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Triton Survey: Yacht budgets

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This month’s survey comes from a captain on what he calls a “no-budget boat” who “had it out” with the chef after receiving the credit card bill. (“She went a bit crazy,” he said.) It got him thinking about budgets and he wondered if most yachts operate under a structured spreadsheet-and-budget kind of system, or if they ran more like his boat, budget-free but reasonable.

So we asked yacht captains: How do you handle the boss’s money for the yacht? Does your vessel operate within the limits of a budget? Or do you work better with no limits?

More than 70 yacht captains replied to this month’s survey, most on yachts between 100-140 feet, in yachting more than 20 years and with fewer than six bosses in their careers. We think that might help us understand some of the answers.

In general, our responding captains preferred to operate a boat without the constraints of a budget by a ratio of 2-to-1, but they also preferred to substantiate expenses with reports and receipts.

Click to read comments from this survey.

The ideal

We began by asking general questions about their preferences. Do you prefer a yacht program with a budget or one without?

Nearly two-thirds of responding captains said without, and some turned philosophical.

“This is a wish,” said the captain of a yacht 120-140 feet in yachting more than 30 years. “Most vessels now operate on some type of a budget, whether stated directly or imposed. Every receipt is checked and expenses — especially crew salaries, insurance and travel — are checked closely. I think no-budget boats are almost a thing of the past. Some crews and captains have helped this happen with the owners.”

“I say no budgets but, obviously, there needs to be some understanding of the yearly cost of the vessel,” said the captain of a yacht 120-140 feet in yachting more than 15 years. “There also should be a discussion about the cost of yard periods and what needs to be done.

“I think we as professional captains, given the job of protecting the owner’s family and investment, should be given the respect of the position and the freedom to control the expenses of the yacht,” this captain said. “I think we have lost some of that control and trust of owners due to captains not discussing a budget and not doing their best with the owner’s money. I feel bad that owners now go to management companies because they can’t trust the person that they hire with the money. But they still trust them with their lives?”

“Personally, I am frugal and don’t [spend] the owner’s money unless something is needed and I shop around for best price for required maintenance and repair items,” said the captain of a yacht 120-140 feet in yachting more than 15 years. “If we are looking at a large repair bill for something, I always notify the manager prior to spending the money, that way there’s more than one mind to consider options to control cost. So, I don’t feel a need for a budget as I only do what’s necessary. That said, I do feel that some owners need to be more involved in the day-to-day operation as I’ve seen ridiculous expenditures on unnecessary changes, modifications and ‘repairs’ that were decided solely by the captain. So, yes, some captains need to realize that the money pit is not bottomless on the majority of boats and they probably should be constrained by a budget.”

“I prefer the freedom and trust to spend wisely on necessary projects/repairs, upgrades and improvements to keep the yacht running in perfect order so that the owner can enjoy the yacht and all systems work each time they come aboard,” said the captain of a yacht 120-140 feet. “The crew have more pride in their jobs when defects can be rectified and things actually work and feel safe rather than just getting by on a Band-aid.”

Slightly more than a third of our respondents appreciate working under a budget.

Triton Survey: Yacht budgets

Triton Survey: Yacht budgets

“I’d prefer a budget, but he wants what he wants when he wants it,” said the captain of a yacht less than 80 feet in yachting more than 20 years. “That comes with costs.”

“I like to know what kind of money the owner wants to spend,” said the captain of a yacht 80-100 feet in yachting more than 25 years.

“I like to work to a budget,” said the captain of a yacht 180-200 feet in yachting more than 15 years. “It also gives me a sense of achievement to keep the yacht in budget.”

“I prefer a budget but have never had one,” said the captain of a yacht 80-100 feet in yachting more than 20 years.

“Budgets give one a goal, something to aim for, the goal of effective spending,” said the captain of a yacht 160-180 feet in yachting more than 20 years. “But the budget must be realistic. By thoroughly planning a season in terms of cruising and maintenance one can achieve a realistic budget. Crew food, interior consumables, maintenance consumables, surveys, yard periods, planned maintenance, communications, dockage and shorepower — and even, to a certain extent, crew turnover and flights — can be budgeted for if a plan for the year can be drawn up and adhered to.

