To understand the complexity of managing a local dive shop, we’ll look at it under two central angles:
- Running all the functions of a small business. It applies to all small businesses.
- Running all departments of a dive center. It’s particular to the dive industry.
1) The Many Different Functions in a Business
Whether you manage a railroad with annual revenues of $6B or a small business with revenues of $500K, you have a bunch of different business functions to handle, including:
- Human resources
- …and so on.
With average revenues of about $500K annually, the local dive shop is either a small or micro business. There’s nothing wrong with that, except it can be challenging at times. With this level of annual revenues, it is unlikely you can afford a vice-president for each one of these functions. You have to wear many hats, all by yourself.
And the problem with wearing all of these hats is that you are unlikely to be good at all of them.
You may be good at hiring, coaching, and motivating staff, but you feel like your accountant speaks Chinese to you. You may be a marketing-wiz, but you have difficulties ensuring the team properly serve clients you managed to get in.
That’s a challenge every single small business, in all industries, have to deal with. If you already have experience managing a small business before acquiring or starting a local dive shop, you’ll have an advantage.
One way or another, if you want your small business to succeed, you’ll have to find help for what you are not good at. Accounting is an easy example. You hire an external accountant, and you pay him per hour. You probably hire somebody to build your website (contact the Business of Diving Institute if you need help with that). And so on.
Now, here’s the kicker. This is just the tip of the iceberg. On top of having to manage all of these different business functions in your small business, you also have six different small businesses to operate, all at one!
2) Diving Products & Services Sold by a Local Dive Shop
Six companies? What are we talking about? Hold on!
Let’s start by looking at what scuba diving products and services we sell in a dive center.
The Main Products and Services Sold by a Dive Center: The 3 E’s & 3 T’s
For the longest time, PADI taught instructor candidates that a dive center sells three things called the 3 Es of the dive industry:
By “experience,” they meant dive outings, dive travel – any activity related to going out and scuba diving.
Those are, indeed, the three main categories of diving products or services for which customers give you money. At the Business of Diving Institute, we prefer to call them the 3 Ts:
- Toys (Dive Gear)
By “trips,” we mean any outside scuba diving adventure whether it’s a single dive at a local quarry or a trip to the Galapagos.
What’s the Entry Point?
What brings customers to your dive center, for the first time?
It varies between a local dive shop (origin dive center) and a dive resort (destination dive center).
a) The Flow of Sales in a Local Dive Shop
For a local dive shop (origin dive center), it’s typically the training that brings people to your store, mainly for entry-level scuba diving courses. Then, you want to sell these people some dive gear before sending them on a dive trip.
For a local dive shop (origin dive center), it looks like this on our whiteboard:
Source: Business of Diving Institute
Training, Toys & Trips are the three main products & services sold by a local dive shop. The first time a customer comes to your dive store, it may be because he is looking at any of these 3. However, traditionally, in an origin dive center (local dive shop), most customers are coming in for training – to learn to dive – hence the most prominent arrow.
Once the student-diver is in our grip, we find a way to sell them as much gear as possible, hence the other big arrow from Training to Toys. These arrows represent the flow of clients.
Once you’ve sold them as much gear as possible, the next step is to convince them to join one of your group dive trips.
These three large green arrows represent the typical order in which you sell products and services to your clients.
This flow remains valid today. However, all of these three arrows are in danger.
- The theory part of courses are readily available online, and the booking of dive resorts are easily made online. Therefore, dive resorts see an increase in the number of clients showing up un-certified and wanting to complete their entry-level scuba diving course at the resort, bypassing the local dive shop.
- Sales of equipment per student-diver are also shrinking with the airlines being a monster to blame. But there are other reasons. For instance, the younger generations tend to go on trips during which they’ll do various activities with scuba diving being only one of them – and only for a day or two. Therefore, they will not travel with a full set of gear for all the activities they do.
- Finally, with information on dive destinations being so readily available online, divers don’t need you to select a dive destination and book a dive trip.
In short, the traditional flow of sales in the local dive shop “wheel” of products and services continues to be valid. But with intense downward pressure on sales on the three main flows.
b) The flow of Sales in a Dive Resort
In the case of a dive resort (destination dive center), scuba divers typically get in your dive center looking for the Experience / Trip.
For a dive resort (destination dive center), it looks like this on our whiteboard:
Source: Business of Diving Institute
“Trips” (the experience of scuba diving for fun) is the leading service sold by a dive resort. The dive boats are lined up and going out every day (or so). It is doubtful that somebody would fly to the Galapagos to shop for dive gear!
However, especially with the growth of eLearning, many customers may be looking for a place to complete their certification course and then, dive for the rest of the week.
We’ve kept a double green arrow from Trips to Toys because it is frequent for dive customers in a dive resort to purchase stuff. However, it is usually apparel and accessories. It’s rarely scuba gear.
