There's Something in the Water

There's Something in the Water

companies by Mark Gordon | Managing Editor

A close-knit family has built a one-shop boat retailer into a $200 million Gulf Coast juggernaut. It helps to not be shy about spending money.

The five Galatis that make up the leadership behind Anna Maria Island-based Galati Yacht Sales have spent the past 20 years or so defying what's largely considered normal and acceptable business behavior. For example:

• Company president is essentially an empty title. Joe Galati, the oldest of the company founder's five children, currently has the designation, but it's only for legal purposes. "We are one voice in everything we do; it is always 100% unanimous," says Galati, who lives in Destin and runs the company's three Panhandle locations;

• The company spends a hefty amount of time, money and personnel on attempting to improve the boating and boat-retailing industry, not just its own business;

• Although a company growth plan is currently in place, in the beginning and middle parts of the story, it was more or less growth by accident. "Our ability to expand," says Galati, nodding at his siblings sitting around a table at the company's headquarters, "was based on us graduating from high school."

The results of the Galatis' sometimes unorthodox approach have also defied the norms of the boat retailing industry, which has been slow to mature and is filled with many mom and pops that get by on a sale-by-sale basis.

While Galati Yacht Sales might still be entrepreneurial and mom and pop - or sons and daughters of mom and pop - it's far from small market.

In 2006, the company had revenues of $200 million, a number that has grown about 45% per year the past few years - in 2003, it had annual revenues of about $137 million, and 1996 it was at $9 million. It has about 175 employees, and is one of the largest privately held boat-sellers in the country.

Although year-to-year revenue growth slowed to the mid-single digits in 2006, CFO Mike Eiffert says industry-wide sales were in such a dive, "we'd have been tickled to death to even be flat." What's more, the company's growth over the past decade stems strictly from sales of boats and yachts ranging in price from about $200,000 to $13 million - not through acquisitions.

Eiffert, the only executive without Galati as a last name, thinks the company has reached the low point of the slowdown. He's projecting 15% to 20% growth in 2007.

Vikings and taxes

This from a company that started from scratch in 1970 repairing boats connected to an Anna Maria Island dock recently battered by a tornado. The Galatis' father, Michael Galati, Sr., moved his family from suburban New York City to Florida to start the business, and he settled on that location for primarily two reasons: His wife was named Anna Maria and the damaged dock came cheap.

The seven Galatis existed on the cheap, too. The whole family lived in a one-room building next to the dock - what is now the kitchen for Rotten Ralphs' restaurant - with no appliances and a well for fresh water.

The Galati children used the docks as a playground, and later as a learning ground for working in what would become the family business. They would work on the gas docks, wash boats and catch bait. Their mom worked too, managing the marina store and handling billing and deliveries.

The business grew slowly. Initially, it was just a repair station and then in 1972, it began selling some small boats. It continued that growth pattern through the 1980s, with the concentration of the business in repair and service.

Then, in the early 1990s, two factors led to a major expansion. First, in 1992, a federal 10% luxury tax imposed on purchases such as boats and yachts was eliminated, opening several additional, and lucrative, sales lines. Carmine Galati, who runs the company's markets from Anna Maria Island south to Naples, called the luxury tax elimination "incredibly significant."

So significant, that about five years later, the company received the rights to sell Viking Yachts, an industry star that is used for fishing and boating in international waters, such as the coasts of Costa Rica and Mexico. "Our customer base uses that boat everywhere," Carmine Galati says. "We went from a local market to being national and international."

The company now has eight locations along the Gulf Coast - seven in Florida and one in Orange Beach, Ala., with another location in the works for Houston. Ultimately, the goal is to be in any markets that touch Gulf waters, from Naples to southeast Texas, Carmine Galati says.

At the movies

The underlying philosophy behind the growth is what the family calls its obsessive devotion to customer service. That ranges from basic repairs to in-house produced boating DVDs to working on Christmas Day to finish a project.

"We deliver on our expectations, which is to exceed the customer's expectations," says Mike Galati, who supervises the company's service, repair and technical support divisions. "My dad always told us, 'you take care of the customer, and they'll be back.'"

The Galatis aren't shy about backing that up with money. About three years ago, for instance, the Galatis realized that repairing customers' boats at the same docks their staff was preparing new boats to be sold was creating a traffic jam.

So they designated an area in the company's Panama City marina as its Single Point Made Ready location. Now a team of technicians work full time there, assembling and prepping all of the company's yachts for sale.

Another costly, yet worthwhile investment in customer service has been in company-wide training programs for every employee. The company also runs a well-received apprenticeship program and is in the process of creating management training guides specific to each position.

