marine industry professionals
Megayachts in miniature
Bill Barrington and two others with Sea Ray pedigrees are building superboat luxuries into their new 40- to 60-foot Savannah line
By Steven Marks
Close to two years out from its inception, Savannah Yachts launched its first model and has a second one in tow. Its nearly 60,000-square-foot plant in Effingham County, Ga., is in full operation. But company officials said they're still in that delicate stage between start-up and dive-in.
They employed several strategies that, they said, will help them sell custom luxury yachts between 40 and 60 feet in a soft market — among them, outsourcing to vendors in the United States.
Bill Barrington, CEO, says his new company, based in Rincon, Ga., has faced the same peaks and valleys as most start-ups. Following the elation of raising capital to fund the complex structure of building custom luxury yachts, came the sobering realization of planning and executing all the steps leading to the building and selling of the boats.
Barrington likes to joke there was nothing they didn't anticipate during the formation and start-up phases of their company, but acknowledges there often seemed to be "more issues and problems than we could deal with."
Barrington, however, had one edge: his experience within the marine industry. He was the former president of Sea Ray and served as chairman of the board of directors of the National Marine Manufacturers Association. He had perhaps planned better than most how to build and bring a product to market.
His first move was hiring people he knew.
He recruited two former senior Sea Ray executives, Gary Stoecker and Scott Noble. Stoecker has 35 years' experience in everything from product development to supply chain management, and is vice president of operations at Savannah Yachts. Noble has 20 years' experience in branding, sales management and customer satisfaction and is the company's vice president of sales and marketing.
They and Barrington are personally invested in the privately held company.
The principal investors are a group of businessmen from Tennessee. A bank debt component and cash equity are also included in the capitalization.
According to records filed with the Secretary of State's Division of Securities and Business Regulation in Atlanta, Savannah Yachts looked to raise $5 million through its offering. As of April 21, 2005, it had raised $3.5 million. The minimum investment it would accept was $30,000. A total of nine people invested.
The investor group consists of individuals with experience in a number of industries and professions. One investor has a Ph.D. in mechanical engineering; another is chairman and CEO of a company involved in wholesale groceries, furniture manufacturing, gas, and oil; a third is involved in commercial real estate. Barrington is especially pleased with the fact that the group over-subscribed its original offering and completed its second and final phase with funding entirely from within the group.
"We have a sound investment group that is in for the long term," says Barrington. "They're not going to be here for five to seven years and then bail out."
With leadership and capital in place, Barrington and his vice presidents began to develop some slightly different ways of implementing their business model. The model was "to migrate megayacht standards down to a product of our size and remain price- competitive."
Communication
One of the company's strategies was to outsource, perhaps more so than other companies in the industry.
"We outsourced primarily because we knew there was some great talent out there in the industry," Barrington asserts. "We outsourced in areas that perhaps others wouldn't."
The company contracted with Luiz DeBasto, a custom yacht designer, for its first model, the Savannah 54. Barrington noted, however, that he and his team were intricately involved in the design process, working with DeBasto to realize their design ideas. What transpired between DeBasto and the Savannah team and between Savannah and the engineers, suppliers, and vendors became the crux of the company's operation: communication.
"We needed to make sure that outside parties really understood our strategy, even down to more simple things like the parts we were ordering," Barrington said.
The outsourcing process, though, was not without its problems.
"We are small," said Barrington. "As a result, you don't always get the attention you hope for. That was frustrating in certain circumstances." In some cases Savannah Yachts had to convince suppliers that by contracting with a company its size suppliers could ultimately increase their bottom lines as Savannah Yachts increased its sales. On the other hand, others were "quite receptive" to working with a boatbuilder who would provide a stream of business on a regular schedule.
Staying focused
Savannah Yachts has also adopted a direct-to-consumer approach to sales.
