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Entries in 2015 (7)

Monday
Sep192016

Turning Over Marine Store Inventory 

This article, by Carl Wolf, was published in Marina Dock Age –  April 2015

Some would say that a marine store at your marina is a core part of your business.  It might be, but how well do you know how if your inventory is selling?  Stepping back, let’s look at the basics of understanding the dynamics of an inventory. 

Pricing

First, understand who is going to be buying your marine products.  Are they boaters who dock or store their boat at your marina?  Is your marine store the only one in the area? Will other boaters come from other marinas or boatyards? Does your marine store have nautical gifts which could attract a larger segment of the population?  Does your marine store have a seasonality or slow season to it?

Regardless of what segment of the market you are catering to, price your merchandise so that it sells out by the end of the season, if you expect to realize a profit.  Pricing has a direct correlation to your inventory turnover.  Do not sit on merchandise that is either obsolete or is about to become obsolete.  If the end of your season is approaching, discount your merchandise so it sells.  Obsolete inventory is only going to go down in value the longer you hold on to it.

Boating merchandise fits one of two categories: perennial staples, such as bottom paints, cleaners and mooring lines; and trends or fads. For these, stay updated by using your suppliers as barometers to understand the boating market trends, especially trends that are fading. 

Turnover

The inventory turnover is a measure of the number of times inventory is sold in a time period, such as a boating season.  The equation for inventory turnover equals the cost of goods sold divided by the average inventory.  At a minimum, you should be able to turn your inventory at least twice a year. 

The inventory turnover ratio is a key measure for evaluating just how efficient your marina is at managing the company’s inventory and generating sales from it. Usually, a higher inventory turnover ratio is preferred, as it indicates that more sales are being generated given a certain amount of inventory.  Turnover ratios you should aim for at your marina:

Target turning over your inventory three to four times per year.

Minimum inventory should be turned at least two times per year.

Your inventory becomes obsolete if it has not turned over at least once per season.

Break your inventory down into segments of like type items.  For example:

  •      Fuel - gas and diesel;
  •      Parts - spark plugs, propellers, and gaskets;
  •      Marine supplies: cleaners, paints and hardware;
  •      Groceries: beverages, snacks and ice.

Be careful not to be skewed by a high turnover of one segment of your inventory.  You can have a high turnover of fuel, but some engine parts may be on the shelf for more than a year.  When you combine a fast turnover item like fuel with a slow moving item, it will skew your results and lull you into believing you are doing better than you really are.

Obsolete Inventory

Let me ask you “What do you consider to be obsolete inventory?”  We consider inventory items to be obsolete if:

  •      The items have not turned over at least once in the year.
  •      The items remains in stock after the boating season has ended.  For example, marinas in northern waters still have anti-freeze and/or shrink-wrap in inventory after the boating season has ended.
  •      The date on an item has expired, such as flares and perishable beverage/food items.

Shrinkage

In financial accounting, the term inventory shrinkage (sometimes truncated to shrink) is the loss of products between the time of purchase from supplier/vendor and the point of sale.  Shrinkage can be attributed to employee theft; shoplifting; administrative errors; improper supplier controls; cashier errors; items damaged in the marine store, and perishable goods not sold within their shelf life.  Shrinkage affects your profitability, as it relates to the difference in the amount of profit your marina will generate.

Funds and Taxes

If your inventory is not moving, your profit and loss statement will reflect it.  As you review your balance sheet, you will see how much of your working capital is tied up in carrying slow moving inventory.  Inventory sitting on the shelves at the end of the year is susceptible to year-end taxes in many states.

Continual Review

Be cognizant of the dynamics of your inventory.  Review your inventory controls policy on a regular basis.  Test the inventory and create safeguards as needed.  There will be a day of reckoning.  That day may be at the end of a calendar year, as your marina is being re-financed or worse yet, the day you put your marina on the market.  The controls you have in place concerning how your inventory is managed will have an impact on the marina’s bottom line.  The controls can mean the difference between having a profitable year or not.

