I expect a dealer to make 20-25% to offer long term success.
My feelings are from 15-20% should be enough to offer e level of service I expect.
My dealership thoughts are 12-16% depending on how.
If I made 10-13% I would think I could manage the business well.
Expectations for my business would be from 8-12%
I would think single digits between 7-10% would be sufficient to operate a boat dealership.
At our company, we shoot for 18%. Whether you get that or not, it gives you some room to work. We've kept the doors open for 18 years so it must be working. Business is business. Doesn't matter what you are selling, have to make a profit to keep the doors open.
I'm kind of curious if there are holdback incentives, like with vehicles. Which is why a car dealer can sell a car at 3% below invoice and still make a profit.
Don't forget all those "paperwork", "destination", "delivery" and "administrative" fees are gravy money to a dealer. And they also get you paying to have it rigged the way you want. They'll sell you new graphs, or charge you to transfer your old ones.
So, what if a dealer loses a couple hundred on a boat by giving you a deal. Depending on the deal they'll come out ahead in the end by all the "add on" services and fees.
Back in my day in the dealership service business, "fixed coverage" (fixed operations is the back end of the business, parts, service and body)) was the buzz word. This was what percentage the service, parts and body shop could cover of the total expenses. The higher that percentage, the cheaper they could sell cars. I would think it would be similar in a marine environment except for the sales (boats) volume difference.
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Believe I will stay out of this one.
Other than to say when it comes to car traders -- boat traders and horse thieves .. I have seen how much money some can make !!
I'd think 15%-20% based solely on volume. I'd bet an average boat dealership sells no more than 2 or 3 boats a week. They might make it on 12%-16% if they have a large...and efficient service department. I'm not a business man, so this is all just a guess.
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contractors normally average 2% to 4% per the attached study. i would think a marine dealership would need 7% to 10% to make it go. i would think they make more on parts and service than on sales. i know a mechanic at a local dealer that mazkes $15 per hour and the dealers around here charge between $80 and $100 per hour. so if they are making $1500 to $2000 on each mechanic, they should be ok with 7% on their boats. again this is all speculation!
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Is there a way for us to find out what the true cost of a boat is? Does a $50k boat really cost $25k to build? Without this info I don't think anybody can really answer your question. I can see $5k to the dealership being reasonable and they will also get the service work.
Let me throw out a little more and I'll be quite. Unlike the auto world, there is not a new boat customer born every day. Not every 16 year old is looking to buy a watercraft therefore this business is a very social one. If a dealer is unable to offer very good to excellent product support after the sale they won't be around very long. Not every new boat buyer upgrades to the latest and greatest every year. Be willing to bet even those that do upgrade often do so at, or near, the end of the engine warranty period which makes them a customer every 3+ years. Others, like me, keep one for several years. The high percentage return is in parts and service be it in warranty or customer paid. So a dealer with a great product support offering simply has to keep his market, or population, seeded. Doing that at a low % gross on a boat sell will market their product by being a very completive dealer and keep their customers coming back.
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5-8% on basic new boat and motor. All accessories added are retail. Normally dealers make 30-45% on accessories and all new parts they sell. They can easily make 30% on used boats sales fom trade-ins. On avarage of all sales, dealers need to make around 20% to stay afloat.
Bingo , exactly how we do business.Originally Posted by Tom G.
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I've been thinking about this for a while as far as boat costs go, they are getting very very high.
It seems like boat sales have been going down for a long time, is the theory by manufacturers that with lower sales higher profit margins are needed to stay in the game?
Overhead costs keep going up too.
If the pricing was lower would there be more new volume to make the build costs go down? Maybe one way to think about it. Not really what you are asking but still in the from of how much profit does there need to be. The higher the volume the less the percentage needs to be.
I live 4 miles from a boat ramp, in a nice neighborhood 3 miles from where my parents lived so it's the same demo graphic let's say.
As a kid just about every house had a boat in the garage, and boats were a ton cheaper back then.
Now where I live I am the only one on my street with a boat in the garage and I've seen one other. Not saying others don't have boats in storage(and especially true with the growing size of boats) but it doesn't seem like nearly anywhere as many peoe in my area have them.
Have they priced out of the market for the most part? I think the answer is yes.
I need to do a cost comparison with dollar value on what a new base boat used to cost vs now in say 1984 dollars but i bet it's not even close.
Also i have seen big wake board boats that have two to three times the fiberglass as a 20' bass boat costing about the same.
If they don't make 20 to 25% they will have a tough time surviving today.
It actually is very close 90 5.0. The comparison is done on USD average in 19__ and today's dollars on a reversing value. You will find boats today to be a value in comparison.
The way the question is worded... "profit on new sales"... it is kind of confusing because profit can only be realized after all the business expenses are paid. Volume would play a major role. Now if the question was how much markup should a dealership put on new sales that could be more easily answered. The owner would need to estimate operating expenses and mark up the boats to cover costs plus a profit he/ she is comfortable with. More volume might allow lower margins which is why I always look for the larger dealers who move more inventory. Turning inventory is the key to better margins.
I run a business and would consider it a poor year if we didn't net better than 10% profit on the bottom line. We have had three very good years in a row. Best in the companies 60 year history and that was around 18% profit. Funny thing is that when I took over this company 15 years ago I made that statement and was laughed at because they had struggled to be profitable for years. We have made at least 10% profit for 13 of the last 15 on sales ranging from a low of 8 million to a high of 16 million. The recession killed the streak.
Greg
Maybe a better question to ask the boat manufacturers would be... Do you guys just raise the price every year to copy the automobile manufacturers? Is this price increase really necessary or warranted? I get so sick of seeing the reference to "well, go look at truck prices". Boats are a hobby for most of us, we can't justify spending $60k on a money pit.
Market price... any company would and should be selling at market price. Cost plus a margin is not a solid business plan. As a consumer I don't like it but it is what it is. Funny thing is that we as consumers are the one setting the price. As long as we pay it that is the fair market price. As soon as we stop paying it the prices will drop.
My opinion is if you cant make at least 20%, it is not investing that much time & money into it.
In my company sales people need to have a mixed profitability of 40% GP or higher to survive. We need an operating leverage of 1.69 or higher to make it viable. In general as a whole we have an operating leverage of 1.92-2.25 . Less than 1.3 and folks are getting fired.
Rick: I know so little of the complexities of running a marine business that I am going to sit this one out. But, I am interested in what others have to say. And, I will be very interested to see how these opinions compare to reality.
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I could see the opinions of your competition on profit being relevant to you, but your customers?
You'd have to announce how much it cost you to make each boat you make, in order to have any kind of perspective as a customer. Are you willing to do that?
The question for each individual customer is "do I want to buy this product, for this amount of money, or not?"
I see percentage profit as irrelevant, especially for a luxury item like a bass boat.
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