We are seeking investors in order to finance the building of the boatyard, buy materials, and pay the workers during our initial two years of operations. The funds will be used for:
Expenses:
1) - Naval architects. France has the strictest codes, so we will have a reputable French naval architect examine, modify if necessary, and approve our yacht's design in every detail. After the suggested improvements, an independent second opinion by a Spanish naval architect will be useful. Their services may cost $14,300.
2) - Legal and filing fees. The services of a good local Spanish lawyer, a notary, and a "gestor" (filing assistant) are an absolute necessity, and are required some months in advance of the land purchase and incorporation due to numerous approvals needed at various levels of the Spanish government, local to national. They should continue to be retained afterwards as well. Three years of their services may amount to $71,400. We will need approval for the boatyard construction, and be legally assured that our yacht design meets all requirements in both Spain and France.
3) - Office rental. A small office should be rented for the business in Sant Carles de la Rāpita, beginning a bit before the company's incorporation papers are filed. Two years rent at $430/month is $10,300.
4) - Land for the boatyard. An unimproved land parcel with about 160 feet of frontage on the Ebro river will be sought somewhere between Tortosa and the sea. One hectare (2.5 acres) should be enough for the initial shop and any future expansion. We seek to own, not lease, this land due to the improvements we will make. We expect this land will cost about $93,000.
5) - Shop and tools. We have estimated quite exactly the cost of the first shop, which will be concrete floor and walls under a sturdy fabric cover, 140x30 feet. Some excavation will be required to access the river. Cost for all this construction, including contracted labor, will be $60,000. The cost of the boatyard's tools will be somewhat less than $32,000.
6) - Wages. We will require the services of one of the best aluminum welders and formers in Spain, and another who is an expert woodworker. Each of these will be assigned a young helper, an 'aprendido,' at a much lower wage as they learn the techniques. The fifth worker is the designer, John Beardsley, who will supervise and perform many chores after-hours in preparation for the next day's work. John Beardsley, who will supervise and perform many chores after-hours in preparation for the next day's work. This prep' will nearly double the crew's efficiency. Assuming full-time employment, and the crew of five paid a total of $93/hour, over two years their wages will be $357,000. These wages are included in the cost of each yacht, as we will not maintain an idle crew.
7) - Social Security. The Spanish government kindly waives corporate taxes for start-ups, but the workers' health and safety still must be insured at an average $36 per day per employee. Over two years this will total $86,000.
8) - First Yacht. The materials and labor for a yacht is about $230,000, depending on the buyer's selected options. Until payment in full upon completion, this must be included in the initial expenses.
In our calculations, the workers' wages have been included in the cost of the yachts. The total of all these initial costs excluding wages, then, is $593,000. Allowing for unforeseen expenses and cash-flow exigencies, we should have $750,000 to start. We assume that we can get government approval of our operation within one year, as is typical.
Expected earnings:
With five workers, this shop can produce three yachts per year, for a gross income (at an average $657,000 per yacht) of $1,970,000, and a net of $1,280,000 per year. If, as we expect, the boatyard will meet approvals and begin operations by the end of the first year, we shall have earned $2,560,000 net at the term of the loan. Of course this depends on advertising and sales, but we believe the advantages of our design are such that the shop will keep busy over the initial two years of operation and build and sell six yachts. Even if just three yachts are sold, the loan agreement will be fulfilled on time.
Risks:
The most significant risk is that the design of the boat or the boatyard will not meet governmental approval at some level, or that the Spanish bureaucracy will fail to decide either way within a year. If at the end of the first year, our prospects for establishing the Ebro River boatyard appear bleak, we will opt either to return the outside investors' capital plus 5% interest, or re-initiate applications for a boatyard in southern France where the process is more predictable.
After the boatyard is established, in the unlikely event that we fail to sell boats or are forced to cease operations for any reason, many of the above expenses are recoverable. The land, the boatyard, shop, tools, and at least one yacht (perhaps incomplete) can be sold to repay the loans, and the loan agreement will state this as a collateral assurance. However, even with this collateral, up to 50% of your capital is at risk.
Estimates above are determined using the exchange rate of $1.00 = 0,70.
