Need advice on charter business plan

[belizesailor]

Originally Posted by OldFrog75

Assuming you could get a 10 year loan at 6%, you're looking at monthly payments totaling something in the neighborhood of $120K/year. Could create a cash flow problem even accounting for depreciation.

Yes, error in my post, I was thinking of just the annual interest expense. Even at interest only its at best a break even proposition.

[belizesailor]

Just looked back over the line items and noticed another thing missing. No venue is going to allow you to run charters without getting their cut. For example, Belize charges a "hotel" tax per guest for liveaboards, plus an additional VAT on top of that. Plus annual foreign vessel registration fee, etc, etc...


A few other thoughts:

Accounting/bookkeeping costs.

Corporate formation costs + annual filing costs

Web site development + maintenance

Moving a big cat long distances ain't cheap whether using a paid crew or transport (very expensive). This may increase your booked days, but at a significant cost.

...

[SniperSailor]

Wow, thanks guys. I had wondered about doing something like this, but figured "If its that easy everyone would be doing it." Looks like I was right.

[alansmith]

At least you are smart enough to dig into the manure he was spreading. You were right to research it with people who have been there and done that. So, kudos to you.

All of the previous answers to inquiry have been pretty much spot on. I would also like to give you some extra direction that will help you to decide how tough this business is. Read blogs of people who are charter captains/cooks like "Zero to Cruising"...there are countless others. One of the equations that will never show up on the spreadsheet, per se, is your employed Skipper and Cook personalities/abilities/problem solvers/mechanical abilities/chef abilities/work ethics/ on and on. As you can imagine, they are your front line staff and everything is dependent upon them to please and entertain. Finding a couple that will fulfill all mission areas is not that easy to find. Read Zerotocruising.com and get an idea what front line staff on large Cats deal with on a daily basis. They work their tails off...at least the good ones do.

You need to understand the daily routines of what your business is about to get full comprehension of what you are pondering to lay your hard earned cash on. I really can't think of any way that this is a business that is easy.

The only way I think this could work is as a corporate write off for fat cats who like sailing and want to do it as a tax deduction for their corporation. They do not care about business capital because it is not their capital. They get to use the yacht a month or so a year during prime time season and the business loss is on the corporation...not their problem.

As mentioned earlier...check out the resale value of 3-5 year old 45-60 foot cats. The second part of that is existing inventory. Take a look at yachtingworld.com or multihull.com and see how much inventory is available. Look at the sales prices and get an accurate idea what the real world depreciation is. It is no joke that you could lose 50% of the boats value in 5 years or less. The third leg of the stool is checking out marine lenders or with large catamaran manufacturer's companies like Fountaine Pajot, Outremer, etc what are their lending rates and qualifications for buyers.

I have a good friend that is in the Sunsail program with a large catamaran. You buy the boat and put it into their program for 5 years. You would be well advised to call them, Moorings, and other goggle searches for charter business and see what they are selling and how their programs work. I think you are astute enough to do all of this research before stepping off a cliff into sharky waters. Then you will at least know what you are facing.

[Chrisgo]

Remember that you will need a broker to sell it for you after 5 years. That won't be cheap either.

[belizesailor]

As Alan mentioned, the charter biz is a lot of hard work. Captains/crew bust their humps during peak season...often running many weeks of back-to-back charters. As a result, burn out rate is high. I would not count on keeping most crew more than about two years. The good ones will wait till off-season to quit. The lesser souls will bail on you in the midst of peak season. Its great fun go have captain/crew bail on you as the charter guests are walking down the dock to board! (been there done that).

[Cadence]

Originally Posted by hirtop

Hello,
I have a friend who presented me with the following very raw business plan for future consideration…I don't know this business at all, therefore I apologize in advance and maybe someone on this forum can give me some good answers, feel free to criticize and why not, make some suggestions. The numbers are looking too good to be true.
The Boat (new)…Leopard 58 Catamaran charter version (six cabins)… replace boat with a new one every 5 years

Scenario:
Location...Caribbean islands (based on USVI)
Trip...7 nights/8 days (1 week)
Estimated trips/year...20
Max people...10 (5 cabins + 1 cabin for the crew)
Potential profit per day...$325 pp/day * 10=$3,250
Total potential income/day...$3,250/day
Total potential revenue/year...$520,000/year (@160 average sailing days/year)
Other revenue sources...scuba diving, kitesurfing, SUP, kayak rentals/lessons...not showed here (might offset some of the skipper and cook costs)
Expenses:
Skipper...$300/day
Cook...$150/day
Provisioning (meals)...$500/day…all-inclusive
Fuel....$20/day
Total expenses /day...$970/day
Total above Expenses/year...$155,200/year ($970*160 sailing days/year)
Adjusted Income/year...$364,800/year ($520,000-$155,200)
Other Expenses:
Catamaran Loan...$84,000/year ($1mil loan @ 6% interest/20 years)
Insurance...$17,000/year (premium insurance @ 1.7% of the hull value)
Docking fees...$6,700 (@$33/day long term storage for 205 days)
Maintenance...$5,000 (average in the highs)
Total other expenses/year...$112,700
Net Profit for 160 days of sailing ...$252,100 ($364,800 adjusted income - $112,700 other expenses)
Two more things to consider...
1- Even with half of the potential profit $252k/year these numbers are very attractive
2- I was told that the catamaran could be moved from the Caribbean when the off season starts to a different location as Mediterranean Sea or South Pacific (by a crew or by a large transport boat), therefore is it possible to increase the revenue, number of trips per year.
I am looking forward for your comments.

