It would be very interesting to know some actual market numbers. My guess from casual observation of the pilot community is that SD have 90% of the UK market. However, this market might not amount to more than a few thousands right now.
I find it very surprising how many aspirant players there are. Presumably some of these are hobbyists who are there ‘because they can’. Others are obviously corporate ‘must haves’ whose actual user base is likely to remain a closely guarded secret, especially from their own boards. I wonder how many players are serious business ventures with a roadmap into the future?
We all know it’s a relatively small universe compared with true consumer products (Perhaps 50,000 pilot prospects in the whole of Europe?) so a company achieving near monopoly status, say 20,000 users, would still only achieve a gross income of, say, £2M based on an annual revenue of £100 each.
Is that enough to sustain such a vastly complex and demanding product line, especially when considering the product liability angle? It seems a bit thin to me. And as for the ‘also rans’, their income must dwindle toward the negligible end of the scale very quickly.
Some of us were deeply shocked a few years back when the original pioneer of all this, Runway Finder, was suddenly forced out of business by patent trolls. As end users, we need one or two of these products to have a sustainable long term future. In such a fragile and volatile market, the last thing that any developer/aspirant needs is a bad case of corporate arrogance, IMHO.
QuoteIn such a fragile and volatile market, the last thing that any developer/aspirant needs is a bad case of corporate arrogance, IMHO.
Agreed, but the core of all of this, is Garmin, Bendix et al, with the GPS, moving map. The others are very nice to have, add on apps, however, well presented they are. If SD went pop tomorrow, it would not be the end of our GA flying careers.
It is obviously in SD interest to present a sustainable, well backed up product, but it also has to run a tight, and structurally sound development tool, without too many distractions. It should come naturally that this has to be done with a nice, smiley, corporate face and customer interface 
I agree with your analysis, Aveling, but £2M is a very nice business, especially a software business (negligible material costs) if you can do it with just say 5 people in total. But even 1/4 of that is a nice business if you keep it tight. A few years ago I read the then Governor of the Bank of England was on 250k and you can draw that from a 500k turnover business if the gross margins are great.
There may be another factor in volume, which we don’t see in the UK: the training business. In the main N European GA markets, they use the printed local-CAA charts. But elsewhere, there aren’t any good charts, so I guess they would have been buying the Jepp ones. These are now gone, so Jepp are ideally placed to take that market, with their Ipad VFR product. Italy is a great example. Also a progressive PPL FTO can use IT to a better advantage than the WW1-based traditional training business we see over here. And we all know that there is a lot more business flogging stuff to PPL (and of course ATPL, even more) training than to existing pilots. Just look at the average pilot shop and what they sell nowadays.
I was reluctant to get into this but I have written it before… Skydemon asked me more than once whether I would mention it in my trip writeups, but when I asked for a free trial version (obviously I wasn’t going to pay £170 to test something I don’t need) they said they can’t do that because they run a “lean” business. I guess they are very happy with their sales.
Peter I’d be the first to agree with you about the £2M software business in almost any sector apart from this one with it’s unrivalled ability to launch spring loaded surprises out of nowhere (just look at the AA story on the other thread!). The beauty of these types of niche product is the ‘locked in’ user base guaranteeing an income stream for years into the future, except in this particular market where there’s more turbulence in the software than during actual flight!
I wonder how many players are serious business ventures with a roadmap into the future?
Ideally none, in my opinion. The aviation GA/recreational industry is too small to be a viable place for business ventures of a size that attract venture capital of any size. The growth potential is very limited or nonexistent all together, very unlike the commercial airline industry. With only a handful of exceptions, the industry consists of small businesses, 1-100 employees. The ones that manage to make it, are the ones that are in it for the “right” reasons, while half of the exceptions are still alive because of a monopoly situation created more than half a century ago, and that monopoly still has some momentum due to lack of competition (because of minimal growth potential combined with an industrial certification scheme belonging to the dark ages).
Nevertheless, people are willing to pay for stuff that adds value and quality, and also for stuff that bring the technology into the current millennium. With the right product “anyone” can make a living. But, due to lack of growth potential, any business will have to remain small and lean.
The ideal business in this industry is a small one where people produce bits and pieces because that is what they like to do. I don’t know what reasons Sky Demon have for not participating, and I really don’t care. They make what they make, and lots of people like it apparently (I’m not a fan).
Sure; you aren’t going to get any vulture venture capital funding in the GA VFR software business, but one doesn’t need that unless one is totally with one’s back against the way on cash. Then, of course, one gets shafted on the interest rate, not to mention personal guarantees.
I have started two businesses; one in 1978 with about £500 and one in 1991 with about 15k. Never had any overdrafts (other than a trivial short term one in 1979, of £700, for which the bank – Barclays – wanted a personal guarantee ) or finance of any kind.
That said, I did not employ any staff until they could be funded out of cash flow, so the real funding is in the form of not drawing money out of it (until there is money available).
If you can get c. 5k to 10k customers paying say £100 each a year, you can run a nice little business on that. In fact, in the UK, if you actually have a PPL and fly, the Revenue will be quite “interested” because they really hate people running businesses related to something which they enjoy (don’t ask how I know).
In fact, in the UK, if you actually have a PPL an fly, the Revenue will be quite “interested” because they really hate people running businesses related to something which they enjoy (don’t ask how I know).
Peter, can you explain a bit more here? I didn’t exactly understand that sentence.
The UK Revenue (HMRC) do not like what they call “hobby businesses”. An extreme example is somebody who is into model planes and sets up a company to ostensibly trade in model plane parts, and just uses the business to buy bits for his hobby, reclaiming the VAT and setting the expenditure off against the profits. Obviously, the boundary is difficult to argue sometimes even in a 100% real business… Only half jokingly, the areas they specially watch are boats, planes, horses and whorehouses. Basically any business in which the owner can get significant personal benefits (yeah, don’t laugh). But this is OT in this thread – drop me an email for more details if they interest you
whorehouses […] drop me an email for more details if they interest you
You didn’t turn a profit with your whorehouse? Drop me an email if you need consultancy on that.
Maybe “product testing” was deficient?
