Yes, I am a writer, editor, and marketer. But I also bring something uncommon to a discussion of this sort, namely, a couple of decades hard-won experience in boatyard operations and marine small-business management. So, you know that, whatever else, I am laser-focused on identifying approaches and solutions that are lean and, most importantly, effective.

Today in 2025, the term “inbound marketing” has pretty much faded from the common vocabulary of marketers. However, while the terminology may have evolved, the reality is that inbound (i.e., content) marketing remains a particularly useful tool for building a small-business brand and a community of staunchly loyal customers. Indeed, if executed skillfully, this form of marketing is still almost perfectly suited for recreational marine businesses — marinas, boatyards, mobile repair and refit contractors, chandlers, and the like.

What is Inbound Marketing?

Inbound marketing is frequently conflated with content-marketing, even by some digital marketing pros. The two are, however, quite different from one another. To be sure, both approaches focus on the delivery of content (information) to customers and prospective customers. But content marketing —sometimes referred to as “outbound” — involves pushing that information out to customers and prospects in much the same way as traditional advertising does, albeit via a different medium.

In contrast, inbound marketing works to “pull” or draw readers into extended engagement with your firm by consistently presenting content whose value to the target audience stands independently of any specific product or service.

For this reason, inbound marketing on social media and in the form of directly delivered digital newsletters and emails stands as an effective way to foster the longer-term development and nurturing of brand recognition and loyalty. Inbound marketing is a subtle, non-deceptive method for encouraging customers to come to see your firm as a known and trusted authority, whenever they are thinking of buying goods or services — meaning solutions to their needs and problems.

Effective inbound marketing proceeds by:

• Drawing customers and prospect into an authentic, trust-based relationship with your firm and the products and/or the services you offer — in contrast to pushing traditional advertising and sales collateral at them.

• Building a community of prospects and customers which has a durable interest in what you do, who you are, and how their lives and activities can be made better by what you offer.

• Focusing on brand recognition and loyalty, as opposed to settling for raw visibility and notoriety.

A keystone in the bridge to these objectives is the development of Community which, in turn, depends on creating engagement with the targets of your marketing efforts. Developing community begins with providing genuine take-away value in the content your marketing vehicle(s) of choice delivers. That means rising above the canned “fun facts” kind of filler you too often see in a firm’s monthly newsletter.

Let’s be clear about this: Nobody gives a hoot about how to clean engine grease off your off your hands with peanut butter. Well, almost nobody anyway. But if you can explain to your marine customers and potential customers how to pick the correctly-sized engines for their new boat or how to attain maximum longevity from those engines or how to select a boat that will run softly and dry in a chop — in clear, understandable, and authoritatively correct terms — that will start them thinking of you as reliable and credible when the time comes to buy. Moreover, if you provide them on a regular basis with information and advice that improves their boating-related experience, without always trying to sell them something in the process, the payback in terms of brand recognition and loyalty is frequently surprising.

Get started the right way

So, how do you get started if you haven’t already? And how do you retrench if you’ve already gotten a weak start? Pick your tools … carefully.

Some commonly-employed vehicles for inbound marketing are:

1. a digital newsletter (usually distributed monthly);

2. a blog (either standalone or as part of a website);

3. durable content published on one or more social media channels.

None of these are prohibitively expensive, even if outsourced. But if you treat them in a casual manner or assign the work to someone not well qualified, you might just as well save your time and money. Here are some other tips:

Create newsletters that get opened and read

If you’re sending out a periodic newsletter, the single most important hurdle to overcome is to assure the recipient opens the letter. One of the best ways to accomplish that is to include in every newsletter a meaningful discount coupon or sale notice for some item or items that your customers commonly buy on a regular basis.

You don’t need to list or advertise that discount special in the newsletter’s subject line or heading — indeed, it’s probably preferable not to do so — but if your customers know there is inevitably a potentially useful coupon inside, they will readily open the newsletter, if for no other reasons than to see what the latest offer is. And then BAM! — you’ve created an opportunity to catch their attention with a well-crafted heading and an image leading into the value content you’re providing.

