The Boating Industry 2007 Top Dealers

If the marine industry is truly down the way experts say it is, you wouldn’t know it by talking to Boating Industry’s Top 100 Dealers.

Out there among the general population of today’s marine dealer body, there are struggles. There’s talk of consolidation. Some dealers are closing their doors. And there’s speculation that more bottom-rung marine dealers will follow.

But in here, among the industry’s leading businesses, you might be surprised to hear of the troubles facing those lesser companies, some of whom find themselves on the brink of extinction. Instead of complaining of a shortfall in floor traffic, these dealers are benefiting from taking the boats to the customers. Rather than cutting their business back, they are gobbling up the competition and opening up new locations. And instead of dwelling on the difficulty of growing or even maintaining revenues, they’re celebrating on-target profitability.

In fact, among this elite group of dealers, sales are on the rise. In 2006, these Top 100 Dealers increased their respective year-end revenues by 12.8 percent over the previous year. This, of course, in spite of an unstable economy, rising gas prices, plummeting housing markets, and all the other excuses lesser dealers use. And the total revenue for this group — of just 100 dealers mind you — exceeded $2 billion.

To illustrate the collective power of this group, last year, the $2 billion mark was attainable only because industry giant MarineMax, Inc. brought most of it to the table. This year, with the inaugural Top 100 Hall of Fame inductee’s revenue figured in, the total retail sales of this group of dealers reaches over $3.25 billion, or just shy of nine percent of the entire marine market.

It hasn’t all been easy, of course. Those doom-and-gloom discussions that seem to elude the best of the best on this list go a long way toward reminding us that it takes more than just a hope and a prayer to find success in these tougher times. Proper plans, customized strategies and well-mapped systems have proven to be these dealers’ key ingredients in performing their way to profitability.

The proper plans
The Top 100 Dealers use many different metrics to track the pulse of the industry. For most, it was long ago evident that boat sales were slowing and would not be meeting expectations going forward. They regrouped, re-established a plan for the near term, and found success by adapting to those conditions.

But they were able to adjust their plans because their efforts were based on a plan in the first place.

Take Skipper Bud’s (Ranked 2; see profile page 42), as an example. The 20-location dealer based out of Winthrop Harbor, Ill., uses its Weekly Management Reports to break down the results of the company’s performance on a store-by-store basis. These incredibly detailed benchmarking reports are used to monitor and analyze the company’s progress on a regular basis, and underperforming line items, such as budget variances or lower-than-expected gross profit percentages, are highlighted in yellow and analyzed.

Galati Yacht Sales (Ranked 1, see profile page 40), uses a similar process, gathering the senior management team the third Tuesday of every month to discuss and evaluate financial information and address any business needs. Resolutions and other decisions made toward outstanding concerns or process improvements are shared with management teams at each location. And to help employees communicate concerns, new ideas and best practices, Galati added an e-mail system in 2006 to assist with improving the overall employee experience.

Taylor’s Boats (Ranked 6), like Galati, believes that happy employees lead to happy customers. With that in mind, owner Taylor Richards launched management retreats to help the Draper, Utah-based company increase not only its revenues and profitability but also its associate satisfaction and its already strong customer satisfaction scores. The efforts appear to be working. The company increased its revenues by 25 percent in 2006, and at the same time increased its CSI scores from 97.2 to 99.3 for the year.

Then there’s South Shore Marine (Ranked 37), Huron, Ohio. The company launched biweekly management meetings and now uses a formal system to track progress on departmental initiatives and individual goals. In the words of Chuck Thompson, CFO, “it is a living, breathing document that we break down quarter by quarter at the company level. It uses both quantitative and qualitative measures of progress and … it keeps individuals, departments and the company on focus.”

With this type of planning and preparation evident throughout the Top 100, the aforementioned growth comes as no surprise. In fact, South Shore grew by 87 percent year over year, giving it the second-highest growth total of all the Top 100 Dealers. In all, 44 dealers showed year-over-year growth rates of double digits, and the revenues came from both acquisition and organic growth.

At No. 1 on that list of growth came Top 100 newcomer Passport Marine. The 78th-ranked dealer from Aventura, Fla., grew 200 percent in 2006, opening up new locations in two new markets. Jim Dillon, president and CEO, expects his innovative franchise plan to help the dealer expand across the country. A number of other dealers in the Top 100, including Parker Boat Co. (Ranked 18), Baert Marine (Ranked 73), Seattle Boat Co. (Ranked 3) and Russo Marine (Ranked 8) either opened an additional location or acquired a competing location.

As Russo Marine owner Larry Russo so eloquently put it in a recent discussion: “The dealers who are proactive, who are focused, who are aggressive and who are committed to growth have sucked the life out of their markets, picking the pockets of their lesser competitors.”
Those dealers can be found right here in Boating Industry’s 2007 Top 100.

Making the best better
Unfortunately, it’s no myth, however, that the industry at large has come on tough times. Industry analysts expected unit sales declines to hit 15, maybe even 20 percent by the end of 2007, dropping to lows the boat market hasn’t seen since the mid 1960s. All that, of course, makes the growth the Top 100 Dealers have seen, much more impressive.

