Marine Engines:
Setting a Course for Profits
by John Carollo,
Contributing Editor 12/05
jcarollo@engine-builder.com
There are hundreds of thousands of motorboats cruising the waterways and coasts of America. It's easy to think the market
for rebuilding engines for all those crafts might be a niche ripe for the
picking.
Some rebuilders estimate the size of the marine
engine market to be fairly small, perhaps less than 130,000 engines per year. But
that can include all types of inboard and outboard engines. According to
experts, it's a profitable niche for some - but is it right for you? We
talked to a number of marine engine rebuilders,
both big and small, about their markets, know-how and the particulars of
building for boats.
Logic might dictate a marine business would need to be located near a body of
water to be successful - but that may be Myth Number One. Location importance
can go both ways for a marine business. Mark Wilson, of Wilson's Machine Shop, operates out of
upstate Brant Lake, NY, in an area that sports five big lakes but his shop
attracts engine business from all over the country. That might be because his
business caters primarily to antique watercraft engines, often 60 to 80 years
old. When asked if it is location or specialization, Mark laughs and says,
"I don't know for sure." He obviously doesn't want to alienate his
locals: customers from the local waters still frequent his shop.
Ray Mariash of Outboard Rebore
in Winnipeg, Manitoba, has a number of large lakes in
his area as well, and agrees that "local" is a relative term. "We
service almost all of three and half provinces," he says, "covering
Northwest
Ontario,
Manitoba, Saskatchewan and Alberta. That is a huge area
geographically, but translates to a fairly small population." In comparison,
it is a market that's twice the size of Texas but with almost four times fewer
people.
From down near the Naval Ship Yards on the Delaware River in Philadelphia, PA, Recon's Vincent Mancini says,
"We have our main remanufacturing plant here and we have another in Mexico, but most of the marine engines
are built in Philadelphia. You can service customers from
the warehouses, but from my viewpoint, I think we do a good job of taking
care of them from here, too."
Located near the banks of Indiana's Patoka River, Jasper Engines and Transmissions
offers several levels of marine performance. The key, says Jasper's Darren
Ragsdale, is having the right product for the right customer at the right
time. "I think as much as anything, location is key,"
he says, virtually echoing Outboard Rebore's Mariash.
"You don't have to be right on the water but you have to be where the
business is. If you're dealing with clientele with bigger boats, it's going
to be harder to transport. It really depends on who
- and where - your customer is," Ragsdale says.
Bruce Hamann
of Lakeland Auto and Marine in Port Clinton, OH, is on the water and says,
"We're right on Lake Erie, but if our shop was 20 miles further south, it would be
a totally different business."
Jim O'Connor of Billerica, MA, sees location in a different light, because he says it doesn't
matter where his customers are - he goes to them. O'Connor's Mobile
Marine, Snowmobile and ATV business goes to his customers for work - year
round.
O'Connor says success isn't earned from where he is but what he is, and the
key to it is advertising his expertise.
"As my name suggests, I'm mobile," he says, referring to his trips to sites such as marinas, homes,
trailers and other locations to bring work back to shop. "I'm unique to the area with my
on-site work, but it's my expertise that separates me from competitors. I
have the technology to rebuild them, whereas most of my competitors just swap
parts."
And expertise - important as it is in automotive rebuilding and
remanufacturing - plays a role in the marine market as well. To what degree
does specialization matter in order to profit from marine work?
Mark Wilson thinks the principles are the same for building and rebuilding
engines no matter what type of engine it is. "It doesn't matter if
you're working on a big block Chevy or an old Chrysler."
Ray Mariash's Outboard Rebore
sells marine and engine hard parts and he says knowing the ropes is very
important. "It's a very specialized field. Things are just a little bit
different," he says.
Mancini stresses know-how. "I think it's very important. It is a
different animal mostly because the engines have to be extra reliable and
extra tough. You have to deal with the corrosion issue. All premium parts
need to be put in. There's no downhill. The measurements have got to be
tighter and the parts have to be upgraded to premium."
Billy Blomquist
of PDQ Engine and Machine in Duluth, MN, explains one the most important
keys
to
marine engines when he says, "It's just like building a race engine
really, because it runs under full throttle or load." He does, however,
make one adjustment for boat engines. He builds in more piston clearance in
the bore due to a boat's intake of constantly cold water for cooling.
Ragsdale provides still more technical insight. "You have to understand
the basic castings are the same. The internal parts such as valves, cams,
springs are different than automotive. It's the duty cycle that's different.
The auto engine is going to maintain rpm at 2,000 or below. A marine will run 4,200 rpm, in open water. You've
got to remember there is no transmission with multiple gears."
Hamann sees training as an important issue.
"Some of the fellows may not be familiar with the fact that when the
engine runs in the opposite direction, it
affects
the
seals and other parts. A lot of marine engines still have distributors and
you have to worry about (spark) advance. Those springs can rust away. I would say much of the
technology in marine engines tends to be about 12 years behind the auto industry."
But Jim O'Connor agrees that while automotive rebuilding
skills have increased along with the complexity of the engines, marine
know-how seems have been slowly slipping
away. "No one is being trained in the marine market," he says.
"And there aren't many places around that will train you other than in Florida and New Jersey." He
says he should know:
his business does only marine work.
Customer Identification
So what is a typical customer base for a shop that does marine work?