Create an engaging blog

If you have a blog or other published content, a key factor is to gain the attention of your customers by injecting a hint of controversy in the topic chosen. This draws questions and comments, thereby creating active engagement — which is the lifeblood of brand-building.

Naturally, a lot depends on who you are, and what your business is. And despite what some may try to tell you, there is no single, one-size-fits-all solution for inbound marketing.

Just keep in mind that engagement comes from conversation. Therefore, anyone ― whether in-house or outsourced ― must know enough about the goods and/or services you market and sell to be authoritative in dealing with and answering questions. And they must be sufficiently knowledgeable and experienced to credibly carry on the kind of conversation that is so essential to building engagement.

Spread your message/brand on Social Media … but with authenticity

Forget what some marketing whiz kids will tell you; you can’t fake it. I can tell you for sure that, in the boating market, you can’t fake it because in boating and yachting, your customers and potential customers are relatively well educated, have read books and articles about their pastime and its associated hardware, spent days and days at boat shows, and perhaps even taken courses in relevant subjects — not to mention likely spent years actively discussing issues on the docks with their compatriots.

So, you will either have to participate yourself (if you are your company’s only expert in the field), or you will have to assign one or more employees, who are themselves sufficiently expert and articulate to carry on the conversation. And you may have to contract outsourced help in packaging and managing that in-house participation.

Whatever you elect to do, never underestimate the opportunity that inbound marketing presents for building credibility, brand recognition, and customer loyalty. However, always keep in mind that the power to convert engagement to sales, is double-edged. Without proper preparation, the opportunity for brand-building engagement can, in a flash, become the occasion to make a fool of yourself and your firm — if you allow unqualified people to represent you in the conversation.

― Phil Friedman

Copyright © 2024 by Phil Friedman ― All Rights Reserved.

Introduction: The original version of this article first appeared in 2014, more than a decade ago. I recently had occasion to re-read it in the course of assembling a collection of what I consider the best couple dozen or so articles, out of the 2,000+ I’ve produced since I first began writing. I hope you’ll like it, as much as I do.

My work in the large-yacht construction sector over the years brought me into contact with numerous very successful entrepreneurs, who were my clients, customers, and prospects. For the most part, that contact occurred in a relaxed venue which encouraged personal openness. Consequently, I've been able to gain some insight into the personalities and general outlooks of the entrepreneurs with whom I've dealt, and to form some conclusions concerning key characteristics common to them.

Of the contact I've had with entrepreneurs in the course of my work as a consultant in the yachting industry, one relationship in particular stands out.

It spanned somewhat more than ten years, and it is from that longer-term interaction that I learned the most of what I know about the entrepreneurial spirit and approach to business and to life. It is the lessons learned from that relationship which I propose to share with you now.

Andrew J. McKelvey, founding chairman and CEO of Monster.com, had already been my client for about three years, when his advertising firm, TMP Worldwide, took Monster public in 1996. Not that I had anything to do with the Monster IPO, or even directly with TMP. No, McKelvey was my client because I managed his yacht, Volando, whose home dock was in the Fort Lauderdale area.

During the span of those and several subsequent years, I had the opportunity to interface frequently with him on a one-to-one basis, as I moved from managing his yacht to supervising the build of his new, fast 120-footer, Mostro, and eventually to being president and CEO of Palmer Johnson Yachts under his Chairmanship, after he bought the shipyard in early 2000. Thus, over the course of a decade, I was afforded a truly fascinating glimpse into the private personality of a quintessential entrepreneur.

Brilliant Sunsets and Stopped Up Toilets...

As I said, McKelvey kept his yacht in Fort Lauderdale. However, he really liked to spend time on the vessel in the Bahamas, and he took her over whenever he had the time. Besides being a high powered businessman, he was a long-time, dyed-in-the-wool yachtsman. Frequently, he'd ask to have the yacht delivered by her captain to a a port or an anchorage in the Bahamas, and left there for him and his party to use in privacy, with the captain flying back for the interim to Florida.

