By Elliott Stark
You’ve heard them. You must have… After all, there are just so many… “How do you wind up with a little money in the fishing business? Start with a lot…” “BOAT – bust out another thousand.” “If you have to ask how much it costs, you probably can’t afford it.”
The ability of boats to eat money is legendary. It has spawned jokes, t-shirts, and bumper stickers of all kind. Rather than being simply fairy tales made up out of thin air, these sayings reflect a level of truth – boats can certainly be expensive.
There are, however, a select group of individuals who are able to consistently use their boats to generate income. The following is a look at several strategies used successfully by boat owners to make money with their boats.
With apologies to the owner/operator of the charter program, this view looks into a few less commonly practiced scenarios for boat-driven money-making.
Boat Economics 101 and the Case for Boat Management
One popular avenue to generate revenue with a boat is to leave the boat at a popular charter destination and enter into a yacht management agreement.
Under this scenario, the boat owner hires a third-party company to take care of the boat and book charters on it. The revenue made by chartering the boat can offset the cost of boat ownership, while allowing owners to fish aboard while they are in town. There are some definite advantages to this approach.
Before you can wrap your mind around how to use your boat to generate income, it helps to understand the expenses associated with keeping and operating a vessel. As owner of Maverick Yachts and a principal of Maverick Costa Rica, Larry Drivon understands the economic variables associated with boat ownership from three separate perspectives.
He is a boat owner, he owns a boat building operation and is involved in yacht management, as well.
“There are three operating expense categories. The first are fixed costs. You incur these even if you never leave the dock. These include insurance, crew, dockage, painting, etc. Next, there are daily costs that arise when you use the boat. These include fuel, ice, bait, food, drinks and everything related to running the boat.
Finally, there are hourly costs,” Drivon relates. For the hourly cost category, Maverick Costa Rica uses two inputs – hours between oil changes and an engine reserve. For a 36-foot Maverick walk around, the oil change figure comes out to $2.00 per hour. The engine reserve, which factors the average hourly cost between engine rebuilds, is $8.75. Therefore, the factored cost is $10.75 for every hour that the boat runs.
“People consistently forget reserves for maintenance,” Drivon says. Neglecting to include this into the balance sheet can artificially inflate the profit margin – until you get hit with an astronomical repair bill that eats all the money you thought you made by chartering the boat. From Maverick’s perspective, the maintenance reserves are a line item in the fixed expense category.
“The charter deal is not as simple as people think it might be,” Drivon continues. “First you need to determine whether you are trying to make money or trying to offset expenses. Before you decide on either perspective, you need to know what it’s going to cost. That’s the first thing.”
“Most people who own a charter boat don’t plan on being the hands-on manager. That leaves two options. You can work with a management company or can opt for captain and crew management,” Drivon says.
“At Maverick we charge $650 per month to manage the boat. That’s turn key. It includes all of the work with municipalities, taxes and fees, and proper licenses. Owners get a monthly profit and loss statement and a quarterly balance sheet. Management consists of a booking staff (for charters) and a representative on the dock every morning to make sure to get people on the right boats and to distribute food, etc. We also have a guy on the dock when the boat gets back in the afternoon.”
Once you understand what is included in a management agreement and get a handle on the costs of boat ownership, it is time to determine how much a boat needs to work in order to break even. To do this, you simply compute your fixed costs (slip, insurance, crew salary, management fee, fishing tackle expense, and maintenance reserves). Next, determine an average daily expense rate per day of boat use. Then, assign an average number of engine hours per day of charter fishing (generally 10 hours) and multiply it by the hourly expense rate.
This will give you the daily input for your hourly expense category. Finally, assign the rate that you charge clients for a day of charter fishing – this figure is money coming in (everything else measures money going out). Once you have the annual fixed cost number, inputs for the average daily cost and average hourly cost and the charter rate, you can begin multiplying everything by number of days chartered.
For simplicity’s sake, you can see what it would look like if you chartered 75 days, 100 days, 125 days and 150 days. Up until your breakeven point, the profit brought in by charter fishing is outweighed by the fixed costs of boat ownership.
At some point on the curve, there is a breakeven – at which time the money you bring in by chartering your boat equals the expenses you shell out paying for all the expenses. From that point on, each day chartered generates income. Once you’ve got a handle on all of the numbers, think about your objective – making money or offsetting costs.
The breakeven point for the Maverick 36, using the company’s management pro forma, is 112 days chartered per year. In 2017, the fleet managed by Maverick Costa Rica chartered an average of 180 trips – the low vessel was 177, the high was 183. Getting a grasp on the costs associated and revenue at different levels of charter activity are central to determining whether yacht management is the right course for you.
Using Your Boat to Exploit Economic Opportunity
Based in Surfside, Texas, Captain Anthony Lopez is experienced in many types of sportfishing operation. His next venture is one that is conceptualized to leverage the multiple layers of economic opportunity in the Gulf of Mexico. Lopez is currently building a 46-foot Mussel Ridge out of Maine. The Down East style boat has a large open deck and forward cabin. It is endowed with a 17-feet beams and the ability to cruise in the low 20s.