Again, it may have been the road less traveled, but the approach instilled "a discipline that we probably wouldn't have if we had gone to an independent dealer network," Barrington said. This approach "has nothing to do with grabbing a piece of the dealer's margin," and in the future he may engage in a hybrid approach, a combination of direct and dealer sales. But, for now, he sells directly to consumers through the company's retail division.
"We started down the path of direct-to-consumer for a number of reasons," says Barrington. "As a start-up with an expensive [$1 million to $1.5 million for the first couple of yachts], fairly sophisticated product, where are you going to find someone to place the kind of emphasis that you think you need to make your product successful?"
Although there are many advantages to going through the dealer channel, Barrington didn't want to end up as the "second, third, or fourth brand in a model line-up."
Consequently, Barrington and his team had to do all the upfront work, which is typically done by dealers. They arranged for customer financing and trade-in appraisals.
In many ways this approach proved to be advantageous, said Barrington. It provided a company-wide discipline on building a product that would attract attention and sell. There may even be a tendency, Barrington surmises, that "you can almost get lazy having an independent dealer operation because, internally, you tend to rely on it to an extent greater than you probably should."
Bonding
Although Barrington has no plans to forego more traditional ways of reaching potential buyers, such as print advertising, his focus in on the Internet. He's driving prospects to the company's Web site, www.savannahyachts.com, through direct mail and e-mail solicitations.
"Once you have these eyeballs," says Barrington, "then you have the opportunity to create a real prospective customer.
"The Web greatly benefits a start-up company like us," says Barrington. The site also offers information on the backgrounds of principals in the company, and services like its concierge program. This program assigns a dedicated person to each customer to help with everything from production orientation, service and warranty, to even making recommendations about cruising opportunities. The program is yet another way to solidify the direct-to-consumer bond.
Soft market
Barrington acknowledges that getting eyeballs glued to the Web site is only part of the sales and marketing process. Converting them to buying customers has been made harder in today's sluggish market. He is quite aware of the slump in sales for inboards of 30 to 40 feet, or above, but said sales for 70 feet and above are not as weakened.
In "talking to people," says Barrington, "I hear that the megayacht market is still very strong, but softened. In our particular segment, 40 to 60 feet, it certainly is not as soft as others.
"With a new product that is exciting, differentiated and innovative, we have seen a tremendous response from interested prospects. That has been gratifying for us. People are still out there buying boats that are new, fun and innovative."
Barrington declined to release any sales figures or projections.
The company's second yacht was scheduled to have finished the design phase in mid-May. The new model is similar to the Savannah 54, but smaller, said Barrington. "After that, we plan to be on a regular production schedule, building a number of these yachts, if the demand continues to be as strong as it is now," he said.
The company employs 55, with about 80 percent working in production. He hopes to hire about another 145 in the next 18 months. But he remained cautious. It will be "one step at a time."
"There aren't too many examples of someone who has gone out and done what we have done," says Barrington, referring to the company's mission of building luxury, production custom boats.
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Direct to consumer: The pros and cons
Bypassing the dealer network is a strategy used by many custom boatbuilders.
If a boat manufacturer has "a pretty skinny production number," then a dealer network may not be the best way to go to market, says Phil Keeter, president of Marine Retailers Association of America.
The best way for a custom boatbuilder to reach the public is to market itself in the bigger boat publications that cater to people who are looking to buy a yacht, says Keeter.
He also says it might not be a bad idea if custom boatbuilders — whether they're building one boat a year or 10,000 — adhere to guidelines established by the National Marine Manufacturers Association or the American Boat and Yacht Council. Such compliance provides a point of reference for the consumer.
The problem with selling direct-to-consumer comes when boatbuilders manufacture production models such as a Bayliner, Cobalt or Regal, according to Keeter. The manufacturers can be selling their boats out of a factory in Tennessee, for example, but its customers are throughout the country.
"That's a real nightmare from the simple standpoint that there's no way to service that customer," Keeter says. "Where in the heck do they go to get the boat serviced?"