One long weekend, in just such circumstances, the onboard toilet system became stopped up. (A pretty common occurrence on yachts, whose toilets do not tolerate foreign objects and other kinds of abuse commonly perpetrated on shoreside plumbing with impunity.) In this particular case, it became a pretty significant problem which, without a captain or paid crew onboard, McKelvey ended up handling by himself.

When Andy returned to NY after the weekend, I was talking to him by telephone. He asked me to have the captain look over the toilet system and have any indicated repair or maintenance performed as soon as practical. I was chagrined that he had dealt with such an unpleasant problem on his own, and I said to him, "Andy, why didn't you call me. Cap'n Rick was on call all weekend, and I could have had him fly out and be onboard in a matter of a few hours. You didn't have to mess with this yourself." To which he replied, "Phil, that's what yachting is all about, self-reliance. You get the marvelous sunsets and sunrises out there on the ocean...and sometimes you get the stopped up toilets. But it's all part of the “package."

Entrepreneurial spirit is bound up with dogged self-reliance

One of my favorite stories about Andy McKelvey has to do with the time we sent his yacht over to the Lyford Cay Yacht Club in the Bahamas, where many of the Bahamian elite, including several top Bahamas government officials, docked their boats. Andy was flying in to meet Mostro and spend a week or so aboard. Cap'n Rick and crew had arrived with the yacht at the intended rendezvous a couple of days early, in order to have enough time to clean and provision her. McKelvey's ETA was, as usual, somewhat amorphous, so when Andy arrived at the airport in his G5, Cap'n Rick and crew were away from the yacht, running errands. Andy simply hopped into a taxi and headed from the airport to the yacht club. The problem was, however, in his inimitable fashion when yachting, Andy was dressed in cut-offs and a T-shirt. And he had left his ID in the plane.

When he arrived looking pretty much like what we in yachting call a typical "boat bum", the guards at Lyford Cay Club wouldn't let him through the security gate. At least, not without Cap'n Rick's say so. And it took us about an hour to locate Rick by cellphone (service was not, at that time, all that reliable in the Bahamas), and another half hour or so for him to make his way back to the club — all while McKelvey cooled his heels in a bar. We were all nonplussed, and I was cursing like a sailor. But Andy was serene, actually thought it all somewhat funny, and spent some time making friends with the Lyford Cay Club guards.

Entrepreneurial spirit embodies a high level of social self-confidence, and a total absence of need to impress based on outward appearances

I also very clearly remember the time I was discussing with McKelvey and his younger adult son the design and construction of Mostro, a fast, raised-pilothouse 120-footer. Andy had a number of favorite anchorages in the Bahamas, and one of them was semi-obstructed by a sand bar that reduced water depth at mean low tide to slightly under six feet. The new yacht was going to draw (sit in the water to a depth of) about 5' 9", half loaded with fuel, water, and stores. So we all had some concern about her being able to enter that particular anchorage at times.

Andy asked if I thought we could still take steps during construction to reduce the yachts draft by, say, six or so inches. However, my take on it was that such modifications at that point in construction were not really practical. I told McKelvey that my considered opinion was that it was going to be okay as is because it was unlikely that the new yacht would be entering that particular anchorage at low tide, and even then, if necessary, the yacht could anchor out for a couple of hours until the tide came up a bit.

Then, I said, partly in fun, "But you know Andy, if the tide should be low and you don't want to wait, when this hull is running fast, she should be lifting up in the water sufficiently to reduce her draft by 3 to 6 inches. So, if someone had the cojones to run her in over the sand bar at, say, 28 or so knots, she'll likely pass into the anchorage without hitting the sand bar." At which point, Andy's son said, "Phil, you know, of course, that you've now absolutely guaranteed my Dad will run the new yacht into that anchorage at a minimum 28 knots." To which McKelvey broke out in a broad grin, nodded unabashedly in admission, and we all shared a laugh at how true those words were.

Entrepreneurs possess an incredibly high tolerance for risk — of all kinds and at all times

Okay. I know you're probably saying to yourself that everything I've been talking about so far has to do with yachts and yachting, personal stuff, and not business. But it is entrepreneurship that interests you, which is why you're reading this piece.