 

Thursday
Aug182016

SECURITY AND YOUR MARINA

This article, by Dennis Kissman, was published in Marina Dock Age –  September/October 2015

Thanks to the media we are bombarded daily with every catastrophic or horrific incident that takes place anywhere on the earth in real time.  Twenty plus years ago when we heard of such things we took them at face value.  Today there is an underlying implication that all of these incidents are tied somehow to terrorism.  Unfortunately this is the world we live in so the question is; how can marinas best cope with this situation?

Now before you say my marina is not in or near a commercial port or waterway but at some inland reservoir and I don’t have a problem with terrorism, I agree with you to some extent but to dismiss the need for security completely would be a mistake.  Think of it this way, terrorism may not be your issue but providing a safe environment for your customer is an issue that should be addressed.

Marinas are considered part of the recreation industry and recreation is defined as: an activity or pastime that promotes refreshment of health or spirits by relaxation and enjoyment.  With that image in our mind as to what recreation should be, when you go to a marina do you want it to look like you have just entered a highly secured military base?  I think your answer would be an emphatic no.  Now the challenge is for you as a marina owner; how do you balance a legitimate need to have your marina secure yet have your boating customer feel relaxed and safe when he or she is at your marina.  Your customer would also want to know that when they leave the marina and their boat is in your care, custody and control that next time they come to your marina their boat is just as they left it.

There are several ways that you can make your customer feel safe and secure without being obvious. Here are a few tips that we have learned through the years mainly observing what some marina owners have done.

Perimeter security is the first line of defense to keep someone off your property or channel how people enter or exit your marina.  Fencing with a top of barbed or razor wire is the best but not attractive.  Camouflage the fence with vegetation on both sides and if not possible at least on the inside of the marina.  Select vegetation that is dense and attached to the fence such as and ivy.  A hedge also is good but the trunk or branches that could traverse the hedge be of a size that would not support a person.

If your marina is in a basin where access to the marina is by a channel or limited in some manner.  When a boat arrives or leaves the marina at night it should trigger sensor that turns on a powerful light that shines across the entire water entrance of the marina but not on boats berthed in the marina.  The light needs to be bright enough to reflect off the boat entering or leaving.  Associated with triggering the light should be a camera that records the boat’s movement.

Security cameras have become popular for recording what is going on around your marina but with that comes an ongoing cost if it is to be an active system rather than a passive one.  If you are not monitoring what is going on in real time at your marina you will not know when a problem occurs until someone reports a problem to you.  For example, a customer comes to you and says he is missing some items off his boat.  That is all well and good but this was the first time that customer came to the marina and his boat in two months.  Now the question is when did the incident occur?  You start to review the recordings going back from the current date.  Your system recycles the recordings every four weeks.  You look back through four weeks of recordings which is no easy task to begin with and nothing.  Whatever happened and recorded had been recorded over and lost.

Cameras may be a deterrent if they are in plain sight but that could also be a negative to some of your customers.  We know that some boats are used for more than just boating, enough said?  This is also the reason it is not a good idea to have real time surveillance cameras that can be viewed by anyone on your website.

Not that many years ago, the feeling was if you restricted access to the docks that was all that was needed.  The feeling was if you controlled who could go through the gate, which often times looked like a prison entrance with barbed wire surrounding it, that was sufficient.  If you rely on this as your security, how many times have you found the gates tied open or tape used to prevent the latch on the gate from locking?  I would venture to say that it is a daily occurrence at some gate in your marina.  I did see at one marina where they hooked up an alarm and flashing light with a timer on it and if the gate was left open for any length of time the alarm sounded and the light flashed.  This solved part of the problem but did nothing to prevent someone entering the dock if the latch had been prevented from locking.  At lease the gate was not visibly open which did help to some extent.

In the last few years technology that was developed for non security applications is making its way into the security industry.  As more and more of this technology is adapted for security purposes the price is getting more affordable.  An example of this is the sensors that were originally developed to be put in the pavement at intersections to trigger a traffic light to change has evolved into a perimeter fencing application where a similar type of sensor is buried and anytime there is a movement over the sensor it is recorded.  It is worth checking out to see some of these new applications and what is applicable to your security needs.  No matter what you do regarding security your goal should be that when your customer comes to the property they feel safe without your security measures being in their face.


