Candid advice: 5 things to strongly consider when starting a single-operator drone services business
Drones are fun, but business is business. Don’t set yourself up for failure.
Having jumped head first into the post Part 107 drone industry since it’s glorious fruition on August 29, 2016, I’ve seen a lot transpire over the past year and a half. But amidst Chinese hardware domination, data security concerns, venture funding of all sorts of innovative drone companies, promises of an autonomous future and a growing public acceptance of non-military drone technology, every week or so, I see posts on various online forums about Certified Remote Pilots (CRPs) selling their expensive gear.
I’m no professional industry analyst, but if it looks and smells like a LiPo battery fire, it’s probably a LiPo battery fire.
Since starting Airzus in late 2017, I’ve been working to build a company that gives CRPs a supplemental revenue stream. Our company was never meant to be a full-time work solution in a world quickly hurtling toward a 2020 reality where it’s estimated 40% of workers will be independent contractors.
So consequently, building a network of CRPs that work independently, adhere to regulatory compliance and have clear professional expectations is what my co-founder and I have been working on.
Given the steady interest from new drone operators and amidst the likely reality that some existing operators have been jaded by an industry that promised (and still promises) substantial growth & opportunity, I’d like to share 5 things I think every new independent drone services operator should consider.
1) Most importantly: Face the reality and learn to specialize
It’s important to realize how nascent the drone industry still is at the moment. Given regulatory constraints and a slow, yet steadily growing adoption rate of drones across multiple industries, the potential for drones to save money while simultaneously adding value is still vastly unrealized. So the opportunity to carve out a niche of the growing market is there, but just because you own a Phantom 4 Pro doesn’t mean you can do it all.
Luckily for you, the kind contributors to Wikipedia have started a running list of various drone applications across industries. (But by no means is this a complete run-down of all use-cases)
Of course you can provide a few drone-related services and eventually do them very well, but inspection work requires different gear and skills than, say, cinematic video capture. At a professional level, there’s even a discernment for what kind of camera is best for still photography vs. video. So figure out what you want to do, practice it and learn to focus.
Pro-tip: Get to know or take a local CRP out for lunch (at your expense) to help shed some light on whatever niche you want to focus on. Or make some “friends” in online forums or Facebook groups. Obviously, because the online world can be full of time-wasting trolls, make sure whoever you learn from has had some direct experience in your field of interest. Depending on what work you’re looking to do, and even before making the necessary equipment investment, there are also classes and online programs you might want to attend.
Key takeaway: Focus is integral to your success. It’s not only about what equipment you buy, it’s about the practice, specialization and application of your skills that will make the difference in your business.
2) Set a initial investment budget
When you start any business venture, if you want to ensure long-term success, you need to be practical; especially in the beginning. Given half of all businesses fail within the first 5 years of operations, you need to consider how much money you’re willing to invest initially into things like incorporation, legal fees, office space, equipment, insurance, marketing and transportation. Flying drones locally still (typically) requires at least a compact car, regardless of if you lease it, rent it, own it or just use Uber/Lyft to get to your jobsite.
“A big issue [that contributes to business failure] is under-capitalization at the outset of starting a business. Business owners frequently underestimate how much money will be needed to fund operations. At the same time, they can overestimate how quickly their products and services will catch on in the marketplace.” (Source: USA Today)
Here, again it’s important to consider what kind of drone services you want to provide. If you’re looking to simply supplement your income by doing some aerial real estate photography once in a while, a DJI Phantom 4 Advanced (or even a DJI Mavir Air) will suffice in terms of equipment. That’s an incorporation and equipment commitment of roughly $2,000. Add another $1,000 for marketing collateral (business cards, web hosting, ads, etc.), $600 for insurance and you’re up & running for less than $4,000. Very roughly speaking of course.
Now, if you already have a DSLR that also shoots (at a minimum) 1080p video, you’re good to go for complete real estate photo & video packages. But real estate photography is a crowded market and you’ll either need to stand out with your marketing or really hit the phones & inboxes heavily to tread water. Recouping your investment is one thing; building a long-term side hustle is another.
On the opposite end of the spectrum, there is more specialized work like thermal and multi-spectral crop inspections. Specialized work requires specialized equipment, which can be pricey. So deciding ahead of time what kind of work you want to focus on will be a big help.
Key takeaway: You’re going to need money to make money. And how much you need will depend on how you use the equipment you buy…on top of standard business expenses.
3) Incorporate properly
Boy do many people this wrong.
I’ll pause here to say that it’s perfectly normal for CRPs to work as full-time employees of both SMBs and enterprise-grade companies. Don’t think I’m solely advocating for everyone to run their own fiefdom without any experience doing so. But being independent has it’s perks and if you’re going to be your own boss, by all means, don’t incorporate before really thinking things through and considering steps 1 & 2 above. Especially if you’re planning on flying drones in the often not-so-glorious quest for profit.
Here comes time to get serious.
For single operators, incorporating as an LLC or S-corporation is the way to go. I went to a fairly prestigious business school for my undergraduate studies (Go Bears!), but I didn’t need that experience to understand that removing person liability from your business operations is an absolute no-brainer. The upfront headache of increased paperwork and additional expenses is well worth the legal protections to your personal asset. Both structures leave you room to grow and bring on partners, with the main advantage being pass-through taxation.