Well, I'm not sure you're right about entrepreneurship and the entrepreneurial spirit, because what I learned from a decade of dealing with Andy McKelvey is that entrepreneurial spirit is a holistic thing. For those who truly have it, it is pervasive and operates in every aspect of their lives.

Honey, I Bought the Shipyard

Andy was aboard his new yacht, the recently completed 120’ Palmer Johnson, “Mostro”, for her maiden voyage. The yacht was headed through the Great Lakes and out the St. Lawrence Seaway to the Atlantic Ocean, when he called me from Chicago.

"Phil," he said, "can you think of three good reasons I would want to own a boatyard?"

My answer was an immediate and unhesitating, "No!" Then, following a brief dead silence, I explained, "I might want to own a boatyard, because I design and build boats. And that is what I want to do. But for you, yachting has always been a recreation and a relaxation. Make yacht building your business, and aggravation will replace recreation and relaxation. And to top it off, you can make a much higher rate of return by buying buildings and leasing them to the government for post offices. So no, I can't think of three good reasons, actually not even one reason that you would want to own a boatyard."

"Well," he said, "I've owned yachts for a long time, and you know, I've always thought it would be fun to own a boatyard. The fact is PJ has hit some difficult times, and they're asking if I might be interested in buying the company. And I'm thinking they have a great brand, and maybe I should. Are you available to spend a few days with my chief acquisitions exec looking over their operation and financials?" So I did. And we did.

Then four days later, Andy called me. "So, what do you think?", he asked. I said, "I think we know pretty much where the problems are and what caused them. I think we have a pretty good idea of what the hard assets are and what they're worth. And I think we have a pretty good handle on the actual and contingent liabilities, with one exception. They have several projects under firm fixed-price contracts that are just starting up, and we have no real idea of how much under water these contracts could finish up. We just haven't had enough time to analyze the cost to build these yachts against the pricing agreed to in the contracts. After all, we know that in recent months they've been low-balling prices on new contracts in order to keep the cash flow spigot open."

Now, Andrew J. McKelvey, paradigm entrepreneur, was not to be denied when he wanted to acquire a company. In fact, he had chided me the day before, when I suggested that he might want to have a team from a major accounting firm look over the books and records, in case his acquisition exec and I had missed something. In reply to my suggestion, he said, "If I had listened to everything that my accountants and lawyers tell me, I'd never have bought 90% of the 125 companies we've acquired over the past 5 years. The mode of operation for accountants and lawyers is always to cover their asses by doing what's safest, which in effect is not to do anything. I understand you're concerned about potential losses built into the existing (custom yacht construction) contracts, but how far underwater could these contracts be? Ten million? Twenty million?"

I said that, under the circumstances, if I had to guestimate, I'd say by as much as $25 million. To which McKelvey replied, "Look Phil, that only about doubles what I have to invest to buy out the company debt. The brand is a great brand, known worldwide. And if we're successful, three to five years from now, that additional contingent buyout cost won't matter." And two days later, McKelvey flew into Sturgeon Bay, WI to do the deal.

Admittedly with Monster Worldwide churning along and McKelvey owning some 26 million shares, he was conservatively estimated, at the time, to be worth somewhere around 1.8 billion dollars. So, in that context, an "additional" 25 million investment didn't seem like that much — at least not to Andy it didn't.

For McKelvey, it was all about what you had to do in order to achieve what you wanted to achieve. And in the case at hand, he wanted not only to own a shipyard, but to own a world-class yacht brand, and to rescue a 50-year old U.S. company with a long tradition of superb craftsmanship — not to mention preserving about 300 jobs of people who had worked on average more than 12 years at the company that had just built him a magnificent yacht.

Entrepreneurs focus entirely on the goal, and consider the means (and the costs) involved in reaching that goal incidental

You have to be careful here to not misunderstand. What McKelvey said to me about the acquisition of PJ, and what he decided ultimately to do, were in no way arrogant or reckless. They were part of a measured decision, albeit one that didn't place bean-counting as high on the list of priorities as certain other of his goals.

