The business end of boating.

[rocknrule]

Deleted by rocknrule

[Tad]

Originally Posted by rocknrule

How can a 23Ft boat cost half again the cost of a good car?

Man hours.......there are perhaps 20 man hours in a car, vs 2-300 in the 23' boat.

[rasorinc]

What state or city do you live in? Do you want the business to be located there? Quality boats can be made without chopper guns and made quickly out of a very strong, almost undestructable composite. Two major costs a machine to cut out the sides and bottom of boat. Same machine to cut out bottom and side frames, stringers,etc. to be placed in the hull after heat welding the composite side and bottom together. That is the other expense--a heat welder computer driven machine. Then hull can be placed on a moveable saddle and moved away for completion. Many hulls a day of different size can be made in a day by two well trained professionals with a knowledgeable helper to keep the raw materials coming. Hulls only, the finish schedule is a different animal.....

[daiquiri]

Originally Posted by rocknrule

the real answer is there is far, far to many builders for to few customers and the business model really does drive the costs. Remember too a car has thousands and thousands of parts (all of which are made from very expensive tooling by real expensive machines) and a boat has a few (made with relatively cheap tools).

I agree that the problem lies in production quantities. But I also think that it is inherent to the nautical sector.

There is one important thing we need to consider, imho. Nearly each one of us have a car, some have more than one. It has become nearly a necessity in the modern world, unless you work through internet, or your business area is limited to zones you can reach by public transportation system (if you luckily live in a country where an efficient public transport system is available). Otherwise, if you want to make income, you need a car.

For a vast majority of people boats are not a necessity but an item for leisure, or even a status symbol. Nobody REALLY has a need to buy a Riva or a Chris Craft. There are relatively few people who use boats for work and as a mean to make income - fishermen, barge or water taxi owners and similar. But percentually speaking, they are a very small part of global population.

If you want to make comparisons with car industry, then I think you should take Ferrari and Porsche as reference brands which compare to said Riva and Chriscraft. Or motorhomes, campers and similar vehicles if you want to have a comparison reference for trawlers, lobsters, etc. Then you will see that even in the reference sector of car industry the prices are pretty high, production is low, and the production lines are mostly made of human hands, not the robotic ones.

Then there is a whole world apart, made of canoes, kayaks, dinghies, pedalboats etc. That's where eventually the car-industry-style mass production system could be considered, and the consequent cost savings could translate into high demand. Perhaps.

[Joe Petrich]

I have to agree with Daiquiri. The analogies to Ferrari and Porsche are good as is the reference to nobody really needing a boat. I have to add that automobiles despite their inherent complexity are cheaper because of the economies of scale. Because an auto manufacturer is buying mass quantities of materials for the cars it can get better prices for those materials. It can also afford a lower profit margin because it sells many units.

[JRMacGregor]

The other posters have already nailed the issue.

If you only design and build one car - the car is very expensive

It can take about 2.5 million man hours to fully design/engineer a mid size car - about $1 billion in development costs.

If you only sell one car - that's a pretty expensive car.

But they hope to recover the costs over several hundred thousand cars per year.

If you can sell that many boats, I think you will be able to compete.

[marshmat]

Some interesting points there, rocknrule, and if you can find a way to get around them you might have a pretty good shot at the business.

My thoughts:

Originally Posted by rocknrule

1) Zero differentiation! There is nothing new in the marketplace. Boat manufacturers keep designing and building for the same customers: fisherman, water skiers and cruisers (all recreational).

I wouldn't say the recreational market is quite that rigidly defined. But let's pull up the car analogy again. There are passenger cars/trucks, and there are commercial buses/trucks. Apart from a tiny handful of rare exceptions, the former category are all between 1 and 3 tonnes, all between 3 and 6 metres long, all have a cruise speed of about 110 km/h (although most can go faster), and most are designed to carry 4 people (sometimes 2, sometimes as many as 8). They all have similar technology under the hood, share many common parts, and have nearly identical control systems.
The boat market, by comparison, has incredible variety and many more niches for specialized products: weights from 20 kg to dozens of tonnes, lengths ranging from fits-in-your-car-trunk to the size of a commercial airliner, capacities ranging from a cramped one-person cockpit to a posh luxury hotel for 12, and designed for conditions ranging from quiet streams to hurricanes in the Atlantic.

