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93

Michigan State
"’"m - . University

 

This is to certify that the

thesis entitled

Costs and Returns of

Michigan's Charter Boat Fishing Industry.

presented by

Charles L. Adair

has been accepted towards fulfillment
of the requirements for

Master of Science degreein Fisheries and Wildlife

 

 

@mJ/ 9 ZJ/WA

Major professor

Date May 31, 1979

 

0-7639

 

OVERDUE FINES ARE 25¢ PER DAY
PER ITEM

Return to book drop to remove
this checkout from your record.

 

 

 

 

 

.I‘\ In“ I‘ll‘lll‘llz

COSTS AND RETURNS or MICHIGAN'S CHARTER

BOAT FISHING INDUSTRY

BY

Charles Louis Adair

A THESIS

Submitted to
Michigan State University
in partial fulfillment of the requirements
for the degree of

MASTER OF SCIENCE

Department of Fisheries and Wildlife

1979

ABSTRACT

COSTS AND RETURNS OF MICHIGAN'S CHARTER
BOAT FISHING INDUSTRY

BY

Charles Louis Adair

This study was conducted to identify the industry's
investment costs, operating costs (fixed and variable), op-
portunity costs (labor, management, investment), financial
ratios and returns. Survey work conducted in 1978 included
a mail questionnaire (83% response), and personal interviews
(37) from a geographically preportionate sample. Only 14%
of the operators interviewed earned more than half of their
1977 personal income from chartering. Major motivations for
entering the charter industry appear to be lifestyle rewards,
supplemental income to cover costs of personal fishing, and
tax advantages. Median present value investment in boat and
motor(s) was $12,000, in equipment $4,750. Fixed costs for
the industry averaged $3,888 with variable costs $3,655.
Small, medium and large operators average 37, 71, and 110
trips per year, grossing $4,381, $8,954, and $18,935 respec-
tively. Return on investment including opportunity costs of
labor and management averages (-l4%), (-l%), and 14% for
small, medium and large Operators respectively. Ten percent
(10%) of the industry gain positive returns on investment,

roughly 20% break-even, and 70% lose money.

Dedicated to

My Wife Nancy

ii

ACKNOWLEDGMENTS

I would like to express my deepest appreciation to my
major advisor Dr. Daniel R. Talhelm for his patient guid-
ance and encouragement during this endeavor.

I am also grateful to Dr. Donald F. Holecek and Dr.
David I. Johnson for serving on my graduate committee.

For typing all tho those tedious tables, and for
cheerfully helping me with the many details of this project
I am very grateful to Sue Hazard.

I am indebted to the Michigan Sea Grant Program for
their financial support and the assistance of their Marine
Advisory Agents.

For their constant warm encouragement and trust I
thank my parents Don and Shirley, my brothers Claude and
Ken and my little sister Joan. ‘

Most of all I want to thank my wife Nancy for her
unconditional support and for the many personal sacrifices
she made to help me accomplish this goal. Without her un-
dying love and encouragement this endeavor would not have

been successful.

iii

ABLE OF CONTENTS

LIST OF TABLES . . . . . . . . .

LIST OF FIGURES . . . . . . . . .

CHAPTER

I.

II.

III.

IV.

INTRODUCTION . . . . . . .

A.
B.

Statement of the Problem

Objective of the Study

LITERATURE REVIEW . . . .

METHODOLOGY . . . . . . .

A.
B.

Phase I . . . . . . .
Phase II . . . . . . .

OVERVIEW OF THE INDUSTRY .

A.
B.
C.
D.
E.

Operator's Motivations

Age and Distribution of Operators .
Direction of Fishing Effort

Industry Volume . . .

Major Problems of the Industry . .

CAPITAL INVESTMENT . . . .

A.
B.
C.

Overview . . . . . . .
Boat and Motor(s) . .
Equipment . . . . . .

Electronics . . . . .
Baits and Tackle . . .
Rods and Reels . . . .

for

Downriggers and Outriggers

Miscellaneous . . . .
Shore Facilities . . .

iv

Chartering

Page
vii

viii

.10

10
13

17

17
18
21
21
22

25

25
27
28

28
30
31
32
33

34

Page
VI. OWNERSHIP AND OPERATING COSTS . . . . . . . . 35

A O overVi ew O O O O O O O O O O O O O O O C 3 5
B. Fixed Costs . . . . . . .

o
o
o
o
o
o
o
o
to
\O

Depreciation . . .
Insurance . .
Advertising .

Slip Rental

Storage . . .
Licenses and Inspec

Telephone . . . .

O

O O I O O O O O
O O C O O O O O
O O O O O O
O O O O O O O
O O O O O I O O

.5

b

tions

Accounting Fees . . 45

C. Variable Costs . . . . . . . . . . . . . 46
Fuel . . . . . . . . . . . . . . . . . . 46
First Mate . . . . . . . . . . . . . . . 47
Travel Expense to Slip . . . . . . . . 48
Booking Fees . . . . . . . . . . . . . . 48
Rods, Reels and Baits Replacement . . . . 49
Downriggers and Outriggers . . . . . . . 50
VII. RETURNS . . . . . . . . . . . . . . . . . . . 51
A. Overview . . . . . . . . . . . . . . . . 51
B. Gross Revenue and Volume . . . . . . . . 53
C. Summary of Fixed and Variable Costs . . . 53
D. Opportunity Costs . . . . . . . . -.- . . 55

Operator's Labor . . . . . . . . . . . . 55
Operator's Management . . . . . . . . . . 56
Total Investment 0 O O O O O I O O O O O 56

E. Summary of Returns . . . . . . . . . . . 57
F. Financial Ratios . . . . . . . . . . . . 58

VIII. MANAGEMENT TECHNIQUES . . . . . . . . . . . . 62

A. Alternative Uses of Boat . . . . . . . . 62
B. Record Keeping Practices . . . . . . . . 63
C. Fish Catch Success . . . . . . . . . . . 63

IX. OUTLOOK AND CONCLUSIONS . . . . . . . . . . . 65
APPENDICES O O O O O O C O O O O O O I I O O O O O O 68

A. Preliminary Survey, Questionnaire I . . . 68
B. Questionnaire II . . . . . . . . . . . . 69
C. Range of Average Operating Costs . . . . 73
D. Percentage Investment in Permanent

Equipment by Area . . . . . . . . . . . 74

Page
E. Average Investment in Permanent Equip-
ment for Small Medium, and Large
Volume Operations . . . . . . . . . . . 75

REFERENCES.....................76

vi

LIST OF TABLES

Table Page

1 Summary of mail questionnaire and personal
interview responses . . . . . . . . . . . . . . 15

2 Average cost of charter boat fishing operation
by area, Michigan 1977 . . . . . . . . . . . . 37

3 Average percentage breakdown of average costs
by area 0 I O O O O O o O O O O O O O I O O O O 38

4 Average costs and average percentages of
total costs for small, medium, and large
volume charter operations . . . . . . . . . . . 52

5 Average volume and revenue data for small,
medium, and large volume charter operations . . 54

6 Average financial and operating ratios for

small, medium, and large volume charter
operations . . . . . . . . . . . . . . . . . . 60

vii

LIST OF FIGURES

Figure

1

Percent of Michigan Operators in each income
category 0 I Q 0 O O O O O O O O O O I O O O 0

Description of study areas and relative con-
centrations of charter fishing businesses in
MiChigan' 1977 O O O O O O O O O O O O O O I O

F

Operator's years of experience by area and
total industry 0 O O O O O O O O I O O O O O 0

Number of present operators who were in
business before 1977 . . . . . . . . . . . . .

Number of charter boat operators in each gross
income category by area 0 o O o o o o o o o ' o

Percentages Of total investment allocated to
boat and equipment . . . . . . . . . . . . . .

Total operating costs for Michigan's charter
fishing industry, 1977 . . . . . . . . . . . .

Percentage of total operating cost made-up of
fixed costs 0 O O O O O C I O O O O O O O O 0

Percentage of total Operating cost made-up Of
variable costs . . . . . . . . . . . . . . . .

viii

Page

12

l4

19

20

23

26

36

39

46

CHAPTER I

INTRODUCTION

A. Statement of the Problem

 

Charter boat Sport fishing in Michigan has been a
significant segment of the state's recreational industry
since the mid-1960's. An "overpopulation" of alewives and
low quality sport fishing in Lake Michigan prior to the mid-
sixties, led Michigan fishery managers to begin salmon and
trout stocking experiments to control the alewives and es-
tablish a quality sport fishery. Salmon and trout have
flourished on the abundant alwife population and now are
the target of thousands of sport fishermen from Michigan
and all over the world. Because of the high demand for
this fishery, yearly stocking continues, to help maintain
and expand the present fishery. From the beginning of
this stocking program the extent and quality of this fish-
ery stimulated demand for charter boats. Anglers who found
it impractical to invest in the boat and equipment neces-
sary to fish far from shore still wanted an opportunity to
catch salmon and trout in the Great Lakes. In response to
this demand the number of charter boat businesses increased
from a scattered handful before the 1960's, to the more than

230 Operators currently licensed and advertising.

Until now little information has been available about
the business aspects of charter fishing Operations in Mich—
igan. Operators large and small find it difficult to compare
their performance to other similar Operations and to learn
about new management techniques. This study was designed
primarily to help current and future Operators Of charter
boat fishing businesses better plan and manage their time

and capital investments.

B. Objective of the Study

 

In order to assist current and future Operators in
running a charter fishing business in Michigan the goal of
this study was to collect and disseminate useful costs and
returns information from the Michigan industry. Three main
financial components of the 1977 industry were examined:
capital investment, ownership and Operating costs, and re-
turn on investment.

The objectives of the study were to estimate:

(1) How many charter businesses were in Operation

and where they were located.

(2) The amount of capital investment in boat and

equipment.

(3) Ownership and Operating costs.

(4) Returns experienced by different size Operations.

(5) Successful management techniques and current

factors that cause management problems.

It is hoped that the information in this report will be

useful not only to present and future charter Operators but
also to extension workers, natural resource planners, policy
makers and managers in future decisions affecting charter

boating in Michigan.

CHAPTER II

LITERATURE REVIEW

Until now little has been known about the financial
condition of the charter fishing industry in the state of
Michigan. Only one other study deals with the costs and
returns of charter boat fishing in the Great Lakes. How-
ever its primary emphasis is on the macro-economic impact
of the industry in Wisconsin not the economics of individ-
ual Operations on the firm level.

Charter fishing is an established industry along the
coastline of the United States. A number Of coastal col-
leges, universities, and state government agencies have
studied various aspects of the charter fishing business.
First we will review the Wisconsin study because it relates
most closely to the Michigan charter industry, then we will
review two studies of charter fishing in coastal waters to
'compare business techniques and practices.

