Executive Spotlight – Consolidation leads to profitability

To me, the biggest challenge facing independent boat builders is how to build a long-term, growing, profitable, and wealth-enhancing business, given the built-in inefficiencies of market fragmentation. There are several hundred boat builders in the U.S., almost all of whom are small. Even with help from buying groups like our own United Marine Manufacturers Association, it is very costly, often ineffective, and certainly inefficient, to do all the things required to run a business properly when operating on a small scale. There are that many boat manufacturers because the cost of entry into the market is low, it’s a “fun” business (like inn-keeping or running a ski mountain), and it is often more personally satisfying to be an entrepreneur in your own small company than a corporate manager in a larger company.

Nevertheless, there is a huge waste of money due to “redundant spending” on services (i.e. each company needs an accounting firm), salaries (i.e.each company needs a plant manager/sales manager/president etc.), regulatory compliance, factory overhead, advertising/promotion … the list goes on and on. The old adage “how do you make a million dollars in the boat business? … start with two million” is, unfortunately, true due in large part to this fact.

I believe the path to increased profitability in the industry lies in consolidation, not necessarily being gobbled up by the Brunswicks of the world but in strategic alliances and acquisitions by second-tier independents of third- and fourth-tier independents.

– Hunt Leavitt is President of McKee Craft Boats