Apparently, there is no stock answer. Blomquist
says his shop is "20 percent marine, 40 percent diesel and the rest is
performance."
O'Connor says, "I
would say that out of all my engine overhauls - 90 out of 100 - 90 percent
are two cycle outboard motors" The salt water environment surrounding
his market caters to affects the maintenance cycles of boats.
And Wilson, who does the antique work says, "I'm more non-local than local.
If I had to rely on local cylinder head work, I'd starve to death." But Mariash's is a different animal. "Our customer base
is in retail business because we're a wholesaler. The majority of our work is
for dealers."
As a production engine remanufacturer, Mancini
explains
that
Recon's main customer is the retailer as well. "We sell to warehouse
distributors and marinas and their needs and programs are different from our
automotive market. Some stores do a better job at selling marine than others
and we equate that to product knowledge and training. "
Mancini explains that identity is important and so Recon has created another
brand name of its marine line of products. "One thing we've done is to create another brand name, Vesuvio, with a separate web site and catalog.
Ragsdale, too, says Jasper knows exactly where its customer base is: "It's independent marine facilities, dealers and mobile
marine accounts. We have an independent sales force that makes calls, goes
out face-to-face and we do some direct marketing - different promotions such
as stern drive availability or engine availability."
Being local has its own matrix. Hamann says,
"We do deal with a lot of the marinas that will bring in engines and
pieces. We get them by advertising and through word-of-mouth."
Every business needs to be able to inform and attract its customer base and
boats are no different. Wilson keeps his simple: "I just
advertise. Plus I attend big boat shows where my engines and boats have won
best of shows. I take some of my work that is done and show it off."
Blomquist advertises a little bit but says he's
proud of his Web site. "Actually we've gotten a little more from the Web
site."
O'Connor may have a Web
advantage. "I'm in the yellow book under marine repair and snowmobile
repair. I'm also on the Web." As a member of the Association of Marine
Technicians (AMTECH), his extensive Web site includes about 30 links to him and offers plenty of
useful info on his business as well as the care and feeding of those
engines. The Web site even lists prices and contents of some rebuilds as well
as proper break-in procedures.
Mariash lists his Web site and personal contact as the preferred methods. As a
wholesaler, he says dealers and marinas are contacted and then, "the
majority of our work is shipped to us." In addition to allowing customers to find local retailers, Jasper's
Web site shows pictures of the product and allows customers to compare rebuilt and
remanufactured engines.
Stock or Performance?
Yet another aspect of marine rebuilding is the usual question of building a
stock versus high performance product. How does that play out in the marine
industry? O'Connor, the
go-to-the-customer shop says, "Of my marine and snowmobile work, nearly
everything is stock." What he does in the high performance area actually
includes very little in the way of changes. He says he might make a slight
rise in compression via a different head gasket or go to a four-barrel
carburetor to replace a two-barrel on bigger boat motors.
Blomquist's shop does a little more, he says.
"We build everything. It's about even, stock vs. performance, maybe
leaning a a little more
toward the performance side."
On Wilson's antique market it's mostly restoration work, he says.
"Out of the 90 percent of my business that is two-cycle outboards, 80 percent of
those are pure restorations." He says his clients try to keep their historic boats
original but when someone wants to make the move to more power, he tells him,
"Get away from originality and get a 502 (big block Chevy)." But
when asked if performance is one of the options he offers, Wilson says, "No, I try not
to."
Mariash, too, says "We are strictly OEM. We
don't want to do high performance work. I know there's a marketplace for it
but it's not for us. We have large bodies of water and most people are
looking for reliability." In other words, he says, the demand is simply
not there. "Besides," says Mariash,
"people looking for high performance take more time."
Mancini, Ragsdale and Hamann are all in the
agreement about the market, estimating that 95 to 98 percent of their engines
are for stock replacement. Mancini breaks it down, "The reason that
performance is so low is based on cost. A marine high performance engine
could cost up to $15,000 where auto high performance could be enhanced for
$2,000."
Sooner or later, profit margin (PM) factors in. Can a shop that does both
marine and auto work expect to see a difference between the two? We asked our
experts about their PM differences between marine and auto work. Wilson says, "I'd say it's less
with automotive...but maybe we're not charging enough."
Mancini says, "There's definitely a higher margin with marine. There's
more profit margin because there's more costs to all the special parts."
But Ragsdale doesn't see a difference. He says, "Not a whole lot, no. By
the time you figure casting damage, warranty, obviously the engines cost
more. If you look at profitability it's about the same numbers."
And O'Connor says his is the same, "because it's the same hourly rate." He
swaps out reman engines for the bigger boats and
rebuilds the smaller ones himself.
Blomquist says simply, "It's about the
same."
Hamann equates it to the service life difference.
"With the quality of today's car engines, it's not unusual to get
200,000 miles on one." He cites factors such as customer maintenance,
how they operate the car and how the average marine engine operates harder
than a car - and obviously doesn't last as long.
Like so many other sides of this business, the "wants" often seem
to take precedent over the "needs," says Hamann.
The marine customer often seems to more willing to put more money into his boat
engine than a typical driver will want to spend on the car he drives every
day, he says.
So before you dive head first into marine engine rebuilding, you may want to
test the waters. You can start by re-thinking all the aspects of your
existing business to see if they'll sink or swim in this highly specialized
niche market.
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