Galati Yacht Sales has spent at least $100,000 on an annual basis the past few years on training, and Carmine Galati says that figure can go up, if necessary, adding: "We don't have a budget on training."

The Galatis have made financial commitments in other areas that can be traced back to their ultimate goal of perfecting customer service. One of those is in new business lines, which include a film company and a marina management firm.

The film company, called EPIRB films (the acronym for a Coast Guard distress system) is based on an old boating industry problem: When new buyers leave the dock, their initiation into their new boat is normally a quick chat from the salesman and a thick, jargon-filled manual.

In response, the film company makes Galati-narrated interactive DVDs on the ins and outs of the boat. Mike Galati, who has been supervising the production process, says the goal is to eventually sell the DVDs to boat builders, as well as use them for in-house training.

The marina management company is based on the same customer improvement approach as the film company, Joe Galati says, and he hopes to open resort-style marinas in the next few years in some of their markets. The company is also in the process of designing a new headquarters on their property, which would include a marina and other amenities.

Growing the industry

One final area in which the Galatis have invested is in improving the entire industry. To a man - and a woman, sister Fran Galati, head of human resources for the company - the entire family says their company will only continue growing and succeeding if the rest of the industry does. To that end, the company has supported Grow Boating, a Chicago-based national organization created to promote the industry and serve as a lobbying group on issues such as how local and state governments regulate waterways access.

The Galatis declined to release the specific amount they've given to Grow Boating, but in unison, they all say the money they've spent on improving the industry, training or any other company initiative as been worth it, because it all goes to improving the customer experience.

"We have committed a considerable amount of finances to growing the industry," Carmine Galati says, because "we are so passionate about what we do."

Review summary

Company. Galati Yacht Sales, Anna Maria Island

Business. Selling and repairing boats and yachts

Key. Family business is run by the five grown children of the company founder; it's one of the largest privately held boat sellers in the country.

Power customers

Advice for growing a company has always been a hot ticket, from buying books to hiring motivational speakers.

But the five sibling-executives at Galati Yacht Sales have come up with a more unique way of soliciting advice from a diverse and large pool of business gurus: Sell them their favorite possessions, such as yachts and high-end fishing boats.

By doing that, the Galatis have picked up an informal board of advisors, mainly current and retired CEOs who are also customers. The group has lent their expertise to the Galatis for a variety of situations, such as how to study new markets, where to get financing and dealing with inventory backlogs.

"It's awesome," says Carmine Galati, who runs the company's markets from Anna Maria Island south to Naples. "It's like having a private business seminar."

While the Galatis declined to name all the names, even a partial list of customer-CEOs that have been helpful over the years is star-studded. It includes William Steere, Jr., who served as CEO and Chairman of drug giant Pfizer for 10 years before retiring in 2001; James Armour, president and CEO of AM General, which makes military vehicles, including the Hummer; and Michael Szymanczyk, CEO and chairman of conglomerate Philip Morris.

Other CEOs who have been helpful to the company have ties to the Gulf Coast, such as Howard Peterson, an Indianapolis real estate developer who retired in Sarasota (and whose son is the current Indianapolis mayor) and Bob Jacobsen, CEO of Safety Harbor-based Jacobsen Homes. Jacobsen was one of the Galatis' first customers and has been a regular source of help, Carmine Galati says.

Each of the Galatis has a different approach to the relationship with the crew of CEOs. Sometimes they will call them up with a direct question, other times, things just come up during boating tours and fishing trips. The Galatis are careful not to abuse the relationships, and they have a company board of directors to guide the business, too.

Still, the powerful Rolodex has been a big boost.

"I genuinely credit a great deal of our growth to these CEOs and entrepreneurs," says Carmine Galati. "They were instrumental in us being successful."

-Mark Gordon

A family story

Galati Yacht Sales started as a one-dock boat repair station on Anna Maria Island in 1970. The two main employees then were Michael Galati, Sr. and his wife Anna Maria Galati. The company has since expanded to eight locations, has 175 employees and had $200 million in 2006 revenues. The Galatis' five children now run the business:

• Joe Galati, 46: Company president and co-leader of company sales; runs Panhandle locations, from Panama City to Orange Beach, Ala.

• Carmine Galati, 45: Co-leader of company sales; runs markets from Anna Maria Island south to Naples.

• Fran Galati, 43: In charge of human resources and other administrative departments.

• Mike Galati, 41: Supervises service, repair and technical support departments.

• Chris Galati, 37: Manages the Anna Maria Yacht Basin and is responsible for the Galati Fishing Teams.