Crappy boat builders

[Bpracing1127]

So I was thinking about all the crappy boat builders recently

Ultra
Cheetah
Luxe

And plenty more

My question is normally a business runs on credit for their supply chain (net 30 terms)

When you say luxe buy a mercury outboard do they pay cash up front or are they on credit? This goes for all the supplies to build a boat. (Stereo, billet, motors, and plenty more) what happens when they go belly up to these suppliers and money possibly owed?

We only ever hear of the consumer side but not business to business side

 

[Englewood]

I doubt Mercury extends terms to startup builders but could be wrong.

 

[lbhsbz]

Most people in business will tell you that you don't make money with your money, you make it with other peoples money. I'd guess most businesses have a line of credit with the bank, at the very least.

 

[BHC Vic]

So I was thinking about all the crappy boat builders recently

Ultra
Cheetah
Luxe

And plenty more

My question is normally a business runs on credit for their supply chain (net 30 terms)

When you say luxe buy a mercury outboard do they pay cash up front or are they on credit? This goes for all the supplies to build a boat. (Stereo, billet, motors, and plenty more) what happens when they go belly up to these suppliers and money possibly owed?

We only ever hear of the consumer side but not business to business side

I don’t know about boating but I kind of recently started asking what it takes to be a Union signatory contractor. One of the requirements was an account with 3 material yards. From working at the training center and ordering materials PO’s are paid for relatively quickly. We may have credit to sign and go but our office sends payment rather quickly. I would have to assume it would be the same ordering parts. But that’s just me thinking out loud. You also need to be able to show money in the bank to cover 6 months of wages for employees on staff.

 

[stephenkatsea]

Often new boats are “floored” until sold. The manufacturer has financed the boat through a major finance company. They typically pay a monthly fee to the finance company until the boat is sold and the flooring is paid off. Car dealers do much the same.

 

[riverroyal]

'crappy' is the wrong word. I climbed around a new cheetah and it was built appropriate for the price paid. The boat is solid, rigging was clean, gel was without flaws, interior was well done.
Now 'crappy' business choices is a good word

 

[Bpracing1127]

'crappy' is the wrong word. I climbed around a new cheetah and it was built appropriate for the price paid. The boat is solid, rigging was clean, gel was without flaws, interior was well done.
Now 'crappy' business choices is a good word

That’s what I meant, crappy as in crappy running businesses

 

[Singleton]

Merc requires payment at time of order.
Once you build a history with them, they will allow COD and then payment terms (that is limited and based on order volume and pymt history).

 

[Brian]

Hardware suppliers will not give a start up terms, unless they're crazy. You generally have to build a positive business relationship before any supplier will even consider giving terms.

 

[Desert Whaler]

 

[bowtiejunkie]

If a boat builder goes belly up, any supplier owned money would likely write-off their A/R to bad debt expense. Maybe collect some via the bankruptcy court (if there are any assets that could be liquidated after any lender exercises their 1st lien to assets).

I've never audited a boat builder, but It seems as though small boat builders use customers as the 'bank' to buy product from suppliers. I doubt any bank will open an asset-based revolving line of credit for a start-up or small boat builder. There really isn't any accounts receivable, and no good assets to take a 1st lien on. So, unless the boat builder has a stack of cash, the customer is at least partially funding the operations. With a mis-match of timing for money coming in (deposits, sale of boats) to when payroll and suppliers need paid (weekly/biweekly cadence and Net 0 (or at time of ordering)), boat builders are in a challenging business position from the word go.

 

[Done-it-again]

Not buying booger sugar will help make better choices.

 

[pkrrvr619]

What are the margins on customs boats?

I wonder, could they be built like a custom home?

Material and labor costs plus say a 20 percent margin for example?

Progress payments and everything is line itemized as the build goes.

Seems like that may solve cash flow and robbing Peter to pay paul problems.

 

[76sanger]

I may be completely wrong here. It seems to me like these ones that go out of business are from people that want to live the boating rockstar lifestyle. Let's start a boat company and take in a few orders with "big" down payments, instead of putting their heart and soul into the build and finishing the product(boat), their sitting on presumably $200K plus that I guess is burning a hole in their pockets, so they buy a new truck, other toys and so on.... (which in a way is not their money yet) instead of investing in buying the parts needed to finish the build quickly and professionally (time is money). They get themselves so upside down on a couple of builds and I believe "pride" takes over and they just dont want to accept the fallout until its completely in the hands of the court system. Frankly it's very sad, because some of these guys have amazing boat building talent and skills.

 

[bonesfab]

Just like the car building world. Everything is basically COD. And the problem with big deposits like said above, people spend it on shit that wasn't what it was meant for. People ask for an exact number what its going to cost, I tell them there is no way to give that as things change and the car isnt what it was supposed to be. I tell people if they get an exact number from someone, Be Careful. They are either quoting it low to get the deposit and won't ever be finished or they are quoting it high to male sure they make some money on it... It amazes me how many shops spend the deposit money on shit it wasn't intended for.

 

[Wave Hi]

Robbing Peter to Ol' Paul..!! And the consumer is hoping he's not Peter.

 

[jetboatperformance]

Vendors and suppliers, subs were 30, 60 ,90 for years in business now even to their best long term customers they are 30 max and some even 14 days if not COD or Pre pay , world has changed

 

[petie6464]

What you have in the boat business is men with businesses and VERY few businessman. This fact will catch up with them and usher in their demise.