Lopez’ vision in bringing this beast from the Down East to Texas involves a hybrid model comprised of commercial and charter fishing activities. In many ways, Captain Johnny Walker and his 57-foot Blackwell, the Kitana, has blazed the trail for this type of endeavor. “It’s a hybrid model that incorporates a little bit of several things that the boat can do – charters, corporate type meetings and three to five-day long-range trips in the Gulf,” Lopez relates.
“Then there is the commercial fishing aspect. Ultimately, we’d like to be able to sell sustainably caught fish directly to restaurants. There is a diversity of opportunity in the Gulf – bottom fishing, reef fish, deepwater pelagics – the boat has a greenstick, day and night time swordfishing. We believe the hybrid model includes all the ingredients for a long term, successful family business.”
“A lot of the traditional commercial boats are older and can only do five to ten knots – they can only slow boat out. This is a converted lobster boat that can cruise at 20 knots, enabling us to take advantage of shorter weather windows,” Lopez describes. This is a serious advantage when fishing the spring, fall and winter months in the Gulf. “The boat will be a work horse that folds 1,000
gallons of diesel. With a range of 800-miles and a Seakeeper to provide comfort for charters and safety when commercial fishing, it is a great foundation.”
When it comes to making money, Captain Anthony plans for a diversified approach that is flexible enough to take advantage of opportunities as they arise. “We anticipate the revenue breakdown will likely be in the rage of 70/30 or 60/40 commercial to charter,” he says. “The boat will tournament fish, too – either chartered or privately funded entries. Texas and Louisiana tournaments, mainly.”
Selling Your Build Slot
There are some people wh o are able to make money on boats without ever splashing them. These days many builders are waitlisted for months or years. With more people looking for boats than boats available, those who are in the build process can turn their slot into cash. This scenario occurs most predictably when the demand for boats exceeds the supply and when people are spending money. It is as much a function of the economy as it is the quality and relative scarcity of high end sportfishers available.
Ritchie Howell has been building custom boats in North Carolina for a long time. He has seen a number of these scenarios first hand. “When things were booming, I had four boats going at once. I had a guy sell a slot for $50,000 just to jump back two slots,” Howell describes. “Another time we had just finished a boat and I begged the owner to put it in the boat show because I needed
something to show.
A guy from Texas came up to him and said he wanted to buy it. He said, ‘It’s in the boat show, it must be for sale. What will it take?’ He wrote a number on a piece of paper and gave it to the owner. It was a big number… and the guy was ready right there with a check. The owner got so mad, he got on a plane and left the boat show that afternoon.”
“Most guys that go through the build process could make out pretty good, but they’ve waited so long they don’t want to part with it. You can’t mass produce custom boats,” Howell says. There is another perhaps more popularly utilized method of turning boats into cash.
Rehabbing and Flipping
While the term flipping the hull is generally used to describe the step in the build process when the boat first emerges from the shed, there are those who consistently turn a buck (and have a good time) rehabbing boats and flipping them. “When I was charter fishing, I used to buy boats that had been run into the ground. I’d fix them up and turn around and sell them,” Howell says. “There is pretty good money in refurbing something if you do it right.”
Howell’s latest refit project is a major one. He purchased the hull of the Waste Knot, the Buddy Cannady-built boat that famously sank on the show “Wicked Tuna.” When the vessel hit something at speed, the collision knocked the rudders through the hull and it sank 11-miles offshore of Oregon Inlet. Howell purchased the hull after the boat washed up on the beach. Howell has the boat
at his shop and puts workers on it as he has time. While he has had offers to purchase the boat, once it is ready to go it will be a charter boat for his son.
While there are many tips and things to consider when actually fixing the boat, what should you look for in a prospective sportfish flipper?
“I always looked for boats that perform well any way. Building styles change over time, so a lot of times there are ways to tighten up a boat. I’d look for boats that shove easy and are dry but may have been built with old techniques. I’d do things like put in stiff knees and cut out old frames and just stiffen the boat up,” Howell describes.
“BC (Buddy Cannady) used to build a boat and then charter fish with it in the
summer and commercial fish with it in the winter. He’d then sell the boat in the spring,” Ritchie continues. “I’d do something similar. I’d buy an old boat and charter fish it. I’d fix it up over the winter and sell it. When I was doing it, I was about a boat every two years.”
In addition to his background in boat building, Howell’s position within the North Carolina charter fishing community helped with these projects. “Most of the time, I’d know the history of the boat. What it could do and how it could perform,” he says. “I’d look at some boats and they would have been too big of projects. You’ve really got to have a good foundation to work from.”
“With the Waste Knot, I knew its history and its performance, but also its weaknesses,” he says. “I’ve cut out seen busted frames, took out old knees and glassed things back into place.” The boat is progressing nicely. “I’ve actually had quite a few offers to buy it. If it were for anyone else but my son, I’d have sold it,” Howell says with a laugh. Curious to see how refitting an older, worn-out boat can revitalize a sportfisher?
Check out Captain William Howell, who will be fishing the boat formerly known as Waste Knot out of Oregon Inlet Fishing Center.
Have you ever wondered why so many sportfishing boats are named after owners’ wives? Perhaps this is another reflection of how expensive boats can be. “She can’t divorce me for buying the boat… Afterall, I
named it after her!” All jokes, sayings and bumper stickers aside, boats can certainly cost quite a bit of money, but they can also be used to offset the cost of ownership or even make a bit of money.
Do you have any comments or questions for us? We’d love to hear from you.