Commercial drone business

[PatR]

Ron,

What was used for the Nova clip was pretty basic but some of their sensors would not be. A friend in SoCal makes some pretty trick stuff for whale research off Hawaii, along with things for military, LEA’s, and other first responders. All built to a customer spec, and expensive before a payload is added. Extremely reliable.

 

[Dustoff]

I love the PBS Newshour... been watching for years as my choice in national coverage. And just to let you know how much of a PBS geek I am... yes, my ringtone is the closing credits of NOVA.

Seen a lot of custom drones used for research

 

[FlushVision]

Exactly x Infinity!

Been in the imaging biz for almost 40 years, seen it all, sick of it all. Now, I do my own thing. Everyone wants it for nothing, or their nephew has a really good iPhone, or, if you do this one for free they will promise you more (free) work in the future. As I tell prospective cheapskates, Exxon, Food King and CitiMortgage don't take photo credits or pats on the back, they expect cash.

The first freebie I did a couple of years ago was for a guy who had a window replacement business. The job was unconnected with his business but he made all the promises of sending work my way both connected with his business and others he was in league with. I did the job and produced some rather good images for him...for free. My reward regarding work generated from that free job? Yep...nowt.

 

[FlushVision]

Yes. Not having the pressure of needing the aerial stuff to pay all the bills gives us the time to ever so slowly grow that business. There are times when my regular work sees me put in well over 80 hours a week. Those days will be coming to a close soon . . . I Hope and after that if I could fly my toy drones and take photos and video to my hearts content I will be a happy camper.

I started my drone business after taking to the hobby to fill in my leisure time after retirement. I largely see my business as more of a hobby that I get paid for. Putting food on the table is not a priority since my money pot on retirement was sufficient for me not to be worried about being able to pay the next bill that dropped on the mat.

But I still try to charge a good rate for my work. I see it as my responsibility to those that depend on their drone work not to unfairly undercut them. But it's difficult to do that now... I'm being so drastically undercut myself. I don't need the money from my drone work so the fact that jobs are now getting hard to come by at what I see as a fair rate doesn't overly concern me in itself. What does bother me is that it's coming to a point that I won't be able to cover my costs. Cheapest commercial insurance around £425.00, PfCO renewal about £130.00, money for new batteries if I need them around £100.00 a throw, money set aside to repair or renew an aircraft is indeterminate. When I think about it, I may already be at the point that I'm no-longer in profit! I'm probably already paying to work!!!

 

[PatR]

I came to that conclusion about 6 months ago...

 

[FlushVision]

I came to that conclusion about 6 months ago...

Well, I have a job on tomorrow taking a set of pictures of a war memorial. A simple straight up and down job paying my minimum rate of £80.00 and I was bloody lucky to get the client to agree to that. The next job is a video of a lead mine site in North Yorkshire paying £160.00 plus traveling expenses for unedited footage: The client will be using the footage in an educational video so will be doing his own editing. Then I've nothing else booked until 12th August doing a pro bono job for a personal trainer who is taking a group of Nordic Walkers on a walk over Crompton Moor...which will pay me exactly nothing. My PfCO renewal is looking pretty grim at the moment.

 

[PatR]

Kind of makes you wonder how an outfit can obtain from $7,000.00 to $15,000/flight hour from the government for a small (10’ span) military drone...

 

[Eagle's Eye Video]

someone has to fund the Terminator... you think Ahhnold comes cheap?

 

[Ty Pilot]

Kind of makes you wonder how an outfit can obtain from $7,000.00 to $15,000/flight hour from the government for a small (10’ span) military drone...

Because they didn't have to bargain with the people that actually provided the money?

 

[Rimulator]

From what I am seeing, operating UAS as a business takes business sensibilities.

Cost: capex and opex

Capex: Drone, insurance, batteries, spare parts, containers, cameras, software

Opex: Electricity, website hosting, vehicle operation cost, staff

Amortization: 2 years

Working days: 200
Flying days: 100

So, as a business, you have 200 working days a year. Realistically, only 100 flying days.

In two years, hardware needs to be cycled out. You have to recover the cost of all the CAPEX investments over 200 flights, and in a unique way.


Pseudocode

n=0
x=200

y=0
if y > n, if y < (x+1),(total $ of CAPEX)/2, else exit


This means that you assume 50% of the actual remaining cost of the flying hardware for every flight, for 200 flights. This model forces recognition of the hardware cost early, and if you run like a business, you can recognize a profit later.

OPEX is linear, recognized as actual cost for a time frame.

So, a $4,000 investment would have a $2,000 CAPEX cost for the first flight, along with OPEX costs. However, a few months into it, CAPEX costs are nominal.

This reinforces the only viable business model. Since costs have to be amortized over a short window of time, sales should include the same window.

Commercial operators cannot afford to sell 12 pictures for $250. Once you factor out costs, that flight could cost thousands before factoring in OPEX costs. So, sell builders on a program over time. Sell realtor on a service, with flight coupons, that is priced based on 200 flights.