 

[ChrisV]

Just like the car building world. Everything is basically COD. And the problem with big deposits like said above, people spend it on shit that wasn't what it was meant for. People ask for an exact number what its going to cost, I tell them there is no way to give that as things change and the car isnt what it was supposed to be. I tell people if they get an exact number from someone, Be Careful. They are either quoting it low to get the deposit and won't ever be finished or they are quoting it high to male sure they make some money on it... It amazes me how many shops spend the deposit money on shit it wasn't intended for.

Bingo

 

[Ladsm]

Happens in every line of business. Good ole Justin from Shock Therapy used to build Predator sand cars. My friends lost a $60K deposit, others lost their transmissions and motors because Justin put them in other cars and sold them. Too many people with good ideas and talent but cant manage the cashflow of a business.

 

[Bpracing1127]

Happens in every line of business. Good ole Justin from Shock Therapy used to build Predator sand cars. My friends lost a $60K deposit, others lost their transmissions and motors because Justin put them in other cars and sold them. Too many people with good ideas and talent but cant manage the cashflow of a business.

Wasn’t it revenge racing?

He sure turned business around

 

[BigfnJeep]

Happens in every line of business. Good ole Justin from Shock Therapy used to build Predator sand cars. My friends lost a $60K deposit, others lost their transmissions and motors because Justin put them in other cars and sold them. Too many people with good ideas and talent but cant manage the cashflow of a business.

How does your friend not go settle up with Justin?

 

[Flatsix66]

From a quote that I received for a $300k boat recently, half is the boat and labor and the other half is the parts (motors, trailer...) . The customer pays for the motors when they ship from Mercury to the builder. So given the facility space, labor and duration of the process I really don't think a boat builder is getting rich.

 

[Fastech382]

Ever heard the real story behind magic

 

[LazyLavey]

Look what's goin on with Tommy's and Malibu... Of course on a completely different scale. $$$$$

 

[monkeyswrench]

I don’t know about boating but I kind of recently started asking what it takes to be a Union signatory contractor. One of the requirements was an account with 3 material yards. From working at the training center and ordering materials PO’s are paid for relatively quickly. We may have credit to sign and go but our office sends payment rather quickly. I would have to assume it would be the same ordering parts. But that’s just me thinking out loud. You also need to be able to show money in the bank to cover 6 months of wages for employees on staff.

As a "scab", I tried to pay the materials before they were dropped. It kept me from risking doing something stupid, and I always figured if me or someone had something bad happen, the yards would be paid up. It also helped in our cases, if you were on good terms, you may get an early load out, and bump the guy that paid at 30 days. Payroll was kept simple. As work slowed, heads-up was given. Guys had time to find work before I couldn't pay them.

Stressful stuff. The "bosses" have a lot of stuff on their plate that some workers will never see. It may not pay as well, but being someone else's trained monkey is sometimes not too bad.

 

[JFMFG]

Ever heard the real story behind magic

Let’s hear it

 

[AZLineman]

Cheetah has laid up some pretty tank like boats that have held up well. I've drank a lot of beer with cheetah Bob and Louis Major from Kachina way back. They built pretty good floats for the price back then. Lots of old school three-quarter plywood. Let's not forget all of the Magics out there many sold off my LBYS that Ron Moyes poorly laid up just to get bank financing/flooring for Merc power packages then went belly up and like 3 tractor/trailers (prob swift) disappeared.

 

[77charger]

Happens in every line of business. Good ole Justin from Shock Therapy used to build Predator sand cars. My friends lost a $60K deposit, others lost their transmissions and motors because Justin put them in other cars and sold them. Too many people with good ideas and talent but cant manage the cashflow of a business.

I’m sure many don’t know the backstory on shock therapy. He also had some customers cars go missing too.

Then shows up with a new business and rig.

 

[riverroyal]

I’m sure many don’t know the backstory on shock therapy. He also had some customers cars go missing too.

Then shows up with a new business and rig.

Upfit utv?

 

[Bpracing1127]

Upfit utv?

Yep go check it out. Pretty cool

 

[hallett21]

Ever heard the real story behind magic

Let’s hear it lol

 

[77charger]

Upfit utv?

Revenge racing mid 2000s

 

[adam909]

Ever heard the real story behind magic

Lets hear it.

 

[Bowtiepower00]

Yep go check it out. Pretty cool

Saw one in the showroom the other day, nice car and not unreasonably priced for what it was.

 

[Warlock1]

I may be completely wrong here. It seems to me like these ones that go out of business are from people that want to live the boating rockstar lifestyle. Let's start a boat company and take in a few orders with "big" down payments, instead of putting their heart and soul into the build and finishing the product(boat), their sitting on presumably $200K plus that I guess is burning a hole in their pockets, so they buy a new truck, other toys and so on.... (which in a way is not their money yet) instead of investing in buying the parts needed to finish the build quickly and professionally (time is money). They get themselves so upside down on a couple of builds and I believe "pride" takes over and they just dont want to accept the fallout until its completely in the hands of the court system. Frankly it's very sad, because some of these guys have amazing boat building talent and skills.

This right here is a damn good start.
Having been in the business. I have personally seen the inefficiencies in the business models. Had they been using LSS strategies in all aspects of the business (Parts Room, Fiberglass, Rigging, Scheduling) their money would have went a long way to building a successful business.
I guarantee I could have helped some of these guys "fix" their business from a logistics standpoint.