In short, the traditional flow of sales in the dive resort “wheel” of products and services continues to be valid, although we can expect “Training” to grow, bypassing the local dive shop.
What else with PADI: More E’s.
Recently, PADI revised its list of “Es” in the Instructor Development Course (IDC) to make it 4 Es instead of 3, with a bunch of additional Es.
PADI’s 4th E is “Environment Awareness”.
The environment is essential to the dive industry, for many reasons.
One reason is that many scuba divers (especially those we labeled the “bird watchers“) are mostly interested in scuba diving to observe reef and tropical fish. If the environment is degraded to the point there’s little to see, it will significantly hurt the dive industry. We can play a significant role in actively protecting the environment so that we stay in business – and leave a planet to our children.
Yet, you don’t sell “Environment” to your clients. It’s not a product, nor a service you sell to customers walking through your door – just like the bird watching supply store doesn’t sell birds. Nobody shows up at your cash register to buy 3 Environment for the price of 2.
Therefore, although this 4th E from PADI is addressing an important issue for the dive industry, we believe it has nothing to do in a list of products and services sold by a local dive shop. PADI’s original 3 Es (our 3 Ts) are the three main lines of products & services sold by a local dive shop.
Other numerous Es PADI added to its list:
Providing entertainment, excitement, and enjoyment is a critical component of delivering a quality dive experience. But that is the way you provide diving products and services, it’s not something you sell.
As for exploration, it’s questionable. Being interested in exploring depends on the profile of the diver you are serving.
As we are interested, here, in discussing the management of a dive center, we are focusing on products and services we sell to scuba divers.
On that front, we believe PADI is missing on three other services sold by a dive center.
What else with the Business of Diving Institute: The 3 R’s.
If you have operated a dive store, you know that the following three services are, each one, a beast in itself:
- Rental Gear
- Refills (Fill Station)
- Repair & Maintenance (RAM)
These are support services, and they usually bring in much lower revenues than the 3 Ts. You still have to manage them.
These 3Rs are stand-alone businesses as well as support services for your three main businesses (the 3Ts). For instance, somebody may stop by your dive shop specifically for rental, maintenance, or fills. In most cases, though, rental and refills support your training and travel businesses.
As for repair & maintenance (RAM), it is often seen as an extension of your gear sales and more specifically, your regulator sales. Although regular maintenance should be performed on both the regulators and the BCDs, dive shops usually focus on regulators only. RAM should be supporting your training and travel activities, also.
If you want to encourage people to buy from you, you should give them reasons to do so. One could be that if they join a dive trip with one of your groups, you cover possible problems with dive gear. You should bring a few tools to do basic maintenance (e.g., measuring the intermediate pressure to determine if there’s an issue with the high-pressure seat). Otherwise, since you can’t bring all your tools (and you don’t want to spend the week working as a technician), you can carry spare gear (e.g. a spare regulator, an extra mask, etc.). You should do the same when teaching at the pool.
3) A Local Dive Shop is 6 Businesses in One
So, why are we calling them six different businesses? Because each one of these six diving products & services (the 3 Ts and the 3 Rs) are sold by one dive center while they would be, normally, encountered in totally different businesses with different critical success factors. Let’s compare.
- Training: This is like running a school. You have a lot of clients all at once and then, you have empty classrooms for hours or days. You need to schedule teachers, keep track of the progress of the students, etc. You’re running a school! One financial number you want to follow is “asset utilization.” For instance, your pool is an “asset” you want to use to recover your costs. You may need to expand into teaching other courses in that pool besides scuba diving. The same applies to your classrooms. Unused square footage is not suitable for profitability.
- Toys: This is about managing a retail store with all of what it entails, including purchasing, visual merchandising, preventing theft (shrinkage), scheduling staff, providing sales training and coaching to your team, ensuring the store is opened on time, etc. A financial number valuable to a retail store is ‘turnover’ which is a ratio showing how many times a retail store has sold and replaced inventory during a given period. If you have $500K in stock and your sell $350K of equipment per year… It’s bad! It means you have a lot of cash tied into inventory that may only get sold in 17 months.
- Trips: This part is rock’n’roll. You’re a travel agency and/or a tour operator. And in most jurisdiction, there are numerous laws and regulations about selling travel. On top of that, it usually runs on tight profit margins with little room for errors.
- Rental: This is like running a car rental location. The tools, software, and management skills for running such a business are very different than what is used in a retail store. How many hours per year is this rental gear used? It’s hard for a company to make money with assets sitting idle 80% of the time. As for satisfying customer, you need a reliable and accurate online booking system. And you must ensure their rental reservation is ready for pickup when they show up.
- Refills: This is like running a gas station. You have a sudden peak of clients and then long periods with no client. It’s also a different business than a school or a retail store.
- