A Guides Eye View At Running Your Charter Business
by Capt. Danny R. Guarino
Now that you are a fishing guide in the fishing capital of the world, how do you go about planning and being able to run a successful fishing charter business?
You have gone through the relatively easy part of obtaining your Coast Guard license, applied for and received your Transportation Workers Identification Credential (TWIC) card, you have a boat that will work well on charters and you have a good idea how to catch fish, what else is there? Well, you have to be a good business man and run a profitable business to be a SUCCESSFUL charter boat operator.
Without making a profit in your business you will, in time begin to lose your desire to run charters and when you don’t have the desire your end product will begin to decline. I’m not taking about catching fish (catching is just part of it) what I’m talking about is your customers. If they begin to see that your heart is not into your game it will affect your business. Once your customers are not having fun you are moving in the wrong direction. Most customers are happy just having a good time and the catching is secondary.
I have always tried to judge the success of my trips not buy the number of fish in the box but on the number of smiles on the customers faces. Sure, you are going to have customers that must catch fish and most times you will catch fish. Just remember, to be successful you will want that customer back even if they didn’t catch a fish on a particular trip. It is much easier to retain that customer if you have a positive attitude for what you are doing in all aspects of your chosen profession. I fully believe that running a profitable business is one of the main ingredients for keeping your attitude positive and your customers happy.
One of the hardest areas to forecast is the actual expense of a trip, and without knowing your cost you won’t know how to price it. What I plan to do here is provide you with some guide lines on what you will have to spend on an annual basis and then break that down to a per trip cost. Once a cost base is developed it is pretty easy to find out what to charge. Remember this is just a guide line, your cost may be more or less dependent on you own situation. Try to focus on the type of expense rather than the cost I am displaying. The cost I am providing are from my actual accounting logs and again, they may differ from yours.
I break down my expenses into a number of categories and log them into an excel spread sheet. I keep track of the expenses as well as income on a daily basis and recap them each month so that I can see if I am running my business in a profitable manner. At the end of the year I combine the 12 months and give it to my tax consultant/preparer. I strongly suggest you let the professionals take care of your taxes, you focus on running your business let the pro do the taxes. What you are providing to the tax professional is an accurate list of income and expenses. This is the same information you work with on a daily basis to see if you are in the Black or the Red.
Following are a list of categories and the type of expenses I place into them. It is easy to forget about some of these costs of your business, because they are not directly related to fishing. But, they are related to your business.
1. Accounting
A) Bank service charges
B) Credit Card Service Charge
C) Accountant / tax prep
2. Advertising
A) Web Hosting
B) Web design and Maintenance
C) Business Cards brochures and all print advertising
D) Newspaper, phone book, magazine type ads
E) Referral Fees (Fee you pay for referred trips to you)
3. Fuel
A) Fuel
B) Oil
4. Contributions to charitable organizations
A) Any contribution you make to qualified organizations
5. Insurance
A) Insurance for your business
B) Insurance for your vehicle (If used for business).
C) Towing Insurance
6. Licenses
A) Fishing Licenses
B) City/County business Licenses
C) Boat registration sticker
D) Trailer Tags
E) Vehicle tags
7. Office Expense
A) Computer paper
B) Printer Ink
D) Office supplies misc
8. Postage
A) Postage used for business
9. Repairs and Maintenance.
A) Boat
B) Trailer
C) Office Equipment
10. Supplies
A) Tackle Rod’s Reels, nets (Not depreciated term use 1 year or less)
B) Bait Chum
C) Replacement Lines (Dock Lines, anchors, Anchor lines)
11. Communication Cost
A) Land phone Line
B) Cell Phone
C) Internet Provider
D) Cable connection for Internet
12. Trade dues and Association cost.
A) Florida Guides Association
B) CCA
C) Other
13. Travel Expense
A) Hotel
B) Out of Town meals (Meals away from home 50 mile or more due to business)
The following costs are kept track of for my records so that I can cost out my trips.
My Accountant handles the depreciation for all major equipment purchases. The depreciation figures are calculated with my annual taxes.
14. Depreciation Interest Paid on Loan if applicable
A) Boat (96 months)
B) Trailer (96 months)
C) Motor (60 months)
E) Interest
15. Draw to me
A) Money I draw from my company for living expenses. (Dependent on how you structure your business this may or may not be deductable. I draw $ 15.00 per hour for each trip and it is included in my profits, I am a sole proprietor).
Now that we have outlined your expense category lets put some number to it and see if we can get a raw cost of doing business.
The numbers that follow are based on annual expenses. I will use some numbers from my own business as well as some hypothetical situations to make this realistic to the average person We will assume that we run 125 trips in a years time and we purchased our equipment at a reasonable price of: Hull $ 31,000.00 Trailer $ 2000.00 both depreciated over 8 years and a motor valued at $ 12,000.00 depreciated over 5 years. To make it simple we paid cash for it so interest is not a factor.
Category Annual Expense
1. Accounting… $ 1,135.00
2. Advertising $ 2,460.00
3. Fuel $ 7,500.00
4. Contributions $ 300.00
5 Insurance $ 1,600.00
6. Licenses $ 400.00
7. Office Expense $ 415.00
8. Postage $ 28.00
9. Repairs and Maintenance $ 4,000.00
10. Supplies $ 2,000.00
11. Communication $ 1,800.00
12 Trade Dues $ 250.00
13. Travel Expense $ 600.00
14. Depreciation, Interest $ 6,525.00
15. Draw at $ 15 per hr $ 11,250.00
_________
Annual cost of our trips $ 40,263.00
We have an annual expense of $40,263.00 that is inclusive of us paying our self an annual salary of $ 11,250.00 (this amount is part of the profit) and our assumption is we ran or will run 125 paying trips. So, $ 40,263.00 divide by 125 trips equals a raw cost of $ 322.10 per trip.
Now that we have a cost, what do we want to charge? You have to make some decisions. Do you want to settle for $ 15.00 per hour? Do you want to include something for retirement? Do you want your business to make a profit? Do you want to put something away for a rainy day? All good questions that only you can answer based on your goals and what you can reasonably charge based on competitive rates in your area.
Here is what I think:
1. The business should make a percentage of the gross income.
2. I’m getting old and retirement is important.
3. I’m thinking we may have some sort of unexpected cost. .
The first thing I want to know is what is the going rate for a charter of my type in the region I plan to work? For this purpose I will use my region (West Central Florida) for an inshore type charters with a base rate of (per my research) $450.00 per 6 hour charter with 2 people. Rates very but this seems to be the common rate. I think that on average my trips will at least meet this minimum.
Given what we know so far, let’s do some what ifs.
If we run 125 charters and collect on average $450.00 our gross income would be $56,250.00 now we can subtract the amount of expense of $ 40,263.00 that we came up with earlier and we can see that we will have a positive cash flow of 15,978.00 (Remember we have already paid our self $ 15 per hour or 11,250.00) so our profit is actually $ 27,228.00.)
That is it. It’s that simple.
You have to decide what to charge based on your personal needs and goals. The most important element in your success is knowing how to plan for it. And yes, if you run more trips then your gross income will be more but don’t forget the expense side will go up as well. I used 125 trips because it is on the low side and I like to plan a little conservative. Some cost don’t change based on the number of trips (i.e. Insurance, Boat Payment etc.) but fuel, maintenance, and supplies vary with every trip.
If you make a real name for yourself you may be able to pick up some real deals where manufactures are giving away tackle, boats, and motors for you to be on their pro staff. Just remember, these give-a-ways come with a price and you might have to give up some charter time to accommodate the requirements of your pro staff agreement. If you get one then good for you! However, if you plan not to get one you will be that much more ahead in the profit column if you do.
