Why Every Drone Operator Should Be a Finance Freak and Love Asset Utilization

We’ve talked before about how Southwest Airlines keeps its planes in the air (and how this makes money for Southwest).   The lesson for us is: the longer you keep the drone in the air, the more money you make. 

Today we are building on that lesson with a little something for those finance freaks out there: Asset Utilization.  

Asset Utilization means: “a ratio that measures how efficient an organization is in using the assets at its disposal to make money and turn a profit.” 

As with most formal definitions, that isn’t very useful. So let’s use an example from the manufacturing sector. 

If I have a machine that costs $10,000 and in a day it can produce 10,000 widgets that each sell for $10 (so $100,000 in revenue), then the “Asset Utilization” ratio would be 10:1 ($100,000 divided by $10,000 for the machine, aka, the “Asset” that is being utilized). 

But if the machine costs $20,000 and produces 5,000 less widgets in a day (so revenues are $50,000, i.e., 5,000 widgets produced at $10 per widget), then the Asset Utilization ratio is 2.5:1. And for those of you who struggle with math, that means the cost is quadruple for my widgets - and that means I am a loser.  

How can this be applied to drones? Well, we need to adjust Asset Utilization concept a bit to something we call Cost-per-Flight-Minute (CFM). Similar to Asset Utilization, CFM  measures the efficiency of your drone. However, instead of by revenue it is from a cost perspective, i.e., how much does each minute cost you? Which, in turn, directly impacts your profitability. 

Suppose your drone costs $20,000 but can only fly for 15 minutes. It’s CFM is $1333 per minute. But suppose your drone costs $6,000 but can fly for 120 minutes. That drone’s CFM is $50 per minute. Or, another way of putting it, the more you “utilize” the asset and the less the asset costs, the more profitable you will be. 

Just a coincidence, but it happens that the Quad Configuration of the Modovolo Lift is $6,000…and can fly more than 120 minutes…and has a CFM of $50 per minute.