I don't know about the rest of the country but in Kentucky, taxes absolutely kill small businesses. Especially payroll taxes. Bend over and bring your own vaseline on that one.
question on profit margins
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I don't know about the rest of the country but in Kentucky, taxes absolutely kill small businesses. Especially payroll taxes. Bend over and bring your own vaseline on that one.
Oh, you mean gross margin then (as opposed to net margin). That's what confused me.
As far as a business owner choosing to continue to run a money losing business, well, that just speaks to poor business sense I guess.
As far as a business owner choosing to continue to run a money losing business, well, that just speaks to poor business sense I guess.
Its not that simple, and you know it CBF.
But heh, presenting it that way makes the outrageous seem reasonable.
There are two knids of costs in running a business - variable and fixed. Fixed costs exist irrespective of how much product you move or even if you're open. Things like rent on the building are fixed costs and, to a large extent, so are utility costs (although there IS a variable component in there as energy use does change with traffic levels, particularly in a dive shop where a compressor has to run.)
Variable costs can be broken down into two categories - direct and indirect. A direct variable cost is, for example, the cost of the mask that you have displayed for sale. An indirect variable cost is the lost sales opportunity by displaying that mask - it consumes space that you could use to display something ELSE.
Labor has both a fixed and variable component. Obviously, the quality of labor you need to employ to fill a tank is not the same as the quality of labor you need to have to run a charter boat.
The problem with blanket statements like CBF made is that they are totally irrelavent out of the context of the entirety of the operation, and no two operations are identical in their cost structures.
A dive shop located on a beach, for example, might have a rent that is three or even five-hundred percent higher than one in an industrial location. Yet the first one will have more "curb appeal", and thus more foot traffic. Does this mean that you "owe" the beach shop owner a higher mark-up on your purchases because he decided to locate there?
Nope.
This entire market format is broken. It is broken because the shops and manufacturers have conspired together to keep it that way, with each "pushing back" on the other to decry and try to prevent change. The agencies are, to some extent, involved in this too. SSI, for example does not permit its instructors to teach privately (without a shop affiliation.)
IF that collusion were to go away, or IF a shop was ballsey enough to find a way to break the mold, you could have a set of structures that was VERY different.
For example, you could have a shop that sold ONLY gear. As such the insurance requirements might go away, being nothing more than common retail business insurance (e.g. don't slip on the floor of the building!)
You could also have a shop that sold service (overhauls, etc) and fills. They might need the "traditional" insurance, or perhaps not - perhaps, instead, they would operate on a waiver system - you want air, sign here. You want a reg fixed, sign here. Etc.
You could, finally, have completely independant instructors. Again, they might need their own insurance, but that's ok - its a part of doing business. Of course they might have their waivers too (they certainly do now!)
Would I need a "57% markup" if I was a gear seller? Maybe. But maybe not. I might be the "Best Buy" of Scuba dealers, and sell a lot of gear out of the box for very little overhead.
Would I need it to sell air or repairs? Maybe. Maybe even more!
Ditto for instruction...
But without the jackbooted ENFORCED bundling, business folks would decide which fixed and variable costs they wanted, and how to best tailor their business to make the profit - and value - proposition work.
To cry that you "need" some particular margin when you signed up for a bundled offering where you have costs shoved at you without your free election to be in that part of the business sounds like sour grapes to me - and the mark of a poor businessperson who is incapable of doing their own cost assessment.
This is Business 101 folks, and damn well ought to be in any business plan, which damn well (if you don't want to go broke!) ought to have been written and refined for MONTHS prior to entry into ANY business venture.
I'll bet my last dollar that not ONE of the dive shop sockpuppets in this thread or any of the others could present to me a business plan that actually covered the BASICS that MUST be present in ANY real business plan, and most of them have NO business plan of ANY KIND!
I entered and left lines of business from time to time when I ran my company. THE largest evaluation item when considering the entry into a new line of product or service offering was how it impacted my cost structure.
Before I opened my doors in the Chicago area, I spent three man-months writing and refining the business plan for MCSNet, including soliciting the input from and listening to the feedback from many "money folks" who had a LOT more experience in that stuff than I!
But heh, presenting it that way makes the outrageous seem reasonable.
There are two knids of costs in running a business - variable and fixed. Fixed costs exist irrespective of how much product you move or even if you're open. Things like rent on the building are fixed costs and, to a large extent, so are utility costs (although there IS a variable component in there as energy use does change with traffic levels, particularly in a dive shop where a compressor has to run.)
Variable costs can be broken down into two categories - direct and indirect. A direct variable cost is, for example, the cost of the mask that you have displayed for sale. An indirect variable cost is the lost sales opportunity by displaying that mask - it consumes space that you could use to display something ELSE.
Labor has both a fixed and variable component. Obviously, the quality of labor you need to employ to fill a tank is not the same as the quality of labor you need to have to run a charter boat.
The problem with blanket statements like CBF made is that they are totally irrelavent out of the context of the entirety of the operation, and no two operations are identical in their cost structures.
A dive shop located on a beach, for example, might have a rent that is three or even five-hundred percent higher than one in an industrial location. Yet the first one will have more "curb appeal", and thus more foot traffic. Does this mean that you "owe" the beach shop owner a higher mark-up on your purchases because he decided to locate there?
Nope.
This entire market format is broken. It is broken because the shops and manufacturers have conspired together to keep it that way, with each "pushing back" on the other to decry and try to prevent change. The agencies are, to some extent, involved in this too. SSI, for example does not permit its instructors to teach privately (without a shop affiliation.)
IF that collusion were to go away, or IF a shop was ballsey enough to find a way to break the mold, you could have a set of structures that was VERY different.
