Ever wish you could win every single Boatyard negotiation you entered?
Whether it is a boatyard trade interview, appointment with a new client or winning over a big boat repair contract, you can… If you become ridiculously prepared.
When we invite yacht owners to share their experiences at Boatyards, the dialogue invariably pivots to cost, and the unpredictability of pricing of boat maintenance or boat repairs. It is not uncommon to hear people say, “I’ll take any price the Boatyard gives me, and to be prepared for the final cost is to have that total multiplied by three.”
Understanding that, we are certain that the marine service center aims to please, and strives for returning customers. There are heaps of reasons why they will not succeed. The most common reasons of customer disaffection at the boatyard is the unpredictability of cost.
A clear solution to solving this problem is to emulate as other industries do in providing yacht owners with a fixed pricing quote or at the bare minimum, honest estimates with clear defined margins of inaccuracy. By imploring marine trades to get savvy with the process of quoting, it’s likely that more owners will shun marine trades that can’t demonstrate this level of cost predictability. This process, when implemented, undeniably will influence the way the marine industry is perceived by yacht owners.
The Definitive Guide to Boatyard T&M and Quote
The concept of performing the work and being financially rewarded for the term of the project, often defined as T&M or time and materials, is commonly demonstrated in shipyards. With minimized risk for the contractors, many marine operations prefer to function using this type of approach.
It is highly recommended to request from marine management when both terms “quote” together with T&M” are used, is to write up the project document with articulated definitions from each specific marine contractor. Definitions, while common, are by no means considered structured as code within the marine industry, which is why it is highly recommended to request written clarification, before making a commitment to any boat work.
Typically, when you hire a boatyard marine contractor for yacht repair (be it a varnisher / painter, an engine mechanic, marine electrician or an electronic tech ), you may have options as to how the invoices will be displayed. A typical method is to charge for the time the project takes, and the cost of the materials, and a decent markup for every pump, a meter of wire and liter of primer. Rather than an unreasonable product list price based on the unrealistic manufacturer’s suggested retail price, the T&M approach is the material markup, based on the marine contractor’s cost plus a percentage.
This “list price” is formulated to make “boat owners price” look far more attractive.
This is reasonable for all those involved, using the former approach, unless the marine service company bought the supplies in bulk or got a hot deal on discounted materials, or the product price went down, the savings is often passed on to you, and the yacht service company still makes profit.
While it is not uncommon for owners to ask is what’s the actual “markup,” or what was the actual price paid for materials which some marine trades are reticent to give away any of this information. Along with the markup on labor and on materials is part of the yard’s overall profit plan. Remember, any marine trades goal is to make a profit, expect to pay the markup provided it’s not exorbitant. Depending on the product or part, a common range is from 10 – 40%.
With the notion that most undertakings of marine service and repair are such a shot in the dark. That no boatyard would consider any billing approach other than T&M, the yacht owner has no idea how much the project is going to cost and in some cases the marine trades doesn’t either. Thankfully, the alternative is fixed margin estimates or fixed price quotes for your boat repair.
Quoting as a quotation for a specific boat repair or refit project offering clear advantages to both the boat owner and the boat maintenance company. For the yacht owner, it gives the opportunity to consider the proposal as well as comparing it to others out there. You can also budget for the project and become secure with the knowledge that the job will be performed at a fixed price.
For Marine technicians who do not offer quotes and are thinking, “Sounds risky with no advantage. What’s the benefit for me?” Rest assured, there are many incentives to include in the quoting process found here:
- When a yacht service company provides a yacht owner with a detailed quote, they eliminate the possibilities of incurring a billing dispute, which improves customer relationship and loyalty. There’s nothing more unpleasant for both the boatyard and boat owners alike than dealing with a dispute over how much a project should have cost or have cost. With a quote, you know the price before you agree to proceed, so there’s little to nothing to argue about.
- When a yacht service company takes the time to quote a boat maintenance or a boat repair project for a yacht owner, they are forced to think through every unforeseeable, and foreseeable steps in advance. This equates to better efficiency with planning, and by establishing a timetable, which improves the boatyard marine trade’s scheduling and allows the yacht owner to make plans based on the date of completion. This planning nearly always benefits the boatyard as it enables effective scheduling, which translates to very satisfied customers.
- Because it’s a straight forward quote, not T&M or not-to-exceed protocol (means the cost of the marine project cannot go beyond the agreed upon amount and placing all of the risk on the boatyard / service company. While it’s bad business for them, it’s not harmful to the customer) the main benefit to the marine service company is that the gross profit margin is not fixed, there’s also an incentive to work more intelligently and efficiently. A yacht service company or a marine trade is rewarded for experience, good management, professionalism of the project. If the boat maintenance project completes sooner than anticipated, the boatyard, marine trade is rewarded with higher profit margin. On the other hand, if the boat repair project takes longer than anticipated, the boatyard, marine service company absorbs the loss, so there is a risk. This is in contrast to T&M work, wherein the longer the job takes to complete, irrespective of efficiency, the higher the cost. It is recommended to abstain from this approach as it is inherently flawed; the longer the job takes, the more profit the boatyard trades makes (albeit at a fixed margin, while taking up yard space / resources that could be dedicated to significantly more profitable boat work, thereby rewarding to an inefficiency.)
When a service company will not provide a quote for a clear quotable boat maintenance job, two thoughts come to mind:
- A fear of the unknown and for most yacht service operations, when they commit to quoting, are far better at it than they believe. With the implementation of a quoting program, the possibilities are there. With great success, other industries use this methodology, the marine industry should be no exception.
- If they can’t tell you how long the boat refit project will take and how much it will cost to carry out routine boat maintenance projects, question their ability to undertake the boat work altogether.
When the marine trades carry out the boat refit or boat repair projects and know it’s quoted, they tend to be motivated to work with a greater sense of urgency, particularly if the marine service management company invests them in the quoting process. If you are vigilant, you can often identify yards and for those marine trades who rely on the quoted project approach, you will see less standing around with idle chat chat waiting for to punch out the clock.
While preparing for a quote rather than T&M projects, it should be known that not every marine job can be quoted. Electrical, mechanical and troubleshooting, for example, is not the type of project that any experienced marine professional should or would quote; however, it does pay off for you to ensure that the marine trades carrying out the troubleshooting are well trained, highly experienced, and NMEA or ABYC certified where applicable. In this example, the goal is efficiency rather than a fixed price. Also, small marine projects are usually not quote-worthy. Remember, the Boatyard has to spend time preparing and researching a quote and it makes little sense for this to be prepared for a job that’s anticipated to take just a couple of hours.
Marine projects that do lend to quoting are, among many others, varnish, deck and hull painting, electrical upgrades, equipment and hardware installations such as generators, windlasses, and particularly, complete boat refits. Expect a reasonable sum of caveats with any quote. (When _____ writes a quote ____ are mindful not to include many exclusions, in doing so negates the value of the quote). If a marine trade drills into your deck for installation of a winch or a radar mast and the bit pulls out rotten balsa core, expect the Boatyard to perform an amendment to the quote. The aftereffect can’t be anticipated. Our expectation is that those that can not be foreseen, should be.