Strang and Ditton (1976) studied the charter fishing
industry in Wisconsin to (1) describe the charter boat Oper-
ators, (2) their customers, and (3) to evaluate the indus-
try's financial status and local economic impact. In 1973

there were 98 charter Operators working on Lake Michigan

from Wisconsin ports. The industry generated $670,000 in
sales in 1973. Because of low average sales and profits,
there was little financial incentive for entrepreneurs.
Major motivations appeared to be tax advantages and life
style rewards. Individual Operator's sales averaged only
$6,832. Operating expenses of $5,305, exclusive of opera-
tor's wage, left $1,527 to pay the Operator for his time,
effort, interest expense, and other identified business ex—
penses. Because Operators had a mean investment in boat

and equipment of more than $13,000, industry return on in-
vestment was small (or negative if proprietor's wages are
considered). Even among those charter Operators who make

at least two-thirds of their income from chartering, operat-
ing profits before owners wages were typically less than
$4,000. Strang and Ditton believe the potential for profit
improvement appears to be limited by the relatively high
investment costs for each boat and its equipment, the limited
capacity of the boats, and the short season. Three-fourths
of the Wisconsin Operators, when asked why they began their
business, re3ponded that they did it because they enjoyed
fishing. Another 11% had commercial fishing backgrounds and
started their charter business because of their similarities.
The remainder of the operators entered the charter business
to Obtain summer employment, to take out clients of their
other business, or they could not explain why. Financial
Opportunity seems to have played a minor role, if any, in

the decisions to become charter Operators in Wisconsin.

Strang and Ditton did find that some operators entered the
business to reduce their taxes on their personal incomes.

Differences between northern and southern operators
was noticed during the interviewing. Most northern opera-
tors charter for a living and earn extra income during the
off-season at other jobs; most southern operators earned
their livings at other jobs and participated in chartering
for pleasure, tax savings, and some income during the sea-
son.

Most charter customers (89%) made short, one or two
day trips to participate in charter trips. Two-thirds were
Wisconsin residents. Less than 5% took charter trips as
part of a longer family vacation. Seventy-three percent
of the customers cited the sport of fishing for salmon or
trout as the most important motivation for making a charter
trip. However, approximately one-third of the respondents
also indicated that they made the trip to relax and another
12% were motivated by the opportunity to meet with business
associates.

Although Wisconsin charter customers tend to have
above-average incomes, 66% of those surveyed had incomes
below $20,000 per year. Most of the charter customers
(57%) came from relatively high status white-Collar occupa-
tions--professionals, technical workers, managers, proprie-
tors, Officials and salesmen. Another 25% held relatively
high paying blue-collar jobs, such as craftsmen, foremen

and skilled or semi-skilled laborers.

Strang and Ditton found that the average Wisconsin
charter customer caught 2.5 fish per half day charter.

Those chartering in the north averaged 2.9 fish; those in
the south, 1.8 fish.

The industry generated total sales of about $670,000
in 1973. It was estimated from the customer survey that
each charter fisherman spent $1.42 outside the industry for
every $1.00 they spent in charter fees. This accounted
for an additional $951,000 of expenditures. Charter fisher-
men, therefore, injected approximately $1.6 million into
Wisconsin's Lake Michigan port communities in 1973.

Since charter operators in Wisconsin made about 88%
of their operating expenditures locally, these direct expend-
itures in turn generate additional economic activity in com-
munities through multiplier effects. Other businesses,
such as lodging, eating and drinking places, that receive
fishermen's dollars also respend part of their expense money
locally. Applying a cOmmunity multiplier of 2.16 (that.
Strang developed in an input-output model for Door county
Wisconsin) to the $1.6 million of direct expenditures yields
an economic impact of $3,456,000 on Wisconsin's Lake Mich-
igan communities in 1973.

Brown and Holema (1975) did an economic analysis of
Georgia's marine charter boat fishing industry. They found
that the Georgia charter fleet was small but growing rap-
idly, having increased from 8 to 17 boats in four years

(1970-1973). The operator with the most experience has

been in business only 19 years. Operators caught a var-
iety of species including marlin, dolphin, sailfish, wahoo,
king mackeral, black sea bass, spanish mackerel, and cobia.
None of the charter operators kept any records of total
pounds of fish caught.

The average net income from the average charter oper-
ation was moderate, amounting to $5,108 annually. Only two
of the seventeen rely upon their net charter income for
their entire living. In 1972 the representative charter
boat investment was $28,883. Annual gross income was $18,830
while annual costs were $13,722. These figures were based
on chartering 812 hours. Break-even costs were $17 per hour.

The three most profitable Operators chartered an aver-
age of 1,241 hours annually compared with 812 for the average
operator. The additional hours lowered the break-even costs
from $17 to $11 per hour. The average net return to manage-
ment after all expenses for these three top Operators was
$26,374 annually. The only significant difference between
these three Operators and the average Operator was in number
of hours chartered.

Liao (1977) describes some economic characteristics of
charter boat fishing in South Carolina. Boats averaged 38
feet in length and 7 years old, with primarily diesel en-
gines. The average charter boat captain made 73 fishing
trips (mostly in summer) in 1976 and accomodated 423
anglers.

Gross annual income averaged $17,940 in 1976. Variable

costs averaged $8,972 per boat. They included boat repairs
and maintenance ($3,177), fuel and lubricants ($2,667),
hired labor, mostly mates ($2,385), and tackle, bait and
.ice ($743). Fixed costs averaged $3,511. The balance of
$5,457 covered taxes, loan interest, and captain's wages.
Liao found that most South Carolina charter captains
owned their own boats. As might be deduced from the level
of average gross profit indicated ($5,457 per boat), many
of the captains (45%) had other means of support in addi-

tion to their charter income.

CHAPTER III

METHODOLOGY

A two-part survey was conducted to collect the needed
financial data and management information to achieve the

stated objectives.

A. Phase I
The first phase was conducted from April through May
of 1978. A list of 224 names and addresses of sport fishing
charter operations was compiled from the Michigan Travel
Bureau's "Charter Boat Directory," and membership lists of
various fishing organizations in Michigan. A one page pre-
tested questionnaire (Appendix A) was mailed to each of the
224 Michigan residents operating a charter sport fishing
business.
With resPect to their 1977 Operation, each operator
was requested to:
(1) indicate how many years he has operated a charter
boat business.
(2) indicate whether his charter boat business supplied
more than half of his 1977 personal income.
(3) indicate what percentage of his fishing effort

while chartering in 1977 was directed toward:

10

11

a) salmon and trout of the Great Lakes, b) salmon
and trout from inland lakes and streams, c) warm
water game fish (pike, walleye, muskie, bass),
d) perch, panfish, or other.
(4) indicate the range of his 1977 gross income from
chartering.
(5) indicate the major problem(s) of the present
Michigan charter boat sport fishing industry.
One hundred and eighty-five (185) or 83% of the 224
operators responded to our first questionnaire. In the
first fifteen days 111 or just under 50% of the mail ques-
tionnaires were returned. Operators who had not responded
within 15 days were sent a reminder and another c0py of the
questionnaire. This mailing yielded 53 (24%) additional
responses. Operators who had not responded to either mailing
were sent a second reminder which yielded 11 more respOnses.
Sixty days after the first questionnaire was mailed 78% of
the 224 operators had returned questionnaires. At this point
10 of the remaining 39 non-respondents were randomly selected
and surveyed via telephone. Non-responding Operators sur-
veyed via telephone were found to be evenly distributed by
location, size of Operation and experience. Ten of the 185
respondents reported they had gotten out of the charter
boat business in 1976.
The gross revenue information obtained through this
questionnaire made it possible to stratify operators into

small, medium and large Operations. Operations grossing

12

0-$6,000 are considered small, $6,001—$12,000 operations are
considered medium size, and operations grossing more than
$12,000 a season are considered large. Almost three-fourths
(70%) of all Michigan operators are small grossing less than
$6,000 per season. Twenty percent (20%) of the industry
grosses between $6,001 and $12,000 and only 10% gross more

than $12,000 per year (Figure l).

 

$

i

Q

 

¥

 

PERCENT 01 OPERATORS

1%

 

 

 

 

 

"460.! CATEGORY

Figure 1. Percent of Michigan operators in each income
category
Because Michigan has coast line of 3,200 miles touch-
ing four Great Lakes and their connecting waters, the char-
acter of Michigan charter fishing can vary by location. Dif-

ferences in fishing quality, species available, and other

13

on-shore attributes, all contribute to the variety of char-
ter fishing available in Michigan. Therefore, the state

was divided into five areas (Figure 2). Area I, lower Lake
Michigan from Ludington south, has a longer fishing season
and higher population concentration than area II, the north-
ern portion of Lake Michigan. Area III, Lake Superior, has
the shortest season, low tourist pressure and Sparce popula-
tion. Area IV, Lake Huron, is characterized by shallow

near shore waters requiring more running time to cold deep
water than in Lake Michigan or Lake Superior. Compared to
Lake Michigan's areas I and II, area IV also has a low fish
population. Area V includes Lake St. Clair, Lake Erie, and
the connecting waters of the Detroit River. Almost all the
warm water charter fishing in Michigan takes place in this

area.

B. Phase II

Phase II was conducted in June, July and August of
1978. A sample (non random) was drawn from each of the
gross revenue categories defined in Phase I. In each of
the five areas we attempted to sample a proportionate number
of small, medium, and large operations. Of the 37 Opera-
tors personally interviewed, 13 were in the small category,
13 were in the medium size category, and 11 were in the
large category of Operators.

Each of the 37 operators surveyed were asked to pro-

vide information about his 1977 operation in the following

l4

 

 

    
 

 

 

 

 

 

 

 

 

’2’
MICHIGAN

 

 

 

 

  

 

 

 

 

 

LAKE

 

496A 1
’1
1!. v3“

 

T J:

 

 

 

 

ME 81’. cm!

 

 

Figure 2. Description of study areas and relative concentra-
tions of charter fishing businesses in Michigan,
1977

15

Table 1. Summary of mail questionnaires and personal
interview reSponses

 

 

 

 

 

Area Total mail respondents .Personal Percentage of
currently operating interViews area interViewed
I 33 8 10%
II 57 16 28%
III 10 6 60%
IV 15 4 27%
V 10 3 30%
Total 175 37 21%

 

major areas (questionnaire Appendix B):
A. Operators background
. Type and present value of boat
. Present value of equipment

. Record keeping methods and frequency

B

C

D

E. Business volume

F. Charter boat business expenses
G. Insurance coverage
H. Advertisement techniques
I. Consumer profile

J. Fish catch data

K. Alternative uses of boat
L. General information

All but three operators were interviewed in person with the

interviewer asking the questions and writing the responses

16

on the questionnaire. This method was found to be more
efficient than having the operator take time to read and
understand the questions. Three operators could not keep
appointments to be interviewed but did complete the ques-
tionnaire and mailed it to us.

Many of the questions pertaining to the present value
of boat and equipment were estimates based on the owners
knowledge of the industry and his particular equipment and
business. Only 24% (9) of the operators interviewed had
accurate records available on actual investment in equip-
ment, fixed costs or variable costs. To get a second
opinion on the estimates we received, informal interviews
were arranged with marina operators. In these interviews
marina operators indicated that the charter operator's
estimates we received give an accurate approximation of
the costs involved in operating a charter boat business in

Michigan.

