Growth spurt

First impressions weren’t so good.

When MarineMax, Inc. was formed in 1998, dealers and manufacturers alike thought the boat retail chain was going to be bad for the industry. Their biggest concern was that it would put pressure on everyone’s margins.

MarineMax President, Chairman and CEO Bill McGill says that hasn’t happened. He argues the company has been good for the industry, setting an example that a growing number of dealers are following.

Agree or disagree, there’s certainly no denying that the company has been successful. It has expanded from 5 locations in early 1998 to 76 today, increasing its revenues and profits through a combination of acquisition and organic growth.

In fact, MarineMax, the nation’s largest boat retailer, just surpassed the $1 billion revenue mark.

But it’s far from finished growing. McGill expects revenues to reach $3 billion over the next five years and locations to almost double.

“We can very easily take this company to that level,” he says. “We have created the foundation, the infrastructure of people to do it.”

This focus on people — both employees (see sidebar, page 40) and customers — is one of MarineMax’s trademarks. McGill says it’s also the main reason why MarineMax has been successful while other boat retail chains have struggled.

“We understand it’s about the people, and we have not run this as a bureaucracy,” he says. “We’ve tried to maintain the entrepreneurial spirit. We give [store managers] the tools to do the job. They take ownership in it and run the stores as if it’s their own. They’re doing it as part of a family.”

Growing smart
It’s clear the MarineMax family is getting bigger.

After taking a year off from acquisitions, the retailer completed its largest one to date in January. With a total of 27 acquisitions throughout its history, this is certainly nothing new, but the company doesn’t depend on acquisitions for growth.

“We can grow the company very nicely … to several billion dollars and never make another acquisition,” he suggests. “The way we look at acquisitions is kind of the icing on the cake. We’re just going to run a good company and focus on the internal strategies and the internal growth. And when it makes sense to do acquisitions for us and the seller, we’ll do them. We don’t do them for the sake of growth.”

McGill says that’s where a lot of other companies have gone wrong — focusing on growth through acquisition rather than running a good business. With a 23-percent increase in same-store sales growth last year, it’s obvious that hasn’t been a problem for MarineMax.

Of course, that doesn’t mean MarineMax is done acquiring. McGill says the company could grow from its current 76 locations to as many as 160 locations over the next five years, most of which will be added through acquisition. But he also predicts more than 50 percent of the company’s growth will be organic.

Sea Ray dealers make up the vast majority of MarineMax’s acquisitions. While MarineMax carries Ferretti Group and Grady-White boats, Sea Ray products and those of its parent company, Brunswick Corp., have served as a pillar for the retailer, making up 60 percent of its revenues. Before the acquisition of Port Arrowhead Group — also a Sea Ray dealer — MarineMax accounted for almost 40 percent of Sea Ray’s sales, a number that is growing.

Sea Ray is also the only boat builder with which MarineMax has an acquisitions agreement. The first agreement, formed eight years ago, limited MarineMax’s growth to 49 percent of Sea Ray’s dealer network. In December, two years before it was due to expire, the companies ripped it up and started over, writing a new agreement without those kind of limits.

“Originally, when we did the agreement, there was a lot of uncertainty about this thing called MarineMax,” explains McGill. “We have delivered and done what we said we were going to do, and as such, it was not needed to have that type of agreement any more. Brunswick feels as long as we’re doing a good job, we should be allowed to continue to grow.”

Sea Ray isn’t the only Brunswick brand MarineMax carries. It also sells Boston Whaler, Meridian and Hatteras Yachts, for all of which it serves as the nation’s largest retailer, as well as Baja and PrinceCraft. In 2005, MarineMax says it represented about 10 percent of all Brunswick marine product sales.

“Life gets easier if you’re dealing with one partner,” comments McGill. “The more partners, the more difficult life becomes.”

There are many Brunswick brands MarineMax will likely never carry, though. MarineMax is very clear that it’s targeting a high-end customer, “not the blue collar worker.” Fewer and fewer of its sales, for example, are of trailerable boats.

It comes down to value, not price, for its customers, according to the company. MarineMax prices — which are clearly displayed and non-negotiable — are usually the same or a little higher than its competitors. But the company believes the extras that are included in that purchase, such as Getaways, delivery captains, mobile repair services and extra equipment, make it a value.

“Our focus is more on the people with discretionary dollars,” explains McGill. “We all know those customers are still spending. The only thing they’re really looking for is a hassle-free experience.”

Where there is room to add to MarineMax’s boat line-up is in inboard ski/wakeboard boats and mid-level fishing boats (translation: less expensive than Grady-White and Boston Whaler). Of course, these are also areas in which Brunswick is rumored to have interest as it follows its quest to “fill in the white space,” so it may turn into an opportunity to further grow its business with the marine industry giant.

Adding on
Part of MarineMax’s plan to grow marketshare at its current locations involves expanding some of its offerings and adding others.

McGill says the company already has begun “making big strides in parts and accessories” by “putting some structure around it” rather than simply throwing product on the shelves and “what sells, sells and what doesn’t backs up in the back room, and you write it off one day.”

The retailer also plans to grow its service business “in a huge way.” Because of the lack of product reliability in our industry, compared to other industries (McGill rates the boating industry a 5 out of 10), “we have become firefighters,” according to McGill.

Most dealers only end up servicing their new boat buyers through the warranty period, after which the wait time on most repairs drives them into the arms of what McGill calls “the schmuck in the truck,” where the customer is likely to have a bad experience.

“We abandon them,” he says. “Our initial goal — and we’re going to get there pretty quick — we’re going to service our customers for at least the first five or six years, maybe more.” That ultimately is expected to grow sales.

As part of that initiative, MarineMax has been acquiring — and plans to continue to acquire — marinas. While the retailer is not overly concerned with the loss of public access that goes along with marinas selling out to condo developers (its customers are usually the ones buying the condos with private slips) it is concerned about a lack of waterfront service locations.

In addition, MarineMax will continue to grow its F&I and brokerage businesses and find ways to do more to assist the customer, whether that’s detailing, captain training or yacht management.

“We don’t sell product. We try to deliver an exceptional experience to them and make it hassle free,” says McGill. “Even though the boat is important, the boat is a very small part of the overall equation.”

While MarineMax has a long way to go to meet its top executive’s $3-billion goal, don’t mistake room for growth for lack of maturity.

McGill expects to see very little change as the company grows. Despite being a public company, MarineMax has embraced long-term strategies from the start. That includes its focus on people. In fact, when asked why growth is good for MarineMax, it’s that to which McGill turns.

“The old saying that one plus one equals three is an absolute fact. When you get people working as a team, as one, there are benefits that can’t be derived any other way.”