What is the margin on a new build production yacht?

I wonder if there is a profit in that price..?

Hi,

Why do you seek commercially sensitive information?

What I would like to know is if any producer is making money? I think they are just happy to reach break even these days...

I know some manufacturers......let's say sportfish manufacturers......and right now they only break even on their smallest models.....and they have done that figuring that they get owners into the entry level boats and hopefully buy bigger ones with a bigger profit margin later.

I've been told by several builders that they always lose money on the first one, and it really takes 6 boats (this is in the 40'-60' range) to pay for the cost of the tooling, hull designer, tank testing, and molds to start making a profit.....So as always it depends on the boat and whatever in order to make money.

I wish! Its taken several years, but I no longer have to take consulting contracts to keep YF afloat. Still, the site doesn't generate enough revenue for me to lease an office space, hire help or take a vacation. I honestly thought at this stage - some 9 years later - that YF would rival a magazine's income. Boy did I misjudge the potential! We make less than a one page ad in a magazine each month. I'm hoping to do something about that in the near future, but first I need to get a bite to eat and get some sleep. Just got back from 4 days at the Miami Show. The show is easy. The traffic is tough!

Any business that does not generate a reasonable profit on it's sales is doomed to fail or has very uneducated backers.

I'ts a bit like the car dealers selling at 50.00 over invoice, quickest way to go broke and you seldom see car dealers going broke.

Facts are facts, zero profits or poor profits generate quick calls from the Bankers with pens at the ready to call the loans.

I would speculate a gross margin of at least 15% on those larger builds, larger on production runs.

There really is no cartel pricing in the yacht business, as the industry is not as open to consolidation as the car makers are. So each company typically has their own business model.

But selling at a "break even" approach is a slow but sure death for a boat builder - if you want the price of a boat "without a loss to the factory" are you preferring they keep the warranty allowance in the price and dump the profit for the benefit of the owner? You want warranty, they want profit, gotta meet somewhere in the middle............

An old saying in the biz...

"If you want to make a million dollars building boats, start with several million"

I thought that line was reserved for airline businesses...

Hi,

When reviewing offers and prices for big new boats I have sometimes had to explain to an Owner who wants to screw the yard into the ground and cause its demise as long as he gets a deal that this is not the way to get the best result.

The builders need to make a profit, they need to be able to pay their obligations to staff and sub contractors and have something left over for warranty, infrastructure improvements at the yard etc.

I don't know what the exact profit margin is but it isn't hard to work out when its getting close - changes become difficult and expensive.

Profit seems to be a dirty word for consumers these days, especially when it comes to builders.
It is as though all the massive amount of capital needed, the energy, the innovation, time and the risk are a "public service" and making money is frowned upon!
When will the consumer realise that a fair profit is:
None of your business, unless you have a stake in the risk or equity in the creation.
Essential to the ongoing growth of a healthy and vibrant enterprise.

Look what happened to the British motor industry in the days when it was a conglomerate of brands that was run from the shop floor to keep the workers employed. That was the 1960's and it marked the END of the industry.
Goodbye Healey, Triumph, Austin, Mg etc.

I have a hard time buying into your description of the Dutch Auto industry. The trick in the states is to show the consumer a "dealer" invoice and they would claim that the car is selling for at or below the factory to dealer invoice amount. But the factory has an incentive program to award the dealer with deeper than standard discounts, therefore the car sale is still profitable. Dealers make money on parts and service, but that alone won't carry them for business long term.

Just finished a dinner with some industry colleagues and we have all worked for builders who struggled over the years and who had final year end profit margins in the 2 - 5% range, not exactly something you and your accountant
would consider a "home run".

But there are a lot of reasons/motivations as to why we choose to stay in this industry. It's pretty unique to sell an object that nobody really "needs" but they most certainly "want" whatever that product is

I haven't dealt in the 80' nor custom market, but on smaller production yachts the retail markup (not the manufacturer's) is generally about 27%. However that figure is almost irrelevant as there are very large marketing expenses that can chew that up in no time. A comparison to the auto industry, where the parent company pays for a large % of the advertising and the cars sit in a showroom, doesn't wash. Just think about the cost of moving boats to boat shows. I'd imagine that on a custom build a manufacturer would start at about a 50% profit margin, but that will get severely chewed into with the "throw-ins" and warranty work.
So it takes a very smart and lucky manufacturer to actually make money building a boat. The statement made earlier is the general rule. (If you want to have one million dollars in the marine business start with several)

So if you're looking to develop a negotiating plan the best that can be offered is to do the same as most yacht salesmen. They feel the prospect out to determine how much money they can pry from your pocket. You have to do the opposite. Since brokers sell a lot more than a buyer will buy the average buyer is at a distinct disadvantage. That's why a buyer should always try to have someone working with them who has experience in the industry.

It's hard to throw general numbers around this quite peculiar and somewhat dis-jointed industry. I have been involved with and seen the numbers for production yachts under 65' and your 27% target is not close, but the reality of the situation was the starting number meant very little, as the manufacturer always had to reach in his pocket and dig a little (or a lot)extra. They are the ones who have the pressure to keep the production line labor working, and the concessions to to the dealers can be pretty significant.

A custom builder could only dream about 50% mark-ups, it just does not happen, the competition for a few capable buyers just does not allow it. A custom SF that retails for $4Mil did not (ever) start out at $8Mil...........

On new boats... it depends... but from experience sometimes it is best to set down directly with the senior management when negotiating price... and lay the cards on the table. After a couple of these discussions you find if you can get the trust issue sorted on both sides everyone is happier. This is why I HATE middle men and brokers when dealing with a yard or new boat already or partly constructed as you cannot get through that and often the broker is making more than the yard. The yard must make a fair profit... and sometimes you have to pay more than you might have thought going in for that to happen. The issue is your boat will need both service and the yard to remain in business and healthy business to get good results. Strangely this is easier in owner operator yards than conglomerate run yards... to get the trust issue resolved... i.e. it is easier with family or owner/builder yards than yards run by solely business men. Financial transparency is the key... which includes you the "customer" accepting they need to make a reasonable profit.

In building a boat it is very much the same except on must be careful as you don't want to basically become a partner or owner in the business to keep them going to get the boat delivered.

Profits are hard to define... gross or net... and how you define gross profit and net for the situation. Also, you have to remember yachts are basically hobby or pleasure craft for the owner so there comes into effect that you, the owner, is really on some level a patron not necessarily a customer. Yes, on production small boats you are a customer strictly but larger yachts and custom projects this becomes different.

But generic fair profit margins on your project or boat in my best guess in the 10-30% net pretax profit bracket depending on the boat and technical sophistication AND situation of the yard. A good yard producing a custom boat with a sound business situation and backlog I say 20% is fair... a boat like the Apple yacht this might be 30%. Why more is the risks involved and expectation of high quality success demands a higher margin. A yard struggling this is hard to define and even a 40% gross profit (way different than net) may not be enough to make things work... net might not really be definable in that case. Why is they may have a financial situation that requires a high margin on winners to make up for all the losers. A yard producing a line of a semi custom boats I would guess the number would be in the 12-15% range (net pre tax)... which would be scraping the bottom for a large custom project.

Dealing with pre-owned or used boats it is harder in my opinion and usually you cannot directly deal with the principle selling the boat and go through a broker. In this case it is more of a situation of negotiation...