Boat Building Business opinion

Discussion in 'All Things Boats & Boating' started by daniep, Aug 29, 2016.

  1. daniep
    Joined: Jun 2016
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    Location: Australia

    daniep New Member

    Hi all
    I am new to the forum. Over the last 7 months or so I've been doing research on starting up a Sailing Catamaran design and building company.
    I'm interested in your thoughts on this idea and would really appreciate any honest comments, positive or negative.
    One of the approaches to start off with could be:

    Buy a kit like the Spirited 480 with the idea of selling it at, hopefully a profit if I manage to keep the costs low.

    The Pro's in my inexperienced opinion:
    - Access to industry experts as part of the service provided by the kit designer and manufacturer
    - Possibly less capital to raise as the kits are designed and material waste should be minimal (note the 'should')
    - Proven design
    - Might be easier to raise capital if based on a proven design
    - Quantities for tape, cloth and resin already determined

    The Con's:
    - Don't have my own designer to customize the design as required
    - Design already done, may not be able to incorporate carbon in as many places as I would've liked
    - I don't want my company to be a ship builder or yacht builder only. We are a design house with original ideas and shapes. Using the latest construction methods and materials.

    Neutral points:
    - Same sub-contractors to be used for finishing
    - Tools and equipment required for the build will be similar for kit build as opposed to custom build.
    - Electronics and other equipment still the same as for any design.

    For the moment I will call this Approach 1.

    I really look forward to your comments.
     
  2. PAR
    Joined: Nov 2003
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    PAR Yacht Designer/Builder

    Welcome to the forum.

    You can likely purchase a limited production run license for the design you want, but to buy one kit and to start mass production of a version of this frankly unethical and illegal.

    Building from kits will not be profitable, as you're paying the kit cutter with your profit potential. Again, a license agreement from the designer is the option, then you can cut your own kit, from materials you procure, etc., eliminating the middlemen in the picture and securing some margin.

    In reality, you should develop a reasonable business model and work from there. If you want to be a design house, the fabrication portions of this project would be best jobbed out. Naturally, your margin will drop considerably, but anything is better than nothing. If you want to be a builder, you should pay for the design, so you can get a favorable license and production fee, assuming you don't have someone in house that can perform this task.

    Lastly, if you're looking to make mad profit, pick another industry.
     
  3. Barry
    Joined: Mar 2002
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    Barry Senior Member

    Obviously there are other major businesses building catamarans and you will have to compete against them to be successful

    They will have the ability to purchase materials from manufacturers directly as an OEM in large bulk volumes to keep prices low. You will probably be paying 30 to 50% more as you start up.

    They will have their own naval architect while you will have to pay for this service

    They will have their own builders/laborers that they only pay wages at cost while you are considering subcontracting this out and pay the subcontractor high dollars per hour and a profit margin.

    They will have a sales volume to distribute their fixed costs over many boats while you will have to cover all costs with the first boat.

    They will have a proven known design, proven in the real world and a recognized name. If you are building a 48 foot boat, for a big buck, how will you entice a customer to spend 200,000 or 300,000 to buy your boat.

    They will have a dealer network to keep their workforce busy to keep costs low. You will not

    I hate to rain on your dreams but you need to do a complete business plan, pick a boat, perhaps your kit, calculate the cost of every component, the labor etc to see if there is a hope in heck of competing in the marketplace.

    New starts need an edge. Perhaps the ultimate high quality boat or the low cost entry level boat for that length to work their way into the market. The major manufacturers are competing against other major manufacturers and will have minimized costs to maximize margin.

    Can you compete?? What do you think their profits are in percentage points? Probably around 10% of gross sales. But your costs could be 30 -40 % higher than theirs. So rather than my question,
    "can you compete?" the question should be "How can you compete/"
     
  4. Petros
    Joined: Oct 2007
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    Petros Senior Member

    welcome to the forum,

    the basic question you need to ask yourself first is: why do this business?

    the answer to that is as important as anything else. if you think it looks like fun, you should keep your day job. Any business is a lot of work, long hours, stressful, and more often than not can not be run profitably (iow, you will be lucky to break even). It is never "fun" to be losing money and have creditors after you (I have been there and done that). You will also not get as much sailing time either, all of your waking hours will be consumed running the business.

    What is the market price for the size of boat you are considering? how big is the market? why do you think customers might buy from you over well established competitors? It would be difficult to be able to make boats cheaper than your competitors, which means narrow profit margins, and not much room for costly mistakes (which are almost always inevitable in a new business).

    It has been my observation that it would be difficult to sell boats for more than they cost to build, which means you will likely lose money.

    You might be able to make a go of it as a part time "hobby business", that is, build the first one for yourself, self funded (no investors), sort it out on the water and see if you can sell it. Than do another one, all out of pocket. Do not go into debt for a part time business, do it with cash slowly.

