Industry Markups

But you're talking two different businesses, Judy. I think, yes, boat managers are expected to charge retail for parts and buy them for less. Just like anyone making repairs or servicing a boat. Clearly a shipyard marks up parts. A salaried captain would not. But a management company would operate like any repair facility in that regard. Similarly they might engage mates to help transport a boat or load it on a ship and would charge more for the mate's time than they paid.

A captain, hired simply as a captain, would generally charge the items directly to the owner and would not make a markup.

As to a broker, I think making any money other than the brokerage fee would be wrong. You use the words referrals and kickbacks and they would both be wrong. That's not what a management company is getting. They're making profit on their work. Your profit is set and agreed to be limited to your commission.

Now there is one other type entity. That's the large brokerage that also has other divisions or functions such as build management, general ship management, and sometimes even chartering and/or providing crew. Those may or may not be separate divisions. I do think they put the broker in a precarious situation because suddenly the broker is selling other services too and getting a fee based on that. I haven't seen their disclosure forms so can't speak to how transparent it is. A recent example of one that didn't work out might be Fraser on the 90' Northern.

So, back to what I'd expect as an owner. I would not expect my captain, employed full time or part time but solely as a captain, to make any money from me other than his salary. I would fully expect a management company to make money on all they provide including parts and other labor. For parts, they simply charge what anyone would. They purchase at wholesale and sell at retail. I wouldn't expect them to get any fee from any service facility such as a canvas maker. Simply on the work they performed. However, they would get paid for supervising and managing the work of the canvas maker. I would expect a broker to get nothing other than the commission. And, when it comes to these multiple service large brokers I would want everything clearly spelled out in the agreement. And, frankly, I get disturbed over many such relationships there. If the broker is referring to in-house yacht management, I want to know if the broker is getting a commission on that.

Most of the marinas on Long Island insist that journeymen bill through the marina, and they take a cut. Generally they add it to the bill, but sometimes they take it off the journeyman's side. It can often be up to 1/3 of the bill. They also take a markup on all parts used in a repair as Capt. J does. For your business and mine this would be a conflict of interest, but most businesses today seem to be going after every last dollar that can be squeezed from a customer. Just look at banks. At one time the paid interest on deposits and collected interest on loans. Now their big money is in fees. Same with the airlines, same with the phone companies. To me it feels dirty, but it's the norm today.

Actually that is a quite welcomed approach in my mind. In the past and still in some places, the contractor billed them and they then billed you and you never knew what the contractor had charged. The other way was them charging the contractor a fee. When they do it as you describe it's very clear and transparent and a relationship that benefits the customer, the contractor and the boat yard.

As to everyone trying to get all they can, as long as they're transparent and honest, I have no issue. They've made the investments and they're in it for profit. Fees for services is an adaptation but makes sense. I don't like all the nickel and diming (well more like dollars and more dollars) but in many cases I have to admit it's fair. Why should the person traveling with no luggage have to pay for the one with many pieces. Baggage handling is a big expense.

As long as everything is fully disclosed I'm ok with most practices. You choose to deal with the person or not. However, I'm not ok when it's hidden and non-standard. Kickbacks are never ok. If a management company wants to charge a fee for all yard work such as 10% for supervising and monitoring or if they just choose to charge for their hours, I'm fine. If they, however, got a kickback for referrals, then that would be wrong.

As to a captain employed on a single boat, the agreements we have with ours are very clear and they are in writing and in our policies manual. They cannot accept a penny, cannot accept presents. They can't even allow the vendor to take them out and pay for the meal. That one is really for their protection as some vendors suddenly think that earns them business.

The other thing that merits disclosure is any other relationship that exists. For instance, even if a broker wasn't getting anything on a referral to a surveyor, if they also have another business relationship with that surveyor (say they co-own a training company) then that should be fully disclosed.

Be open, honest, and transparent.

But you do fully expect any independent company performing work on your boat is buying parts wholesale and selling them to you at a higher price and hiring help and billing you more than they pay the help.

NYCAP

Just a typical example: You come into my shop. You are looking for filters for your Mans. I have them on my shelve. I give them to you for your DIY project. Aren't I entitled to something$ over and above my cost? Same if I install them? In your desired scenario, I'm just a pass thru - I'd be out of business in a month or have bare shelves. Its a very "clean" and straight forward business transaction that has worked very effectively for centuries. Does your beer distributor just hand you cans off his shelf? Or say, ok, I'll get that from my supplier tomorrow, but don't worry there will be no additional cost to you? Don't think so....

As for the subcontractor. He is using my bathroom, my sink, my parking, my docks, my electric, my recycling bin, leaves crap all over, he's my liability risk, etc, etc. - bring your boat to his shop (if he has one). BTW, could I stop at your office so I could make some parts orders and customer calls....maybe shower if it is a really hot day. And don't worry, that Boom box I bring won't bother your seasonal customers who are trying to enjoy their boat at the dock

As a yacht broker your base income is the commission received upon selling a boat, but................

But, if you are asked to source a marine surveyor you should put something in it for yourself to cover the related costs.

If the surveyor bills you, just mark it up. If the surveyor bills the client directly, then the surveyor should pay you something for finding him/her the business.


In reality, anything above and beyond the advertising, showing, sea trial and drawing up the various paper work is extra and should be billable. And that should be told to the client up-front.

