Design Costs

Discussion in 'Services & Employment' started by Willallison, Feb 24, 2010.

  1. SheetWise
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    SheetWise All Beach -- No Water.

    If that's the market, obviously some people are accepting that liability.

    Your question reminds me of a wage dispute an airline was having with its flight attendants. The union was standing firm that senior flight attendants would not only retain their wages, but also be given wage increases commensurate with their experience. The union posited that their position was aligned with everyone interested in passenger safety.

    I had a conversation with a senior flight attendant, and I asked her how many crashes she had been in. Her answer was 'none'. I then asked her why flying with her was any safer than flying with a rookie attendant. She didn't have an answer.

    There's a difference between having twenty years of experience, and having one year of experience twenty times.

    I wouldn't have asked that question of any pilot.

    Should I ask the designer how many boats they have both designed and built? How many have they simply designed? How many have they designed that have been built but didn't sink? What are the metrics?

    In answer to your question, there is no "right" price. Choosing to be a naval architect may be very similar to choosing to be an artist -- you do a lot of work for free hoping that the right project will come along ...

    [BTW -- Every musician wants to be someone like Eric Clapton -- and for every one that wants it, less than one in a million with the right talent will actually make it. There simply aren't that many positions available. In the meantime, they take the $20 and hope a position opens up. Either that, or they make it a hobby.]
     
  2. Eric Sponberg
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    Eric Sponberg Senior Member

    A lot of what we do relates to perseverence--you have to stick it out. You are not going to be able to make a living at this work overnight. When I was getting ready to hang out my own shingle, a well-known designer, of whom I asked advice, told me that it would take 15 years before I would become well-enough known to make a living at yacht design. That proved to be pretty true. It took me six years before I got my first design commission. And it was another three years before I got the second one, and another three years before the third one. In the interim, I did some marine surveys, and worked for other designers and boat builders doing odd-job engineering and design work.

    The other thing that designer told me was to publish, publish, publish. Back then, you tried to get your designs published in the yachting magazines, but that was right about the time the magazines decided they did not want to publish designs any more, only reviews of built boats. So it became a catch-22 situation--you could not get design commissions unless you got published, and you could not get published unless you had design commissions. This is still true today.

    So I started writing articles for yachting magazines, and was fortunate enough to write things that were interesting and that got accepted. SAIL magazine gave me a boost, taking my articles for quite a few years. Freeman Pittman, the namesake of the Freeman Pittman Innovation Award from SAIL, was my editor. (I won Honorable Mention for the award in 2002.) I have written for a string of magazines, and probably most of them for Professional Boatbuilder, with over a dozen or so, including a cover. I also have participated many times at the IBEX conferences as a speaker. These are my primary methods of marketing my work.

    Every designer you talk to will admit to having a tremendous amount of luck in getting ahead. Luck plays a big role, and you have to be able to place yourself in areas where luck happens. By that I mean, you look for opportunities, and be prepared to act on those opportunities when they arise.

    Eric
     
  3. SheetWise
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    SheetWise All Beach -- No Water.

    You've approached your profession in a way similar to many professionals I've known. These are people who are cutting edge, want to be independent, and want to make a difference. The bottom line is -- they're often the most uncompensated people in their field.

    When an independent adds up the time they spend promoting themselves, finding customers, preparing quotations, and continuing their education -- they'll find that it's a lot of time. Add to that the hard costs of maintaining a base of operation, and you've got got a fairly substantial sunk cost.

    As a designer/engineer you may demand $150 an hour -- but if you spend 100 hours a month promoting and soliciting in order to actually bill 60 hours a month -- or $9,000 -- and $5,000 of that is used to support your business infrastructure -- you've net $4,000 for 160 hours of work. Is this any different than a person charging $25 an hour, who has as much work as they want, works out of their home, and bills 160 hours a month? They also net $4,000 a month. If the rate was raised from $25 to $50 -- the cut-rate designer would be earning twice as much at one-third the rate.

    As a consumer, I may prefer the $50 an hour guy who is a full-time design-engineer to the $150 an hour guy who only gets 60 hours a month hands-on work.

    It's very expensive to try and make a difference in your chosen field.
     
  4. Mudz
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    Mudz Junior Member

    Great Thread. I've just decided to not pursue a career in design now. Manufacturing is where the money is.....
     
  5. SheetWise
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    SheetWise All Beach -- No Water.

    I think you're drawing the wrong conclusion. The responses in this this thread were mainly directed at the OP. Re-read. I think a thread on manufacturing would get similar responses. "The money" is probably in marketing and sales, but that certainly doesn't obviate the need to understand design. If money is your primary objective, and it rates higher than happiness -- then you should probably stay away from anything nautical. Most people who play these games are happy, and they stay that way by balancing their need for money with their need for fulfillment -- the fulcrum in that balancing act is determining what is "enough" ...
     