Understanding this, any operator, even a realtor or builder, needs to do the same calculation. If you can discuss this, you can show a client how it is less expensive and a better choice to engage a professional rather than take on a large new liability.

In the end, price CAPEX + OPEX over 200 flights, times 1.40 (margin), and that gives you a number that is competitive. It is a business. This model works for trucking, airline operations and any business that has to amortize precious depreciating hardware but the fee per service is low.

 

[FlushVision]

From what I am seeing, operating UAS as a business takes business sensibilities.

Cost: capex and opex

Capex: Drone, insurance, batteries, spare parts, containers, cameras, software

Opex: Electricity, website hosting, vehicle operation cost, staff

Amortization: 2 years

Working days: 200
Flying days: 100

So, as a business, you have 200 working days a year. Realistically, only 100 flying days.

In two years, hardware needs to be cycled out. You have to recover the cost of all the CAPEX investments over 200 flights, and in a unique way.


Pseudocode

n=0
x=200

y=0
if y > n, if y < (x+1),(total $ of CAPEX)/2, else exit


This means that you assume 50% of the actual remaining cost of the flying hardware for every flight, for 200 flights. This model forces recognition of the hardware cost early, and if you run like a business, you can recognize a profit later.

OPEX is linear, recognized as actual cost for a time frame.

So, a $4,000 investment would have a $2,000 CAPEX cost for the first flight, along with OPEX costs. However, a few months into it, CAPEX costs are nominal.

This reinforces the only viable business model. Since costs have to be amortized over a short window of time, sales should include the same window.

Commercial operators cannot afford to sell 12 pictures for $250. Once you factor out costs, that flight could cost thousands before factoring in OPEX costs. So, sell builders on a program over time. Sell realtor on a service, with flight coupons, that is priced based on 200 flights.

Understanding this, any operator, even a realtor or builder, needs to do the same calculation. If you can discuss this, you can show a client how it is less expensive and a better choice to engage a professional rather than take on a large new liability.

In the end, price CAPEX + OPEX over 200 flights, times 1.40 (margin), and that gives you a number that is competitive. It is a business. This model works for trucking, airline operations and any business that has to amortize precious depreciating hardware but the fee per service is low.

I understand that. The problem is (for me anyhow) that it has come to the point that trying to base my rates on anything like the above has become impossible mainly because here, in the U.K., the commercial drone market is saturated and to compound the problem is heavily undercut by people without the legal paperwork who are prepared to chuck their aircraft up for peanuts.

Yes, there are some larger outfits who are still managing to get by, but they are using far more sophisticated equipment carrying cinematic cameras. Their equipment is of a magnitude (or several) above the likes of the H480 or Phantom 4s...or even the H520! They are in a different league to the likes of a one man band like myself. The truth is that for the level of drones that I'm using, I'm wide open to the amateur hobbyist with a phantom cutting my legs from under me.

Indeed while writing this I've come to the decision that, baring a sudden upturn in my business, I'm gonna chuck it in and just fly hobby. My PfCO runs out in early November and If I was going to renew it I would have to start the reapplication process by mid September. I simply don't see that upturn in my business happening within the next two months.

 

[Dilly Joat]

I understand that. The problem is (for me anyhow) that it has come to the point that trying to base my rates on anything like the above has become impossible mainly because here, in the U.K., the commercial drone market is saturated and to compound the problem is heavily undercut by people without the legal paperwork who are prepared to chuck their aircraft up for peanuts.

Flushvision, I completely agree with you about the state of UK commercial work. I am nearing retirement (should have been last year) but my pension pot was hit very badly in the 2008 fiasco.
So I thought about getting my PfCO and starting a small business to help eke out my pension. Researched the market, calculated the costs, worked out the amount of leg-work to get the business known etc. After this analysis, I dropped the idea fairly quickly since projected income did not exceed outgoings by enough to even pay for the first serious crash. (Two types of pilot - those who have crashed and those that will crash.)
I am going to avoid the stress, tighten my belt a bit and enjoy my flying instead.

 

[FlushVision]

Flushvision, I completely agree with you about the state of UK commercial work. I am nearing retirement (should have been last year) but my pension pot was hit very badly in the 2008 fiasco.
So I thought about getting my PfCO and starting a small business to help eke out my pension. Researched the market, calculated the costs, worked out the amount of leg-work to get the business known etc. After this analysis, I dropped the idea fairly quickly since projected income did not exceed outgoings by enough to even pay for the first serious crash. (Two types of pilot - those who have crashed and those that will crash.)
I am going to avoid the stress, tighten my belt a bit and enjoy my flying instead.

Well, when I first decided to go commercial things were better then. I did all the research and I could see it was viable...then. My how things have changed this last year! Like you, if I were thinking of starting a business now, I wouldn't, and I would strongly advise anyone else thinking of setting up to think again. Like I've said in a previous post, unless you are going to service a particular niche using cameras costing thousands you will always be pray for the guy with his hobby drone.

IMHO I think you have approached the subject in a very adult way: not succumbed to you heart but let your brain do the real thinking. I've just got a couple more commercial flights booked but after that I think I'm done.