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New Builds Yacht Margins?

Discussion in 'General Yachting Discussion' started by Pelagic Dreams, Aug 17, 2013.

  1. Pelagic Dreams

    Pelagic Dreams Senior Member

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    In our quest to find the right yacht we were wondering just what the profit margins are for builders in the 50'-70' range are? Is 15-20% profit close? I am talking about a yacht with all modern amenities, top rated power plants, appliances, electrical systems etc.
    This information is useful in helping us decide if we want to go new or used. Yacht depreciation on the other hand is what drives the used market. I believe many, many factors play a role in how fast a new build depreciates.
    One other factor to consider.....custom, semi-custom, or production builds.....profit margin the same?
  2. AMG

    AMG YF Moderator

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    Profit margins..? :confused:
  3. Pelagic Dreams

    Pelagic Dreams Senior Member

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    I sort of knew someone had already asked a like question. Thanks for the site info.

    My estimate of 15-20% is what seems fair to all parties. YES, the builder has to make a profit, or what is the reason for the business? Boats in the size range I mentioned are not "toys" but a luxury purchase. Those builders should exact a price for that. Mold costs, design costs should always be passed on to the consumer. If they can't afford it, then buy a production boat with the cost of the mold already cancelled out over multiple builds.
    I would gladly pay the aforementioned profit margin if I knew people were being employed and owners would remain in business.
  4. AMG

    AMG YF Moderator

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    This could have been true before 2009. Ask yourself how many builders are still around and how many boats do they build compare to then..? I think very few are making net profits these days...
  5. PacBlue

    PacBlue Senior Member

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    Glad you think it's "fair" for all, but come on, let's be real. The market really dictates the price, it is up to the builder to seek his own profit levels.

    I bet those Rolex watches or plenty of other luxury goods are running way above 20%, hell I know t-shirt designers/sellers making a higher profit than that. You think Nike and Addidas are running at 15%? I would worry less about the builder's "fair" profit margin and focus on a profitable company that is going to be around to support the product and buy a boat that meets your expectations AND budget.
  6. NYCAP123

    NYCAP123 Senior Member

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    Let me paraphrase Kevin O'leary from the Shark Tank just last night. Most business today are looking for a 45% profit margin. Now some of that comes from things like underpaying their workers or cheaping out where it can't be seen or syphoned off in executive pay packages, but that's the number businesses are looking for. All that however will do nothing for your bargaining position.
    The first purchaser of a yacht is expecting to take a bath when he sells however. That, and the low hours yachts get put on them, are why I would never buy a new yacht in this category unless I wanted something custom or I had stupid money.
  7. Capt J

    Capt J Senior Member

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    I highly doubt that any production builder sees a 45% profit margin on yachts. Think of the costs of warranty repairs and such. Not to mention the dealer has probably a 30% markup but again they have maintanence, insurance, overhead etc,.....
  8. RER

    RER Senior Member

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    How do you define profit in this case? ...gross profit or net profit?

    What is the builders overhead? ...leveraged within an inch of it's life? ...or, well capitalized with no debt? ...it's something a buyer has no control over.

    Maybe the builder will decide to re-pave the yard and re-roof the building on a project - I'm kidding, but you may remember Art Buchwald famously sued Paramount Pictures Studio for ripping off his screenplay on the movie Coming To America and was awarded a part of the profits. Paramount claimed that despite a box office of $288 million dollars the movie made no net profit. Buchwald responded that he would fly to Hollywood and expects to see a fresh coat of paint on the entire Paramount Studios lot.

    I can't imagine how this information would be useful in helping to decide if you want to go new or used. As our former Secretary of State screeched recently "What difference does it make?" ...all that matters is what value the product has to a buyer. Whether a builder ultimately ends up with a profit or loss is irrelevant to market value.
  9. K1W1

    K1W1 Senior Member

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    Hi,

    Boat bought in 2005 costs X

    Same basic boat bought in 2008 costs X x 2

    New one this week up 50% of size of 2005 one, with all the news of no wage rises and negative growth filling the TV this one costs X x ?

    I will be interested to see who gets it first.
  10. NYCAP123

    NYCAP123 Senior Member

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    That would be gross profit which is why I added: "All that however will do nothing for your bargaining position." The 2nd paragraph was the actual advice part.
  11. PacBlue

    PacBlue Senior Member

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    Exactly.

    Magazines/Advertising, Boat Shows, Special Events, Factory supported Warranty Centers, maybe even in multiple locations, Factory Captains, Websites, Dealer Training, Customer Training, special "Policy" considerations, Flooring allowance/assistance, etc. It has to come out of somewhere.

    Trying to determine a yacht price on a cost plus basis is a dead end. In the old days. you could find a custom builder who would allow a buyer to basically pay the monthly costs of goods, plus a predetermined labor rate for payroll, then agree to a "fair" margin at delivery. But the owner never knew what the yard paid his employees, and there was built in profit on that rate that went to the builder. And there was always side deals with the large product suppliers for "rebates". Elliot Yachts in Santa Monica comes to mind for those on the West Coast.

    Look at cars and all the blow-out pricing their dealers advertise. And lately, you just see them racking up record quarterly profits while "blowing out" all their product????
  12. Pelagic Dreams

    Pelagic Dreams Senior Member

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    It does mean something to me, first, if we decide to purchase a new boat, the builder will make money, employees have a job and business thrives. If we decide to buy a used boat, none of that happens for a builder.

    I just thought some of the members of the forum would know or have inside knowledge about how margins in the yacht industry worked..So far I have learned:
    1. It varies from a loss to maybe 40%
    2. There are a bunch of ancillary costs with being a builder. Which is part of your overall overhead and should be factored into each build as part of the cost of doing business.
    3. As a buyer knowing this amount does not give you any leverage at purchase. I was not looking for leverage just wondering.
    4. A well maintained used boat will probably be a much wiser financial decision than buying new. Unless money is not an issue, or you can't find a yacht to your likes/needs.
  13. Capt J

    Capt J Senior Member

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    All of this is true except 1 point. Buying a used boat has a 50% chance of helping a boat builder out because it may be the only thing holding the seller back from buying a new boat is the sale of his current boat. It does definately help out other people in the marine industry because when someone buys a used boat (or new), they spend money doing maintanence that was deferred, making changes to the yacht, and adding things to the yacht and purchasing goods and services like a tender for it.
  14. rmjranch

    rmjranch Member

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    Market Conditions

    In the last few years, there have been fewer new builds, because of the poor market. A buyer looking for a boat a few years old will not find anything. He or she must then buy new. Most builders in the last few years were happy to just keep the doors open. Now the market is slowly changing. The can and are entitled to a profit. Good used boats also have appreciated because of lack of supply. As someone said above, buying used is good for the marine industry, because of the maintenance that will be needed on the used boat. As to resale value, best thing to do when you purchase a boat, new or used, is to figure it is worth nothing on the day you buy it. Then when you sell, you will not be disappointed. A boat is not an investment. When you spend a beautiful afternoon, in a quiet anchorage, hard to put a value on that time.