  6. MauiCruzer
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    MauiCruzer New Member

    Maui Dreamer

    Aloha, I have a project design in mind for a popular water craft. That is about all I am able to contribute, but I think this type of craft may become popular. I would like advice on how to start.

    How do naval architects conceive ideas and get them to float? Of course you need financial support to float an idea. If everyone involved retains a percentage of the royalty, then every one wins!
     
  7. conceptia
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    conceptia Naval Architect

    and thats what the defenition for impossible is...
     
  8. Eric Sponberg
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    Eric Sponberg Senior Member

    The easiest way to get started is to have a "sugar daddy". That's right, someone you know who believes in you, has lots of money, and is willing to spend it on you. That's how Olin Stephens got started--his sugar-daddy was Drake Sparkmen who commissioned Olin's first yacht design and found other customers for Olin among his rich friends. The hard part about that is, who is your sugar daddy????? That has plagued all entrepreneurs for all ages.

    We naval architects don't necessarily conceive our own ideas--more often than not, we are commissioned by our customers to bring their design idea to life. We adopt the better ideas for our own, sometimes, and every once in a while, will come out with a new design of our own. But then we are faced with the same problem--we don't have enough of our own money to build the bloody thing, and we have to find customers who are willing to put the money down to build the first one--sometimes this is our sugar-daddy. I am 60 years old, have been in this business for over 30 years, and I am still looking for my sugar-daddy.

    If your design is small enough and easy enough for you to build, then go build a prototype. You will have to use your own money or any that you can beg or borrow from friends. Don't bother with banks, they won't help you. A new boat building venture is one of the riskiest going, and banks know this--they won't lend you money to begin, even with a fool-proof business plan. People don't need boats--what may look like frosting on the cake to you is simply a cash drain to banks. So build your prototype and use it. Prove it. Show it to people. If they like it, they will continue to ask questions, want more information, and eventually maybe, just maybe, want one for themselves. And then maybe you can sell one, or two, or a few. If you are right, and the design proves popular, you will have become your own sugar-daddy and can afford to expand your business on the profits of your sales.

    A word about royalties. Boats, like anything else, have a price point. There is a point where if the price is too low, people won't buy it because it is too cheap. And if the price is too high, they won't buy it because they don't see the inherent value of a too-high price. There is a broad middle ground where the price is just right, and hopefully, your costs for development and manufacturing come somewhere in a little below that level so that you can make a profit. Profits are not great in boatbuilding--somewhere between 5% and 15% generally and historically, which is about the same with the vast majority of businesses. The designer's royalty, if you are paying a designer for the necessary naval architecture work, will likely be 2% of the selling price, if he is reasonable. If he is a prostitute, he'll charge a lot less, maybe nothing. If he is a crook, he'll charge a lot more. Your backers, your sugar-daddy's, if they are reasonable, are going to want to see their profits that are reasonable, which means at least 5%. Can you afford to build for that? After the designer and the backers, you have lost about half your profit, which does not leave a lot left to pour back into the business.

    So my advice is, start out small on your own, grow slowly, and follow where your potential customers lead you--they will tell you whether your boat is good or bad, and it is up to you to adapt. Then maybe in 5 or 10 years, you'll have a going business and you can be proud of your work.

    Eric
     
  9. daiquiri
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    daiquiri Engineering and Design

    Can't agree more. :mad:


    Eric, your opinions are, as usual, so valuable (should I say priceless?) because they come from so many years of hands-on experience in boating industry. I keep learning a lots from each and every your post.
    This phrase has caught my eye and has made me think a bit:
    I have read few economical analysis about the future of boating, which have partly changed my previous opinions. I was convinced, not so long ago, that only a high-end (in terms of price and quality) of this "industry" will survive the current crisis. After having read the said analysis, I have included the low-end builders to the group of survivors. But I still believe that the mid-range models, just like middle-class folks, would become almost a niche in the (near?) future.
    Here you are apparently suggesting the opposite, if I have understood it well. It is surely coming from your experience on this topic, so I'd like to ask you if you could please say more about your point of view on this issue.

    Cheers!
     
  10. Eric Sponberg
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    Eric Sponberg Senior Member

    Daiquiri, thank you for your compliments, and I am glad they have some import for you. By the way, I do appreciate your insights and posts on these forums, too, and I think you offer valid observations and opinions. Good work.