Friday
Jul152016

COMMERCIAL BOATS AND MARINAS 

This article, by Dennis Kissman, was published in Marina Dock Age –  March 2015

It is not uncommon to have water dependent commercial ventures operating out of a recreational boat marina.  Most of these operations are recreational boats for hire operated by the boat’s owner and operated as a separate business.  As a marina owner or manager these types of operations can have a positive impact on the profitability of the marina but if not controlled properly can have a larger negative impact.

Some of the more common enterprises include sport fishing charters, day sailing cruises, dive boats and what is commonly referred to as head or party boats where a large number of people are on the boat for a particular activity or event.  These types of operations operating out of your marina attract a different type of clientele than the typical recreational boater.

There are three important aspects to consider when a commercial venture operates out of a recreational marina.  First, is the increased risk of liability, second, additional wear and tear on the marina’s infrastructure and third is if the marina is designed to accommodate commercial ventures.  Let’s look at each of these three issues and understand what is at stake.

First on the subject of risk; as the marina operator you need to ask yourself the following questions.  Are the boats that are working out of your marina for hire recognized by the public as a legitimate business?  Do they have a business license and do they carry the proper insurance coverage that includes the marina as an additionally insured on their liability policy?  If you answered no to either of these two questions you could be placing your marina at risk should an incident occur involving one of these operators’ paying customers while on marina property.  One of the more frequent incidents with people not familiar with marinas is the “slip and fall”.  If a slip and fall accident occurs when that person is either boarding or disembarking the charter boat it is unclear who is at fault, the marina, the boat owner or the injured person.  What you can be sure of is that the marina will be named in any litigation resulting from that accident.

If you have the possibility of this happening at your marina talk to your insurance agent to make sure you are properly protected.  Also have your insurance agent review the boat owners insurance to confirm they have the proper protection for the marina.

Second, boats operating as commercial ventures will add additional wear and tear on the marina’s infrastructure as compared to that of a recreational boating customer for two reasons; first the increased number of people coming to the marina and second the frequency in which it happens.  Also, a commercial charter boat, because of the frequency it departs the dock and returns, puts more pressure on the mooring cleats, pilings and the dock structure itself than you would expect from a pleasure boat customer.

Is there a designated location in the marina where commercial boats are docked or are they scattered throughout your marina?  If they are scattered throughout the marina it is a problem.  It is like trying to mix oil and water.  Recreational boaters come to their boat to relax and enjoy the ambiance of the marina and being out on the water.  Once there is commercial activity on the dock that ambiance is lost and often times results in losing your recreational boating customer all together.

To minimize this impact on the marina all commercial activity working out of your marina ideally should have separate access to a dock dedicated to this type of activity.  Depending upon your marinas configuration this may not be possible but you should try to at least group these boats with like activity as much as possible and keep then as close to the bulkhead or shoreline as possible.  Although your recreational boat customers may have to walk pass this activity when going to their boat they will not have people walking by their boat on a frequent basis.

The third issue; is your marina designed to accommodate commercial ventures? Charter boats will add additional demands not only on the docks but also on the marina’s parking lot and restroom facilities.  Most times these issues are not mentioned in any permitting requirements imposed on a marina but the marina should address these issues so as not to inconvenience your recreational boating customers when wanting to use their boat.  If it is your decision to cater to the commercial boat customer then you should take into consideration their specific needs.  One example is that we have found these commercially operated boats always need more secured storage space whether on the dock or in a dedicated storage facility than that of a typical recreational boat owner.  Also, these commercial operated boats will usually demand more utility services than the recreational boater.  Make sure that your utility infrastructure can accommodate the higher demands.  If your dockage rate structure includes any utility services these commercially operated businesses should be sub metered and charged based on usage.  If you do not do this there is a good chance that the marina will end up subsidizing their businesses.