Talk to me... globally

Consider, if you will, another incident during my decade-long interaction with Andy McKelvey. While we were in the early stages of building Mostro, when the Iridium Satellite Telecommunications System was announced. Unlike existing SatCom systems, it utilized a portable global "telephone" handset which had its own antenna. McKelvey thought it would be great for global communications while traveling on his new yacht, instead of existing SatCom with its large fixed antenna and far less than portable configuration.

As for me, I wasn't so sure. Despite all the representations that the system would be up and running in a couple of years (at just around the same time McKelvey's new yacht would be launched), I had my doubts.

As I remember, the system was to utilize some 10 satellites, which were to be sent into orbit by the Chinese. But as at that date, only one or two satellites had been successfully launched. And one of my personal mottoes is that if sh%t can happen, it will. Consequently, on repeated occasions, I argued with Andy over the advisability of going with the Iridium system for Mostro's global telecommunications.

The problem was that the best and most cost-efficient time to install large telecommunications systems is while a yacht is being built. Once she's complete, and :buttoned" up, it becomes a major operation to retrofit the cables and the wiring for such a system. I repeatedly tried to get McKelvey to look at what problems might arise, if he went with the selection of Iridium, and the global system did not go fully operative by the date promised by some faceless Iridium marketing VP.

Finally, at one construction meeting up at Palmer Johnson Yachts in Sturgeon Bay, WI with McKelvey and a couple of friends he had brought with him, I made a last ditch effort. And I managed to really irk him with my persistence. Andy turned to his friends and said, only half jokingly, "Phil is really starting to get on my nerves about this, and if he keeps it up, I think I'm going to have to find another consultant."

Nevertheless, I took a chance and suggested a compromise. As I said earlier, the most expensive and time consuming part of retrofitting a SatCom system is running the heavy antenna cables through yacht to the control console. So I promised Andy that I would shut up about the whole thing, if he would agree, at least, to allow me to lay in all the necessary cables while the yacht was still under construction. We didn't have to purchase the SatCom system, just the antenna cabling for now. If the Iridium system was delayed, then we could simply install the SatCom antenna and control console at either end of the cable. And even if Iridium got up and running, and we never actually used the cable, it's purchase and installation would still be cheap insurance, by anyone's standards. Andy grudgingly agreed, and we did not talk about the matter for almost two years. Until one day in 1999 — after about two thirds of the Iridium satellites that had been launched by the Chinese to date, remained dark — I took a telephone call from Andy.

"Phil" he said, "I really, really hate doing this, but..."

"But what," I thought, and waited for the other shoe to drop.

Then Andy said, "I have say that you were right about Iridium. They declared Chapter 11 bankruptcy this morning. Let's put in the SatCom system, and thanks for being so damned stubborn.”

Entrepreneurs never contemplate potential failure, not in themselves, nor in others on whom they rely...

But while entrepreneurs do not contemplate the possibility of failure, they also do not shrink from facing and acknowledging failure. Indeed, I've found it to be a prime characteristic of entrepreneurs whom I've known that they recognize and accept failure, and move on decisively and quickly to another project.

Mirror, mirror on the wall, who's the smartest of them all?

One of McKelvey's favorite questions to a prospective management hire was, "Have you ever hired someone who was smarter than you?" If you were destined to become part of his management team, your sincere answer had to be, "Yes, all the time." Or something similar.

The point was not to establish that you were sufficiently modest — modesty as a managerial trait was not in itself valued. The point was to gauge if you had the ability to submerge superficial ego in order to get the job done. And to see if you were of the sort to concentrate on getting the job done, without being diverted by issues of perceived job security and intra-company jockeying for prestige. Andy viewed the ability to recognize and use the finely developed skills and expertise of others as central to the truly entrepreneurial approach to building and managing a business venture.

Entrepreneurs are maestros: they lead and orchestrate the efforts of individual virtuosos, thereby creating genuine synergy...

