Need advice on charter business plan

[OldFrog75]

If you are serious about pursuing this as a business venture, I would suggest investigating it with a charter company close to where you live. Either buy out one of their existing charterers or discuss buying a used boat in the area and putting it in charter with them. That way you can experience "the business" with a lot less risk.

As a case in point, I looked at a nice used boat that has been in charter and the owner wanted to sell. It's a very popular boat with a 5 year history of solid charter income. It was reasonably priced (a little less than $60000) but I still couldn't make the numbers work out for me.

It's not just the expenses but the difference in purchase price vs. selling price (depreciation) when I want to get out. At the end of the day it's cheaper for me to charter a boat when I want to sail than it is buy a boat, put it in charter, and potentially sail 50-100 days a year for free - even with an "inexpensive" boat.

I'm aware of the concept "pride of ownership" realtors promote so vigorously. Might work for houses. Not so sure about boats.

[FLLCatsailor]

I manage a bunch of boats out of St. Thomas, and can say that on a 10pack boat it is not unrealistic to expect to net $125-150K a year after expenses. With an 8 pack boat to net somewhere in the neighborhood of $80-100K, and with a 6 pack boat somewhere in the $35-55K range.

If I were managing the boat I would expect to run 15-18 charters in year one, and 20-23 charters per year after the first year.

There are also some serious tax benefits of going this route versus the more traditional charter company route...

[valhalla360]

Go ask the moorings how many boats they own.


If it was profitable, they would buy their own boats and keep the profits. Their business plan works because the "owners" take all the risk while they make a guaranteed profit on each charter.

[Cadence]

Originally Posted by valhalla360

Go ask the moorings how many boats they own.


If it was profitable, they would buy their own boats and keep the profits. Their business plan works because the "owners" take all the risk while they make a guaranteed profit on each charter.

If they didn't every employee, of theirs would. There ain't no free lunches.
If there is I haven't found it.

[hirtop]

Oaaa!...I have to say that I am really impressed by the amount and variety of these answers! I want to THANK YOU ALL for your time to address this matter. I do appreciate it a lot!
Since I am living in a place where it rains quite a lot, the dream of owning and/or running such business might become delusional for some people...especially when you have the funds for it
Honestly, I thought from the very beginning that the numbers are somehow not real and it might get more complicated, but I wanted to ask an informed crowd for a confirmation. You guys rock!
Maybe this might be a good idea if one wants to offset some of the boat expenses...after all, you have to admit that these Catamarans are looking very sexy...it appears that marrying a beautiful women doesn't do the trick on the long run...he he

Best Regards

[mstrebe]

The core problem with chartering businesses is the depreciation of a sailboat: They lose 2/3rds of their value in the 5 years that they'll be useful for chartering, and you don't recover that cost.

This is why no boat chartering company owns their own large yachts. This "hidden" cost of depreciation is passed on to the private boat owners.

If you are already going to own a boat, so it's a "sunk cost" so to speak, then chartering is a reasonable way to make some of that money back. But you're never going to actually even break even.

We've had our boat in charter for the past year, in a reasonable program that doesn't affect our use much at all. We use it whenever we want, and the chartering company lets it out to their club members when we aren't using it. We've had no problems with the program and like the fact that they clean and maintain the boat constantly, so I don't have to.

Our boat is very popular and generally rents first when its available. We make 60% of the chartering revenue, and then pay all costs (slip, insurance, mortgage, and maintenance). The chartering company manages everything.

Thus far in the past year the boat has made back about 95% of its total costs, or about $3000/mo. on average. We've also been able to claim the entire boat as a capital expense for the chartering business which creates significant tax savings >if< you've got a profitable business that can use the tax write-off.

Because we'd already bought the boat and were going to own it anyway, that's a nice recoupment of costs but it would be a money-loosing proposition on its own. Given that I do have a revenue making business that can absorb the capital equipment and loss for boat, the entire enterprise is very slightly revenue positive for us.

