good or bad time to buy a dive shop?

Any feedback on the state of the industry and whether or not this is a good time to buy into a retail shop / charter boat business? What are some recent industry trends? Has 9/11 helped or hindered the industry domestically in the US? Are there profits to be made or only lost?

I'm looking into buying a dive shop in a popular california dive destination spot. Location is good, they have a 40' boat and pool facility. Revenues have dropped consistently and significantly over the last couple years. Broker says this is due to owner/manager involvement issues. Seems like a pretty good price. The shop's been in business for 13 years. I used to manage/work in a dive shop in college (ten years ago) and am a PADI DM, however, have been out of the diving loop for some time.

Any advice/feedback/suggestions is welcome!

Thanks,
L

wexwind once bubbled...
Revenues have dropped consistently and significantly over the last couple years. Broker says this is due to owner/manager involvement issues.

Click to expand...

This statement and explanation would make me wary.

I am not a business owner and not associated with any dive shop - just a diver.

Oh, I'm definitely worried about that! However, when buying a business, it makes sense that you want to buy it when it has room for improvement and expansion, not when it is at the height of its growth.

I can pry into the business and find out more about the declines. What I can't tell though is whether the whole industry is hurting (most specifically in California).

Well, I have no direct knowledge or experience myself, but from reading on this board for the last 7 months, I'd advise you to run a search and look at Mike Ferrara's posts over this time for the input of a small dive shop owner. Granted, he's not in CA, but I think he's been very vocal about his feelings of the industry and would be a good person for you to talk to / get advice from before making a decision....

From what I have seen here in Orange County, CA, the small dive shops seem to be run as though they are the owners' hobbies, not main source of income (but, let me add that I really don't have any inside knowledge of this as fact, it's just my observation, really of one particular shop where I know the owner has a "real job" and in fact keeps the shop purely for that reason).

I wish you luck with whatever your decision, and if you do decide to go ahead, let us know where you are (if that's against marketing rules, then pm me) so we can stop by and support you!

Just another general observation - if the trend towards buying gear off the internet continues to grow, how would this hurt your shop? Is a substantial percentage of the revenue from gear sales, or could the store survive on just training, rentals and boat charters, with minimal gear sales? Will air/nitrox fills be a revenue stream, breakeven, or a lossleader to attract business? (make sure you give good fills - short fills might cost you business if another store gives better fills!)

Don't under-estimate the value of a good website in directing traffic to your store - many potential new customers will judge the quality of a business by the quality of it's website. A store in Monterey, CA has started offering online bookings of boat charters at their website, and their charter business has jumped dramatically as a result. "Inc" magazine covered the success story.

Totally seperate note - if you do get the shop, be an innovative LDS and put some back inflation BCs, DIN tanks and DIN regulators in your rental fleet! Differentiate yourself from other LDS by having a long hose / bungeed backup rigged regulator set available for rent, and some 5' and 7' hoses on hand for sale. People are always on here asking a million questions about hose configurations because there's nowhere they can rent them to try.

Sorry, enough with the what-my-LDS-doesn't-have gripes

but dive business here on Catalina Island seems pretty strong. Of course we have an optimal location for plenty of open water and shore dives, good opportunities for classes to come out, and limited competition here (just two primary shops in Avalon).

Where does the shop's primary business come from: local or out-of-area divers? Catalina depends on those coming from the mainland, as well as foreign travelers. I'm probably a primary local customer for both shops here (I split my business). A mainland shop undoubtedly would have greater dependency on local divers.

Given that, how much marketing has the shop done locally. How much promotion of dive services and training? Is there a large enough local market? Who are the competitors, where are they located and what advantages/strengths does this shop gave in that competitive arena?

Personally I would not consider owning a dive shop. Too much potentially liability for my tastes. What kind of legal track record does the shop have? Is it incorporated? If so, would you be liable for previous mistakes and legal action based on them?

How much business experience do you have? You mention working at a dive shop years back? What have you been doing since? Is it just you or is your spouse/SO there to assist?

Of course these are all questions to answer yourself... no need to reply to me or the board. I know a number of my dive buddies who would love to have their own operation at some point. I think some of them are crazy... but if it weren't for such daring where would the economy be? Come to think of it, just where IS the economy???

Dr. Bill

saf_25 once bubbled...
... one particular shop where I know the owner has a "real job" and in fact keeps the shop purely for that reason)...

Click to expand...

I am curious, what shop is that?

Otter

I for one see the internet sales of dive equipment taking a LOT of business from the LDSs. I think an LDS that manages to figure out how to incorporate the LeisurePro style with a LDS front office will be the success story.

If you can find an LDS that will order your equipment and then let you try it out, THAT will be the one that survives. Best of both worlds...but with the manf lock on prices right now, it will be hard to do.

Not a business owner...not a highly qualified diver...just someone who watches the latest trends and sees what the internet is doing across the board.

I would say that the Dive Industry is in a major slump. Post 9/11 and economic issues have impacted the way people spend their money....there are still people coming in, but not like it used to be.

Additionally, as many have pointed out through numerous posts, the industry seems to be poised / in need of a major restructuring....Andy Grove would say we are nearing an inflection point. Online sales of equipment, changes in the diving protocols (ie. mixed gas, rebreathers) and going to cause major disturbances.

The good news is that MANY dives shops are run by divers with only basic business understanding. This represents a significant opportunity for someone with a solid business background and fresh ideas on how to add some excitement to the retail experience.

The downside is that the industry is very small (in terms of market size), dominated by the major manufacturers and certification agencies, and very political. Coming in as an outsider will be a challenge.

Assuming none of that scares you off, are you prepared to work 12 hour days, 7 days a week for an extended period of time? How will you generate revenue....margins on education are slim (you are yet an instructor so you will need to spend some $$ for training our outside instructors) IDC's have nice margins, but you have no Course Director and/or will need to pay dearly for the services of one.

I could go on and on....this is a subject that I have been wrestling with myself for some time now.....thusfar, being moderately conservative, I have been on the sidelines.

Otter

Probably an obvious statement, but there's no substitute for good (independent) research. Your broker gets paid whether you make a success of the business or not, so excuse my cynicism, but he/she will always have their own interests at heart.

That said, buying-in when the market is weak and investing your time to build the business is where the money is made.

If you're serious about the business, build a business plan. This should include a version on a "worst-case" basis? This is the only way to work out what your genuine fixed costs are - how much do you need to make to break-even (don't forget to include a small wage/disbursement for yourself - you have to live!!!)

Look for signs within the market place. If the broker is correct about the management affecting sales, their should be evidence of people going elsewhere (maybe some bad-mouthing too). You'll have to be creative to re-brand yourself away from the existing business so customers know the business is no longer run by uncaring half-wits...

Best of luck if you decide to go for it....