I do not pretend to be a social scientist. Not even someone who has seriously studied the lives and actions of entrepreneurs. Nor do I pretend that what I have presented to you here represents anything other than anecdotal inference. Certainly, nothing I've outlined here is rigorous or exhaustive. But, in this day of an almost cult fascination with entrepreneurs and the entrepreneurial spirit, there are several, possibly unpopular, points I feel compelled to make::

1) Not every wealthy person is an entrepreneur. Actually, relatively few are.

2) Not every CEO of a large company is an entrepreneur. In fact, very few are.

3) Not every owner of a business, small or big, is an entrepreneur. Indeed, only a few are.

4) Not everyone who starts his or her own business is an entrepreneur. Relatively few are.

5) Not everyone who works for him- or herself is an entrepreneur. Only a few truly are.

That said, my one-on-one contact with paradigm entrepreneur Andy McKelvey led me to identify the key characteristics of entrepreneurs which I've detailed here. To be sure, these probably aren't all of the relevant characteristics. Indeed, I'd bet if you were to interact on a behind-the-scenes basis with, say, Richard Branson, you might very well identify additional distinguishing characteristics of note. However, I believe those I've listed here capture pretty well that which makes true entrepreneurs tick.

To my mind, and in my experience, entrepreneurs are a breed apart. They approach business — and life — from a very different perspective than most of the rest of us. Granted some of us might exhibit a couple of what I've identified here as key entrepreneurial attributes — but only true entrepreneurs exhibit all of them.

— Phil Friedman

(In memory of Andy McKelvey, entrepreneur, philanthropist, yachtsman, and all-around good guy who touched many lives, my own included, for the better.)

Text and Images Copyright © 2014-2026 by Phil Friedman ― All Rights Reserved.

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Preface: An earlier version of this article appeared in my LinkedIn newsletter series. This current version has been revised and updated. However, it should be noted that the core principles referenced here remain constant — and they mirror the durable principles of small-business management in general.

The "case study" cited in this piece involved the reorganization and expansion of boatyard operations which I undertook for a client several years ago in the course of operating my marine small-business consulting practice. Keep in mind, however, that the suggestions outlined here are equally applicable to just about any small-business operation that sells products and/or services.

Small-business operators need to keep a close eye on Gross Profit and Gross Profit Margin.

Most business managers focus on sales and gross revenues. However, in a small-business environment, higher sales numbers don’t necessarily yield higher profits. Depending on various factors, increased sales may actually lead to lower profits and/or profit margins.

This is because many, if not most small businesses fail to achieve the vaunted but highly elusive "economies of scale" available to big business. Just as often as not, additional sales volume actually overloads a small company's established infrastructure and requires additional quantum investment in capital equipment, the bulk of which then goes underutilized.

Significant incremental increases in sales may also require a disproportionate quantum increase in administrative and other staff costs, at a level that cannot be supported by the available increase in gross profit.

Consequently, in a small-business context, gross profit and gross margin are better performance indicators and improvement hooks than gross sales revenue. They are also the best place to start when seeking to improve net profit and net profit margin ebidta.

Even relatively small increases in retail pricing generally drop straight to the Gross Profit line.

In many small businesses, relatively small increases in the retail pricing of urgent-demand goods such as engine oil and filters, drop straight to the gross profit line — indeed, often right to the bottom line.

The following example drawn from a recent consulting situation illustrates the power to boost profits through a relatively quite minor increase in retail price:

1) A small boatyard, for whom I was consulting several years ago, performed about 1,000 engine oil changes per year.

2) Average number of oil quarts per engine oil change (including refilling the filter cannister) = 4

3) Existing retail pricing of engine oil per quart = $8.95

4) Wholesale cost of engine oil per quart = $5.37

5) Existing gross profit margin per quart = 40%

6) Gross profit per 1,000 engine oils and filter changes = $14,320.00

7) Raise retail price $1.00 per quart (total average raise in retail price = $4.00 per engine oil change)

8) New gross profit margin per quart = 46% (increase in gross profit margin = 15%)

9) New gross profit per 1,000 engine oil and filter changes = $18,320.00

10) Effective rise in gross profits on oil per 1,000 engine oil changes = 28% (from an 11% increase in the retail price of oil)

Competitive market pricing should always be tracked and considered

During the course of studying the retail pricing structure for batteries, which the yard was selling and installing, we also noticed that the operation was charging on average about $25.87 less per battery than the local store of a dominant national marine goods mass merchandiser. And the mass merchandiser's price was for carry-out, DIY installation, whereas the yards pricing included installation. Annual battery sales for the boatyard were running to more than 1,000 units, across the gamut of groups 24, 27, 31, 4D, and 8D.