Sorry if I sound crass! Are you sure this is a friend? I guess if it is a 50/50 venture ? If it sounds to good to be true it probably is and the best way to lose a friend is to go into business with him.

You may get some excellent advise here but not verifiable. JMHO

[Shrew]

Take a look at "The Moorings". They offer this type of service wrapped up in a bow for you. You buy the boat, they take care of everything else. They claim to show positive returns. However the profits are significantly lower than your projections. I would suspect they will have a significantly higher number of weeks booked.

Supposedly, their model essentially pays for your boat and repairs for you over the terms of the lease. I have always been skeptical as it sounds more like a timeshare than a charter for the vessel owner.

[belizesailor]

Originally Posted by Shrew

Take a look at "The Moorings". They offer this type of service wrapped up in a bow for you. You buy the boat, they take care of everything else. They claim to show positive returns. However the profits are significantly lower than your projections. I would suspect they will have a significantly higher number of weeks booked.

Supposedly, their model essentially pays for your boat and repairs for you over the terms of the lease. I have always been skeptical as it sounds more like a timeshare than a charter for the vessel owner.

OP: If the real draw for you here is to own a boat and defray cost of ownership then going with a mature and well defined program like Moorings is a much safer bet. You are very unlikely to lose your ass going with the Moorings, but that's a very real possibility with any new business ventures (never stated in business plans of course). You are not going go make $250K/year with Moorings, but that's not gonna happen under this business plan either.

If you are truly looking for an investment, forget boats, and stick with something tried-and-true which historically makes money like real estate.

[belizesailor]

Originally Posted by seasick

I ran a charter operation for too many years in the Caribbean. 130' topsail schooner.

The enlightening (read depressing) thing that I found out the hard way was that most of my competition were vessels owned by corporations that didn't have to return a profit. In fact these vessels were corporate write-offs used for "team building" when not being chartered by the general public.

Good point. The owners of most boats in charter service don't expect them to turn a profit. Most are private or corporate ownership and managed by someone else. If the owner covers expenses, gets some tax benefit (which can be substantial...also omitted from the original plan), gets a few weeks use of the boat, can brag aboat his boat...then the owner is happy.

I know a number of folks who've gone under trying go make living running a single boat. There are much more effective ways to make money.

A much more viable way to actually make money is to manage boats for others...just look at Moorings.

[Kim Klaka]

If it looks to good to be true then it probably is. There are lots of dodgy figures there. The chargeout rate looks high, number of days on charter looks high, skipper wages very low, maintenance costs way too low. Do a sensitivity analysis on the figures or just change everything by a worst case scenario of say, 20% (but double the maintenance costs), and you have a more realistic and less attractive outcome.
I don't run a charter business but I have run a small marine company and I do run a boat.

[TheThunderbird]

If luxury could be paid up by a renting middle class clientele.. than almost everyone would wear diamonds driving a RR to a private jet.

On the contrary, luxury comes at a cost, by definition. You have it BECAUSE it makes bleed money.


I have a second hand RangeRover V8
In 5year time I spent for fuel 3X the purchase value
In maintenance, an additional 1X

So overall it is 5X the upfront cost

PS in doing a business plan, start being smart at subtractions and divisions, first, before toying with multiplications


PS at 650USD a day I'd go to any Four Seasons with a nice bed-mate :-)

[ozskipper]

Originally Posted by SniperSailor

Wow, thanks guys. I had wondered about doing something like this, but figured "If its that easy everyone would be doing it." Looks like I was right.

Just curious . Were looking at this as a business or because you wanted a share in a nice boat?

Some commercial charter companies, Sunsail and Moorings manage boats and give you a few clams back in return. They dont suit everyone. But, for the "right' person with the "right' accountant, it may be worth researching them. At the end of the term, hopefully you own a boat outright at best. Albeit a boat thats five years old. Though a good accountant would get you to buy lots of yummy new electronic toys in the last year of its business life.

Yacht Charter and Sailboat Rental Company - Sailing Vacations | Moorings
Bareboat Yacht Charters, Sailboat Rentals & Sailing Vacations | Sunsail

[Manos1955]

You need agents to book for customers and they get 30 to 50% commission
Maintenance is always at 10% the boat value as new for private use Yours will be charter therefore much more
Do not expect more than 14 weeks charter per year in the Med and another 14 in the Med in the good years The usual is 8 weeks per year

[oregoncycle]

Owned and operated a five boat day charter operation in Alaska.. The initial cost of the boats not an issue. It was all the incidentals that doubled our budget. Inflatables with motors, insuring your captains and crew, three types of insurance - business, customers, boat. Then there are the customers who break things, lots of things. Don't forget you have to feed the captain and the crew. Life rafts, haul outs, life jackets, it was easy to spend 50k just getting ready for a season in replacements items.

These are just a few of the things that come to mind from that business venture.