If you have or are considering commercial boats working out of your marina consider an alternate rate structure that would be appropriate for commercial boats for hire working out of your marina as their demands on the marina are far greater than the recreational boater.  As previously stated, commercial ventures operating out of your marina can have either a positive or negative financial impact on your marina.  Since no two marinas are exactly alike I think it is safe to say that thinking through all the consequences of your decision is paramount.  Take into consideration either the short and long term gains or losses keeping in mind short term gains in profitability may result in long term losses.



Wednesday
Mar162016

Discounts and Deals: Hurting the True Value of your Marina 

This article, by Carl Wolf, was published in Marina Dock Age –  November 2015

Have you ever thought about what the true value of your marina is?  Do your short term plans include possibly selling or refinancing the marina?  Are you doing everything possible to enhance the value of the operational value of the marina business?

 There’s no question that marinas and boatyards are a niche industry.  It’s their uniqueness that charms owners into believing the value of their marina is higher than what is actually is.  But at the end of the day, the marinas are still a business and need to be managed and operated as such.

 During the normal course of operating a marina, many owners and/or operators are tempted and some succeed in going forward with transactions which may not be recognized as a true business transaction.  These transactions, which may seem like a deal at the time, can have an effect on the value of your marina.  Although many of these issues have been addressed in earlier articles in Marina Dock Age, it never hurts to be reminded of how your decisions will impact your marina’s value.

 Under the Table - Money that is paid “under the table” is paid secretly, such as paying cash  to someone for services provided, which you believe will help keep the marinas cost down, such as paying cash to a neighbor for cutting the lawn.   On the opposite side, you have a customer who comes in late in the season and is willing to paying cash for a vacant slip.  Instead of the cash being deposited with the daily receipts, you decide to put it into an unrecorded slush fund.

 Bartering or Contra Deal - To trade by exchange of goods/services rather than by the use of money or to exchange in trade, as one commodity for another.  Your marina has some work needed on a dock and you have a contractor who can do the work.  That contractor needs a slip for their boat.  A deal is struck, your dock is fixed and the contractor has a slip for his boat.

 Comp Deal - Goods or services provided free of charge to specially chosen recipients.  An example of a “comp deal” could be the marina gives away an unoccupied slip for a specified period of time to the winner of a contest being held.

 Deals for Friends - Providing dockage, storage or services to friends at an unpublished reduced rate.  Not only will this have a negative effect on the marina’s bottom line, it sends the wrong message to other employees of the marina.

 Most deals or special transactions may not be in the best interest of the marina.  The value of the service/product/money received may be less than the value of the service being provided by the marina in exchange.  Is the transaction a one-time only transaction or is it repetitive in nature and happens every year?

 How do these transactions hurt the value of the marina?  You’ve put your marina on the market and you have a potential buyer.  When the buyer starts to look for a loan, the financial institutions the buyer is working with, will want to be able to verify past financial income of the marina.  This verification could include two (2) to three (3) years of company financial records supported by the appropriate income tax returns for the same period of time.  If the previous deals or special transactions are not reported in the marina’s financial statements, the buyer will have less borrowing power. 

 What impact would $1,000 of unreported income have on the value of your marina?  You’ve put your marina up for sale.  You have a potential buyer interested in purchasing your marina and is expecting a 10% return on their investment.  If that $1,000 had been reported as income in your financial statements and the corresponding annual tax returns, the buyer would have been able to use the unreported income of a $1,000 for payments on interest for monies which are to be borrowed to purchase the marina.  If the buyer was able to borrow money to purchase the marina at a 10% interest rate, you could divide the $1,000 (unreported income) by 10% (the interest rate at which the buyer would borrow the money for), giving the buyer an additional borrowing power of $10,000.   

 While these “deals” and “special transactions” may seem attractive at the time, they negatively impact the true value of your marina.  A prudent marina owner should always have a reasonable understanding of what their marina is worth.  By doing so, whether you are planning to sell or not, it will help you make the right business decisions. 

