I have been writing articles in this publication for the trends issue for a number of years and have never had difficulty with looking forward and giving an opinion as to where the industry is headed except this year. I happened to be giving a presentation to the Kentucky and Tennessee Marina Associations annual meeting on November 7 and meeting with several marina owners I felt there was a lot of uncertainty about the future of their marinas. The presidential election was to eliminate the uncertainty we have all lived with these past couple of years but it appears based on the people in the industry that I have talked to, there is a general consensus that the uncertainty of the past is just continuing into the foreseeable future.
There is one fact that started many years ago and is continuing and that is the growing number of Americans that have been forced on the government dole with this lingering weak economy. With that fact in mind, we in the marina industry must face reality that we are in a leisure industry and not in an industry that is necessary to sustain life. As a result the areas where someone will cut back is in their discretionary spending and for some, that discretionary spending is boating.
Because of the length of time this recession has lingered on a lot of marina owners are facing a host of new challenges that was not an issue in earlier downturns in the economy. The biggest problem that I see looming on the horizon is maturing of marina loans. Most marinas are financed to some extent and of those most loans are structured with a five to seven year balloon payment that will be coming due shortly. Lenders are faced with their own troubles and marinas are only a small portion of those troubles. This could be a blessing in disguise. Lenders are more apt to work with you to restructure your loan than to foreclose but they can only do that if you communicate with them. One thing a lender hates is not communicating your problem. Trust me you are not alone and they have heard far worse than what you are going to tell them.
Let’s assume you get your lending situation squared away and on track you still have work to do. The days of raising rates because you are spending more money are over for a while. You need to take a close look at your operating costs and where those could be reduced. Don’t take a machete to your costs but rather a scalpel. For example, you can cut down on labor expense by adjusting your hours of operation or maybe a closer eye on maintenance issues to get an extra couple of years use out of a piece of equipment because you tightened a couple of bolts or changed the oil more frequently. It is these little things that will end up making a big difference without alienating your customer base.
Next you need to keep a close eye on your cash situation. Keep a daily log of cash receipts and disbursements. Know at all times how much money you have to operate with. Take into account the seasonally factor for receiving cash. A lot of seasonal marinas get the bulk of their cash before the boating season begins. If that is your situation look at your historical cash flow and figure at least thirty percent less cash flow for this upcoming boating season and keep enough of this year’s receipts in reserve to cover any shortfalls.
Be diligent on collecting your receivables. During these times look at the payment pattern of each of your customers. If a customer always pays his dockage on the fifth of the month and all of a sudden it goes to the tenth of the month that should raise a red flag and you need to look into what has changed. It could be as simple as someone going on vacation but then it could be that customer has some other financial issues that could be a problem going forward and impact your ability to meet your financial obligations. One other thing I want to mention about cash management and that is if you sell fuel. No matter how hard it is write the check to the fuel company do it the minute you get the delivery. That does not mean you pay the fuel company before your agreed terms of payment but you want to get it out of your available cash.
Any of you that know me I am a strong advocate of adjusting dockage and storage rates annually. Well, with these economic times and the unknowns ahead of us I still recommend adjusting rates annually. More care has to be exercised than you might take in a better economy but look for small adjustments. For example let’s say that you price slips by groups like boats from twenty to thirty feet in length one price and boats from thirty to forty feet in length pay a higher price. You notice that two thirds of the boats in the twenty to thirty foot group are twenty eight feet in length. Instead of raising your group rates why not change the upper group’s lower end from thirty feet to twenty eight feet thus increasing the revenue you receive without actually raising your published rates.
This is a time to pay close attention to your business like no time before. By making small adjustments in how you conduct your business like those mentioned above will make the difference in your success in the years to come.