This article was also published in issue 154 of Marina World magazine. Click here to read the online version.
Boats always break. This is as true as death and taxes. If you’re clever, you can sometimes find your way around taxes, but you most certainly cannot get around the fact that something will go wrong on your boat.
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Marinas that understand and incorporate this fundamental truth about boating into their operations are the businesses that create real value for their customers - a value that is seen in healthy margins and exciting exits. Boat service is the consistent need that provides real and immediate value to customers. If done poorly (or worse, not at all) it drastically affects business operations, brand value and customer retention. If done well, people stay for years, your phone doesn’t stop ringing and good money will be made.
As marina consolidation and software intrusion shake up our industry, all eyes seem to be on the durable revenue derived from slip and storage rentals. When you begin to connect the dots between the money and the water, you’ll see how large firms fundamentally see marinas as a type of real estate investment. With very real limitations to future new development, marinas-as-real-estate fit snugly into a tried and true investment model: moat-protected accelerating property values plus a rent-based secure cash flow. Cha-ching.
The hospitality thesis
But for these firms to really add a few digits to their exit multipliers, they need to add value to the already existing operations. Enter the hospitality thesis. Marinas become a “lifestyle” play with the added amenities of a country club or a luxury resort. While some marinas increasingly cater towards a wealthier demographic as cost of boat ownership increases, the hospitality thesis creates value across a wide range of marina demographics, from luxury to working class. These businesses have a significant opportunity to capitalise on their customers’ spending power through a lateral expansion of marina services. I know a marina that will deliver $30 bespoke cocktails to your slip so you never have to leave your boat for an ice cold martini, at an average 300 percent markup.
In addition to hospitality, there is a more fundamental need that is currently being unmet in this new era of marina business: repair and maintenance. Remember, boats always break. Without functioning boats, you don’t have a functioning marina. I have heard many times that boat work is a lost lead and operational nightmare. This does not have to be the case. With the right operational architecture and software, boat work can be a significant revenue and margin driver for any marina.
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Three major impacts of failed service
When a marina does not invest in and support boat repair and maintenance they are negatively affected in three primary ways: lost respect, lost customers and lost profits. All three of these can combine to drastically reduce overall marina value.
Lost respect
A couple years ago I watched as a local marina and shipyard was acquired by a big and well-known entity. They had one of the largest lifts around and were a well-respected yard. For reasons that I can only surmise, the new ownership decided that the repair and maintenance side of the business was too costly and complicated, and wanted to focus instead on a “best in class” experience: with slips, a mooring field, tenders and a very nice shipstore. They promptly fired the technical staff and left just one or two employees to help with winterisation and other small tasks.
Then, as you would expect, they were unable to repair their customers’ boats as they began to break. Frustrated customers began leaving for other marinas and they watched as their occupancy rate quickly declined.
But something worse happened; they lost the trust and respect of the local community. When they realised their mistake, they tried to reopen the service yard but couldn’t get the techs to return. Today they must rely on a steady flow of independent contractors and watch as a poorly staffed but fully built service centre leaks margin and overall value day after day. This marina remains substantially undervalued because they lost the respect and trust of their community.
Lost customers
Marinas also lose customers through poorly run service departments. My father is the proud owner of an 11-year-old 24’ Everglades that he keeps in immaculate condition. He puts more hours into his engine than most fishing guides. Last year he was having trouble with the pump in his baitwell so he took it to the marina service department to see if they could fix the problem. After several frustrating delays from misdiagnosed problems and a few bills paid to cover the labour charges, they finally declared they had fixed the baitwell. He paid them and then went fishing the next day - during which the baitwell promptly broke.
He did not bother calling, nor did he complain or ask them to fix it. Instead, he went to another local service department. They fixed the problem in a couple of hours and now he uses them for all of his repair and maintenance work. The moral of the story is that a poorly run service department will drive customers away, often invisibly, resulting in declining customer trust, lost revenue, decreasing margins and overall diminished enterprise value.
Lost profits
My final example comes from a more insidious and harder-to-see problem, but one that nonetheless diminishes margin, affects revenue and devalues the business. This is the problem of operational inefficiency in marina service departments, a problem that is commonly created by the use of outdated or industry-agnostic software. I’ve seen this problem at multiple yards, but want to share one specific example from a well-respected marina with a modest repair, build and maintenance operation.
This yard does about $3M a year in boat repair and maintenance. They use a well-known legacy software solution to help manage their service operations. In the shipyard office there is a whiteboard full of sticky notes that managers use to track projects. There are two full-time employees whose job it is to transfer and retype information between the legacy software, their invoicing process, inventory, customer correspondences, project flow and accounting software. There’s a stack of notebooks with customer information that managers have to manually search through to look up customer history. There are multiple spreadsheets managed by different people. The software crashes when you try to run a report on business health analytics. The costs compound while the marina hires people and pays for labour time to work around the problems that the software should be solving.
Yet, they are still profitable, and business goes on as usual in all of its ordered chaos. It’s like trying to bail a sinking ship with a milk jug and just because the boat still floats, you believe everything is normal. On the surface, everything seems okay. Customers are mostly happy. Bills are paid. The business is making a profit, but bleeding margin on every line in their profit and loss due to a software solution that is just “good enough” to keep the ship afloat.
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A compounding problem for marina portfolios
This problem compounds when these marinas with legacy software solutions are acquired and rolled up into larger portfolios. You don’t need to be a data scientist to understand that if you add multiple different systems together that are running on chaos-causing software, you get an increasingly chaotic system. Bad data leads to bad decisions which leads to bad business. When this becomes endemic to a marina portfolio, you have the potential for massive devaluation, lost revenue and diminishing margins - when combined they lead to a scenario of compounding loss.
Solutions exist
Boats break, but your service department doesn’t need to be broken too. There are many new software solutions entering the industry. This is mostly a good thing, although there can be too much of a good thing, especially in a world where hauling on a sheet, navigating an inlet or casting a line is a profoundly analogue experience. One place that software development has largely overlooked is also the place where software can make an outsized impact on customer satisfaction, company valuation and the bottom line, and that is in boat service, repair and build operations.
It’s my belief that good software should never tell the pros how to do their job. After all, they’re the experts and there is just too much variability in boats. It should instead help them run and understand a better business. There are a small handful of software companies out there doing this.
Our company, Herons, is designed to specifically address the black box operational problem of marina service, repair and build operations. However, regardless of which software you choose to run your marina service departments, they should all share a few common best practices: standardise where you can standardise, simplify when you can simplify, be available to help with real people, and share a goal to support an industry that is far older than computers or software. We do this because we all share a common love for boats and being on the water.