CHAPTER IV

OVERVIEW OF THE INDUSTRY

A. Operators Motives for Chartering

 

Only 14% (24) of the 185 licensed Operators respond-
ing to our mail questionnaire reported earning more than
half of their 1977 personal income from chartering. Gen-
erally, charter fishing businesses in Michigan are a part-
time or second occupation. It appears that the primary
motivation for running a charter business is rarely profit,
but one or a combination of the following reasons: (1) for
the pleasure gained from fishing on the Great Lakes and
working at something enjoyable, (2) to pay the overhead
costs on a primarily personal fishing boat, and (3) for
attractive tax benefits on personal income taxes.1

To be able to work at something one enjoys doing is
more important to most operators than simply producing pro-
fits. Most Operators fall into one of the following cate-

gories: (l) he makes a modest living from chartering,

(2) he breaks even and has other sources of income, or

 

1Because a charter business has income tax advantages
that an individual boat owner does not have, i.e. Operating
costs deduction, some boat owners set up a charter business
for this reason. Being able to deduct certain expenses has
the effect of lowering the Operators real costs.

17

18

(3) he considers charter revenues only a supplement to his
costs for personal fishing. Because of the profit limita-
tions inherent in the charter fishing business, the major-
ity (90%) fall into categories 2 and 3.

For part—time operators to qualify for income tax de-
ductions of items such as depreciation, Operating costs,
maintenance and insurance, 51% Of a boats yearly use must
be business related. However, business use of 51% or more
allows you only a proportionate deduction. For instance,
if a boat is used 75% for chartering and $4,000 a year is
spent on maintenance, only 75% or $3,000 can be taken as a
deduction.

Pleasure boat owners have run into trouble with the

IRS lately when they have tried to treat part-time

chartering as a full-time business. Basically you

will have to show that you have a profit motive and

an ongoing business-—not just an on-again, off-again
sideline (Reinhard, 1976).

B. Age and Distribution of Operators

 

Operators range in age from 22 to 65, with an average
age of 44. About one third (29.5%) started their charter
business in 1973 and 1974, (see Figure 3). Only 17 Opera-
tors (9.5%) Of the current Operators were Operating before
1965. Of these 17 eleven (11) operate in Lake Michigan.

In Area III, Lake Superior, none of the currently
advertising Operators have entered the business since
1974, (Figure 3). This may indicate that the demand for
charter boat services on Lake Superior since 1974 has been

too low to enduce new Operators into the industry.

l9

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32:30 5 a...» 32:26 E 2...»
+3 9.- ...~ 0.6 v'o «to

32:25 3. 23>

.3, .91....i .I.; .810

 

 

 

 

 

 

 

 

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3. r8
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5. a.
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. 38¢

20

In southern Lake Michigan, area I, more than three
fourths (77%) Of the Operators have been in operation six
years or less. Less than half (48%) of the Operations in
northern Lake Michigan, Area II, have operated six or less
years, leaving a 52% majority who have Operated more than
six years. Therefore, northern Lake Michigan (Area II)
Operators generally have more experience than southern Lake
Michigan Operators. Sixty percent (60%) Of Area IV and Area
V Operators entered the charter industry in 1973 and 1974.
Although there is one operator who has chartered for more
than 30 years on this side of the state, most of the bus—
inesses are young. Figure 4 illustrates when the operators
answering our mail questionnaire entered the Michigan charter .

fishing industry.

 

an-
0“

Mo‘
gymu
0
3“”‘ u
gin»
:«ur
C
g‘flh
i so-

7 “or 40 1010-71 1012-13 urn-n 1970-11

to
. VIM ENTERED cm.

Figure 4. Number of present Operators who were in business
before 1977

21

C. Direction of Fishing Effort

 

Ninety-one percent (91%) Of the total charter boat
fishing effort is directed toward salmon and trout in the
Great Lakes and connecting waters. Only 3% of the effort
is directed toward salmon and trout in Inland lakes and
streams. The remaining 6% is directed toward warm water
game fish, i.e. walleye, muskie, bass, and perch. Almost
all of this warm water chartering is done in Area V, i.e.

Lake St. Clair, the Detroit River and Lake Erie.

D. Industry Volume

 

Responses to the mail questionnaire indicated that more
than one third (38%) of all operators in the state grossed
$3,000 or less in 1977. Adding another one third (33%) who
grossed between $3,001 and $6,000 in 1977, we have almost
three fourths (71%) of all operators grossing $6,000 or
less in 1977. From information collected in personal in-
terviews, median Operating expenses (exclusive of Operators
labor) are $5,200. If 10% of the value of the boat and
equipment is added (as depreciation) to operating costs, the
median operating expenses increase to $6,600 a season.

In summary 38% Of the operators in 1977 reporting gross
revenues of $3,000 or less did not cover their Operating ex-
penses, (labor is not included in Operating expenses). An-
other 33% grossing $3,001 to $6,000 are Operating around the
average break-even point. But, if a 10% depreciation rate

is used on the boat and equipment, approximately 71% of the

22

1977 operators could not cover all Operating expenses,
(exclusive Of labor). This leaves less than one third
(29%) Of the Michigan Operators who cover Operating costs
and contribute to a return on their time and capital.

Figure 5 summarizes the gross revenue of each area.

B. Major Problems of the Industry

 

Most endeavors whether for fun or profit or both, en-
counter some problems. The most pressing problems for Mich-
igan's charter fishing industry in the opinion Of the Opera-
tors are as follows, in order of reported importance:

(1) Indian fishing rights

(2) PCB and other fish contaminants

(3) Season too short to make a profit

(4) High insurance rates

(5) Non-licensed Operators taking business away.
Southern Lake Michigan Operators, Area I, ranked PCB and
other fish contaminants their most important problem.

Those along the northern shoreline, Area II, and Lake Super-
ior, Area III, were more concerned with the indian fishing
rights problem. Not enough salmon and trout in the lake is
considered the number one problem by Operators in Lake Huron,
although it is not one of the tOp five problems for the en-
tire industry. The problem of non-licensed Operators taking
away business from licensed Operators varies from port to
port. Usually the non-licensed Operators are pleasure boat

owners who get a couple friends together and share the costs

23

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hp huoqwumo wEOOGH mmoum 50mm :fl muouwummo umon kuumno mo Honesz .m madman

Acme-2.2.: Acts-2.23 Ants-39.:
9.00.30 2.30:. :80 .3310 2:3... :95 foo-=0 2:8... :30

0— up 2 9 9 o—
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é
9
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Ex!—

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«op wow nap «To 0.0 Gun 91° 2 a

so. 1!, 138?. 0.0 0.9 010

n

 

=. g = 1m: _ <w¢<

24

of a day's fishing. Licensed operators complain that some
of these non-licensed operators solicit charters as if they
were legally licensed, registered and insured. Because of
the liability coverage required to be a licensed charter
boat, insurance premiums for legal Operators are approxi—
mately twice as much as a pleasure craft. Thus an illegal
operator without adequate liability coverage has less over-
head to cover, but he also assumes more risk, as do his

passengers.

CHAPTER V

CAPITAL INVESTMENT

A. Overview

For most charter Operators the decisions that go
into selecting a boat and equipment are determined by their
personal tastes, preferences, and available money. Often
because the primary motive is not simply to make money,
initial investment decisions are not based on solid business
principles. These decisions, motivated more by pleasure
than profit, make it even more difficult to recover operat-
ing costs, much less realize a profit. Judging from our
personal interviews, some operators would be cOntent to
loose money in their charter business year after year, as
long as there are some tax advantages that reduce their own
fishing costs. However, if an Operator wants to maintain
his business status by Internal Revenue Service regulations
he must show that his Operation is for profit and not just
a hobby or tax shelter. Because of these restrictions,
even for the Operator unconcerned with showing a profit,
we will presume that Operators want to show a profit Often
enough to at least meet IRS regulations. In that case ini-

tial capital investment decisions are critical to long run

25

26

potential profitability. Since charter fishing in Michigan
is by nature capital intensive, initial investment decisions
in boat and durable equipment are critical for two reasons:
(1) a short season (six months maximum, May to mid November),
and (2) difficulty of increasing profit margins to make up
for short season. This combination of a short season and
thin profit margins, if any, make the initial capital invest-
ment decisions ones that have a large bearing on when, or

if, the Operation shows a profit. The more expensive and
bigger boats usually have correspondingly higher operating
costs i.e. insurance, fuel, maintenance and loan service.
Higher operating costs plus a short season and a ceiling on
fees, cut drastically into profit margins. Therefore an
operator serious about realizing a profit from chartering
must be prudent and plan ahead before investing in a boat

and equipment.

 
 
    
 
   
  
    

no (Average $20 , 810)

Boat and Metor(s)

Baits
Radar

Shore Facilities
Misc.
Radios

Fishfinders
Downriggers
Rods and Reels

 

 

Figure 6. Percentage of total investment allocated to boat
and equipment

27

B. Boat and Motor(s)

 

The average investment in boat and motor(s) is $14,600,
making up 71% of average total investment. Median investment
is $12,000. Even with this sizeable investment many charter
boat owners say that they need more aft space than is usually
available on standard cruise boats in the 26 to 38 foot cat-
egory. Currently, because of limited aft area, many opera-
tors prefer to take only four passengers even though their
boat is licensed for six. Operators interested in building
clientele feel that four comfortable, satisfied customers
are better in the long run than six unhappy one-time cus-
tomers.

Thirty-two percent (32%) of the operators interviewed
use fiberglass hulled boats;l primarily because of their low
maintenance time and fuel efficiency. All Operators inter-
viewed who were contemplating the purchase Of a new boat,
considered fiberglass the only logical choice.

Because fiberglass boats last longer and are in high
demand by recreationists, most pOpular name-brand models are
depreciating very slowly. The recent increase in the price
of petroleum products has caused boat manufacturers to re-
duce hull thicknesses On new boats to hold down prices.

Boats built prior to 1974 with thicker hulls hold their
value and in some cases appreciate above original prices.

Inflation and high demand for boats in general, are also

 

lFifty-four percent use wood hulls, 5% use aluminum
hulls, and 8% use steel hulls.

28

keeping the prices of new and used boats high. Ninty per-
cent (90%) Of charter boats have inboard or inboart-outboard
gasoline engines. The other 10% have outboards or inboard

diesels.

C. Equipment

Electronics (Radios, Fishfinders, Thermometers, Depthsounders,
Radar)

 

Today in Michigan modern electronic equipment is essen-
tial for a successful charter fishing business.- Radios for
example are indispensable to charter captains, for they en-
able them to communicate with other captains and keep abreast
of the current fishing conditions.1 Sharing of information
by radio helps the Operators in the same area to fish more
efficiently, leading to more fishing success and higher cus-
tomer satisfaction.