    Regarding the boating market, of course I speak in generalizations. Yes, there will always be a very cheap end of the spectrum, and a very expensive end, which will survive. There are always a few customers to support all elements of the spectrum of the market. And this is true with any market, any product. Like evolution, the surviving boat builders are going to be the ones who can adapt. In this kind of market, that will mean cutting back costs, eliminating waste, and being able to operate more efficiently. On top of that, the market always demands new things, so new ideas and innovation are a way to keep up with the market and to stay on the leading edge. It's all really just hard work, and hopefully you don't go broke trying to stay afloat.

    Let's take the high end of the market, the superyachts. In my opinion, the lavishness of the superyachts in some quarters is going to come crashing down, and we are going to have a lot of white elephants floating around. The reason is because the very rich are now being perceived as conspicuous consumers who don't give diddly-squat about the environment. But these behemoth yachts consume vast amounts of fuel. So the adaptation is going to be, and we have already seen it start, that superyachts are going to become green--hybrid power will come to the fore. Solar and wind power are going to be developed even more. There will be more sailing yachts in proportion to power boats, and customers are going to decide it is OK to go slower, but they'll still want the whiskey on the rocks in a crystal glass on the fantail in $1000 chairs, and $500 shirts and shorts. They'll still spend the money to get there, and some builders will survive. The real entrepeneurs in ship refits will offer hybrid conversions to the existing fleet of superyachts, so some of the superyachts will survive in new clothes. Others will be converted to other uses, such as hotels, condominiums, hospital ships, troop transports, what have you.

    On the other end, with the really cheap boats, I think many will go by the wayside. A few will survive, because there will always be a few people who want to spend only the minimum of money. But if you are already priced at the dirt cheap end, and your costs go up due to the crisis, there is not too much more to cut. It depends on what the expectations are in comparisons to the expectations of the market. Some builders will die, others will adapt somehow.

    In that broad middle ground of the vast majority of boat builders, again, the adaptations are to cut costs and operating expenses yet still build quality in the product. The price of the boat may come down, but it will also be buoyed up by inflation. The buyers' expectations are going to shift as well. They will recover some semblence of disposable income that can be used for recreational purposes, but they are going to want value for money, or more directly, more value for less money. The builders have to adapt or die accordingly. We have already seen it here in the US, and we'll have another year or two before prices and the market stabilize.

    I recall a fascinating example of price point about 10 years ago or so at the Newport International Boat Show. A boatbuilder was selling his new "picnic boat" which was getting rave reviews, and the initial sales at the show were very encouraging. So shortly into the show, the company started upping the price of the boat by $10,000 on each successive order. They sold about 20 boats at the show, each one $10,000 more expensive than the previous one. It was remarkable--there was not $10,000 more worth in the boat, it is just what the customers perceived to be a logical and acceptable price--the price point. Admittedly, this is an extreme example, and don't we all wish that we could do business like that. As a result, that particular design always had a very high price, yet there was not that much value in the boat itself. It established its price point that the market was willing to pay. Now, in a down economy, that builder has lots of excess profit that he can shed simply to keep the boat in production, so he is quite lucky, in a way.

    In the meantime, I do the same thing. I look at how I can operate more efficiently--can I get those design drawings out faster and cheaper? I look for ways to do that. Thank the stars for "cut and paste" because a lot of design is taking this detail from here, that detail from there, and putting it into a new idea. And I'll take my whisky in my lawn chair and grubby shorts, I'm fine with that.

    Eric
     
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  11. dskira

    dskira Previous Member

    Eric, I think the "sugar daddy" concept is rather..........blunt.
    If Sparkman the brooker went with the young Olin, it is because Olin was an exptional personality and a genius.
    99% of the designer did have a "sugar daddy", at the time, no need, every one needed a designer.
    Things changed.
    Now, an imbecile download a free program and he is a designer, an confusing more the field is the great amount od production boat.
    I will keep the "sugar daddy" for the social behavior of low class people.
    And your beautiful work for sure do not need "sugar daddy". You are well renowne and a great designer.
    Daniel
     
  12. Alik
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    Alik Senior Member

    That's right. And next step of such imbecile is: create images of something looking like boat without feasibiliy check and any engineering. Then place his 'photo realistic' renderings in yachting press that became a source of pre-paid brainwash, not source of information anymore. In these conditions those professioanls who provide objective and realistic data to customer are in loose situation.
     

  13. Eric Sponberg
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    Eric Sponberg Senior Member

    I meant to be blunt to drive home the point. And not to detract from Olin's genius, he certainly had that. But how many other unsung geniuses are out there that did not have the opportunities that Olin had? I think they are legion. This is true in every field of human endeavor. Some geniuses have sugar daddies and luck, but most don't.

    Thank you for your compliments, too, I appreciate that. I may not have had a sugar daddy or the luck that some have had, but I soldier on because I really love what I do, and fortunately, I persevered long enough to the point where I could make a living at it.

    Eric
     
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