The best companies realize that even down markets present an opportunity to improve their systems and procedures in an effort to emerge stronger when the climate makes the turn. The battle on the front lines for market share oftentimes comes down to, as MarineMax explains it, getting back to the basics. The Clearwater, Fla.-based marine industry giant says it grew its market share by 4.5 points, or 24.5 percent (read more about it on page 23) by doing a better job with its processes and personnel, growing closer to its customers and hosting more events and classes than ever before.

It’s that same mentality that motivated the 2007 class of Top 100 Dealers to the most impressive list of year-over-year improvements to date. The list of these improvements reads like a how-to manual for achieving No. 1 Dealer status, stretching into every nook and cranny of marine dealer operations and ultimately achieving the one goal that drives each and every one of them: customer satisfaction.

CSI scores, in fact, reached their highest average in the three-year history of the Top 100, jumping from 95.4 last year to 95.9 this year. It’s no wonder: many of the improvements these dealers realized in 2006 involved embracing the value of CSI scores and finding myriad ways to make them better.

Action Water Sports (Ranked 14; See Best In Class award, page 38) of Hudsonville, Mich., showed an incredible year of improvements, for example. The company purchased another dealership, built a new store, and created a number of new positions, including a customer relations manager who has taken on the responsibility of personal communication with all customers. This person follows up with all customers regularly, and owner Jerry Brouwer says that “by having our customer relations manager initiate the communication, it makes the customer feel much more at ease to tell us of any issues that may have come up.” There are very few issues with Action’s sales and service experience, however. The company has maintained its 98-plus CSI scores for this year.

Marine Connection, Inc., (Ranked 14, See Editor’s Pick profile, page 82) worked very hard at improving its CSI scores in 2006. Marine Connection uses an in-house quality assurance program for new boat and service deliveries, through which three different employees inspect every boat to ensure that issues are “caught by us, not by the customer,” explains president and owner Mark Lassila.

The company also uses a strong follow-up system, monthly random calls to customers by dealer principals, weekly CSI review meetings, and CSI tracking by department, employee and individual manufacturer to remediate deficiencies at their root cause. The commitment has worked as Marine Connection drove its CSI scores up to 94.7 from 90.7 last year.

Aim for perfection
The goal with customer satisfaction ratings, of course, is perfection, and there are a number of dealers who achieved 100-percent scores from their customers. Interestingly enough, four of the five who reached the magical number were MasterCraft dealers: Redline Watersports (Ranked 89), MasterCraft Boats of Arizona (Ranked 64; See Editor’s Pick profile, page 80); Liquid Sports (Ranked 45) and Midwest MasterCraft (Ranked 26).

Redline, Madison, Wis., steadily increased its customer satisfaction scores from 94.25 last August to 100 in March of this year, and the company has maintained its strong scores ever since. The company caters to its customers with a weekend emergency mobile service phone line and membership in the Redline Owners Club, which includes preferential treatment for priority service, water sports clinics and sales prices.
MasterCraft Boats of Arizona says it has spent the last 18 years among the top five for MasterCraft’s CSI scores. But what the company is really proud of is not its initial ownership scores, but rather its two-year scores, which are still at 100 percent.

“We continue to give them great service during their entire ownership,” say owners Debbie and Jim Hayes. “We have to make boat ownership easy and convenient. If we don’t, they will take their discretionary income and go do something else with it.”

With that in mind, the company provides an incredible delivery experience and sends the customers home with an “Owning the Dream” DVD that was developed and professionally produced in 2006 to cover the highlights of the delivery.

Liquid Sports has worked diligently at building its name to represent family fun on the water. To that end, it recently launched what it refers to as CFI — customer fun index.

“We all know CSI is very important, as is keeping the customer on the water,” says owner Mark Watts.

“However, we feel CFI is the true measurement of how much enjoyment our customers have with their boating lifestyle. We have instilled a company culture that reflects a relaxed, fun atmosphere. The attitude of the entire staff is to transfer the enthusiasm for boating to our customers.”

They do that through an extensive delivery process, an exciting dealership and boat show atmosphere, attention-grabbing direct mail and numerous events — “It’s in our team’s heart, minds and souls with every customer interaction we have.”

Then there’s Midwest MasterCraft, which is looking to continue a tradition of great growth, but not at the expense of CSI scores. The Crystal, Minn.-based dealership raised its revenues by 23 percent year over year and has increased its service department revenue by more than 300 percent in less than three years. Most of the service growth, says owner Andy Larson, can be attributed to the move to a larger facility with more service bays.

“I think one of the main things that sets us apart from the competition is that too many dealers are comfortable with the status quo,” he says. “We view status quo as just going backwards slowly. We know that we are not entitled to our customers’ business and have to earn it on each and every sale.”

Clearly, these perfect scores don’t happen by accident. These dealers are meticulous about improving themselves. All four participate in a MasterCraft 20 Group, all four use Joe Verde’s services to train their sales staffs, and all four map and continuously improve their processes.

