Marina Dock Age, September/October 1997

Explore Every Option to Improve Marina Income
by Dennis P. Kissman

As the boating season is winding down for many marinas, a lot of you already have your eye on what changes could be made to improve the marinas income in the off season and for the next years boating season. Those changes could include capital expenditures, staffing changes or product line changes. In each case, if the wrong decision is made, the expected increases in income could turn into decreases before you realize what happened. Under these circumstances the cost to correct the situation usually far exceeds the cost involved in making the initial change.

I always recommend that marina operators work through the effects of those changes on paper before committing to the actual change. For example, say that you sell new boats. The new boat sales office is located in your ships store, and new boats are also displayed on a limited basis in the stores retail area and outside at the marinas entrance. Excess new boat inventory is kept in the marinas dry stack building in vacant racks. New boats are rigged and warranty repairs are performed by your in-house repair department.

While reviewing your last 12 months of boat sales, you determined that you lost $100,000 to your bottom line from selling new boats. You believe you have three options. One: Get out of the new boat business. Two: Set up your new boat salesperson in business for himself by letting him take over the new boat sales profit center. Then have him lease space back from the marina. Three: Understand why you lost money and make the necessary changes to make new boat sales profitable.

At this point, you’re psyched up about options one and two—getting out of the business and letting someone else have the headaches. This is where I make a simple request: Prove that you lost what you said you lost. The majority of marina operators in this situation cannot provide proof, and often stop at: “I just know.” If you make your decision on the strength of that statement alone, your chances are good that it will be the wrong one.

Now the question becomes: How do you go about making the right decision? Begin with the assumption that if you lost $100,000 of profit in boat sales, it would be fair to assume you should have made a profit. Say that, based on your sales volume, you should have made a $200,000 profit.

Now step back and look at the options again: Which option is best? With option one—getting out of the new boat sales business—would your profits increase by $300,000 (the $100,000 loss plus the $200,000 you should have had in profits)?

There is a good chance that they would not have. Here are three reasons. First, boat sales are an intricate part of your business and the overhead and operating costs that were allocated to the boat sales profit center will have to be absorbed by the remaining profit centers.

Second, the repair business would most likely decrease because of the reduced volume. If the rigging and warranty business is not as profitable as other types of repair business, and if you do not have the billable hours to take up this void, then your non-productive labor could increase.

How many boats do you sell that remain in the marina? Those boats become the third reason that you may not profit from the decision to get rid of boat sales. If you have to look elsewhere for new customers, can you attract them at the same rate as you do when you have a captive audience with the dealership on site? If the answer is no, then the storage rate increase you planned this year—because occupancy increases warrant it—might have to be put off for another year. All of a sudden, that $300,000 increase in profit you thought you would get is rapidly decreasing and option one may be losing some of its appeal. Continue »