2) Boat manufacturing is local because it is difficult and expensive to ship small boats far from the factory.
3) Fiberglass boatbuilding is pretty primitive for a mass produced product.

I don't know many mass-produced boats for which local manufacturing applies anymore. Just about every builder doing high-volume production ships to multiple countries; it's just the small custom guys who tend to stay local. Yes, conventional hand-laid fibreglass is a primitive process by today's standards, but given enough capital investment, it can become quite a sophisticated production system. That said, local manufacturing is thriving where appropriate- that is, where a specific set of shared requirements has, over time, led to designs well-adapted for a particular duty.

4) High inventory costs in a cyclical business environment
5) High sales margins
6) Manufacturer has a single source of inventory – sell a boat to a retailer

Apart from the high sales margins (basically a function of competition and demand), the same applies to most manufacturing industries, especially the car sector.

7) No barriers to entry
8) There are many other as well
All of the above issues drive the cost structure in an uncompetitive direction – UP, without adding anything to customer value.

What would you propose to drive the cost structure down? This is a vicious, cut-throat industry where many a start-up (and many an established builder) has been torn to shreds by the fabled banker shark, Carcharodon Creditor. Toyota has sold over 35 million Corollas; as far as I know, no boatbuilder in history has ever come close to even dreaming about sales numbers like that.

I begin by saying the market is different, and bigger than the industry is able to see. I base my manufacturing model on the basis of that bigger and more diverse market. Because the market is bigger and more diverse I need to find a better way to satisfy these different customers and the needs other builders have not been able to meet. The result is a more affordable and rapid way to deliver to those customers all over the world. And in almost every market a better value to the customer and more profitable to my business and its partners.

Not to burst your bubble, but this sounds like a Canadian deficit-reduction strategy: just assume that there's a bigger, more diverse market somewhere that everyone else has missed, ready and poised for insane growth. Unlike the earlier example- where the Corolla is perfectly well suited to about 35 million people in countries all over the world- the requirements for a boat differ enormously from place to place, or from job to job, and the markets long ago adapted to respond to these demands.

And I can buy a brand new boat from a re-possession outfit for half price – why go to a retail dealer. There is enough old inventory to keep factories closed for awhile.

Most large-scale manufacturing efforts (read: car sector) have this same problem. The thing lasts fifteen or twenty years; why would I spend $30k on a new one when I can spend $15k on a two-year-old one?

And don’t forget that a large part of the world uses boats as a primary means of transportation. My business takes me all over the world and as one example 500,000 people a day use water transport in the city of Bangkok, 85,000 per day in Dubai. There are over 2.5 million islands in the world – what do they do?

They build boats appropriate to their area, and they use them until they break down beyond repair. Which, for a well built boat, is a very long time indeed.
There's another issue with getting mass production in on this scene- everyone wants something a bit different. Unlike the bus market, where the tradeoffs are fairly straightforward (capital cost vs. noise, accessibility, seating capacity), every water taxi operator, every river ferry has a slightly different set of requirements that, inevitably, is different from his counterpart ten miles upstream.

Another issue – most crisis seem to happen on the water: hurricane Katrina, the Asian tsunami, the typhoon in Myanmar and the list goes on and expands continuously. Watercraft is the best means of rescue – not helicopters. I contend the boat market is HUGE.

The question is: Who needs a boat and will buy a boat, who doesn't already have a boat or access to one? You'll find a lot of people who say "yes, I'd want one of those" when you show them a prototype, but only a very tiny fraction of those will say "OK, here's a cheque, gimme the keys".

How can a 23Ft boat cost half again the cost of a good car?

An equally valid phrasing of this question would be "How the @#$% is a 30-foot cabin cruiser worth as much as a decent townhouse?" as is often asked when some newspaper reports the loss of three such boats in a marina fire to be "a $500,000 loss".
I don't disagree that there are production boats out there that are priced far too high for their quality, and undoubtedly the aforementioned issues with marketing, inventory and sales overhead contribute to this. But the only boats that have ever succeeded with a "make 'em all identical and just churn 'em out as fast as the line can handle it" approach are Zodiacs and little aluminum fishing skiffs.