Total investment in radios averages $685. All but one
operator interviewed have both a marine and citizens band
radio on his boat. The marine radios are used almost ex-
clusively by charter captains during normal Operations be-
cause: (1) marine radios have a longer working range than
citizen band, (2) marine frequencies have clearer voice
transmission, and (3) the Coast Guard uses and moniters mar-
ine band frequencies. Usually Operators use their citizen

band radio as an inexpensive back up in case their marine

 

1Sharing of information by radio seems to be common
in all ports. Captains exchange information daily by radio
on what species are being caught, where they are being
caught, at what depth, and with what type of lures.

.

29

radio malfunctions.

Another electronic tool that operators use in con-
junction with their radio communications is a sonar device
for locating fish in Open water. This device is commonly
refered to as a "graph" or "fishfinder." Its function is to
indicate the number and depth of the fish the boat passes
over. This information allows Operators to stay with a
school of fish and to keep his lines at the correct depth.
In Michigan the average present value of the investment in
fishfinders is $1,117. Approximately 70% of the Operators
included in this average also have roughly $150 invested
in a depth sounder. Since this device indicates only depth
Of water under the boat, it is used primarily as a naviga-
tional aid.

Electronic thermometers for measuring water tempera-
ture and locating the thermocline are used by only 5% to
10% Of the Operators on a regular basis. Thermometers are
not being used regularly because: (1) the present avail-
able data describing prime temperature for specific species
is not dependable ("few fish have read the temperature
charts"), (2) present temperature measuring equipment on the
market is fragile and not made for everyday use, and
(3) the poor data and undependable equipment together make
the time and energy involved in taking temperatures unprofit-
able.

Investment in radar equipment is rare for a charter

fishing operation in Michigan. However, our interviews did

30

encounter two Operators with present value investments of
$3,000 and $8,000 in radar equipment. The two boats are

in the 40 to 60 foot range and are used by their owners
primarily as pleasure cruise craft, with charter fishing a
minor activity set up for income tax purposes. The ex-
tremely high cost of radar usually makes it an impractical
investment for the average charter operation hOping to make

a profit.

Baits and Tackle

All operators interviewed who fish for salmon and
trout reported using artificial baits exclusively. While
some operators are known to use live bait the majority do
not because: (1) Operators find no apparent improvement in
fishing success, (2) live bait is expensive and difficult
to obtain and store, (3) extra rigging and clean-up time is
required, and (4) customers prefer artificial baits over
the messy live baits. However, charters in the Lake St.
Clair and Detroit River areas (Area V) that concentrate on
warm water species reported using live baits more frequently
than artificial baits.

All Operators interviewed found it difficult to esti-
mate the present value of their investment in artificial
lures. Inventories or accurate records of lure purchases
are seldom kept. To estimate an average percent value of
baits per boat, operators were asked to estimate the num-

ber of lures they owned. This total was then multiplied

31

by an estimated average cost per lure Of $1.50. Using this
method the average present value in artificial lures comes
to $1,209. Investment per operation ranges from $50 to
$4,000 per boat (Appendix C).

Lures are purchased in small quantities throughout
the season due to wear and loss, but usually in the hope
thatalnew color and design combination will have the "magic"
fish catching characteristics. Operators found it "painful"
to realize the true extent of their investment in lures.
When questioned about the need for such an extensive inven-
tory of lures, captains refered to their desire for consis-
tent catches Of fish and satisfied customers.

In the past bait and tackle manufactures sponsored
some charter boats, supplying them with free lures and
tackle. Many operators welcomed this arrangement because
it was a way for them to reduce the cost of running their
boat. Others reportedly were not interested in being spon—
sored by one manufacturer because it limited their choice
Of lures. Today lure manufacturers seem to be getting away
from the practice of sponsoring charter boats to help test

baits and tackle.

Rods and Reels

 

Average investment in rods and reels is $783 with in-,
vestments ranging from $70 to $3,000 per boat. Depending
on the arrangement, size Of the boat, and fishing condi-

tions, from four to thirteen rods and reels are used at one

32

time. Operators usually have one or two extra rods with
reels on the boat for backup. Philosophies on the quality
of rods and reels to use in chartering vary. Quality
ranges from medium to the highest quality available. Oper-
ators purchasing high quality equipment reported long run
savings in replacement costs over lower quality rods and
reels. Operators believe that status Of the higher quality
equipment also improves customer satisfaction.

All operators interviewed use standard open face bait
casting type reels. The main attributes of the bait casting
reels are, simple dependable Operation, ease of maintenance,

and increased line life.

Downriggers and Outriggers

Present Value of the investment in downriggers and
outriggers averages $862. Investments per operation range
from zero for some warm water charters in Area V Who do
not use downriggers or outriggers, to $2,000 for a custom
equiped high volume Lake Michigan boat. All Operators in—
terviewed who use downriggers and outriggers have at least
four downriggers and two outriggers set up on their boat.
Operators report that more than five downriggers in use
at the same time is unmanageable in anything but calm water.
The most common arrangement is four downriggers and two out-
riggers. Sometimes, Operators attach two lines to one down-
rigger line at different depths thus pulling two lures be-

hind one downrigger increasing the chances of catching fish.

33

Besides lost weights or occasional cable replacement,
maintenance problems are minimal on downriggers and out-
riggers.

The level Of investment in downriggers can vary with
needs and goals. Depending on the projected yearly usage,
an Operator can gauge the level of quality to fit his par-
ticular operation. Expensive custom built electric down-
riggers are practical only for the high volume operations.
However, not all high volume operations take this view.

Two of the operators interviewed who gross over $12,000 per
year use hand Operated downriggers exclusively. As with
many equipment decisions, the choice of downrigger systems
and quality is determined by the size of the Operation, the

operator's tastes, and the preferences of his clientele.

Miscellaneous Equipment

 

To Operate a safe and efficient charter boat an owner
must invest in various miscellaneous equipment. Fish cool-
ers, food and beverage coolers, life jackets, rain gear,
fire extinguishers, chairs, binoculars, marine toilets plus
accessories, and assorted hardware all add up to an import-
ant investment. The average Operator has roughly $600 in-
vested in miscellaneous equipment.

Coolers for fish, and food and beverage range in price
from $25 to $150. Instead of using one of the large $150
coolers, many Operators prefer to use two medium size

coolers. This makes lifting coolers in and out of the boat

34

easier and safer. Life jackets of commercial Coast Guard
approved quality required for licensing cost approximately
$20 each. Raingear is an item that most Operators leave

up to the customer, but Operators who did supply rain gear

spent an average of $15 to $20 a set.

D. Shore Facilities

 

Few operators invest in shore facilities other than
a small storage chest near their slip. The operators who
did have an investment in shore facilities either owned
their own dock or they owned a house trailer so they could
live near their slip during the season. Only eight Of the
37 interviewed had any investment in shore facilities. The
average investment by these eight was $466, with $2,600

being the maximum invested.1

 

1Three Operators had charter operations connected to
marina businesses; none of the marina investments are in-
cluded in charter business shore facilities investment cal-
culations.

CHAPTER VI

OWNERSHIP AND OPERATING COSTS

A. Overview

Expenses that occur whether a boat goes on one char-
ter or a hundred are fixed costs. Examples include, de-
preciation, insurance, advertising, slip rental, storage,
licenses and inspections, telephone, and accounting fees.
In Michigan fixed costs account for 56.5% of the $7,543
average total operating costs, including depreciation
(Table 2 and Table 3) . Without considering boat and equip-
ment depreciation, total 1977 Operating costs average
$5,460. Figure 7 illustrates the percentage breakdown of
total Operating costs.

Expenses that occur only from the Operation of the
boat are called variable costs. Examples include fuel,
maintenance, travel expenses to slip, rods, reels and baits
repair, downrigger repair, first-mate, booking fees and
other miscellaneous expenses. For the average operation
variable costs account for 43.5% of their total Operating

costs (Table 2 and Table 3).

35

36

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oocmusmcu

wamoo DMNHM
Nn.om

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Hmuamm seam
magmauuw>e< be
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wcfiwvoa a names NN.H
msoocmaamomfiz
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madem<>

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n- men was as com emu nsoonaunoouez
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mom a OE. coo mg 93 nannies:
mo om an m cm vs uuoouuucsoa
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.866 com mvv Man can mama and. on onconuo ~o>uua
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auaquon mundane uuaddoa uuo-oa nuunaoa sausage cacao odnuqun>
savanna” > >H man an a «mac
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38

TABLE 3: Averege percentage breakdown Of costs by area, for charter beet fishing
operations, Michigan 1977.

 

 

 

 

LE
Variabie Ooete 1 n ‘ 111 IV v Induatrv
4 4 4 4 4 4
m1 13.7 14.9 19.0 23.2 17.8 16.1
Maintenance 7.9 11.3 9.2 3.9 12.2 9.8
Trevel Expense to Slip 13.4 1.7 3.1 5.0 1.7 4.6
Meele 4: Lodging 1.0 1.3 1.0 0.6 2.5 1.2
Rode, m1- : leit Replece.3.3 1.7 10.9 1.4 10.1 3.2
Downriggers 1.0 0.6 0.1 1.3 0.3 0.7
rust-ate 3.1 6.9 3.3 8.4 - 5.6
Booking reee 1.2 0.6 0.1 0.4 - 0.6
mm 1.6 1.1 2.3 1.7 6.4 1.7
Tbtel variable
Ooeta 46.2 40.9 49.0 45.8 51.0 43.5
rind coat-
Telephone 2.6 3.2 ' 0.9 2.9 5.1 3.0
Heintenence 4.0 5.7 4.6 2.0 6.1 4.9
911;: 6.3 5.1 2.0 ' 3.2 3.9 4.9
Ineurence 6.5 6.6 5.9 5.9 4.9 6.4
Advertising 6.2 4.8 2.0 2.2 5.0 4.7
Storege 5.0 3.4 0.7 2.6 1.8 3.4
Licenees a inapec. 1.1 0.9 1.2 0.9 1.5 1.0
Accounting reea 0.8 0.6 0.2 0.7 1.2 0.6
Deprecietion 21.3 28.0 33.4 33.9 19.7 27.6
mom riaed
Coete 53.8 59.1 51.0 54.2 49.0 56.5

Tbtll Coets 100‘ 100% 100‘ 100! 100‘ .1000

 

39

B. Fixed Costs

0.6% Accounting Fees

1.0% Licenses & Insp.
(56.6% of Total Costs Telephone

SA Storage

47
228 Advertising
Depreciation:
Slip Rental

Maintenance

Insurance

Figure 8. Percentage of total Operating cost made up of
fixed costs

Depreciation

Average depreciation on boats and equipment is dif-
ficult to determine because each Operator's financial situa-
tion determines which depreciation method he willuse.

In todays boat market, standard depreciation methods
are useful only for bookkeeping and tax purposes. When a
boat owner is ready to sell his boat he is interested in
the price he can sell it for not its depreciated value.
Regarding resale value in todays market, Reinhard says

one can figure that new power boats depreciate in
value roughly 20% in the first year, 10% in each of
the next three years and 5% a year thereafter. On
this basis a power boat in good condition will be
down in value about 50% at the end of its fourth
season. Taking account a general price inflation
for boats of 8% to 10% a year, a four-year—Old

boat would sell for about 10% less than its orig-
inal new boat price. A boat that sold for $10,000
new four years ago, with real value down 50% would

40

sell today for $9,000. A comparable new boat would
cost about $14,000.

