not quite as substantial, reviewing lower-cost elements within your budget can be revealing. Sometimes the little things send big and unintended messages.
Service Levels – We recently worked with a client who had multiple magazine and newspaper subscriptions available in the aircraft prior to every departure. When we interviewed the frequent passengers, it was discovered that nobody read them. Worse, there was a passenger perception that the aviation team was spending money unnecessarily. Have a frank conversation with your passengers about their needs and continue to review your options. A best practice in 2015 is not necessarily what is appropriate for 2020.
Aircraft Stocking & Catering – Similarly, another client continually stocked their aircraft with custom napkins and coffee cups. Each departure had a full complement of catering that always lead to an abundance of leftover food. Dialogue with the frequent passengers helped the aviation team understand they were misaligned, and their efforts were perceived as frivolous spending.
Cabin Entertainment – Cabin connectivity is a critical business tool. However, media storage devices holding hundreds of movies and their associated subscriptions are not. In many cases, we observe aviation teams attempting to anticipate every passenger need. This leads to investing in resources that are infrequently used.
The cost savings in each of these examples totaled to less than 1% of the budgets. However, the impact was far greater than the dollar value. As goes the adage: perception is reality; think carefully about the message you want to convey.
It is imperative to evaluate cost management strategies for all budget items. What may seem insignificant to you may have a bigger impact than you think. Contact VanAllen today to learn more about cost management strategies.