What % of net income should I agree on as a charter captain ?

[monkeymind]

I'll be getting my Captain's License soon and working on putting together a day sail charter business on a privately owned sailboat (not mine). The owner will be more "hands off" and I'll take people out as well as doing the networking/advertising/sales off the boat. He will cover boat expenses like repairs & insurance. I would get a percentage of the business (after expenses like food and drinks) and I was wondering what percentage would be fair. My initial thought is somewhere in the range of 25% - 50% but I would love to hear the thoughts of people who have experience with this. Or please just vote on my poll above.
Thanks!

[Tempest245]

From what you've said, you have no expenses and the owner or the business has all of them. ( slip or mooring, insurance, fuel, food and beverage, repairs and maintenance etc. ) Then there's taxes: income tax, sales tax, SS tax etc. ( if you plan on paying those). Then there's depreciation.

My question to you would be: how long are you willing to work without being paid? You won't know how much money the business earns until all the expenses are factored in. There's a break-even point to the business. You will have to take charters out for free until the break-even point is achieved. The BE point is a function of the fixed and variable expenses vs sales.

You can try to break it down on a per charter basis, by attempting to amortize the expenses over the season but in the 1st year you'll have no sales history to project into the budget, and there's always unforseen expenses. ( someone drops a winch handle overboard, or breaks something.)

Your post didn't mention slip or mooring fees. Personally, I wouldn't put my vessel into charter service unless I could deduct them from the business, the IRS will look at % of sales. (The amount of charters vs personal use)

Perhaps, I've made this more complicated that it is. If it were me, I'd decide what my time was worth for a day, and make sure the fees supported that and I got paid for every trip, factor your fee in as an expense to the business. What is the owner getting? The write-off of Slip fees? ...

I don't think there's a simple percentage answer one can give, with the limited information given. There are many ways to organize.

[Dkdoyle]

I would argue for 70 percenr after expenses. Remeber your patner has most of the expenes but he or she also has all the business tax deductions is my guess. The problem is always who keeps the books and will you have a minimum draw. If you are not making a profit you don't get paid. That could get old fast. You might want to negotiate for a small salary and the a part of the profits on top of that.

[David_Old_Jersey]

"Fair" does not come into it.....it's what works for you (and partner ) to put enough cash in pocket to make the enterprise worthwhile.

Given the question raised I suspect that at the moment there will not be enough cash generated from day to keep both Parties happy. Have to decide whether to trade cash now for the prospect of more cash in the future - or other (non-cash) benefits.........say, like you will later have acquired the knowledge to run the business, have a book of contacts and don't really need a Partner - so can set up on your own

The good news is that you (and Partner) can make up any rules you like . I would calculate what you need to have in your pocket on a regular basis and take 95% of the gross income to acheive that . Could then say that the next $10k of income gets split 70 / 30 (in your favour) and afterwards 50 / 50 - with boat expenses down to your Partner........IMO really want to avoid the situation where you are sitting idle with no income and Partner happy with the position as his boat expenses are covered from day 1..........IMO that should be part of his risk from the venture not succeeding, not down to you to generate / underwrite.

[Pblais]

It's probably unreasonable that you can pay all boat expenses and make a living wage with a day sail charter service. It's pretty rare. If you are in an area where you can generate steady traffic then there is already a prevailing charter rate in place from the other boats. If there is not much activity now then the bigger question is why?

Day sail charters really don't generate the money that say fishing charters generate or group charters on cool old boats. Catering profits drive a lot of the money as well with day sails. A certified sailing instructor might make more money and they don't get rich by any means. You can lease boats if you have the credit to back it up. If you had the business plan right a lease arrangement would spell out what you owe the owner of the boat. Otherwise you'll be forever going round and round. If you miss the business plan then your lease payments will end the whole adventure quickly and not prolong the problems of two dissatisfied partners.

You need to do a complete job on the market to get realistic numbers for how much business is out there to get. Expectations between partners sort of dictate the whole ball game. It's like being married and arguing about money without the fun parts.

[Sunspot Baby]

After normal (fuel, dockage, etc.) operating expenses 1/3 to the boat for up keep and/or upgrades, 1/3 to owner, 1/3 to crew. Assuming you are the sole crew, then you would take all of the crew 1/3. If you have other crew, then you are splitting that 1/3.

George