Actually a broker can not have any financial benefit in a surveyor referral. That would be a serious conflict of interest. Judy doesn't do it and no other reputable broker would.

Broker's commission is a cover all fee. Unfortunately, covers a lot of wasted time with window shoppers, covers deals that fall apart upon survey. The only exception might be if the broker or their company also provided a management service and managed the boat somehow while waiting for the sale, but that would have to be a separate fully disclosed contract. If they just engaged a manager, the broker can get nothing for doing that.

Back on the original post, we're talking about a variety of persons.
1. Captains employed on one boat.
2. Management companies and captains
3. Brokers
4. Brokers who are part of larger companies that provide additional services.

My rant on behalf of boatyard owners is irrelevant, then.

That would be an absolute conflict of interest, and unethical. As far as the community is concerned you'd be recommending the surveyor based on who will pay you the most rather than who will do the best job for the customer.

In my business I've had boat brokers offer to split commissions with me or give me a "finders fee" for steering clients to them. That puts them right on my do not recommend list.

We have 2 different scenarios being discussed here. 1) markup on retail items (Normal. You sell things to make money), and 2) professional ethics. Having your ethics questioned as a broker or a captain will end your career. We're not selling items or operating an employment agency. What services we render outside of our direct job is called customer service. That's different from what capt. J does. He has a maintenance company it seems. I get the impression that's similar to the mobile mechanics we have on LI. Part of his income is the markup. Legit. If I bought an item for a client's boat I would buy it retail and hand him the invoice. No markup, because that's not my business, just customer service.

The 'commission' paid to Skippers and crew in the Med used to be big business in the old days. A Chandlery or Service Supplier would deliver to the boat and then pass over a brown envelope with the Skipper's cut for using their services. This used to anger me and my fellow crewmembers, as we were very well looked after by our Boss, so insisted on having the commission taken off as extra discount from the invoice. Doing this got weird looks from the suppliers and p*ssed off other crews. Maybe we were naive and not greedy enough, but we were honest. I think this is one reason to how Yacht Managers became so popular for big boats.

As Capt J said, if a client is spending XXXX$$ with me for parts month in/month out, I'll give them a good discount, much more than any Skipper or Owner would get. I'll also make sure the parts are there really promptly. As a supplier of parts, I will look after my big customers first, it's simple business. That's not to say you will ignore the smaller ones, that's a poor idea.

Similar practices exist in various parts of the world in all industries. Working for a US parent company it was often hard to get the point across to those elsewhere in the company that you take a bribe or kickback or any other fee, you make anything personally on company business and you're immediately terminated. When you're an employee then your allegiance is to your employer. Boat owners generally entrust a lot to their Captains, if they have captains who work solely for them. The moment they can't fully trust them, then the relationship is destroyed. Often they're trusted to manage $10 million to $100 million boats and paid well and if they will take advantage of that for extra money on the side then what will they do.

I do know of one marina that was giving captains 10 cents per gallon cash. After the wrong owner found out that practice was eliminated.

There are people who think boatyards should just let anyone come in and do what they want for free or very little. Why? They aren't in business to make profits for others but none for themselves. I like those who are upfront and clearly spell out their charge.

I also want to see boatyards make money. If they don't, we have nowhere to turn and their employees have no jobs.

That would be like an airline, doctor, cable or phone company advertising the actual price you will pay including all the fees, taxes, etc. My phone bill actually has a fee with my name. My $19.99 cable bill is about $35. Ethics and being up front have been lost on business. When I quote my day rate it's exact whether I basically play for 2 hours or work my tail off for 12. More often than not I'll end up with a tip that sometimes more than matches my salary, but I leave that completely up to my clients. I've found that when you're honest and up front it's so appreciated and that appreciation is worth more than the money to me. Guess I'd never cut it as a big time business person.

As a shop you have to make money. Which usually is both in part makeup and labor.

That said, shops have sometimes ...interesting part markups.

I can buy a car part retail, overnight it, rent time on a car lift, exchange the part in ~15 minutes. With confidence, I did it before. - And still pay less than half than the shop price for the very same brand part. Which is of course not in stock ("tomorrow maybe") and would also have to be installed by the shop at additional cost. ("at least a hour")

The marine market is of course a bit more captive than cars.

not always reasonable

my experience has not alwaus been positive as far as a closed shop at a marina, especially if the same company owns several marinas in the area. i dont mind paying for the time it takes to do a certain job, but not a flat rate. i have experienced charges over the past few years that seems to be getting a bit crazy. at the current marina they try and charge you a summerization fee when your boat goes back in spring time. if your there at launch there is still a minimum charge unless you squawk about it. i have been at the current marina for the past four years and have not received a correct service invoice yet. ofencharged for parts that never were installed as an example. with the same company owning several marinas in the area it is difficult to move when i know the same thing may very well happen. takes the joy out of boating to some degree.

Every yard should be detailed and transparent about its charges and its work. its just good customer relations. I know a yard that uses a GroPro camera during diagnosis so he can show the customer exactly what the problem is, and provides a box with the old parts at the end of the job - minus of course the stuff that has a core value, But that gets recorded with a photo. If he finds additional problems as he is working, its back to the Go Pro to get authorization. He can send the video over the internet from the slip directly to the customer for authorization