    If your product is an easy sell and can sell them at a profit, and you have orders lined up with deposits in hand, than quit your job and start building boats. Do it slowly, one at a time to start, keep your overhead low (do it out of your home garage or shop). You will learn how much work goes into them, and if you can sell them profitably. It is better to loose money on one or two boats, than to lose money on a production line. You will also learn what works out well and not well on the first few boats you build, putting you in a much better position to make money on the boats you build next. That way you will not be sorting out the production problems on an assembly lines with employees standing around wondering if you will stay in business.

    BTW, you do not need an "exclusive" design to turn a profit. There are lots of excellent and popular designs out there that have been built by a number of differnt companies. A proven popular design starts you out with a much better advantage. Find a design that is popular but out of production, and find out who owns the production or design rights to it.

    If you can turn a profit that way, than you can considering introducing your own designs, or design variations. You would have already established your company, and hopefully will have a good reputation, it will make it that much easier to introduce a model or all new design that way.

    Good luck.
     
  5. Skyak
    Joined: Jul 2012
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    Skyak Senior Member

    I am sure you are looking for more expert opinion than mine but what I have to say is fairly obvious.

    You want to design and build sail cats -but you don't have design capability. For success you need 'core competency' that you will always demonstrate -but you can't afford to always explain it at every step. From what I read above, of the three components labor, equipment, capital you have only labor. I don't see much advantage for you in a rather difficult market. My impression is that Asia is getting into yacht building with very low labor prices. The biggest reason someone would NOT build there is poor property law protections. So Asia is high risk/high return on capital, you are high risk/low return.

    My advice would be to partner with a NA or designer of some reputation that you see eye to eye with on construction. As far as capital goes I don't know how you can lower risk enough to get a reasonable rate. The problem with building a kit is that the kit is marketed as needing minimal labor. It appears to me that you are taking all the risk for half the margin. I would not build a kit boat on speculation (only build it if it is sold).
     
  6. daniep
    Joined: Jun 2016
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    daniep New Member

    Thank you very much for the insight and opinions. It is clear all of you have loads of experience and I appreciate the time you take to share it.

    From your responses I now understand that building a kit is probably not the right way to go if the intent is to establish a new business. One of the reasons for considering it was to be able to turn it around fairly quickly. However the increased cost is evident.

    During the initial study I only considered fairly small savings on construction cost by only purchasing the sheets and having the cnc work done myself. Not paying for workshop space. This will probably only be a small saving in the bigger scheme of things.

    The fact that all of those major businesses are out there is quite scary. They have all of the resources a new start-up can only dream of. No doubt it would be near impossible to compete with these companies for a long time.

    I know this will be a lot of hard work and long hours and I'm prepared to do whatever it takes.

    The main question is "How can I compete?" The answer to that is something I am still working on. I have a few ideas and will post some of those to the forum to see if I'm heading in the right direction or have to keep thinking some more.

    The suggestion to only build a kit if it is pre-sold makes a lot of sense.

    My next phase of study will be based on looking at proven designs which I can purchase for production. Hopefully there is a designer out there who can assist someone like me to make a start with half a fighting chance.

    One thought to lower the risk on my behalf could be to build something smaller and develop and hone the necessary skills. Then grow it from there.

    Once again thank you very much for your insights
     
  7. Mr Efficiency
    Joined: Oct 2010
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    Mr Efficiency Senior Member

    To make a successful business in most any industry, you need to know the nuts and bolts of it, through and through, or you are a lamb to the slaughter. I haven't seen many, or even any people, start a successful business without having been very well grounded in it, know what the pitfalls are, and be able to be realistic about what is required to succeed. I'd suggest you consult an accountant, and discuss your plan.
     
  8. Barry
    Joined: Mar 2002
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    Barry Senior Member

    {{One thought to lower the risk on my behalf could be to build something smaller and develop and hone the necessary skills. Then grow it from there. }}

    This is a great idea as your input costs, labor costs etc will minimize losses and you will learn the vastness of your plan. If you can build a smaller unit you will be able to re-evaluate your determination and put numbers to a business plan.

    A kit will provide cheap "design costs" as compared to starting from scratch and make it easier to sell
     
  9. upchurchmr
    Joined: Feb 2011
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    upchurchmr Senior Member

    This is one of the fastest ways to go broke that I know.

    Just my conclusion from 35 years ago when I first started working after getting my ME degree.
     
  10. Stumble
    Joined: Oct 2008
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    Stumble Senior Member

    The first question you need to answer is what can you offer that no one else in the market currently can. It could be price, but this is going to be hard against large quantity builders. It could be quality, but you better be able to show your work as compared to high end builders. But these require a work history that you just don't have.

