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Entries in 2011 (7)


Making the Right Purchasing Decisions

This article, by Dennis Kissman, was published in Marina Dock Age –  November 2011

I think it is a fair statement to say that everything that makes up a marina will eventually wear out, break down or become obsolete.  If you agree with that statement then when it becomes time to add, upgrade, replace or do nothing you need to ask yourself am I making the right decision, is it the right time and for the right reason.  This is what I refer to as the “decision making process.”

There is no one right answer, each situation must be judged on its own merits and circumstances.  Too many marina owners do not think of all the consequences when making some business decisions relating to their facility and as a result these decisions often fall short of expectations.  If too many of these business decisions are made in this manner the business will not achieve its economic potential and will eventually fail.

There are too many possibilities to address in this one article.  It may be best to use some examples to explain this thought process when making physical changes in your marina but first, there is one thing that will always have an influence over the decision making process and that is how is it going to be paid for.  Unfortunately, if money comes into play too early in the decision making process the end result may not be what is expected or best for the property.  I mean this in two ways; if you have unlimited financial resources it can be just as instrumental in making the wrong decision as having too few funds available.  The key is to striking the right balance between funds and needs.

Here are a list of thoughts that should enter into your decision making process.

-If what is being installed is buried underground or behind walls where it will require additional costs to get to when something goes wrong, and it will, I look for the best product available and make sure that it is installed right.  In this case top of the line is better than average.

-Separate “nice to have” from “must have to maintain or improve cash flow.”  “Nice to have” is part of your wish list and does not belong on your maintenance list.

-If safety of staff or customers is an issue that has to have the highest priority regardless of cost.  If you think because you have liability insurance you are protected, think again.  If your insurance company finds you neglectful in maintaining your property they can deny any claim made against you and your business.

-Select the right tools and of the best quality to maintain the property.  Poor quality or inadequate tools will shorten the useful life of the marina’s equipment and facilities.  If you do not have the right tools to properly maintain your equipment and facility, inevitably short cuts will be taken when performing maintenance thus reducing the expected life of what is being worked on.

-If for three years in a row you spend more per year on maintenance than the annual depreciation expense of the asset consider replacing the asset.

-If you have more than one asset that is the same and parts are starting to fail, cannibalize the assets and replace only the number of like assets that are necessary.  An example of this is sectional floating docks.  Let’s say that one section has a bent frame while another section has a bad float.  Combine the serviceable parts into one and only replace one section.  You may find that you do not even need that one section and not have to replace it.

-Just because technology has changed from what you currently have it does not necessary mean that it is better or will last longer.  Look for a proven track record over some slick advertisement telling you how good something is.

-If you request competitive quotes for something, and you always should, be specific in your request.  If it is not in writing and in a manner you understand do not assume. Ask questions and get clarification before signing that contract or purchase agreement on the dotted line.

-Be sure that by extending the useful life of an asset that it will not become obsolete before the end of its extended useful life.  A good example of this is what happens with docks.  As boats get wider sometimes perfectly good docks become obsolete because they cannot accommodate the newer and wider boats.

-Plan repairs and replacements to occur when it will have the least amount of impact on your ability to generate income.  This is not always easy, usually when it is the best time to conduct repairs or install replacements it is in a slow cash flow period.  The way to minimize this problem is to keep a perpetual list of needed projects.  The list should include a brief description of the project, the estimated cost, whether or not it will be done in house or farmed out and a priority in relation to the other work on the list.  This is a living document and can change on a daily basis particularly relating to the priority.

-When it comes to equipment such as forklifts, boat hoists, transporters, vehicles and office equipment, consider the tax implications and available cash to decide whether it is better to lease or buy.

I think it is worth mentioning again that cash will influence what, when and how something gets done in your marina.  But, if you wait to add the cash element into the equation after going through the steps that brought you to a particular decision you will have a different perspective regarding cash and usually find a way to come up with the necessary funds to get the job done.

I am sure that some of you reading this article could add to this list from your own experience.  Keep in mind it is not necessarily a specific list that is important but as long as you have a methodical way of going through your decision making process and follow that process you will maximize the financial resources you have available and keep your marina in good shape.


What Marinas Can Do to Weather Today’s Economic Challenges 

This article, by Dennis Kissman, was published in Marina Dock Age –  May/June 2011

I was recently reading an article that caught my eye where a group of industry leaders were talking about an Association of Marina Industries survey of 124 marina professionals where they talk about the changing climate in the industry.  The one particular comment that caught my eye was the mention that marinas are going into receivership because they lost business.  A marina should be able to withstand a certain amount of lost business if the business was solvent before any downturn in the economy.  What I have seen so far in this economy are the marinas that are headed for or in foreclosure or bankruptcy seem to have one thing in common and that is they are in some stage of redevelopment with one exit strategy and that was becoming a dockominium or rackominium.

The article went on to state that the banks that have taken over the management of these marinas are reducing slip rates to boost occupancy and offset their costs.  The banks that are doing this did not make a marina loan based on an operating business but rather a real estate play.  Instead of these banks recognizing the mistake they made in the first place their actions now are only making the entire industry suffer more than necessary and in the end it will cost the bank more of a write-off.