To be sure, the boatyard was purchasing its batteries from a local supplier at very advantageous wholesale pricing, and the existing gross margin was significantly better than break-even. And to be sure, it is difficult at times to get more at retail for batteries than the low DIY carry-out price offered by mass merchandisers.

But because at equal pricing, there is no advantage to a customer for him or her to pick up and tote heavy batteries back to his or her boat, there is absolutely no reason to charge less. The retail pricing for batteries at the boatyard I was reorganizing was the result of an arbitrary cost-plus template — which is something that almost always should be rejected if your small business is to achieve strong profits levels. Consequently, we moved immediately to raise the boatyard’s retail pricing on batteries to match that of the competing mass merchandiser ― with the result that annual gross profit for this boatyard on maintenance and service goods rose more than $25,000, in little more time than it takes to snap your fingers.

If you apply similar reasoning, evaluation, and procedures to every item you sell — whether that’s oil filters, engine-water intake impellers, O/B and I/O engine lower unit lube, or other goods — the results can build into tens, even hundreds of thousands of dollars additional gross profit. And because pricing increases do not require additional overhead, that additional Gross Profit drops straight to the bottom line.

Moreover, if you apply price changes gradually and in moderation, your customer base will likely not resist, if it even notices at all. Always keep in mind that the objective is not to gouge or overbill your customers or clients, but rather to apply retail pricing raises to those items for which such raises will be readily accepted.

The idea is to price according to what is justified by the market and what your customer base will bear — and not in accord with some arbitrary cost-plus template. In my experience, cost-plus pricing results uniformly in lower profits than might otherwise be attained. 

— Phil Friedman

Text Copyright © 2024 by Phil Friedman ― All Rights Reserved.

Postscript: This is the first installment of a serialization of my eBook, Small-Business Primer: Real -World Tips for Starting and Running Your Own Small Business. Subsequent installments will be published at irregular intervals over the next year in our MarineBiz Blog section. If you are a marine industry pro and interested in receiving these right into your email inbox, as they are released, simply subscribe below. I look forward to welcoming you aboard.

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A friend of mine let me know that I had been quoted in the Business Section of a recent online edition of the Sun Sentinel. Naturally, I was pleased to be quoted — but at the same time, I was concerned because, while the quote was fairly extensive, it did not convey the full substance of what I said in my original article. Therefore, to keep the record straight, in the inimitable words of Paul Harvey, “here’s the rest of the story:”

Virtually all contracts for the construction of a new yacht provide for an initial payment, plus several more “progress” or “milestone” payments during the project. Indeed, most contracts for the construction of new custom or semi-custom yachts have the buyer paying in-total as much as 90% of the purchase price prior to completion and delivery. This involves a measure of financial risk and, consequently, a key question for a buyer is, “What financial protections are available to safeguard that up-front investment, between the time of contracting and receiving delivery of the yacht?"

New custom builds in the U.S., Canada, and Western Europe ...

In the U.S., a new-build buyer who is paying a deposit and progress (milestone) payments can be protected under the Uniform Commercial Code (UCC) by “perfecting” a Preferred First Security Interest in the new yacht under construction. This form of security interest places the new build buyer first in line (except for tax collectors and bankruptcy lawyers) for the payout of any monies in the event of a shipyard reorganization or bankruptcy.

The legal perfection of a Preferred First Security Interest and the concomitant procedure of “perfecting” that interest claim by filing of a lien against the vessel in process, is one of the best forms of protection for a new-build buyer. The procedure is relatively straightforward, but keep in mind three key points:

1. An agreement by the builder to cede such an interest to the buyer should be written into the new build contract,

2. The filing and perfection of this kind of claim and associated lien is always best handled by legal counsel experienced in such matters, and

3. Writing the relevant provision into the new build contract doesn’t do any good if you don’t follow up to ensure that the appropriate UCC filings are actually made and perfected.