Redline, for instance, has attended the Joe Verde sales training course and has since invested in the online training system, as well. Now all salespeople, including part timers, are required to train at least one hour per week, and the dealership has established a special training area where the staff members are “off line” so as to completely focus on their training. The company also used a Six Sigma expert from GE’s At The Customer For The Customer program to create a detailed process map of its service department and has now established a one-year plan to address and implement the recommendations.

The map to success
The recent interest in mapping processes was surely aided by the introduction of the Marine Industry Certified Dealership program, which went in to full swing last year. And the improvement opportunities this program affords has found its way into the Top 100 as well.

Last year, 69 of the Top 100 Dealers were certified or were in the process of becoming certified. This year, 81 of the Top 100 have been, or are in the process of becoming certified, and nearly 150 Top 100 Dealer locations have been certified at the time of this writing.

The certification process helped other dealers, such as Spring Brook Marina (Ranked 30) reach and maintain perfect CSI scores, as well.
Spring Brook has notched perfect CSI scores consecutively for all three years it has applied to the Top 100. In addition to diligently mapping its processes, the Seneca, Ill.-based dealer achieves such scores with an unending focus on taking care of the customer with personalized service.

Similarly H&S Yacht Sales/Southwestern Yacht Sales (Ranked 17) used both the certification program and GE’s program to help map its processes. The company uses an incredible delivery process, complete with banners, red carpet and champagne; an ownership experience that provides direct toll-free access to the service department; and a warranty reserve by which the company funds the service department up to a specified dollar amount per boat to help the service writer deliver outstanding customer satisfaction, even if a manufacturer turns down a claim.

When it comes to personalized service and an unending desire for improvement, Prince William Marine (Ranked 15) may be the perfect example. The Woodbridge, Va.-based dealer has a goal of contacting its customers a minimum of 10 times each year. That’s not as difficult as it may seem for the one-location dealer, as it hosts more than 40 events (this year’s Aquapalooza was its best event ever). In fact, Prince William has increased its CSI score from 94.1 to 98.1 in the last year on the back of the longest list of improvements — 42 in all — that we saw in this year’s Top 100 applications.

The Sail & Ski Centers (Ranked 11) carries one of the highest CSI scores on an annual basis. In fact, this year, the five-location dealer based in Austin, Texas, became the first dealer ever to attain the highest Sea Ray scores in the nation for both sales (98.9) and service (99.3) CSI.

“We have a simple strategy for achieving exemplary CSI scores,” says owner Rod Malone. “Exceed your customers’ and your employees’ expectations, and high customer satisfaction will follow. Such a strategy is easy to verbalize but takes planning, systems and leadership from the top to the bottom of the organization to achieve.”

The (new) right systems
It used to be that marine dealers could focus almost all of their energy on selling new boats. However, the current state of the economy is forcing boat dealers to diversify themselves. And the Top 100 Dealers have found great success in doing just that.

In fact, their focus on such areas of their business as pre-owned boat sales and the F&I department have been integral in achieving a solid net profit. A number of the best performers in the Top 100 realized net profits of 8, 9, 10 on up to 13 percent, and the average of all these dealers exceeded 4 percent.

For many dealers on the list, if it weren’t for their finance and insurance departments, their net profits would have been much lower. Others have just recently placed a renewed emphasis on their F&I business.

Seattle Boat Co. (Ranked 3), for example, had a phenomenal year ramping up its F&I focus. The five-location dealer implemented a full-time finance department in January of 2006 and in one year more than tripled its reserve income and net profit from extended warranty sales.

Similar steps led to similar results at Russell Marine (Ranked 9). The Alexander, Ala.-based dealer hired an experienced business manager to head up its F&I efforts, and in 2006 increased its F&I revenue by 313 percent.

Marine Connection uses two full-time business managers who support the sales team by protecting profit goals and assisting in the closing of deals, among other responsibilities.

“Reaching the levels of success we have in F&I,” explains owner Mark Lassila, “is only possible when the entire group concurs that F&I maintains an importance level on par with, and is not an
afterthought to, the sales process.”

This single-location dealer in West Palm Beach, Fla., increased its F&I sales by more than 11 percent in 2006; increased its overall revenue by nearly 21 percent, and generated 39.1 percent of its net profit through the F&I department.

At Port Harbor Marine, President Rob Soucy knows exactly what his costs would be if the company didn’t place an emphasis on selling its F&I services. By calculating the missed opportunities on financing, service contracts, extended warranties and insurance products, the 20th-ranked dealer has determined that it costs the company roughly $1,300 for every customer that does not get turned over properly to the F&I department. For a business that sells 371 new boats and 139 pre-owned boats, that can add up quickly. That’s nearly a half a million dollars on new boats alone.

To guarantee success in this area, Port Harbor holds its salespeople accountable for properly turning over customers to the F&I department. And it works. The company’s business office contributed 29.5 percent of the overall net profit in 2006.

The focus on back-end profit centers exhibited by these dealers helped them achieve and grow profitability during the recent industry-wide unit sales downturn.

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