Finding Investors

[PinkPADIgal]

I am curious...

We are looking at doing some expanding and we are having a difficult time finding financial institutions to see that scuba is a good investment in the current economic climate. We are looking at options to raise capital and was wondering what kind of options are out there. We aren't excited about bringing on any partners, but interested in finding investors. How do you find them?

 

[bjf123]

I don't think it's necessarily the banks looking at scuba as a bad investment. It's more a result of the problems banks are having in recovering from the sub-prime mortgage debacle which has, in many cases, the banks tightening their credit requirements. What does your business balance sheet look like? How much cash flow is your business generating?

When my wife and I bought our dive shop last fall, we put up most of the money, but needed one additional investor. We've got a friend who's a diver and was interested in investing, but not being involved in the running of the business. From what I understand, a lot of the dive shops in our area have operational issues because of multiple owners/investors having different thoughts on how things should be done, and never really agreeing on things. This does nothing but cause problems. If you can avoid partners involved in operations, do it.

 

[aquanex]

The other person who replied hit the nail on the head. Whether you are presenting to banks and/or potential investors, they are going to look at your financial and business history, your cash flow, and your plan. How much of an investment are you looking for? If you are looking for a pure play investor, they are looking at what is the risk, what is their return on investment (ROI) and what is the time it will take to their money back and opportunity cost (could their money be making more or more safely somewhere else). They will want to know how professionally do you run your business? Do you have a business plan? How are you progressing against it? What is your marketing plan? Have you done market research or are your assumptions based on anecdotal/gut-feelings? What is competition like? Are you realistic?

If your balance sheet shows you scratching out a living, it is unlikely that you will have investors standing in line with their checkbooks. Smart investors look for smart investments. You have to craft your plan and presentation with that in mind.

I would check local business networks, high net-worth customers that may know you and how you run your business, ...in your area -- divers who work/have worked for Microsoft/Amazon/Starbucks...may also be interested and have money they are willing to invest. Are there local business owners you may be able to partner with (and who would benefit from your expansion) ...like boutique/adventure travel companies?

 

[bjf123]

Steve hit on a big point that I only hinted at, how professionally do you run your business. I think many dive shops, especially in non destination locations, are run as a hobby. The owners think they can start a dive shop with little overhead, which can be true, and then can go on dive trips for little or no money and can get all of their own gear at cost. They don't really worry about cash flow, inventory control and turnover, customer service, etc. That philosophy can survive for awhile, but not long term.

 

[clint@uniquescuba.com]

When I first started out in the diving business it took a few years to get the ball rolling. I took over a dive shop that had already been in business for 6 years and things were going good. After I had been there for a couple of years we were making good money and we were looking to expand into a new building and build a pool. We needed a loan to make this happen and I thought we were a lock!

I was wrong.

After looking at everything, our banker said he would not be able to give us the money because sales at the store always went down when I was out of town traveling. If I went on a liveaboard trip, sales were down while I was away. This was a big problem to the banker.

He said that the business was to reliant on a specific individual to give that kind of a loan. Until I could show that sales continuously came through the door whether I was in the store or not he could not help us out.

We worked hard to fix this problem and that resulted in a new store.

We developed better business systems and added additional profit centers to help this problem.