“Breakages and unplanned repairs cannot be budgeted for,” this captain said. “Newer vessels are easier to budget for; older, uncared-for vessels more difficult. Owners’ expenses are usually not budgeted for, including fuel for an unexpected cruise, dockage, transport, food, wine. To budget means to limit what one can do. A benefit is efficiency. A disadvantage can be to put off what needs to be done, and suffer some sort of failure in the future.”

Among those who prefer no budget, we asked What does “no budget” mean to you?

More than three-quarters said “no budget” does not mean they can spend with abandon, but rather that they are able to spend with permission and documentation.

“I am rarely questioned and can justify any expense,” said the captain of a yacht 100-120 feet in yachting more than 25 years. “I am naturally budget minded.”

“The owner never says no,” said the captain of a yacht 80-100 feet in yachting more than 20 years.

“This creates and keeps the bond with the owner,” said the captain of a yacht 120-140 feet who has worked for two owners in his more than 15-year career. “If he feels like looking at the receipts then so be it. If not, at least you have provided the proof.”

“Upgrading needs permission; mechanical, get it done; food, no budget,” said the captain of a yacht 100-120 feet in yachting more than 30 years.

Just 23 percent of those who prefer no budget boats said they preferred no restrictions on spending.

“Safety, routine maintenance, food, uniforms, and routine paint and varnish are no budget,” said the captain of a yacht 120-140 feet in yachting more than 20 years. “Major item replacement or major paint would have some discussion.”

“I’m sure that if I began spending large amounts of money without being able to justify it there would be consequences,” said the captain of a yacht 120-140 feet in yachting more than 15 years.

For those who prefer budgets, we wondered Do you want input into establishing that budget, or would you rather have your boundaries established and then simply deliver?

Interestingly, 100 percent of respondents said they prefer to offer input into establishing the budget, or even creating it themselves.

Regardless of whether the boss has a budget on the boat, we wondered of captains Do you prefer to submit receipts and other supporting documents to justify expenses?

Nearly all do.

And we were curious if budgets made operating a boat easier, so we asked Do you prefer to have your department heads adhere to a budget?

Even though captains prefer to have no budget, nearly three-quarters prefer their departments to operate under a budget.

The bottom line: What is the ideal fiscal environment between a captain and the owner on a yacht?

The majority — again, about three-quarters of our respondents — prefer to have the authority to spend within reason, with support documents filed monthly.

“I feel this nurtures the trust that expenditures will be reasonable and justifiable, and reduces the difficulty in securing funds,” said the captain of a yacht 200-220 feet in yachting more than 10 years.

“Keep invoices on all purchases, submit to accounting for reporting, and records on board the boat for future reference and back up should an issue arise as to where and why money was spent,” said the captain of a yacht 120-140 feet in yachting more than 10 years. “Given the latitude to be smart with the owner’s money to keep the boat in the proper order.”

The next largest group (12 percent) opted for support documents to be filed quarterly.

Just 7 percent prefer a strict budget and documentation so there can be no misunderstandings

And only 3 percent wanted the authority to spend within reason, but no paperwork.

“Been with him long enough that we both know where we stand,” said the captain of a yacht less than 80 feet in yachting more than 20 years with just two owners. “Some of the bills get out of control; we still work it out.”

Not a single captain chose the answer “open checkbook, no questions asked.” Even a captain who has that situation on his current command said he’d prefer to file quarterly reports.

The reality

In addition to what captains prefer in the ideal world, we wondered what they were actually working under, so the rest of our questions are based on their existing job. In your current command, do you operate with a budget?

The answers were pretty split, with 43 percent saying no, 35 percent saying yes and 22 percent who said “sort of”. The make-up of budgets are as varied as yacht programs themselves.

“No budget, but I am frugal and operate well within the 10 percent of original value figure that many put out as a standard for operating expenses,” said the captain of a yacht 80-100 feet in yachting more than 30 years.

