An unconventional strategy for small boat dealerships to improve sales performance by embracing boat rentals
This strategy will not work for every boat dealer or marina, and comes with a certain level of risk, but if carried through properly it can make boat sales a profitable endeavor even at very low volumes. Any dealer taking on this strategy would have to be a part of a marina (access to slips) and establish a good relationship with a manufacturer.
The basic structure looks like this:
- Have your dealership buy boats outright (high upfront expense, removes conflict from floor planning).
- Rent these new boats during the summer months.
- Sell those rented models at, or around, cost after the season is over.
- Consider the seasonal rental fees to be your profit.
Top of the line maintenance, renting only to qualified customers, and being honest about what you are selling are all necessary to have this strategy succeed. If done correctly the payoff could be greater than using traditional sales methods.
Buying outright (no financing) and renting brand new boats may sound absurd at first. However if we consider the numbers, it makes more sense. I’m going to use general estimates to demonstrate my point.
For example, consider a 21' center or dual console with a 200hp outboard motor. For the sake of argument, say this boat would regularly sell for about $50,000 new and your cost is $40,000 from the manufacturer. If you can rent that boat for 40 days between Memorial Day and Labor Day at an average rate of $450 per day, that would bring in $18,000. (This is very reasonable to do in the northeast.) Also consider that about $4,000 would go to operating and maintenance costs assuming those costs are internalized. Pending any major mishaps the boat has produced approximately $14,000 on your initial investment of $40,000. That’s a 40% increase (!) in gross profit from what you would typically receive from a new boat sale. I am well aware that this example uses very rough numbers, but it is to illustrate a greater point. Using an unconventional method can yield outstanding results if you’re willing to break with the norm.
What you are left with after the rental period is a unique product: a boat that is less than a year old, still under warranty, with typically less than 200hrs on the motor, and minimal cosmetic wear and tear. This nearly new boat can be sold with a rock bottom price tag because you made your profit from the rental fees. Selling the boat for cost, or slightly above to cover any unforeseen expenses, allows you to clear a nice profit and move inventory. Once you prove the concept, just rinse and repeat.
There are a few other benefits to this strategy. First, the rentals keep a more steady cashflow into your business instead of your inventory costing you money as it sits on the showroom floor. Second, as a benefit to dealers of lesser known brands, your brand new boats have been floating up and down your local waterways, getting some great exposure. Third, renting allows potential buyers a “try-on” period that gives them more time than a typical sea trial. Fourth, buyers that don’t like the idea of buying an former rental still have the option to buy a boat in the traditional method and customized to their liking.
Of course, as I stated earlier, this strategy will not work for every operation. Cost of entry for this strategy is high, and there will likely be a strong learning curve to nail down the details. This method can be scaled up or down based on the initial investment, starting with a few models during a trial season. Perhaps a rent to sell method is the key to turning a healthy profit at small scale boat dealers.