General depreciation percentages for electronic equip-
ment are difficult to estimate because the resale market is
spoty. However it is safe to say that graphs and radios
lose at least 20% to 40% after one season of use, depending
on the quality and acceptance by the industry. Charter
operators normally do not buy used fishing equipment (i.e.
rods, reels, baits) although used radios and graphs are
frequently sold or traded. Again, priority is placed on
the captain's and the customer's satisfaction.

In this report all depreciation figures are calculated
using the "straight-line" method. For each operation depre-
ciation is calculated by taking 10% of the present value of

the boat and equipment (Table 2 and Table 3).

Insurance

 

Insurance accounts for 6.4% of the total operating
expenses, and is the second largest fixed cost. Operators
average $483 per year in premiums. Named as one of the
major problems in the industry, insurance rates jumped
20% from 1976 to 1978. More expensive liability coverage
is the primary reason for the increase. Although the in-
dustry's safty record in Michigan is superb, insurance com-
pany representatives claim one serious liability settlement
would wipe-out all the premium contributions of the rela-
tively few charter businesses.

Some operators have cut premium costs by taking ahigher

41

deductable. A group of Operators in the Great Lakes Charter
Boat Association is exploring the possibilities of setting

up their own insurance program.

Advertising

 

Advertising is essential for developing a full-time
or part-time charter fishing business in Michigan. Opera-
tors agree unanamously that word of mouth is the most effec-
tive advertisment they know Of. As in any business a satis—
fied customer is the most productive form of advertisment.
After word of mouth, operators reported that direct mail of
personal letters and brochures in the Off season worked
best, giving the highest return per advertising dollar. Es-
tablished operators use direct mail techniques in an attempt
to maintain and build their already established clientele.
Newer operators find it important to use direct mail after
their first season to hopefully persuade customers to re-
turn the following season. For Operators in ports with
tourist trade, newspapers and yellow pages reportedly
attracted a small number of charters each year. One Oper-
ator reported success with a group of neighborhood newspapers
in a large south-western Michigan city. Ads in the sports
sections of large metropolitan papers reportedly give a
poor return per advertising dollar.

Business cards are used by 80% of the Operators. Their
main purpose is to give established clientele telephone num-

bers and other pertinent information, and possibly assist

42

word of mouth advertising. Business cards are considered
a worthwhile investment.

Other advertising techniques used that Operators felt
gave very limited or no return per advertising dollar in-
clude highway billboards, sports show displays, television
ads, magazine ads, and radio ads. Operators believe very
few charters are the result of any of these techniques.

Some believe that a combination of word of mouth, reputation
and one or more of the other advertising methods could pro-
duce a new customer. However, the cost of the advertisement
(highway billboards, sports show displays, television ads
magazine ads, and radio ads) and the trouble involved in
placing the ads in most cases is thought to be more than

the net returns to the operator. Ten percent (10%) of the
operators interviewed Spent no money for advertisement Of
any kind. These licensed Operators have established a

large enough clientele from reputation and by advertising

in previous years to do as much chartering as they want

without advertising.

SlipgRental

 

Many Operators consider slip location to be an impor-
tan ingredient for a successful charter business. If one
wishes to cater to walk on customers,1 a highly visable,

easily accessible slip is necessary. These types of

 

1Walk on customers are customers who make no prior
arrangements or reservations. They just walk up to oper-
ators and arrange a charter on the spot.

43

operations are found mainly in the ports that have many
tourists. Local charter boat associations also find advant-
ages in concentrating the charter boat slips in one highly
visable central location. An association in Frankfort,
Michigan has found that a central location for all local
Operators increases public awareness of the industry, and
results in more charters for all Operators at that loca-
tion. They also feel there will be long term benefits as
more tourists are exposed to the charter industry. These
prime slip locations with high visability range in price
from $150 per season (including electricity and drinking
water) in some central Lake Michigan ports, to $1,400 per
season (not including electricity, drinking water or gar-
‘bage pick-up) for a prime downtown slip in a northern Lake
Michigan port.

Charter boat owners who occupy prime slip locations
close to a port’s central business district tend to be high
volume Operators. Part-time operators, usually find rela—
tively less expensive slip space further from the main con-
centration of full-time operators.

Slip space is becoming more and more scarce for com-
mercial charter operations and rental rates are increasing
every year. Besides the overall slip shortage some marinas
do not want charter Operations. A few marina Operators
fear early morning departures will disturb their established
customers who sleep on their boats, and/or that the fish

cleaning operation could create aesthetic problems in the

44

marina. State regulations forbid commercial fishing char-
ters from Operating out of a harbor of refuge and most
cities or towns do not permit them in their public docks.
Some cities, though, allow charter Operators to bid for a
limited number of city slips.

Average slip costs for the charter fishing industry
in Michigan in 1977 were $426. Short supply and inflation
are pushing this fixed cost higher every year. For boats
over 25 feet, slip rental is an unavoidable overhead cost.
Even operators with smaller boats that can be easily trail-
ered must rent slip space, or contend with the inconven-

ience of launching and haul-out for each charter.

Storage

Storage costs for the industry average $382. In-
cluded in that average are haul—out costs associated with
storing large untrailerable boats. Operators Of trailer-
able boats Often use their own yard or secure inexpensive
storage inland.

For boats over 25' storage costs are normally another
unavoidable overhead cost. Operators of boats less than
25' have the alternative to shop around for storage space
at the best price or use their own back yard at no cost.

This action can save from $50 to $200.

Licenses and Inspections

 

TO legally Operate a charter for hire one must possess:

(l) a Coast Guard motorboat license for six or less

45

passengers1 (four hour written exam, no charge), (2) a
sport trolling license from the Michigan Department of
Natural Resources ($16.00), (3) a state registration stamp
($15.00), (4) a boat inspection which ranges from $15.00
for a vessel less than 16 feet to $50.00 for a vessel 45
feet in length or greater, and (5) an inland passenger's
license for charters operating on inland waters ($5.00).
Average expenditures in 1977 for licenses and insepctions

was $73.00.2

Telephone

 

In chartering as with most businesses the telephone
is an indespensible tool. Telephone expenses for charter
Operators interviewed average $246 in 1977. Close communi-
cation with out-of-town customers on weather and fishing

conditions account for most telephone expenses.

Accounting Fees

Forty percent (40%) Of the Operators interviewed do
their own bookkeeping and accounting, and report no expense
for this fixed cost. Operators who pay for accounting ser—
vices spend an average $79 per year. Most charter businesses

are one-man Operations using the sole proprietorship legal

 

1Almost all Michigan charter fishing-boat captains have
only the Coast Guard motorboat Operators license for six or
less passengers. A license for more than six is available,
but because Of the limited capacity of sport trolling boats
more than six anglers on one boat is not feasible.

2For more information on licenses and inspection regu-
lations write to the Department of Natural Resources, Law
Enforcement Division, Box 30028 Lansing, Michigan 48890.

46

structure. Only 5% to 10% of the charter businesses are

legal corporations.

C. Variable Costs

 

($3,655 or 43.5% of Total Costs)

First Mate

Travel to Slip

Rods, Reels, Baits

Miscellaneous

1.2 % Travel to Slip

0.7% Downriggers &
Outriggers

0.6% Booking Fees

  
 
  
   

 

 

Figure 9. Percentage Of total operating cost made-up of
variable costs

Fuel

 

Fuel accounts for 16.1% Of the total Operating costs,
and is the largest single expense item other than deprecia-
tion (Table 2 and 3). To determine the average cost per
trip for fuel, we divided the total gallons burned by the
number of trips taken. Multiplying the gallons per trip by
an assumed price of gasoline in 1977 of $0.65 per gallon,
the industry average cost per trip is $17.50. Area III
and IV burn considerably more fuel than the industry aver-
age at $20 and $27 respectively. Longer travel time to
deep waters in Area IV and low fish populations in both

Areas III and IV necessitate longer running time per trip

47

to locate the scattered fish. Area I and II (Lake Mich-
igan) operators average $16 per trip. In Area V (Lake St.
Clair, Detroit River) operators spend the least for fuel,
averaging $13 a trip. This area requires little running
time from slips to fishing areas. Also, fishing for warm

water species does not require constant trolling.

First Mate

 

Of the operators interviewed 51% employ the services
of a first mate. Wages for first mates range from $8 per
half day trip for one captain's thirteen year old son, to
$20 per half day for a mate on a high volume Lake Michigan
boat. The average first mate payment is between $14 and
$18 a half day trip, although other arrangements having to
do with percentage Of the trip's gross are common. Some
mates depend on tips from customers for their income.

Yearly costs for first mates range from $130 to $1,800.

At the dock a mate's duties usually include cleaning
and wrapping the customers fish, cleaning up the boat, and
other minor maintenance duties. On a charter a first mate
helps set up and rig fishing lines while the captain locates
the area he wants to troll. After the lines are set and
the trolling begins a first mate‘s duties usually center
around steering the boat. This permits the captain to
take care of his customers by keeping lines set, communicat-
ing with other boats about which fish are hitting which lure,

and generally entertaining his customers while they are

48

waiting to catch their fish. On boats that average five
customers per trip, a good first mate is considered inde-

spensible.

Travel Expense to Slip

 

Travel time and money involved in getting to and from
one's boat is a substantial sum for some operators. In
Area I many operators live in inland cities, travel costs
account for 13.4% of the season's total Operating expenses.
In the other four areas the percentage is lower, ranging
from 1.7% to 5.0%. Allowing 15 cents a mile, the average

travel expense is $660. The median travel expense is $340.

Booking Fees

Booking fees are charges a charter Operator pays to
someone else for the service of arranging a charter. Usu-
ally Operators who have other people booking for them in-
corporate the services Of a nearby business that serves
potential charter customers, e.g. marinas, restaurants, or
bait and tackle shOps. The state-wide accepted fee is
10% of the charter's gross revenue. For instance, a marina
owner who books four customers with an Operator who charges
$35 each or $140 gross, would receive $14 as a booking fee.
A few marinas operate on a system of 20% for a charter
booked by the marina, and 10% for every charter booked by
the captain on his own. This extra 10% charged by the mar-
ina in addition to normal slip rental, is reportedly for

extra wear and tear on the marina facilities, i.e. rest

49

rooms, garbage, parking, and fish cleaning.

Often a full—time Operator will get requests for char-
ters he can not handle because he is already booked. When
this happens he usually will contact another local charter
captain and ask if he would handle the charter. If he
agrees the captain who had the charter originally will be
entitled to 10% of the gross receipt from the other boat.
This happens through out the season and most operators
wait until the end of the season to reimburse each other.
By working together throughout the season taking trips for
each other, operators keep their customers satisfied and

increase their total trips.