“I use a monthly / yearly format,” said the captain of a yacht 160-180 feet who operates under a budget. “An entire year is estimated and broken down into monthly and then into categories.”

“I have an annual budget; all invoices/receipts are submitted to accounting each month,” said the captain of a yacht 120-140 feet who has worked for three owners as captain in more than 10 years. “I reconcile the petty cash and credit cards and submit those reports to accounting, who then in turn runs the necessary reports for the owners. I look over that report before submittal.

“There are monthly, quarterly and annual reports detailing all expenses and how the budget is looking,” this captain said. “Necessary repairs are anticipated and there is wiggle room for any unforeseen issues. Some months we go over the budget, but other months we come in under budget. For 2014, I came in under budget across the board, but over budget in a particular category based on our cruising requirements.”

“I get an ‘allowance’ every month deposited into the boat account,” said the captain of a yacht 120-140 feet who considers his boat to be “sort of” on a budget. “It is to cover operations, maintenance and upgrades. As long as I don’t have to ask the boss for more money, I can spend it any way I want. Crew paychecks and fuel are covered by our home office.” (It may be worth noting that this captain has worked as a captain for just one owner during a career of more than 25 years.)

“We do not have a set budget but daily expenses that are over $1,000 I would talk over with the owner,” said the captain of a yacht 100-120 feet in yachting more than 15 years. “We do what work we can ourselves, only subbing out big projects.”

“No specific budget,” said the captain of a yacht larger than 220 feet. “Expenses less than $5,000, don’t need OK from managers. Big expenditures, I always try to inform them in advance. It’s a risky situation if you don’t control other card users. Monthly cash/card reports supported by invoices.”

“No, but definitely not open checkbook,” said the captain of a yacht 120-140 feet who does not operate on a budget. “Very knowledgeable, long-term owner. He understands costs, wants the boat in great shape, does not want to be taken advantage of.”

“Not in an accounting definition,” said the captain of a yacht 180-200 feet in yachting more than 30 years. “We submit short forecasts of funding needed. Major works are approved and planned.”

“With a one-on-one with the owner, there has never been a budget, except with charter situations,” said the captain of a yacht 100-120 feet in yachting more than 30 years. “It always depends on the owner as you know what he wants, then you shop or buy as required.”

“No budget; we just make the boat run on schedule,” said the captain of a yacht 100-120 feet in yachting more than 25 years. “If I ask for permission to spend, I am always told no. If I just spend what is needed, it is never questioned, so that is what I do.”

For those captains who operate under a budget (or even sort of), we asked Is your budget adequate?

Most of our respondents — 87 percent — said it is.

Do you have input into that budget?

Again, most — 79 percent — do.

For those captains who do not have a budget onboard, we wondered Do you make an effort to keep expenses down anyway?

Ninety-three percent said they do.

“Otherwise, there will be a budget,” said the captain of a yacht 200-220 feet in yachting more than 20 years.

“No budget, but I keep all records in a spreadsheet,” said the captain of a yacht less than 80 feet in yachting more than 25 years. “Even when there is no budget, it is my responsibility to keep costs as low as possible.”

“By due diligence and careful research, I save the owners my salary annually without any sacrifice of quality,” said the captain of a yacht larger than 220 feet in yachting more than 30 years. “A captain and department heads should know how and where to source virtually anything and should continue to develop more knowledge, relationships and resources to that end. There’s no sense in throwing money away just because an owner has millions or billions. I wouldn’t work that way in my own life.”

“We also tend to use the same vendors, subcontractors, etc.,” said the captain of a yacht 120-140 feet in yachting more than 20 years. “You often get what you pay for. Going bargain basement seldom pays off at the end of the day.”

“I consider the money I’m spending to be my own, and make every effort to minimize waste across all aspects of the vessel,” said the captain of a yacht 200-220 feet in yachting more than 10 years. “I think this is an important duty of the captain/manager.”

“Doing more with less gets you noticed and compared favorably against the last guy,” said the captain of a yacht 180-200 feet in yachting more than 30 years.