HOWEVER, that's only going to last for about five years. When the boat is no longer the sexy new thing and doesn't rent well anymore, the charter company will give us the boot, and we'll have a boat worth $100,000 that still has a $150,000 mortgage on it, so we'll be upside down by $50,000 on it. Because we love the boat and will be keeping it for our own use, that's fine. But if we tried to sell it, that $50K loss would wipe out any possible positive revenue made over the five years we'd chartered it.

The only people who actually make money are the charterers, and this is why they don't own their own boats.

I have estimated the 20 year cost of owning my boat at $600,000, $230K of which is the capital cost of the boat and the other bit is insurance, slip fees, maintenance, etc., for 20 years. In sum over five years, the chartering program will generate around $180,000 of that money back, and cut my total cost of ownership by 1/3.

Now, assuming you are the charter company, you get the additional 40% of revenue on top of what I make, but that still only puts the 5 year revenue at $300,000. The boat would have to charter at its top rate for 10 years just to break even on it's own costs, generating no additional revenue for the company. That's never going to happen, and that's why charter businesses don't own their own boats.

[Cadence]

Even a turtle doesn't get without sticking his neck out. Just make sure yours isn't going to get cut off. The present proposal seems ill willed unless you have very deepmpockets

[Mirage35]

I'll add my thanks to those of the OP - good information, everyone.

A friend suggested some sort of charter ownership as a way to own a boat at other peoples' expense - I hadn't bothered to start crunching numbers but my gut feel wasn't positive. So now I'll save myself the trouble of digging further.

[alansmith]

Mstrebe, thanks for posting your experience with this phenomenon of sail boat charters. It was an accurate and enlightening post.

[belizesailor]

Originally Posted by 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

That's high for agents. IIRC the highest I've encountered, or at least agreed to, is 20%, often less. I have booked a lot of charters, as agent or via an agent, at 10%-15%.

For a while we made some decent additional revenue acting as an agent to book Moorings charters because going thru the centralized Moorings booking process was such a PITA (at the time, may be better now). That was at 10%...until Moorings corporate headquarters squashed that arrangement.

This is another whole area of expenses omitted from the business plan. Promoting your business, thru agents and other avenues (like Google Ad Words), is a significant cost of doing business. No promotions = no business. Agents take their cut of course, but the good ones can also book a lot of business for you.

[belizesailor]

Originally Posted by alansmith

Mstrebe, thanks for posting your experience with this phenomenon of sail boat charters. It was an accurate and enlightening post.

Yes, good summary of what to realistically expect as a charter boat owner. The OP would be better advised to follow this as a businesses plan.

[Paul Annapolis]

So, let me get this straight... "a friend" presented you with this business plan? He did this so you could get us here to review and analyze it for you or "a friend" for free? So, the first thing I'd say you are missing is about $2000 to hire a professional consultant who can spend a day with you to tell you what you really need to know. Even if you could find a good captain at $300 per day, what about his or her payroll taxes, benefits, expenses, healthcare etc? etc? If you are willing to make money---you better be willing to spend it first to find out the real story--from real professionals who will share their expertise...but for a fee. Otherwise free advice is worth what you pay for it.

[Skip JayR]

[QUOTE=hirtop;1888275]Hello,
I have a friend who presented me with the following very raw business plan for future consideration…/QUOTE]

Nice dream your friend has.... I worked as professional skipper, for charter agencies, sailing schools, private owner, sailing events / incentives... and I started sailing in the 70ths.

The calculations of your friend are an illusion, lets call him a dreamer. The number of booked weeks is OK, 5months per year = 20 weeks... more is not possible, e.g. you have to calculate some extra time for deliveries/transfers, maintenance, seasonal ups and downs...

A 100% booking of all berth is a pure illusion. Calculate 40%, then you come close to a very realistically business target. You want transport your crew guests like sardines from A to B ??? :-) The times are gone to find sailors who like it minimalistic, low comfort and tough sailing. People nowadays prefer luxury on board... leasure times = space in own cabin. We live in times of "individualists", with many singles...