Rods, Reels and Baits Replacement

As soon as a charter boat gets to fishable waters,
lines are set and fishing begins. Rods are left set con-
tinuously throughout the charter unless some travel to a
new location is required. This continuous use of rods,
reels and baits takes its toll throughout the season. For
the entire industry, including operators who reported no
expenses for these items, the average expenditure is $259
(Table 2). Because some Operators from each category re-
ported no variable cOst for rods, reels or baits in 1977,
the averages in Table 4 are only for those operators who
did incur this variable cost. Average variable cost in

1977 for rods, reels and baits was $378, $308 and

50

$2801 for small, medium and large operations respectively.

Interestingly, large operators average less than medium or

small operators. This may be attributable to better equip-
ment that lasts longer, better care and maintenance, or

use of the right kind of equipment in the right circum-

stance .

Downriggers and Outriggers

Variable costs associated with downriggers and out-
riggers during the 1977 season amount to less than one per-
cent (1%) of total Operating costs. The industry averages
$66 with small, medium, and large Operations averaging $64,
$80, and $57 respectively. Primary expense comes from re-
placing worn downrigger wires and lost weights. Miscellan-
eous repairs on pullys and electric motors accounts for

occasional expenses only.

 

1In collecting data for this variable expense we asked
Operators who have rods, reels, or baits supplied by manu- _
facturers to estimate what they would have to pay if they
purchased them themselves. These estimates were used in
calculating Tables 2, 3 and 4.

CHAPTER VI I

RETURNS

A. Overview

After making allowances for opportunity costs of
labor, management, and capital investment, we find that
Operators grossing less than $12,000 a year, i.e. small
and medium size operators, are losing money or breaking
even at best. From a strictly monetary profit stand point
only the Operators in the large category comprising only
10% of Michigan's industry, realize a positive return to
investment (Table 3V4L.Medium size operations, representing
20% Of Michigan's charter industry, tend to be breaking
even with an average minus one percent (-l%) return on in-
vestment (Table 4). Small operators, who make up a 70%
majority of the industry, lose an average 14% on their in-
vestment. These findings indicate that 90% of Michigan's
charter fishing business either broke even or lost money
in 1977. Nearly three quarters of the industry lost money
in 1977. The following sections summarize how we arrived

at these findings.

51

52

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53

B. Gross Revenue and Volume

 

Annual gross revenue ranges from $2,050 to approxi—
mately $25,000. The average Operator in the small category
grosses $4,381, medium category $8,954, and large $18,935
(Table 4). To reach these gross revenues the average small
Operation takes 37 trips, medium size Operations take 71
trips, and large Operations average 110 trips per season.
Regardless of the total trips taken, the percentage of
lost trips do to bad weather is roughly the same for all
Operations. Most Operations lose roughly 20% of their char-
ters to bad weather, with medium size Operations losing
only 14.5% (Table 5). Total customers per trip for small,
medium and large Operations average 141, 283, and 493, re-
spectfully. The total hours spent with customers on board
fishing averages 228 for small volume Operators, 447 for

medium, and 698 for large volume operators (Table 5).

 

C. Summary of Fixed and Variable Costs

Fixed Costs

 

Total fixed costs for the industry averages $3,888,
about 56% of annual total costs (Table 2). Depreciation is
by far the single largest fixed cost averaging 27% of total
Operating costs for all Operations. The second largest
fixed cost is insurance (6-5% of total costs), then slip

rental (4.9%), and the maintenance portion of fixed costs1

 

1Data collected from personal interviews provided one
total figure for maintenance costs. Because maintenance
costs increase as use is increased, we chose to divide main-
tenance costs between fixed and variable costs. One third

54

 

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.bhma cmmwzowz .cheumuomO msecmwm unom

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55

equalling 4.9% of total costs. Because of low volume rela-
tive to the amount of investment, small Operations on the
average have almost 61% of their total costs allocated to
fixed costs, while medium and large volume operators have
slightly less going toward fixed costs at 52.4% and 54.5%

respectively (Table 4).

Variable Costs

 

Total variable costs average $3,655, about 44% of
the total annual costs for all Operators (Table 2). Fuel
is the largest single variable expense averaging 16.1% of
total Costs (Table 3). Maintenance costs are the second
largest variable expense, averaging 9.8% of the total costs
for all Operators. For a percentage breakdown of costs by
area see Table 3. For a percentage breakdown of costs by

size of operation see Table 4.

D. Opportunity Costs
Operator's Labor
If an operator were not spending his time working on
his boat, he could potentially be making money by working
for someone else. In this study we use $4.50/hour as a
conservative wage rate for calculating operator's Oppor-
tunity costs. For a small, medium and large operation the

number of labor hours per season averages 228, 447, and

 

of the total maintenance cost is allocated to fixed costs,
and two thirds to variable costs.

56

698 hours respectively.1 Multiplying these average labor
hours by our assumed wage rate of $4.50 per hour, Opportun-
ity costs are estimated at $1,026, $2,011, and $3,141 per

year for small, medium, and large Operations (Table 4).

Operator's Management Costs

It takes time and skill to manage a charter fishing
business. If the operator did not want to carry out manage-
ment responsibilities he would have to pay someone else to
do it for him. Judging from management arrangements in
other small businesses, a fee of 10% of the annual gross
returns would be a reasonable guideline. Using 10% Of the
gross as our guide the average Opportunity costs of opera-
tor’s management for small, medium, and large Operations

are $438, $895, and $1,893 respectively (Table 4).

Total Investment

 

Since an operator has capital invested in his boat and
equipment he is incuring an opportunity cost on his money.
For example the average small Operator has.invested $19,845
in his boat and equipment (Appendix E). If he invested
that same amount at 8.5% interest it would yield $1,687 per
year. Assuming the 8.5% interest rate, $1,687 is the invest-

ment opportunity cost for the small Operator. Using the

 

lLabor hours include only hours actually on the lake
fishing. Hours not directly connected with a charter, i.e.
maintenance et cetera, are not included. It should be noted
that maintenance labor can amount to considerable time and
effort depending on the owner's tastes and equipment.

57

same 8.5% interest rate the Opportunity costs for medium
and large operators are $1,290 and $2,158 reSpectively

(Table 4).

E. Summary of Returns

Average returns for small volume Operations were not
sufficient to cover fixed and variable costs (Table 4).
Medium and large volume Operations covered their fixed and
variable costs and also had positive returns to labor, man-
agement, and investment. Based on the total number of hours
fished by operators in each size category (Table 5), small
volume operators received (-$5.80) per work hour, medium
$3.30 per work hour, and large volume Operators $9.30 per
work hour for their labor and management (Table 4). In
other words the average small volume Operator is paying
$5.30 per hour for the privilege of working on, and manag-
ing his charter boat. The average operator in the medium
and large volume categories receives $3.30 per hour and
$9.30 per hour respectively for their labor and management
skills. Returns to investment for both the small and medium
size firms were (-l4%) and (-l%) respectively (Table 4).
This means that after covering total costs, Operator's labor,
and Operator's management there was insufficient profit left
for any return to investment. Large volume firms however
attain a return to investment of 14% (Table 4). Relative
to other small businesses this is a respectful return. The

primary reason the average large volume firm has a higher

58

return to investment is simply greater volume. The data
indicate that the average small and large volume firms

(90% of the entire Michigan charter industry) are accepting
very low or negative returns to investment. The reader is
reminded that some firms are more profitable than others.
Not all firms in the small and medium categories had nega-

tive returns to investment.

F. Financial Ratios

 

Business managers use ratios as indicators of business
financial health and Operating efficiency. Ratios allow an
operator to compare his present performance with that of pre-
vious years and with the performances of other charter bus-
inesses. Depending on an operator's goals and objectives
he can use the information he gains from.his ratios to more
efficiently and profitably manage his business.

In Michigan most charter boats are licensed for six or
less passengers. For reasons of comfort and customer satis-
faction, few Operators take six passengers very frequently.
The average customer per trip for a small Operation is 3.8,
for a medium size operation 4.0 customers per trip, and for
large Operations 4.5 customers per trip. This extra half
a customer per trip for large Operations adds $15 to $20
more to each trip for the large operator (Table 6). An
Operator averaging 4.5 customers per trip will gross approx-
imately $1,100 to $1,400 more per year than the medium

size operator averaging just 4.0 customers per trip, assuming

59

both Operators take 71 trips (the average for medium size
Operators). Large Operators also average more full day char-
ters. These longer trips are more profitable because of
higher fees and proportionately lower variable costs than
the common half day trips.

By analyzing both the customer per trip ratio and the
gross revenue per trip ratio an operator can determine:

(1) if he should raise his fees, or (2) if he should try to
increase his number of customers per trip. These decisions
will of course have to be made within the limits of what the
market will bear concerning higher fees. In 1977 small Op-
erators averaged $118 per trip, medium $126, and high vol—
ume operators averaged $172 per trip. The average large
volume Operator grosses $46 more than medium size operators
and $54 more than small operators because: (1) the large
Operator averages half a customer more per trip, and (2) the
large Operator also averages almost seven dollars more in
revenue per customer at $38.41 versus $31.07 and $31.64 for
small and medium size Operations (Table 6).

The asset turnover ratio (gross revenue divided by
total assets) tells a manager how much volume his operation
generates in relation to its value in boat, motor(s) and
equipment. The average asset turnover ratio for small,
medium and large charter operations is 0.22, 0.58, and 0.73
respectively (Table 6). For example, the small Operator's
ratio of 0.22 means that $1.00 of assets is required to

support every 22¢ of sales, and similarly for medium and

60

Table 6: Average Financial and Operating ratios for small,
medium and large charter boat fishing Operators,
Michigan 1977 '

 

 

 

 

Gross Income Category Small Medium Large
_ $6001-
Income Range 0 $6000 $12,000 $12,000+
Average Gross Revenue $4,381 $8,954 $18,935
Customers per trip 3.8 4.0 4.5
Gross revenue per trip $118 $126 $172
Gross revenue per customer $31 $32 $38
Asset turnover - 0.22 0.58 0.73
(gross revenue/assets)
Gross profit margin (-30%) 31% 45%
Net profit margin (-64%) (-2%) 19%
Gross profit per trip (-$36) $39 $76
Net profit per trip (-$75) (-$2) $33

 

large operators. It is difficult to compare the asset turn-
over ratio of a charter business with that of Other small
businesses because there are few similarities. Usually,
though, an asset turnover ratio less than one indicates
either volume is low, capital investment is too high, or
both.

The gross profit margins1 for Michigan's small, medium,
and large volume charter operators average -30%, 31% and

45% reSpectively. After taking into account the opportunity

 

1Gross profit is the total revenue minus fixed and
variable costs. Gross profit margin is the gross profit
divided by total-revenue (Table 4). Net profit equals
total revenue minus total costs, Operators labor, and Oper-
ators management (Table 4).