If you’re creating a business that you hope or need to attract investment for, go with the C-Corp (or S-Corp if you’re not going to seek investment in your first year or two). I don’t want to dwell too much on this topic and at the end of the day, you should never take advice from anyone other than an attorney regarding incorporation matters. But know this: sole proprietorship’s are never the answer. And partnerships, they are the devil.
*Please note that I am not a lawyer and this is not legal advice. This entire post is simply my opinion. For a free, informative video resource relating to incorporation, go here.
Key takeaway: If you’re serious about your personal financial well-being (which, like your health, you should be), don’t operate your drone business as a sole proprietorship or general partnership. Incorporate as an S-Corp or form an LLC. If you’re going to try to attract investment in the first year or two, create a Delaware C-Corp. Done.
4) Understand that patience is a virtue (a.k.a. Persistence pays off in the long term)
This part requires some forward-thinking vision.
Very rarely do we hear about the patient business person who took years to build out a sustainable business over time; focusing on customers and doing good by vendors. It’s not something the tech blogs or news outlets want to talk too much about. Which is a shame.
If you’re looking at modern drone technology and thinking to yourself, “this stuff is the future”, you won’t find any argument here. In fact, every single CRP or hobby flier I’ve ever spoken to understood (or felt) that unmanned aircraft are the future.
Judging by the video above, you can see that the urban transportation environment in the early half of the 20th century was quite a mess. Similar in ways, but also starkly contrasted to the more organized chaos that defines the modern day. But notice the amount of horse-drawn carriages there were back-in-the-day? Many more than cars.
If you look at the sky today, no matter where you’re at, you’ll see a lot more planes than drones. No on can predict the future with 100% certainty, but a lot of people think this will change as the adoption of drones for commercial use picks up. Most certainly the pendulum will make the most drastic shift once urban delivery drones start buzzing around in pre-programmed routes to their “drone balcony” destinations on the 37th floor of your residential skycraper.
We’re still not there yet. But we will be. And that’s the analogy to business I’d like to make.
In the age of 6–9 second attention spans, obviously the quick buck seems like the most attractive for both investors and entrepreneurs. But the quick buck and the drone industry don’t necessarily go hand in hand. Even DJI, which is the hands-down market leader in drone hardware world-wide, was founded in 2006. It took countless fly-aways and serious persistence to climb (or fly) to the top of the mountain.
Key takeaway: Don’t focus on the short-term in this business. Grow your customer base, perfect your skills, innovate and think of new ways to get your work done to save time & money. Just because you have a drone doesn’t mean it’s a golden ticket. It’s more like the flint & rock you’ll need to start a fire. Now focus on the finding the kindling (i.e. customers). Think of the dry wood as you persistence; the more you have, the larger your fire can get.
5. Details matter
When dealing with clients, the devil is in the details. Make sure you create thorough contracts and agree on payment expectations in advance.
Does the job require insurance? Did you stipulate a payment due date in your SOW? Are there any expectations your client might have that they’re simply assuming will be done? How will the media be delivered and how long will you keep it on your servers (or cloud storage service provider’s folders).
I’ve been on job-sites where the client didn’t know what file format and capture resolution they wanted their video files in until 5 minutes before I took off, which isn’t the biggest deal, but imagine if the client was looking for 4K content and you were shooting in 1080p?
Getting the details right from the get-go isn’t an absolute deal breaker, but as is typically the case in any business, having clear expectations for both you and your clients can only help to prevent future headaches. This becomes extremely relevant when things go wrong, people are late or unforeseen circumstances create situations that lead to an uncomfortable situation with a client.
And on the same note, details matter in your insurance policily as well. Are you getting General Liability coverage or simply Hull Damage coverage? Is Errors & Omissions coverage included in your premium? I’m not going to bore you with various insurance coverage options, but don’t be in a rush to make an important decision about insurance just because you don’t want to deal with it and would rather be flying.
Key takeaway: Get your contracts in order. Don’t work with new clients thinking that accepting a job over email for the sake of convenience is the right approach. Professionals and good business people will understand that the more you agree upon ahead of time, the less you’ll potentially argue about after the job is done.
Closing thoughts
It’s a thrilling time to be in the commercial drone industry. With the highly anticipated, gradual roll-out of LAANC throughout 2018, many more opportunities for all kinds of aerial work will sprout up. But as opportunities arise, competition will also intensify. There have been people working with drones in various industries for upwards of 10–15 years now, but it’s still the early phase. Part 107 really opened up the doors in August 2016 and now there are upwards of 70,000 commercial drone operators in the United States (not taking into account the ones that fly for money and don’t bother getting officially certified). So consider the situation and if you’re serious about it, now is the best time to get started.
Disclaimer: The views and opinions expressed in this post are those of the author and do not necessarily reflect the official policy or position of Airzus, Inc. or any of its partners or affiliates. Examples of analysis or suggestions included within this article are only examples. They should not be relied on solely in real-world decision-making as they are based only on very limited and narrow source information. Assumptions made within the analysis are not reflective of the position of Airzus, Inc. or any of its partners or affiliates. Online readers should not act or decline to act, based on content from this post, without first consulting an attorney, CPA or other appropriate professional. This post does not intentionally or unintentionally contain any legal or strict professional advice.