“We do all work in-house and this saves a heap of money,” said the captain of a yacht 100-120 feet in yachting more than 25 years. “I am an engineer first who happens to be able to drive a boat so the owner is lucky and knows it. This helps keep the need to justify down.”

Regardless of whether the owner requires a budget, we were curious Do you prepare spreadsheets to support expenses each month?

More than half do, and the bulk of the rest submit reports of some kind. Just 6 percent do not.

Again, even if budgets are not established by the owner, we wondered Do your department heads have a budget?

Slightly more than half do not. About a third of captains require budgets of all their department heads. About 16 percent said only some departments have to adhere to a budget.

With or without budgets, we wondered Do you have a spending limit, above which you must seek approval?

Seventy percent said they do, but that limit varies depending more upon the owner or the owner-captain relationship, it seems, than the length of the boat.

“All major expenses above a set dollar value are sent to the boss, with options, for his approval,” said the captain of a yacht less than 80 feet in yachting more than 25 years.

“Up to $1,500,” said the captain of a yacht 180-200 feet in yachting more than 30 years. “Anything over needs prior approval.”

“Currently, no budget,” said the captain of a yacht larger than 220 feet in yachting more than 15 years. “Have a limit to $5,000 before asking permission. All expenses supported.”

“Will give the owner heads up on big items prior to spending anything over $25,000,” said the captain of a yacht 160-180 feet in yachting more than 30 years.

Do you have incentives (such as a bonus) to keep expenses down?

Ninety-four percent said they do not.

Flotsam and jetsam

Operationally, we were curious if captains faced similar financial hurdles, so we asked What is the yacht’s biggest annual expense?

Far and away, it was crew (including salaries, uniforms, training, etc.), chosen by 60 percent of respondents.

“Pay peanuts, you get monkeys,” said the captain of a yacht 100-120 feet.

“Try to keep salaries under control; greedy crew can look elsewhere for work,” said the captain of a yacht 200-220 feet in yachting more than 10 years. “We offer a good package overall, and a good working environment.”

“Well-paid crew, will motivate them to do the extra work (within knowledge and capacity), avoiding external subcontractor,” said the captain of a yacht 120-140 feet in yachting more than 10 years.

“Getting the best people for the value of money spent,” said the captain of a yacht 160-180 feet in yachting more than 30 years. “Salaries, repairs and fuel are the top three expenses.”

“But in refit years, then the refit expenses are far and away the largest expense,” said the captain of a yacht 120-140 feet in yachting more than 30 years.

Maintenance and repairs came in second with 21 percent of the vote.

“Boatyard visits and equipment upgrades are the biggest,” said the captain of a yacht 80-100 feet in yachting more than 25 years. “All must be priced out first and submitted for approval.”

“Ongoing upgrades to a 10-year-old yacht to keep it fresh,” said the captain of a yacht 120-140 feet in yachting more than 25 years.

“Normally, maintenance/refits is the largest expenditure as we do it every year,” said the captain of a yacht larger than 220 feet.

About 15 percent of respondents chose fuel and dockage.

“Previous boat, we sat behind the owner’s house so dockage expense was nil,” said the captain of a yacht 120-140 feet in yachting more than 10 years. “This owner, we have a great seasonal rate, but still a monthly dockage and electric expense that adds up. There is no way around dockage if you don’t own your own dock. Fuel, well, if you want to cruise then it costs money to run. You want to run fast then it might cost a bit more. Sometimes the fuel cost and burn gets attention because it is a big expense on one big hit that is easily noticed on the balance sheet. Plus they watch the market like hawks and every dollar up or down is felt quickly at the pump.”

The few “other” choices simply married two of the above.

“We spend about a third on crew, a third on maintenance and a third on paperwork (insurance, flag state and such),” said the captain of a yacht 100-120 feet in yachting more than 25 years.

And beyond the biggest expense, we wondered What is your biggest fiscal challenge?

We were relieved to see that more than two-thirds said they had no financial challenges with their current owner and program.