61

costs of labor and management, the net profit margin comes
to -64%, -2%, and 19% for small, medium, and large respec-
tively. Gross profit contribution per trip is -$36, $39,
and $76. In other words, every trip the average small Oper-
ator takes costs him $36 (not including labor and manage-
ment). Medium and large operators make $39 and $76 respec-
tively on their average charter. However when Opportunity
costs of labor and management are added in, the net profit
per trip comes to $-75, $-2, and $33. These figures show
that the average small operator is paying $75 per trip for
the pleasure and satisfaction of working on his own charter
boat. Medium size operators come close to breaking even,
loosing only $2.00 per trip. Large Operators average $33 '

per trip above their labor and management costs (Table 6).

CHAPTER VIII

MANAGEMENT TECHNIQUES

A. Alternative Uses of Boat

The only money making techniques employed by charter
boaters interviewed, other than fishing charters, were site-
seeing cruises and scuba diving charters. Site-seeing
cruises were not advertised heavily by any owner. Some men-
tioned being available for short cruises but this service
is not emphasized. Most sport fishing charter Operators
consider themselves fishermen, not boat drivers.

Only one Operator advertises charters for both fishing
and scuba diving. In this case scuba chartering is the main
business and sport fishing secondary. For efficient scuba
charters the boat is equiped with a side-scanning sonar.
This device gives a profile of the lake bottom and makes it
possible to locate wrecked ships and other underwater sites
of interest.

All Operators interviewed who had taken site-seeing
charters reported it amounting to less than five percent
(5%) of their yearly gross revenue. Operators agree that
site-seeing cruises are not economical at the fees customers
are willing to pay, especially when the operator's time is
included in Operating costs.

62

63

B. Record Keepinngractices

All full-time Operators keep some type of financial
records but less than half keep any count of the number Of
fish their charters catch. Completeness and accuracy of
expenses and receipts records varies from Operator to Oper-
ator.

It is difficult to determine if there is any correla-
tion between accurate, complete records and a profitable
Operation. This would seem to be the case however, because
in our interviews operators who had poor records tended to
underestimate costs and over estimate receipts. For some
operators who have impressive fish catch success, accurate
records of‘this area of high customer interest can be used

for advertising purposes.

C. Fish Catch Success

Records of fish caught by charter customers are kept
by less than half of the operators we interviewed. Com-
pleteness of the records that were available varied widely,
adding to the difficulty of determining an average catch
per customer per trip. However, by combining both the avail-
able records with estimates from the Operators who did not
keep records, the average catch per customer was estimated
to be 2.5 salmon and/or trout per trip.

Average catch for warm water species in Area V is
most likely considerably higher than 2.5 fish per trip. Be-

cause warm water charters catch many small panfish, operators

64

do not attempt to record their number. Since accurate
records were not available to base an estimate on, we did
not attempt to estimate average catch per customer per trip

for warm water charters.

CHAPTER IX

OUTLOOK AND CONCLUSIONS

The future of Michigan's charter fishing industry
will probably be determined by a combination of five fac-
tors, customer demand for charter services, the availabil-
ity of slip space, fuel costs, fish availability, and the
price of alternative activities. In recent years industry
growth has been strong. Increases in leisure time and a
growing awareness of Great Lakes fishing has stimulated
the Michigan charter industry. Growth potential however
is notlimitless in Michigan. Slip space all over the state
is at a premium, with many new owners having to trailer
their boat or bid up the slip rental prices. If slip space
shortages continue, growth of Michigan's charter fleet could
level-Off.

Since fuel is a major expense (16% of total Operating
costs), its ever rising price will force Operators to:

(l) raise their fee to maintain profit margins, (2) try to
save on other variable costs i.e. first mate, travel to
slip, booking fees and equipment replacement, or (3) accept
a lower profit margin and attempt to increase customer vol-

ume. A combination Of these three alternatives will probably

65

66

be the wisest strategy in dealing with the high fuel cost
problem.

The fourth major factor that will partially determine
the future of Michigan's charter industry is the availabil-
ity of fish. Michigan's salmon and trout fishery is based
on an artificially planted population. Where and how many
of these fish are planted can directly affect charter fish-
ing businesses. Therefore, future fish planting policies
will influence the health and growth of charter fishing in
Michigan. As far as can be dtermined, state planting poli-
cies will continue to provide a sufficient fishery for the
present charter industry.

As the price of charter fishing increases because of
higher fees and travel costs, the price of alternative means
of recreation closer to home may become more attractive to
some current charter customers. This tendency could lower
demand from out of state customer forcing Operators to con-
centrate more on local markets.

High capital investment, low profit margins, a short
season, and limited boat capacity all work together to
make charter fishing in Michigan a difficult way to make
a living. From a monetary profit point of view, there
are better ways to make money. But for the independent
person who loves to be on the Great Lakes fishing from his
own boat, enjoying it with other people, charter fishing
provides a high return of pleasure and satisfaction. For

this type of person accepted business evaluation methods do

67

not tell the whole story. To discover the rest of the

story, book a charter this summer.

APPENDICES

APPENDIX A

PRELIMINARY SURVEY, QUESTIONNAIRE I

I'lICl-IIGAN SEA GRANT PW
1978 CHARTER BOAT BUSINESS SURVEY

1. How eany years have you operated a charter boat business? 0-2 B 7-8 Q
3-4 C] 9°10 ._.
5.5 D 11+ D

2. 014 your charter boat business supply non: than HALF of 785 C] no G
your 1977 personal income? '

3. "bet personage of your fishing EFFORT while chartering in 1977,
was directed towards the following groups of fish?

 

__1 Salmon and trout fran the Great Lakes and connecting waters.
__1 Salmon and trout from M lakes and stress.
1 Warm water game fish. (Pike. Halleye. Muskie. or Bass)
1 Perch, panfish or OTHER
4. Please mark the box that best estimates the l977 $3003? - £2.88?)
GROSS REVENUE Before Costs of ur charter boat . - .
business. ( ) yo $6.001 - $9,000Q
e‘ggw] - $12,000”

‘12.m1 "" 315.0000

5. In YOUR OPINION which item or iteus below best describes the or
problem(s) in the charter boat industry? (If you choose more an
one. please mark the most important by circling the box.)

1.: High Insurance rates.

U PCB and other fish contaminants.

CI tion-licensed operators taking business away.
5; Rates too low to make a profit.

,| Season too short to make a profit.

'._=‘ Energy crisis problems.

-i riot enough fish in the lakes.

..!_._3 Docking space shortage.

Too many govemnental regulations.

1; Cannercial netting impact on sport fisheries.
‘=J Indian fishing rights.

5.! Increases in boat and equipment costs.

 

Tiwnk you for your cooperation.

Michigan Sea Grant Program
Michigan State University
Dept. of Fisheries a wildlife
East Lansing. MI 48824

68

APPENDIX B

QUESTIONNAIRE II‘

MICHIGAN cram soar OPERATORS Elam

Thefirsthauofthisgmstimirewiuconsuethemsttiu,theseccndha1£con-
sistsotquicklyanswerablequestions. Theentirequestionnaireshouldnottakesore
thantwentyninnteatooqlete.

OPERATOR 11mm:
Age
Harbor“)
Other Occupation
Operating Season
BOAT moment-rm
Estimated Resale Value 8 Is itpaidter? YES.— in-

 

 

Ensineis) l a 2 . l/O, Outboard, Inboard.- Gas , Diesel.
(circleone transachgrow)

Hull material: (circle) Wood, Fiberglass, Alsatian. Steel, Other

 

Doyouheveplanstopln'chaseanewhoatinthenertmyeers? YES— )0—
rm

 

 

PRESENT VALUE C? MIR-‘1' m m
(resale value)

Radios

ludar
Fishfinders
Rods a Reels
Baits a Tackle
Dcdnriggers

Shore Facilities
(office, phone answering equipment)

Other Equip-ant
(ice chest, rain gear, etc.)

 

 

 

 

 

 

 

 

Recommend
Indicatethetypeofrecordsyoukeepandthefreguncyofreccrdingfcryoer

operation in 1977.
can! wears! W seam

up. of fish caught
Species, depth. bait
Catcher ones. addresses
Each charter's receipts
Fuel costs

Other

Ellllll

3
3

 

6

\O

70

Page 2
ma sun's

 

 

 

 

Huber of half-day charters in 1977 at hrs-Im-
Hi-her of full-day charters in 1977 at hrs./charter.
Total trips

 

now-anytisesinlSfldidyouhannorningandafternoonhelf-daycharterson
Totalmofcustuersinls‘l‘l

 

Total Gross Revenue in 1977 8 (before espenses)

Consideringhadmetherandyouravainhletiletocharterowhstuthssarin
nuberofdaysyouoould possibly charter?

 

flownenychartersdidyouloseinlmhecauseofweather?

 

Ifnotsvailahletochartereverydayduringseason,specifywhichdaysyou
usuallycharter.

Which nonthisyourhusiest? What percentoftotal? ____a

 

mmmmmmisn

ruel:Oa11ensbnrnsd Totaloost

alangeinresalevalneofhoatfr'oet7‘lto'78
(canhe+or-. assuaenorsaleaintenance)

Changeinresalevelueofeguipntfru'flto'n

 

 

 

 

Heintsnanceandlqairfor 8:111
Engine
Other

 

Interest on loanis)

 

M‘Mswu

 

 

 

 

Telephone
Niggers
Slipis) Rental
(specify pusher of) first-sate Salary

 

Federal Incas Tar

 

Insurance Prenim

 

 

 

 

 

 

 

 

 

 

Other fares
Advertising

Monument
Winter Storage

Dentin tees
Licenses. Inspections

Misc. Supplies
Car kpense e Postage

(use .15 per sile)

Other

Heels 8 lodging

 

harntonestpege

71

Page 3
185081802 COVERAGE
3°11 Covena- Deductdbls
Equip-ant Coverage Deductable
Liability Coverage

 

 

 

Comte
museum
lad; in order of effectiveness, the methods you use.
‘__'_ Word of sputh '_ Sports shows
.___ Brochures ____Newspsper
_ Do not advertise _ Direct mail ._ Radio Id!
_ Business cards __ ‘N ads
.___ Signs 4 billboards ;___Hagasine ads

 

CONSUMER PROFILE

__2 Michigan residents within 20 ailes of port where you operate.
_2 Michigan residents, but go; within 20 uiles of your port.
__2 Ion Michigan residents .

Describe your average custoeer. _hale __Low incoes _Erperieneed
(check one from each group) _Fenale __Mediua income fisherman
utildren _nigh incoes _'dot Expat.
fisherann
FISH DATA

How say of the following species did your charters catch in 1977?
Lake Trout __ minooh Salnon bass '—

 

 

 

Brown Trout __ Coho Saloon __ Mantis ——
Steelhoad ' __ Atlantic Saloon Walleye
Perch Other

 

 

Cir-51g the species toward which you direct your fishing.
GENERAL INFORMATION QUESTIONS

Do you charter other than troll fishing charters? YES... NO _
(Scuba, Sight-seeing, etc.)

If YES, what percent is it of your total business?
that use your total incoea outside of ghartarigg in 1977?
How esny years do you plan to stay in the charter boat business? 0-1_ 5-6...