The technology exists to turn out huge numbers of boats at a very low per-unit price. The trouble is, nobody can sell huge numbers of boats- everyone needs/wants something a bit different, and the majority of those already have a source for whatever special thing they need. There are certainly niches that are currently unfilled and could be successful, but I think it's highly unlikely that any one company is ever going to take a majority stake in the boat market as a whole (as much as Brunswick wants to try).

You may have one heck of a business model, rocknrule- the thing is, I just don't see any obvious way to shake up the boat market or make it more competitive than it already is.

[Fanie]

I agree with you rocknrule, there is a market out there but not for the standard thing everyone thinks it should be. I have a similar idea, but there's no market in SA, this place is on the way out.

I'm going to build a few hulls here then take the business elsewhere. Anywhere for that matter. Probably give it to someone. Just not here.

There is going to be a good middle path between cost and effort. The trick is to make it worth your while while at the same time the customer is happy he got a good deal also.

Geeeezzzz Mat, that long post will have to wait for the weekend and how many chapters are there

[Distorted Humor]

The biggest issue is that it is a smaller market, so your capital costs and retail costs are higher. (If I put in 1 million in machinery to produce the boat, and can sell 100, that means that the boat has $10,000 in captial costs, while 1000 boat production run means it drops to 1,000, the retail costs is that a boat dealer might sell 1/100 of the units that a car dealership will sell, if that, thus they must be able to make more money per unit (thus, a higher markup) to pay for all the costs and to pay themselves a wage.

the other issue is that since they are so pricy, people expect it to be detailed and made how THEY want it, not the other way around.

Glad I am not a boat builder!

[daiquiri]

Only if you create something really revolutionary and unique, imho.
And even then, you have about 6 months to conquer the world before the others start making and selling very similar (or competitive) stuff.

But hey, you know what? This is the only life we have and I believe that if you have a dream it's always worth chasing it! So just go ahead!

Originally Posted by rocknrule

Stop thinking like a boat builder and start thinking like an entrepreneur!!!

Start thinking like an enterpreneur, but don't forget you're a boatbuilder! (it's boats you want to make...)

[fcfc]

This boatbuilder http://videos.mensup.fr/view/199/rep...liers-harmony/ is near bankrupcy. (Filed under equivalent of chapter 11 about 2 years ago). (interesting things start at 1:20 on the video)

[fcfc]

Originally Posted by rocknrule

What I meant is that from a buyers point of view it is difficult to rationalize the high cost of a boat.

Yes. But you have exactly the same problem in General Aircraft industry.

Ferrari builds and sells arounds 5000 cars a year. Check the prices, and Ferrari does not make a big profit. It is now a subsidiary of Fiat.

Now, what kind of boat can you sell 5000 a year ?

I was once visiting a friend in Ventura, California. I saw a few more "interesting" individuals than usual - even for California (turns out that there is a minimum-security mental hospital there). One, I remember, would get on a payphone when people walked by and pretend to fire dozens of workers, trade millions of dollars, have one of the workers take the Bentley to the dealer for servicing, etc.. Hard to imagine what his motivation was either.
Best case scenario is that there is a plan to spit out roto-molded plastic things at a high rate and that the venture is successful - then we have to look at the damned things in every third-world corner of the globe.

[BMcF]

"The boat itself is a powerboat and could be of any size from say 15Ft to 50Ft or greater though I see the primary market as between 18Ft – 32Ft.
"

Interesting, isn't it, that the equipment installed in a powerboat hull is equipment that you will purchase from the same folks everyone else does (particularly the propulsion) is one of the single largest drivers of total cost. In fact, that aspect of the business even explains why the companies that build the propulsion packages (or own the ones that do) bought up so many of the larger recreational small boat production companies.

[Joe Petrich]

I certainly wish you luck in your efforts. I will be interested to see how it progresses. I can't help think of another entrepeneur who had a revolutionary outside the box idea, a good product, a good business model, and a good track record. His name was Dean Kamen and his product was the Segway. That fell somewhat flat.