    It could be a new design, but it needs to be proven better...

    Whatever it is, you need some justification for why someone with a half million dollars to spend should give it to you instead of one of the other builders on the planet.

    One of the few niches I see as being unmet actually is build speed. The lee time for having a new custom 45' cat can be substantial. Find a way to build it in half the time and you may be able to open up a niche, and here using a kit may be worthwhile. The downside of course is that build costs have to go up, and the buyers need to be price insensitive, which would also require high quality builds. Also see major penalties for late deliveries.
     
  11. Ike
    Joined: Apr 2006
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    Ike Senior Member

    If the boating industry in Australia is anything like the US, consider the following; in the USA about 400 people start up a boat building business annually. About 400 boat building businesses go bust every year. Of course they are not necessarily the same business but a good percentage of them are. About 10% survive into the second year.

    The big mistake that most boatbuilders make is underestimating their startup cost, underestimating their labor and materials cost and underestimating their overhead. The second mistake is not making enough on sales to cover those costs! Many have to sell at a loss just to get into the market and make an identifiable brand name for themselves. This takes time and ready cash. Plus that getting the cash needed may leave you in debt for years to come. Some real important don'ts,
    Don't mortgage your house to finance this.
    If at all possible don't use credit cards to finance it. Credit card debt has a much higher interest rate and can take a long time to pay off.

    DO's:
    Make a good business plan. If you don't know how, colleges and universities usually have classes in this, and you can find it on the internet.
    Determine how you are going to finance it ahead of time, and put that in your business plan. Investors will want to see your plan

    I have a section on business on my web site for boat builders (free. no cost) There is much more there. But what everyone has said so far is good advice. Give this a lot of thought. In the mean time keep your day job.
     
  12. gonzo
    Joined: Aug 2002
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    gonzo Senior Member

    A kit may save a bit of time, but the hull and deck is a small percentage of the total time and cost of building a boat. If that is the only part you can save money, your total cost may be more than the selling price of any of the major manufacturers.
     
  13. Barry
    Joined: Mar 2002
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    Barry Senior Member

    Daniep
    You have asked for opinions from various people and the majority have been negative. There is a lot of experience within the forum and are throwing out caution to be sure.

    You have a goal. I will state what it might be:
    I want to start a catamaran building company to make money.

    You wanted to buy a 48 foot kit, finish it and sell it at a profit. This is an option.
    I assume that you are not a knowledgeable builder so you have to learn the processes.
    A 48 foot cat might cost maybe 400,000 to build, or more?
    This path to your goal could bankrupt your account.
    An extremely wealthy man, self made, once gave me a piece of advice 40 years ago and it was simply, do not risk more than you can afford to lose.

    So with this in mind, how can you minimize the magnitude of the loss?

    A kit boat will have already have a design cost from the kit builder that built into the kit price but amortized over many boats. If you take the price of the material supplied in the kit, AND the amortized design cost, there is a good chance that the kit price will be cheaper than you starting out by paying for someone to design your cat and buying the material. Ie their material costs will be less than what you can buy, the DXF cutting files are already done, and the design cost is included.

    But at the 48 foot level, the finishing costs might push $400,000 or more.

    IF you build say a smaller boat, say a 34-36 foot cat from a kit, perhaps the costs might be 150,000, ( I am guessing here) and if you do quite a bit of the labor yourself, you will learn the process and systems that you need to install.
    If the kit is from a known manufacturer, it might be easier to sell than one of your own design

    If you sell it, you will then be able to see if you want to continue on to risk more capital with a larger boat. Many kit manufacturers will to you build more boats on a royalty basis.

    You can work to attain your goal but this approach will minimize exposure to loss.
     
  14. WestVanHan
    Joined: Aug 2009
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    WestVanHan Not a Senior Member

    Points:
    - two (and possibly three) past posters on here spent their life's savings and lost their homes/investments and also their wives while engaged in the building of a catamaran-one 40',the other 50'.

    -there are currently over 400 sail cats for sale on yachtworld,from 45' to 55'. I took it up to 55' as an older 55' can be less than a newer 45'. You will be competing against all of these,plus the established yacht builders.

    -you will also be competing against Fusion cats. Send them money,and a couple steel containers show up and you put together the premade pieces of the hull,in not much time=IIRC 4 guys in 11 days. Then how many months for all the rest? You don't want to know how much a certified marine electrician charges an hour.....

    I'd consider a trip to Vegas as being much less risky. At least with blackjack you stand a chance of winning.
     

  15. Petros
    Joined: Oct 2007
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    Petros Senior Member

    daniep,

    I have still not seen an answer from you to the question of why you want to start a boat building business.
     
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