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Entrepreneurs
Business Observer Thursday, Oct. 29, 2009 10 years ago

Fill the Sails

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Doris and Steve Colgate grew their sailing school through calm and rough economic weather. They expect winds to be at their back next year.
by: Jean Gruss Contributing Writer

Doris and Steve Colgate grew their sailing school through calm and rough economic weather. They expect winds to be at their back next year.


Steve Colgate learned a good business lesson early when he started a sailing school in New York in 1964: Be careful with debt.

He had started Offshore Sailing School in New York City with a partner who owned a sailboat. When his business partner divorced a short time later, Colgate was burdened with paying the partner's ex-wife $100 for 36 months to use the sailboat.

That was a lot of money for a young entrepreneur just getting started. Accounting for inflation, that's nearly $700 a month today.

“In the very beginning, we had no money,” says Colgate, who survived by placing tiny ads in the New York Times and trading on his reputation as a champion and Olympic sailor.

Two years later, Colgate borrowed $6,000 from his mother to buy two sailboats of his own. “She didn't charge me interest and I paid her back,” Colgate says, chuckling at the memory.

Since then, Steve, 74, and wife Doris Colgate, 68, have built their sailing school with little debt. The Fort Myers-based company has seven sailing-school locations and it is close to selling its 350th sailboat, the Colgate 26, which the U.S. Naval Academy uses to train sailors.

The Colgates grew their business by reinvesting profits from the company. “We rarely borrowed, except when we got to a number of branches,” says Doris Colgate, the school's chief executive officer and president.

That conservative approach to growth is how the Colgates steered their business through good and bad economic times and it helped them survive last year's storm. “We were getting almost no new inquiries late last year,” Doris Colgate says. “It just fell off.”

Although they cut back on advertising, they invested about $40,000 in a new Web site (Offshoresailing.com). “The return is already starting to show,” says Doris Colgate, who expects the site to generate as many as 1,000 legitimate inquiries a month.

The Colgates are confident 2010 will be better than 2009, though they concede that no one can forecast that with certainty. One positive leading indicator: Forty people recently signed up for an offshore sailing class at the recent U.S. Sailboat Show in Annapolis, Md.

Outlook is improving
The Colgates have seen their share of economic growth and contraction after more than 40 years in the sailing vacation business.

In previous recessions, the Colgates say professionals such as attorneys, accountants and upper-level executives were largely spared. “Our customers got fired this time,” says Doris Colgate. “I don't recall that this level up here got hit like it has.”

Meanwhile, young retirees who wouldn't hesitate to spend about $1,500 on average for a sailing vacation a few years earlier are now guarding their retirement nest eggs. “They're out there sitting on their money,” says Colgate.
“Everyone was banking on the Baby Boomers. They're going back to work.”

Overseas customers have dwindled too, despite the rapidly falling U.S. dollar. In addition to the financial crisis spreading to Europe, foreigners aren't fond of stricter visa restrictions and long lines at U.S. customs. “People don't want to go through the hassles of coming to the U.S.,” says Colgate.

To generate sales, the school's sailing courses cost 25% less this year than last year. “There were times when we never discounted,” says Doris Colgate. Now, customers don't hesitate to ask for a deal. “They've been taught to bargain you down,” she says.

Because there are no licensing requirements, anyone can start a sailing school, which many entrepreneurial sailors have done lately. “There are a lot of cheap sailing schools,” Doris Colgate grumbles.

At the peak in the 1980s, Offshore Sailing taught about 3,000 courses a year in 10 locations. This year, the Colgates estimate they'll sell 1,900 courses and 2,200 courses in 2010. “We'll gradually bring prices up, but I can't do that quite yet,” says Doris Colgate.

The Colgates sold 40 courses at the recent sailboat show in Annapolis, up from 28 last year. “We haven't done that in years,” Colgate says. “I actually think it's going to be a good year.” A telling barometer will be the upcoming sail show in Chicago in January.

Fortunately, the Colgates have seven school locations, from Captiva to New York, the Chesapeake Bay and the British Virgin Islands. “If we were strictly local, we'd be in big trouble,” says Doris Colgate.

They sell their courses in conjunction with hotel rooms as a package, enticing travelers who prefer to do more than lay on the beach. “We have a product that gives people more than a tan,” says Colgate. “We sell a lifestyle; It's a learning vacation.”

The Colgates have also discounted the 26-foot sailboats they sell. So far this year, they've sold 11, down from an annual peak of 40 in 2000. For example, they'll include a $4,300 trailer, which amounts to a 10% discount.

The boat sales represent about 10% of the company's total revenues. “We are not tied to the boating industry,” says Doris Colgate. The Colgates contract the manufacturing of their sailboats to Precision Boat Works in Palmetto.

Bottom-line focus
Eventually, the Colgates plan to sell their company because they have no children. To prepare for that eventuality, the husband-and-wife team has been particularly attentive to controlling costs.

They cut unnecessary travel, paid close attention to how much they spend maintaining the fleet of sailboats and closed poorly performing locations in New York and the Florida Keys.

“We're risk takers, but we've pulled in our horns,” says Doris Colgate, declining to disclose financial details of the privately held company. “We need to maintain the bottom line.”

Besides a fleet of sailboats, the Colgates don't have a lot of overhead. They sell sailing vacations, so they've traded dock space at resorts in exchange for filling hotel rooms. For example, at South Seas Island Resort in Captiva, Offshore Sailing is one of five travel partners that account for a “significant number” of rooms, says Rick Hayduk, the resort's general manager.

Contracting with Precision Boat Works to manufacture the Colgate 26 boats also means the company doesn't have to maintain the manufacturing overhead. For both the courses and the boats, the Colgates collect payment before delivery.

One area that the Colgates have invested in lately is the Internet. They've spent $40,000 on a new Web site they hope will generate as many as 1,000 leads per month. To counter that expense, they've cut down on printing and mailing brochures.

The Colgates also cut back on public-relations expenses, spending money instead on social networking to stay in touch with magazine writers and editors. Over the years, Offshore Sailing School has been featured in Southern
Living and Delta's Sky magazines.

As a result, the Colgates expect a 10% increase in sales next year. But Doris Colgate is quick to say that's not enough. “We need to do better than that,” she says with a smile.

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