Hi everyone, I would like to start a boat building business. I need suggestions from you guys

I would like to start a boat building business as I have engineering background in naval architecture and I was a part of a building a ship that was given to navy operations. Please let me know as to where in terms of growth

 

Welcome to the Forum Somaero.
I presume that your Parramatta is in Australia?
City of Parramatta https://www.cityofparramatta.nsw.gov.au/
It might perhaps be better to start off by seeking employment with a boatbuilder in the area?
One could say that pretty much everywhere has potential growth for boatbuilders - but only if you are building boats that are desirable / in demand, and are perceived to be 'good value for money'.
And it might be difficult to realise 'good value for money' if you have to pay Aussie labour rates - look at the number of Australian boatbuilders who have set up in countries in Asia where the labour rates are much lower.

 

Hi, thanks a lot for your quick response to my message. There are many boat building companies are there in new South Wales. I can have a team of 4 members and we had been doing boat surveying so starting with a small dedicated team would ensure commitment towards the business goal, whereas location plays a vital role. And initial investment too

 

There is a member here called 'waikikin', he is a shipwright ( I think ) in Sydney, he might have an opinion.

 

Thanks a lot for your reply late. I will have to check with someone who is in Sydney so that I can get a clear idea about how good the business is

 

Boat building is one tough business.

Cash flows are a problem.

Cost overruns are a problem.

Changing market demand is a problem.

Economic recessions are disaster for boat builders.

Global competition is a problem.

Yards never commission at retail which means lower margins.

And I assure you, I am a glass half full optimist.

Here in the US, people always complain about the repair costs. I would try to start as a repair business and build as a side business so that recessions don't destroy the business. And for Australia, you need to understand where boat dollars go and there must be some commerce data available, as in a breakdown shipping, commercial pax, recreational and sizes within, and military, etc.

Asking a forum for advice shows some creativity and some naivety both.

I got a quote from a yard about 2.5 years ago and the yard ended up filing bankruptcy within a year. Not sure why they failed per se, but it seems commonplace for boat builders to fail. I did not commission the work for several reasons; one was because they had hand scribbled the delivery date and it was illegible. I assumed this meant they had a concern about timely delivery which was a massive red flag.

Do more homework and learn the industry better. If you understand failure and change problems into opportunity; you could succeed. Even buying a failed builder can be a formula for success. Don't laugh at my list of horribles; take them very seriously. Good luck.

 

If you want to start a business, you need to know the nuts and bolts of it very well. And that applies to any kind of business. Most people get that from being an employee or sub-contractor for the particular type of business involved.

 

Thanks a lot for your valuable response and I hope you guys,past experience, shows to what extent I can go with a plan and precautions as to be on the safer side. And as efficiency mentioned that foundation must be strong in whatever field we want to shine, but competition is always there to bring out the best from us. My qualification in naval architecture with a few workmates of same engineering field can be a handy to set up a small engineering workshop. Please suggest me a location and what would be the initial investment for starting with a 4 member team. Thanks fallguy for your valuable thoughts.

 

In an ideal world, your location would be a nice site on the waterfront, complete with a facility for launching and recovering boats (it might be just a slipway).
However waterfront land always comes at a premium price to either buy or rent.
Hence why a more realistic location for your business would probably be in a rental unit on an industrial estate somewhere far inland where the rents would be cheaper.

Re initial investment - the sky is the limit really. What type / size of boats do you want to build (or even repair)?
I am sure that this sage piece of advice has been mentioned before on here, but it is worth repeating.
Q : "How do I go about earning a small fortune in the boatbuilding world?"
A : "Start off with a large fortune".

 

First thing you should ask yourself if why would people buy a boat from you, an unknown builder, instead of an established brand. You will have to convince customers that the boat is a better deal. For example, explain how they will be able to make a warranty claim. Also, if your boat looks like any of the thousands of models available, the only selling point may be price. Can you build a boat cheaper than what is in the market?

 

All the previous is really good advice -
I will add/comment
(a) Ship building and boat building are quite different so boat building experience is valuable.
(b) you will be using a design from an experienced designer (I presume) but boating experience can be invaluable: helps lessen the chance of 'architect's dreams'.
(c) Scope out the market so that you supply something that is 'wanted'. Do it right the first time: Building a 'cheaper' boat might sound attractive but achieving it with shortcuts etc will come back and bite you.

 

One of the reasons for small start up boat building companies to fail without a ton of capital is that they are entering into a market that has many competitors
who have weathered the storm and developed a sales volume.
On the supply side of your materials, there are many mark ups to get to say a suggested retail price. Starting out you will not have the volume to purchase at
the lowest available price that the large production boat builders have attained.
In the automotive sector, the easily identifiable price discounts look like this Suggested list less 25% to a dealer price less a further 25% to get to a jobber
price less another 25% to get to a distributor price less another discount (guessing another 15%) to get to an OEM price. (further volume discounts may be available)
So for a $100 retail price, the cost to an OEM, may only be say $35
Certainly fibreglass etc would probably not fall into this discount structure but for a fact many marine hardware items will be pretty close.
So starting out you will not be able to buy at the "big boys" price and hence lose much of the needed margin to be able to build a boat anywhere near the
same selling price and make enough margin to run a business. Ie you cannot run out to a basic marine store and purchase all of necessary items needed at a low
enough price to make money selling a boat. Now with the offshore supply, usually China but there are others, the boat manufacturers are not only buying
direct from the hardware manufacturers but are buying at an extremely low price.
Having been involved in various sectors of business, manufacturing, retail, installation, and distribution, it has over the years been apparent that
you need an advantage in the market place to earn a place in the industry. It normally will not be price as your hard costs, ie materials will be higher than the high
production boat manufacturers so your savings to produce even a similarly priced boat will be difficult. Of course if you can lower the labor costs, which you may be able to do, depending on your local available labor pool.