The question now is what you should do as a marina owner that just happens to have one of these bank owned marinas in your neighborhood.  You cannot pick up your marina and move so you must deal with the poor decision made by others that do not understand this business.  The first thing is to understand the banks motivation.  They are in the business to make money on the money they loan.  Most of the time this works out for them but in the case of these marina loans it did not happen.  You as a marina operator in that market most likely know what that marina is worth and at the right price it would be a good deal to acquire.  If you have aspirations of expanding your business come up with a plan to acquire the marina.  This may sound ridiculous at first but even if you just go through this exercise it can help you improve your business because you will now have a better understanding of the competition.  First you must come up with a value of what you would be willing to pay.  You know the depth of the market because you already do business in it.  From that estimate the amount of income you could generate from it if the marina was in the condition equivalent to your current marina and without any expansion.  That will give you an estimated income number that you will now apply an interest rate that would be acceptable to you.  For example, let’s say that you believe you could generate $600,000 of operating income and for the risk you are taking you expect a 12% return on your investment.  That would mean that you would offer $5,000,000 but let’s say that in order to achieve that 600,000 of income you have to invest $500,000 in deferred maintenance in the property therefore your offer is $4,500,000.  Now that is probably a fraction of what the bank has invested in it but if you are serious about it, persistence and educating the bank on its true worth you may have a good chance of acquiring the property at your price which would not be the first time that has happened.

You are probably thinking to yourself that buying that marina is all well and good but I am trying to stay afloat when the bank is trying to put me out of business by lowering rates below what makes economic sense.  First, do not lose sight of the type of business you are in, the service business, bankers look at it as a rental business.  Second, you have a defined amount of space to generate income from, maximize it and third, boats physically do not disappear as rapidly as owners of those boats may change, meet those new owners expectations.  If you stay focused on these three thoughts you will weather this economic downturn.  Let’s look at each of these in more detail and what can be done to improve your business.

First, there is a big difference between running a service business and a rental business.  I think it is fair to say that most boaters are willing to pay something for service and that is what you have to sell over a bank managed property.  To look at how we can do this let’s look at other industries and see what is being done.  Take for example the airline industry; they continually modify their business model.  If you have flown recently you may have noticed the additional checked bag fees and on some airlines if you want a drink of water you have to buy it.  Personally I am not a fan of these policies and would rather pay a little more and have these services included but many people I talk to likes it because it gives them an option.  If you consider a policy such as this, make sure that: first, it is a service that is an actual cost savings if none of your customers want it and two, it is at a minimum a breakeven for the customers that want the service.  As is the case with the checked bag fees on airlines, bags mean extra pounds and on an airplane that equates to extra fuel consumption.  Reduced fuel consumption means reduced fuel cost.

Second, marinas have only so many slips to rent.  Here again let’s look outside the industry and see what is happening and how a marina can benefit from it.  The hotel industry has a very good business model in their room rate structure.  For example, two identical rooms, one overlooks the dumpster and costs $100 per night while that same room with an ocean view is $300 per night.  That is called value pricing the same should apply to your slips.  Look at your marina and decide which slips have more value to the boater than others and price each slip accordingly.  Again you give your customer a choice of where they would like to be in your marina and willing to pay for that location.  Here the key is to use your current published rate as the median with slips that are better than the median cost more and those that are below the median cost less.

Third, unfortunately many of the existing boats are going back to lenders.  Lenders are not boaters and their interest in that boat is to preserve the value of the collateral for their loan so they can get their money out of it through a sale, while the original boat owner who would be using his boat is buying fuel, getting repairs and buying sundries in your ship’s store.  If you have or can attract lender owned boats into your marina there is an opportunity to maintain or increase your revenues by creating a caretaker program for these boats.  A caretaker program includes items such as detailing services, exercising the mechanical systems and brokerage services.  Most likely some or all these services in some form you already provide at your marina.  To succeed with a successful caretaker program it must be sold to lenders as a value added program until the boat is sold.

This is the time to take control of what you can change and be aware of what you cannot.  Turn this negative situation into a positive that will make your operation stronger as the economy begins to turn around.


MMS represents the NMMA in the IMG

Had enough Acronyms?? Let me explain. Marina Management Services, Inc. (MMS) represents the National Marine Manufacturers Association (NMMA) in the International Council of Marine Industry Association's Marina Group (IMG). What is IMG?

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Top Trends in Mega Yacht Marinas - Yacht Essentials

This article, by Carol Bareuther, was published in Yacht Essentials on November 1, 2011. Carol did an excellent job of sourcing information from the major marina operation and design firms actively working with Mega Yacht marinas. I was interviewed for the article, and my published comments are found below. Check out the entire article at Yacht Essentials.

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A safe fuel dock is also an environmentally friendly one.

When I was first asked to write a marina operations article with an environmental theme, I thought I was the wrong person to ask. Don’t get me wrong—I’m as concerned about the environment as most people but definitely am not one of these go green and save the planet fanatics. This did get me thinking about what to write on and after some thought I have come to the conclusion that I am more in tuned with the environment than I first thought and you may be also.

If your marina operates a fuel dock and does so in a safe manner then by default you are conscious of the environment surrounding that fuel dock. Technically, it is impossible to safely operate a fuel dock fuel and storage facility and not be sensitive to the environment. The more safety conscious you are in handling fuel; the more sensitive you are to the environment.

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