2-3_ 7-9...
34.... 10+...
Don't know _
ageless the nil-ber of days in 1977 you used your boat for personal fishing or
”mu“ 0 _ 26-40 __
1-10 _ 41+ __

11-25 __
Turn to last page

72

Page 4
GENERAL IIFOIHATIOH QUESTIONS (continued)

In(19;;1did you trad; fish or reduced rates for other food or services? !!S__.NO__
se ces being repair work or other favors) Estisstsd value in dollars

Unuld you be interested in any of the following information in regards to Operating
your charter boat business?

;(Chack appropriate line) v‘r’ Mod.r.g.1y Hot

Interested Interested Interested

Business sonagesent

Fish and lake biology

Mechanics (boat, engine, radios)
Laws affecting your business

Publicity techniques

Know data of fish populations in
your area

Information explaining Great Lakes
fishing to give to your custoesrs
Information of PCB and other
coats-insure

Other

 

 

ADDITIONAL BRIEF COMMENTS:

SEA GRANT PROGRAM
Dept. Fisheries 8 Wildlife
Michigan State University

East Lansing, Mich. 118821;
(517) 355-7491‘

Thank you for your tins and cooperation

APPENDIX C

RANGE OF AVERAGE OPERATING COSTS

73

 

 

cn-~ioo- unconc4~e onoo-c-n on~ouemon oo-~ueen mucn~unc- mauoo scams
eueco cones ~4noa
m~enieoe n~e~smem openness c~uuusoe mueou~o- nnmn.onn co~ne~oenn4n
oe~uc sauce oo~uo mnno on~nc om~no 444a nc~ncooou¢
nn~um~ -~-~o ~n-oe ~oumu ne~-~o ~o~u~o co~uosaec~ s eoecoo~o
oom~.c om~-nn~ eonnc cm~.o oom~ic cma.o onenonn
con~sc nucleon ccuuon conic coc~uc ccn~uco~ n=~4~uuo>cs
oc-icn~ o~e-enn ccoiee~ omeuco~ oc-ucna conucen 4444u444~
coe~ic canicmu eoeuo om~iom oce~nma~ ensues a-u
co-.o mneuco~ men.om o-uo cou~nmu cannon sconnu~ea
eneoo cou~n
omo-c omo-cn om~-cn aneuo~ con.o conuo eoooc4-eoe~r
conic . c-uo m~no conic com.c ease nc~xoon
oon~nc . omo~nc can.c oon~-c conic sues-uen~s
conic on... 878 cnnc comic 8?...“ 48462058
co-sc cc--mp~ mwnic noeuem~ ocean coe.c .4oe~nou u~4n 4 e~4eu .4464
cce~uc «maacm~ oc~io cn~-o oce~uc comnc nc~neo~ e e~44s
com—To ocnuo omeno movie 336 cone-O 534 3 encodes ~s>4u.~.
occmumn oeauomn ean~uom occmnnn cochlea coun.cc~ 4444:4nc~4s
comuimen «mo~-com c~nauee~ ocmnuccn ocm~-con oce~ume~ ~44»
ennoo 4~n4~u4>
suuecoc~ > >~ -~ - ~ 4444
an n e o o~ n 44~n444 no non-oz

 

.chm~ cso~ro«x .uous an codusweno ocdoedu anon unaware

new .nueou accuses we sons: .0 uanoa

APPENDIX D

PERCENTAGE INVESTMENT IN PERMANENT

EQUIPMENT BY AREA

IIBLE D: Parccntago hrcakdcun of total industry inwnstnnnt in poslnnnnt
again-Int. Michigan 1977.

 

 

 

 

 

An};
I :1 1;: IV v mug!

Boat 6 Motor(l) 71.2\ 71.54 64.44 82.34 48.44 71.04
Radio. 4.3 2.5 4.6 3.7 5.8 3.3
Radar - 2.6 - - - 1.5
rishtindnti 5.5 6.0 4.1 4.1 3.7 5.4
Rod: 6 tools 3.9 2.9 7.4 2.1 9.7 3.8
Baits 6.8 5.6 4.8 2.2 17.2 5.8
Downriggors 4.2 4.3 3.6 4.7 2.2 4.1
Shara facilitial 0.2 2.4 7.4 - 1.5 2.2
0th.: 3.9 2.2 3.8 1.0 11.6 2.9

m 1004 1004 1004 1004 1004 1004
Turnovur Ratio

(Grout ruv./asscts) .66 .63 .37 .36 1.04 .60

 

 

74

APPENDIX E

AVERAGE INVESTMENT IN PERMANENT EQUIPMENT FOR SMALL,

MEDIUM, AND LARGE VOLUME OPERATIONS

 

IRBLEJBI: Avaraga aira of invaatlant in parlanant aquiplant: anall. Indiu-
and larga volula oparatinna. Michigan 1977.

(parcantaqaa ara parcant of total invnat-ant tor aach catagory)

 

Vblula o! Oparatian

 

Sira Slall Madiua Larva
lumbar of gggglaa 13 13 11
Dollars 4 Dollars 4 Dollar: 4

Boat & motor(s) 14.461 72.9 9730 62.5 19.136 73.3
Radio(a) 646 3.3 1002 6.4 788 3.0
Radar 5.500' 4.3 - - —- -
Piahrindar(a) 935 4.7 711 4.6 1593 6.1
Roda a raala 592 3.0 846 5.4 826 3.2
Baits & tackla 850 4.3 1431 9.2 1270 4.9
Downriggara 967 3.7 775 4.6 1145 4.4
Shara facilitiaa 1223 1.4 1239 2.4 4080 3.1
0thar aquiplant 529 2.5 742 4.8 525 2.0

Rwaraqa total praaant
valua of aaaata

 

 

 

 

19.845. 100.04 15.550 100.00 26.100 100.08

 

*140 oparatnra only.

1431: :2: Rang. 01 Invaatlant

 

Boat

Radin

Radar
tiahrindar
Roda & raala
Baits & tackla
Dovnriqgara

Shara facilitiaa

\

 

 

nollara Dollar: Dollars
2500 - 50.000 5500 - 25.000 6500 - 30.000
350 - 1000 ‘ 300 - 1000 300 - 2000
0 - 8000
300 - 2000 400 - 1600 500 - 3000
180 - 3000 400 - 1800 200 - 2000
50 - 2000 200 - 3000 200 - 4000
0 - 2000 0 - 1000 550 - 3000
0~- 3500 0 - 2600 0 - 8000
0 - 1500 75 - 2000 100 - 1200

 

 

7S

LITERATURE CITED

LITERATURE CITED

Brown, E. E., F. J. Holema. 1975. "Georgia Charter Boat
Industry." Marine Fisheries Review, Vol. 37, No. 4:
11-12 April.

Liao, D. S. 1978. "South Carolina Party Boats and Char-
ters." Sport Fisheries Institute Bulletin, No. 295,
June.

Reinhard, Siegbert. 1976. "The Joys and Costs of Boating."
Business Week, June 28.

Strang, W. A., Ditton R. B. 1976. "The Lake Michigan Char-
ter Fishing Industry: A Product of Love and Taxes."
University of Wisconsin Sea Grant College Reprint
Wis-SG-77-374.

Additional References

Ahsan, A. E., Ball, J. L., Davidson, J. R. 1977. "Costs
and Earnings of Tuna Vessels in Hawaii." University
of Hawaii Sea Grant Program, Publication AR-72-01.

Alchian, A. A., Allen, W. R. 1969. Exchange and Production
Theory in Use. Chapter 14 "Costs and Output Programs."
Wadsworth Publishing Co., Inc.

Anderson, Susan H. 1977. "Boating Industry Management."
University of Southern California, Sea Grant Marine
Advisory Services USC-SG-ASI-77.

Battersby, M. E. 1976. "Great Tax write-Off: Boating
Expenses." Motorboating and Sailing 137:62-3, Feb.

Burns, R. W. 1976; "How to Cut Your Boatyard Bills."
Yachting. 139:77, Jan.

Cato, J. C., Morris, R. A., Prochaska, F. J. 1978. "Pro-
duction, Costs, and Earnings by Boat Size: Florida
Spanish Mackerel Fishery." University of Florida,
Marine Advisory Program. Florida Sea Grant Publica-
tion MAP-4.

76

77

Christiansen, R. A., Staniforth, S. D., Johnson, A., Cooper,
R. 1968. "The Wisconsin Ski Industry: Some Economic
Aspects." University of Wisconsin, College of Agricul-
ture and Life Sciences Research Report R 2064.

Dean, N. 1976. "This Boat for Hire." Motorboating and
Sailing 138:44-5, November.

Etzold, D. J., Murry, N. B., Veal, D. C. 1977. "Charter
Boat Fishing on the Mississippi Gulf Coast." Miss-
issippi-Alabama Sea Grant Consortium Research Pulica-
tion MASGP-77-021.

Fraser, M. B., Henderson, J. A., McManus, J. F. 1977.
”Survey of Commercial Sportsfishing Boats in the Coas~
tal United States." Oregon State University Sea
Gran College Program Publication No. ORESU-T-77-OO9.

Groene, J. 1973. ”Is the Charter Boat Business for You?"
Motorboating and Sailing, p. 72, Feb.

Hart, 8. 1976. "Exotic Horizons: Charter Excursions."
Yachting 139:74-6, Mar.

Hodgson, R. W., Moncrief, L. W., Cross, 6., Rittenger, D.,
Seiple, W. 1976. ”Recreational Boating Carrying
Capacity." Michigan State University Agricultural
Station Research Report, 283 Recreation and Tourism.

Knegendorf, W. A. 1976. "How to Get Boat Financing."
Motorboating and Sailing 138:784 Sept.

Manus, A., Wilson, R. L. 1977. "Recreational Boat Insur-
ance." University of California, Californai Sea Grant
Marine Advisory Publication, Leaflet 21006.

Merril, T. 1977. "Dollars and Sense of Sale/Lease-back."
Motorboating and Sailing 139:87, Jan.

Morris, R. A., Prochaska, F. J., Cato, J. C. 1977. "An
Economic Analysis of King Mackerel Production by
Hook-and-Line on the Florida Atlantic Coast." Univer-
sity of Florida Marine Advisory Program, Florida Sea
Grant Publication MAP-l.

Murry, J. D., Sutherland, J. E., Gratzer, M. A. J. 1976.
"The Charter Boat Industry of New York State: A Prob-
lem Analysis." State University of New York, College
of Environmental Science and Forestry.

Pulis, A. G. 1977. "Finance a Yacht." Yachting 141:100,
Jan. .

78

Smith, Frederick J. 1971. "Organizing and Operating a
Fishery COOperative, Part One." Oregon State Univer-
sity Extension Marine Advisory Program. 8.6. No. 19.

Smith, Frederick J. 1975. "Fishing Business Management."
Marine Cooperative Extension Service. Marine Sea
Grant Information Leaflet 8.

Stapleton, S. 1976. "Boat Buying as an Investment."
Motorboating and Sailing 138:80, Sept.

White, N. J. 1976. "ABC's of Chartering." Motorboating
and Sailing 138:82-3, Nov.