Another item is the marketing effort. You need tremendous sums for advertising. Its not just to have a boat. You need lots of agencies who do the booking (not enough to have a website and little bit social medias) and who want a highly commission rate.

And you need a "real person" presentation during the big boat shows, so you need lots of marketing efforts (flyers, being printed in charter catalogues etc. ...). To participate with a little show room during a boat show (with personal staff costs, travelling expenses etc. ...) can cost you quickly 10-20 Thousand Dollars...

A charter business is only profitable, if the captain = owner can live on the boat... everything else is an illusion.... as parallel costs (house on land, car (car insurance, tax)) never can be covered. That's why mostly only couples who work as skipper + servant/cook/entertainer work on their boat can survive.

First 10 years you only will work for the bank to finance the boat... then maybe next 10 years you can have a living... and in the 3rd decade you can put something aside for pension. Probably not, as then you already need huge re-investments for buying a new boat or heavily refittings.

The running costs are immense.... mostly under estimated... but thats another topic.

I suppose if you do a re-calculation with 40% instead of 100% of all berth, you wil come to the result: its a deadly business, not at all profitable.

Good luck !
---
The big money one can make with day charter... take a big day crusing catamaran, make the deal with a big hotel... and put on day crusing 30-40 people on board with making party and have fun... thats the real cash cow... :-)

[Skip JayR]

[QUOTE=hirtop;1888275]Hello,
I have a friend who presented me with the following very raw business plan for future consideration…/QUOTE]

Nice dream your friend has.... I worked as professional skipper, for charter agencies, sailing schools, private owner, sailing events / incentives... and I started sailing in the 70ths.

The calculations of your friend are an illusion, lets call him a dreamer. The number of booked weeks is OK, 5months per year = 20 weeks... more is not possible, e.g. you have to calculate some extra time for deliveries/transfers, maintenance, seasonal ups and downs...

A 100% booking of all berth is a pure illusion. Calculate 40%, then you come close to a very realistically business target. You want transport your crew guests like sardines from A to B ??? :-) The times are gone to find sailors who like it minimalistic, low comfort and tough sailing. People nowadays prefer luxury on board... leasure times = space in own cabin. We live in times of "individualists", with many singles...

Another item is the marketing effort. You need tremendous sums for advertising. Its not just to have a boat. You need lots of agencies who do the booking (not enough to have a website and little bit social medias) and who want a highly commission rate.

And you need a "real person" presentation during the big boat shows, so you need lots of marketing efforts (flyers, being printed in charter catalogues etc. ...). To participate with a little show room during a boat show (with personal staff costs, travelling expenses etc. ...) can cost you quickly 10-20 Thousand Dollars...

A charter business is only profitable, if the captain = owner can live on the boat... everything else is an illusion.... as parallel costs (house on land, car (car insurance, tax)) never can be covered. That's why mostly only couples who work as skipper + servant/cook/entertainer work on their boat can survive.

First 10 years you only will work for the bank to finance the boat... then maybe next 10 years you can have a living... and in the 3rd decade you can put something aside for pension. Probably not, as then you already need huge re-investments for buying a new boat or heavily refittings.

The running costs are immense.... mostly under estimated... but thats another topic.

I suppose if you do a re-calculation with 40% instead of 100% of all berth, you wil come to the result: its a deadly business, not at all profitable.

Good luck !
---
The big money one can make with day charter... take a big day crusing catamaran, make the deal with a big hotel... and put on day crusing 30-40 people on board with making party and have fun... thats the real cash cow... :-)


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[SniperSailor]

This is beginning to sound like the High End Audio business. Know how to make a million dollars in audio? Start with three million.

Though off topic below is a photo of my audio system. The large bass cabinets are built with 100% Okume 9 ply, void free, marine plywood, which is certified by Lloyds of London to British boat building standards.

https://youtu.be/CVaazHrDp-w