“Thankfully all invoices and available monies are not a problem,” said the captain of a yacht 120-140 feet in yachting more than 10 years. “Vendors are paid on time, the credit card always works and petty cash requests are met in a timely fashion. Sometimes, accounting scoffs at the size of some expenses or why, but usually a quick e-mail description is sufficient as they are not totally aware why things cost so much or why it is necessary to spend on certain vendors.”

Among the third who did, it was most often that the budget was not adequate (11 percent) and that bills were not paid on time (10 percent).

“Having adequate crew in numbers to keep the vessel in perfect shape, maintain a happy and good working crew,” said the captain of a yacht 120-140 feet in yachting more than 30 years.

“It hurts to develop trust with vendors and then the boss is tardy in paying them,” said the captain of a yacht 140-160 feet in yachting more than 20 years.

“On time is relative,” said the captain of a yacht 180-200 feet in yachting more than 30 years. “Management is used to a standard net 30. Industry has many small vendors who find it hard to manage net 30. They want seven or 14.”

Just two respondents said that crew are sometimes not paid on time.

But even these fiscal challenges are endurable.

“The crew are always a month or two behind in pay,” said the captain of a yacht 100-120 feet in yachting more than 25 years. “Crazy, but it’s an easy job so we put up with it.”

“Credit card balance management at the office is not as efficient as it should be,” said the captain of a yacht 100-120 feet in yachting with three owners more than 30 years.

Even though most captains said they had no fiscal challenges with the owner, there were a few other things that financially challenge captains.

“Crew who come into the program and say ‘The owner is rich, why should he or you care?’,” said the captain of a yacht 160-180 feet in yachting more than 25 years. “Wealthy people are not wealthy because they do not watch their money or hand it out freely.”

“A ‘yacht manager’ who is an accountant, has never worked on a yacht for pay and who does not come from a yachting background,” said the captain of a yacht 80-100 feet in yachting more than 30 years.

All the captains who offered final thoughts about budgets and yachts noted that budgets always help in building trust with the owner, whether the budget is official and formal or something the captain sticks to on his/her own. A few parting thoughts:

“Budgets build trust with owners,” said the captain of a yacht 100-120 feet in yachting more than 30 years. “If we call ourselves professionals, we should be able to act like it.”

“I do my budgets even if the boss doesn’t ask for them, and my monthly reports with documents by department,” said the captain of a yacht 120-140 feet in yachting more than 10 years.

“Rather than a budget, I think we need a financial policy signed with the boss,” said the captain of a yacht 140-160 feet in yachting more than 20 years. “This should spell out parameters of spending. It does not need dollar figures but can have them in there. i.e. the captain has authority to engage contractors for repairs as he sees fit for the safety of the vessel (could say a dollar figure up to a certain amount), and receipts to be submitted (however often). This is basically an OK from the boss to engage someone to do work.”

“No yacht should operate on a total no-budget basis,” said the captain of a yacht 120-140 feet in yachting more than 20 years. “Even in cases where I am given a great amount of latitude, I still involve the owner in the process. My very first owner taught me a valuable lesson. As captain, don’t try to win every battle. Trust is not built by being able to maintain a strict budget. Trust is built and maintained by make good decisions and keeping the owner informed.”

“A captain’s real job is crew and money,” said the captain of a yacht 180-200 feet in yachting more than 30 years. “Almost anyone can drive.”

“Owning a yacht is an expensive business,” said the captain of a yacht 160-180 feet in yachting more than 20 years. “Budgets and financial reports assist the captain, crew and owner to determine value for money, and make spending more efficient.”

“They run their businesses with budgets so why not the yacht?” said the captain of a yacht less than 80 feet in yachting more than 20 years. “It would be easier all round.”
Lucy Chabot Reed is editor of The Triton. Comments on this survey are welcome at lucy@the-triton.com. We conduct our monthly surveys online. All captains and crew members are welcome to participate. If you haven’t been invited to take our surveys and would like to be, e-mail lucy@the-triton.com to be added.

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