For example, you could have a shop that sold ONLY gear. As such the insurance requirements might go away, being nothing more than common retail business insurance (e.g. don't slip on the floor of the building!)
You could also have a shop that sold service (overhauls, etc) and fills. They might need the "traditional" insurance, or perhaps not - perhaps, instead, they would operate on a waiver system - you want air, sign here. You want a reg fixed, sign here. Etc.
You could, finally, have completely independant instructors. Again, they might need their own insurance, but that's ok - its a part of doing business. Of course they might have their waivers too (they certainly do now!)
Would I need a "57% markup" if I was a gear seller? Maybe. But maybe not. I might be the "Best Buy" of Scuba dealers, and sell a lot of gear out of the box for very little overhead.
Would I need it to sell air or repairs? Maybe. Maybe even more!
Ditto for instruction...
But without the jackbooted ENFORCED bundling, business folks would decide which fixed and variable costs they wanted, and how to best tailor their business to make the profit - and value - proposition work.
To cry that you "need" some particular margin when you signed up for a bundled offering where you have costs shoved at you without your free election to be in that part of the business sounds like sour grapes to me - and the mark of a poor businessperson who is incapable of doing their own cost assessment.
This is Business 101 folks, and damn well ought to be in any business plan, which damn well (if you don't want to go broke!) ought to have been written and refined for MONTHS prior to entry into ANY business venture.
I'll bet my last dollar that not ONE of the dive shop sockpuppets in this thread or any of the others could present to me a business plan that actually covered the BASICS that MUST be present in ANY real business plan, and most of them have NO business plan of ANY KIND!
I entered and left lines of business from time to time when I ran my company. THE largest evaluation item when considering the entry into a new line of product or service offering was how it impacted my cost structure.
Before I opened my doors in the Chicago area, I spent three man-months writing and refining the business plan for MCSNet, including soliciting the input from and listening to the feedback from many "money folks" who had a LOT more experience in that stuff than I!
That was long...
But what I said was the average shop in america needs a 57% profit margin. This is just statistics given by many dive rep meetings throughout the country each year. I don't know what else to tell you. I didn't want to get into how to run a business 101. A profit margin is a profit margin and people may call it different things for whatever reason maybe because of different schools or colleges we went to. Keep in mind I'm from Kentucky....Just kidding... One thing that you referenced to is the mask that sits on the rack for display purposes. This is called a "fixture" and is put into the upfront starting cost of a business.
At least it should be.is run poorly, then that number means nothing other than that some folks think that owning a LDS is a license to steal.
There is no value in "averages" like this, because there is no knowledge of the "average" shop-owner's business acumen or whether they even wrote a BUSINESS PLAN before going INTO business!
As I said, I'll bet 'ya that 90% of the dive shops could not present to a potential "angel" investor a coherent business plan. Not now, not when they opened, not EVER.
I'll further bet 'ya that far more than half of them never even WROTE a plan beyond some scratch on the back of a bar napkin.
There is no value in "averages" like this, because there is no knowledge of the "average" shop-owner's business acumen or whether they even wrote a BUSINESS PLAN before going INTO business!
As I said, I'll bet 'ya that 90% of the dive shops could not present to a potential "angel" investor a coherent business plan. Not now, not when they opened, not EVER.
I'll further bet 'ya that far more than half of them never even WROTE a plan beyond some scratch on the back of a bar napkin.
Well, I can't speak for anyone else. But I had to present a business plan to start the shop on the property that WE own. Well..It's obviously not paid off yet...
The profit margin average does have value....It gets us to communicate...
But in fact there is knowledge of the "average" shop owners business acumen.
If you want I can get you that too if possible, my next trip down. Believe you me..I'm out to help you out Genesis. Whatever you want, I'll try to get ya.
Probably, but that's because the business plan for a shop in most areas will tell you that's it's stupid to open one. They open them anyway because they want to.
The business plan can't work because of the model. For instance, if a shop wants to be a PADI (or other) member shop or an authorized dealer for any of the major manufacturers it's required that the shop provide gas fills. But...there is no way to sell enough gas in Laffayette In to justify the cost of a fill station.
That's it! end of business plan. LOL
You want to put in a business plan what products you want to stock to control variable material costs? Forget it, the manufacturer will try to tell you what to stock and how much money you'll put into their line each year. That's it again. End of business plan.
You want to make instruction stand on it's own as a profit center in your business plan. No way. In most areas, class revenue isn't going to pay UW liability insurance, travel, equipment depreciation and all the other costs. We'', I guess you could plan to use it as a loss leader but everything in a dive shop is a loss leader that is supported by equipment sales.
The point is that any reasonable business plan will tell you not to open the shop.
I tell you what, there are sales reps alone that will make you want to shut the shop down just so you never have to deal with them again. Seems like they would get a clue. It's amazing how they know what's best for your shop with YOUR money.
If true, and I don't doubt that it is, then the blame for the poor service and outrageous treatment is TRULY in the hands of the LDS owners (collectively), since without them that model would not survive.
SP, Suunto, etc could not sell their hardware without the shops. If the shops wrote business plans and then went to the manufacturers and said "this way, or forget it", the first would be told to stuff. So would the second. But by the 100th, the tune would change.
It would HAVE TO change.
But heh - as long as chicken scratch on a napkin works.......
Quite simply, I don't care what the profit margin is for an LDS.
I care about what I pay for the gear. If I believe that I'm getting value for my money, then I really don't care if its 1000%.
A reasonable profit is whatever the market will bear, customer by customer.
I care about what I pay for the gear. If I believe that I'm getting value for my money, then I really don't care if its 1000%.
A reasonable profit is whatever the market will bear, customer by customer.
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