Outside the U.S., similar forms of protection for the new-build buyer are available in Canada and many countries in Western Europe. In the EU, for example, protection is available under the Financial Collateral Arrangements Directive. But as you move further away from the type of legal system found in the United States, Canada, and Western Europe, the new-build buyer’s options in this particular regard narrow significantly. However, that does not mean that you have to forego financial protections entirely in an overseas new-build deal, outside of the U.S., Canada, or Western Europe.

Elsewhere in the yacht-building world ...

There several other devices and techniques that can be employed to protect the financial interests of a new-build buyer. These include the judicious use of Irrevocable Commercial Letters of Credit and the procurement of performance security bonds provided by insurance underwriters. But again, the best course of action for a new build buyer is to engage the services of an admiralty or business attorney who practices in, and is familiar with the laws of the country in which the selected shipyard operates and does business. Provided, of course, that the amount of money innvolved is sufficiently large to warrant the cost of such legal services.

Another key element in providing financial protection to the buyer in a new-build situation is the clear identification of the company from whom the new yacht is actually being purchased. Many a new build buyer visits a large, well-established and well-capitalized shipyard to develop his or her project, and to negotiate and structure a deal, only to then sign a contract with a corporation that is a separate legal entity from the shipyard, and does not have adequate corporate assets to protect the buyer in the event of a failure to perform on the terms of the new-build agreement.

In such a case, the buyer may find him- or herself with a claim against an essentially asset-less (shell) corporation, which has already sent the buyer’s initial and progress payments on to the shipbuilder (whose contract is with the sales/marketing corporation and not directly with the ultimate buyer). Therefore, a new build buyer does well always to make sure that his or her contract is directly with the shipyard that will be building the yacht, or that the contract is specifically guaranteed by the shipyard involved, and backed by all the assets of that shipyard, and any other parent or umbrella corporation.

Buyers should always watch out for elaborate asset protection schemes that effectively isolate the assets of the shipyard from claims by a new-build buyer, in the event of financial problems and a failure to perform on the part of the yacht builder or the failure by any intermediary company to pay the builder. Such asset-protection schemes often involve having a separate corporation own the hard yard assets (including land) and lease them to the shipbuilding company. And in such cases, the buyer contracts with, and pays his or her money to a yacht sales company, which in turn contracts with, and pays a shipbuilding company which only leases its yard and other operating assets from still a third, legally distinct company. With the result that, in the event of financial difficulties befalling the shipyard (or a financial failure of any of the cluster of companies involved de facto in the transaction, there are no, or nearly no hard assets to backup the contractual undertakings.

In the absence of a performance bond from a reputable and substantial insurance company, a buyer's best protection is to ensure that the legal entity which owns the hard operating assets of the "shipyard" is one of the parties to, or guarantors of the build contract. And a buyer should secure the counsel of an appropriately qualified and experienced maritime attorney to assure that he or she does not find themself in a contractual relationship with a shell corporation.

The difference between prudence and panic ...

Such recommendations for reasonable prudence should not be interpreted as occasions for fear. Most new build projects go off without a financial hitch. However, the cost in time and money of providing the best possible financial protections for a new build buyer are generally exceedingly small in comparison to the price being paid for the new yacht and in comparison to the risk of loss, in the event that problems do arise. Paying proper attention to all such issues at the time of purchasing a new (not yet completed) yacht, or contacting to have one built from scratch, is the best way to ease your mind and put yourself in a position to enjoy the project.

— Phil Friedman

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Note: An earlier version of this article was originally published on YachtbuildAdvisor.com and on my LinkedIn Newsletter. Please understand, as well, that this article is the expression of my 40-some years experience as a boatbuilder and marine business manager. It is not in any way intended to be legal advice, nor am I, in writing and publishing it, offering legal counsel to anyone reading it.