Discussions over the years with like minded business owners has produced a terminology called "entry level capital"
Meaning that if you want to fix a car, you need to be a mechanic of some type and $40,000 of tools and a work bay, you can call yourself Billy Bobs Automotive
and Yo Yo Emporium. Alternatively, if you want to produce say a new line of automobiles, you may need several billion to get this started with huge
losses until, if you are lucky, you become profitable.

Niches are often found in two areas, as others have mentioned. First extremely high quality boats with extremely high price tags, that there is a limited
clientele availability. In the small boat market a name like Mastercraft comes to mind, $120,000 for a 22 foot wakeboard boat. This is a hard niche as
again they are buying their hard parts/material at good prices and have a brand recognition.
The other side of the spectrum would be a "good boat" at a "low price". As per my comments above, this will be tough without being able to commit
large initial orders for the hard/material supplies to get to lower costs.

Obviously, proprietary or patented concepts within the middle of the spectrum, ie quality boats at competitive pricing, may be an entry level.

Before embarking on such a venture the very first thing that I would do is to actually cost out all of the materials and hard parts, every item, to come up with a
cost. Then estimate the labor for whatever boat that you building. Be generous, ask around, talk to people who repair boats etc.
Add in an overhead, you had mentioned 4 plus yourself as a team? That is a lot of upper management weight already.
You will have an estimated cost price.
(Generally you would run two columns per item, say a retail price that you would pay as a guy coming in off the street then say a discount of at least 30%
to be an estimate of what you might see when you gather some volume purchasing advantages. This will create a variance of costs and help with a business plan)

Now look at similar boats to see what their retail prices are, subtract the cost from this and check to see what your actual margin is per boat.
If you have to build a boat per day to have your margin produce a breakeven business, you will have come to the conclusion that this is not a business
that you should consider. The other extremely important question that you need to
get comfortable with is " Are there enough people buying the type of boat that you want to build?"

Regarding start-up capital, moulds, tooling, space rental, insurance, advertising, naval architect costs, need to be considered. Don't forget Warranty costs

Our 21 foot aluminum jet boats took about 200 man hours to build. As we already had a shear, brakes, plasma table, welders, spray booth, space, etc, it was easy to build a boat and make some money at it. It has been awhile but I expect our start up cost if we began from scratch would have been in the $400,000 range just for equipment. As we already had a profitable manufacturing division, we only had to add in some extra people to build boats. Ie extremely low
man hour costs, while your venture will have to sustain ALL of the overhead.

In any case, after you build a business plan, contact an accountant to run all of the numbers by him and have him analyze your numbers for an outside
opinion. Additionally, he would be able to produce a cash flow report, ie deal with prepaid expenses, rent, equipment capitalization, overhead costs.
We have found Cash Flow projections to be a sobering tool to evaluate a business's viability. In a nutshell, it will tell you how much money that you will lose before
you actually make a buck. Again, include variances, ie you say you will build 30 boats per year, what happens if you build 25 or 20 or 35.
Also, and it is too long of discussion already, Google SWOT. Strength, Weakness, Opportunities and Threats. This is an analysis tool that will help
you decide if you have a "possibility to succeed" with your venture.

Good intentions and a dream started many successful businesses. Entering into a market, with a history of destroying these traits, is a risky proposition.

 

In "tough" business arenas, the best approach is usually a niche one, attacking broad market areas from scratch, on a small scale, likely won't succeed. I think you need a particular idea that has strong merit, and a strong selling point apart from what is currently available, otherwise you are swamped by the economies of scale enjoyed by existing large operations. I don't have any figures, but it does seem that the failure rate of boat-building businesses is higher than the general run of business start-ups, and that may largely be because a lot of it is catering to a market that is very vulnerable to economic downturns. But "boat building" is a term that covers a vast range, and the OP has given little indication of where he intends to concentrate.

 

best way to make a small fortune building boats is to start with a large fortune.

You didn't mention ANYTHING about the type of boats you might be building. I think there is room for two new types of boat currently not being built by anyone, both of which would only be worthwhile as production runs, due to high startup/design costs.

1)a family friendly (or small group) express-cabin-cruiser hydrofoil. Might even be semi-displacement with foils. Foils for both reducing pounding at speed and reducing rolling when stopped or trolling.

2)The Prius Prime of luxury runabouts. Nice turn-key boat able to used by non-boat people, that has good MPG and good full electric silent mode for trolling or just not firing up the engine. Like the Prime, which most people buy because it can PRETEND to be pure electric and hence use special lanes, a Prime runabout would be allowed in places where motor boats are not allowed, but electric boats are.

 

Hydrofoils are an awkward thing, perhaps if some genius can devise a fold-up arrangement, they can become useful. Fixed in place, it is like going on holiday with the clothes hoist projecting through the roof of the car.