 

 

Wednesday
Feb242016

Marina Safety Equipment and Policies

This article, by Carl Wolf, was published in Marina Dock Age –  July/August 2015

In this article, I’d like to address some marina safety equipment and policies for the customers and guests who use your marina.  While not an inclusive list, the equipment and policies should become part of the management practices at your marina.

 No Swimming

It used to be a common sight to watch boaters and their guests jump off the back of the boats and swim in the marina basin. Today, we are aware of the dangers of swimming within the marina basin.  Those dangers range from stray electricity, propeller injuries, underwater currents, and hidden submerged objects.  I recommend that each marina adopt a “No Swimming” policy within the marina basin and post signage to that effect.

 Safety/Rescue Ladders

In my travels, I have observed marinas with safety/rescue ladders ranging from one at each slip to ones without a single ladder within the entire marina.  The intent of these ladders is not to provide access to our customers, but a way to safety egress from the water or to provide safe access to/from a boat.  There are challenges to making sure a person who has fallen in the water can get out safely or helping a boater who needs get off a boat.  Those challenges include: water level fluctuations; water currents; cold water temperatures; accidents/injuries; and vertical bulkheads.   Review the risks at your marina, create a plan to determine the placement and number of safety/rescue ladders needed.

 Life rings

If someone falls in the water and that person has trouble swimming (as a non-swimmer, has an injury or water conditions) and he is unable to safely reach a safety/rescue ladder, how would you assist him out in getting out of the water?  Having a life ring readily available could be your answer.  The life ring is easy to throw and easy to retrieve and should be part of your overall safety policy. 

 The life rings need to be approved by the U.S. Coast Guard as Type IV personal flotation device.  Make sure that adequate line is attached to the life ring for you to pull in the person in the water or in case you need to throw the life ring again.  I recommend that you train your employees on an annual basis in the use of life rings.  Again, review the risks at your marina, and create a plan to determine the placement and number of life rings needed.

 Tripping Points

As a frequent visitor to many marinas, I can’t help but noticed the tripping hazards associated with a marina.  Noticeable tripping hazards at a marina are: transition points (where a ramp meets the pier); unmarked curbs; cleats that are poorly placed; customer lines, hoses or electrical cords laying on or across the dock; deck boards that have broken free on one end of the board; and screws or nails that have popped up.

 Take a walk through your marina, identify these tripping hazards and others which are not mentioned in this article and create an action plan to address the tripping hazards.  Some of these tripping hazards could reappear on a frequent basis.  Conducting a dockwalk on a daily basis will give you the opportunity to identify and correct these hazards before an incident or injury occurs.

 Slippery Decks

Whether it’s due to rain, ice, frost, the type of deck material used or the incline of a ramp, the decks of our walkways and ramps can become slippery.  In the northern states, we are accustomed to seeing signs posted on the highway stating “BRIDGE ICES BEFORE ROAD”.  The same is true at marinas.  The decks of our docks and ramps freeze before shoreside walkways.  Your marina needs to address the slippery decks with proper signage, using materials that are resilient to ice, or addressing the slippery surface, such as the removal of snow from the dock.

 First Aid

Marinas are more frequently providing first aid supplies, equipment and training their employees to handle first aid issues.  Signage near the public and private phones at your marina should have the phone number posted for the first responders to your marina.  Work with the first responders in your area as you prepare a written first aid safety plan for your marina. 

 Today, more and more marinas have Automated External Defibrillator’s (AED’s) located at the ship’s store, the fuel pier, or in the Dockmaster’s office.  Create a dialogue with the First responders in your area on what you should include in your first aid plan: training for your employees; supplies to keep available; and/or equipment to have on-site.

 Each marina has an obligation and a supervisory responsibility to evaluate and address safety issues or risks at their marina.  It is important to understand the liability associated with safety issues, and if you neglect these and other safety issues, your insurance may not cover you, if there is an accident due to your negligence.  Invite your insurance company to walk through your marina with you to help identify what those risks may potentially be.  Then create and implement your safety plan.