Why do I need Management?

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I am often asked “what does a yacht manager do – why do we need you – how do you add value?” For those asking this – including existing and potential owners of yachts – it is a reasonable question.

Think of a complex high value construction project, but further complicated by the involvement of several different jurisdictions and international treaties, and you begin to understand the reasons why a good lawyer with relevant experience (along with other good professionals) is essential.

This case study, drawn from a new client bringing two yachts under our management, will hopefully shed some light on the leading question and West Nautical’s role in the transactions.

Case Study

This case study had all the above ingredients – and more. Our client is a UHNW individual who was an experienced yacht owner having had a sub 40 meter yacht for many years and in the process of building an over 50 meter superyacht also. They knew the industry, they knew the pitfalls and the costs involved, and they knew there were many companies promising them the world and delivering little.

Both the client’s yachts were managed by another company and we had been invited through a mutual contact and recommendation to speak to the owners representative with the proviso of providing a quote for management services after the client had been let down by their existing service.

The negotiations for this case were very easy, the hard part was reasoning why our services were needed in the first place!

‘What is yacht management’ is a question that is, and was very hard to answer. The term is used widely as a general title for many service providers in yachting, from those offering fiscal, tax and corporate structure advice, to crew recruitment and refit planning. For West Nautical, yacht management is the provision of a complete range of in-house services, specific to the operational and technical requirements of the yacht and client, from an ISM-Certified industry provider.

Unlike a commercially registered 500GT and above yacht, where an ISM compliant ‘Company’ holding a Flag State issued Document of Compliance is required to be contracted as the management company in charge of ensuring compliance with the ISM and ISPS Codes and Maritime Labour Convention, sub-500GT commercially registered, and all private yachts, do not require this; and therefore a yacht management company is not ‘needed’. This client knew this and both of the yachts are privately registered with no intention to turn commercial, they followed up by asking another valid question, ‘I have a very experienced Captain, why do we need you?’

A Captain is an operational expert; they are responsible and accountable for the running of all onboard activities, from navigation to provisioning, crewing to itinerary scheduling. They know their yacht, their crew and the owner. They know what they like, what they do not like and how the yacht and crew can best deliver the service demanded of them by the owner. However, a Captain is one person. Yes they have a team onboard to assist them, but they are often very busy operationally and cannot plan medium to long-term activities such as upgrades or refits. It is unreasonable to expect a Captain to single handily liaise with designers, contractors, service providers, insurers, recruiters, suppliers, and surveyors, amongst many such 3rd parties; in addition to running the accounts, making payments, planning itineraries, managing the crew, arranging travel and all other routine tasks.

Will a Captain act in all these ways it if asked, generally yes. Yachting is not an industry where we say ‘no’ a lot. It is filled with positive people, people who coin a famous Sir Richard Branson quote whenever the opportunity arises, which in yachting is often …. “if somebody offers you an amazing opportunity but you are not sure you can do it, say yes – then learn how to do it later”.

In addition to the routine matters, there is the question of emergency support and providing a safety net to ensure compliance with local and international maritime legislation, both for the yacht itself and the crew working on it. If there is no management company engaged, who does the Captain call for assistance when in an emergency, when making an insurance claim or when being targeted by Port State Control or other authorities?

The discussion with the client on this point went on, we discussed how we as yacht managers could provide the Captain with assistance when he only takes orders directly from the Owner, not from us. This to us was simple, for us, the Captain was our client. We would be there to be used, we wanted to form a strong relationship with him, with our services being charged at a fixed monthly rate. This caused the client to question us further…. ‘fixed fee, OK, but what are the hidden fees…’. Simple – a fixed percentage of the invoice cost for any third party service or supply provided by us, fully transparent, and all must be discussed and approved by the client prior to invoicing – simple!

We summarised to the client by using what the Captains of our yachts tell us; that as the industry matures, professional management is ever more valuable. By definition, yachts are frequently in remote parts of the world. A management company is a great means to access important information in a refined and concise way for the yacht. Fleet circulars, discussions, incident reports and near miss statements, supplier and itinerary information pooling are all great ways for the yacht to obtain a greater wealth of knowledge, a lifeline to other yachts and the real world. ‘A well-structured yacht needs well-established management team.’

OK, so we had managed to reason why we should be engaged by the client, and that our services would be reasonable, especially when the price for an office full of experienced people, available at all times to assist the yacht equated to the same monthly cost as a junior officer…..!

So now the tricky part started, negotiations had ceased, contract agreed and signed, now we had to start delivering!

Scratching the Surface

The above analysis only scratches the surface of the work a yacht manager conducts. We hope, however, it goes far enough to explain that difficult question posed at the beginning!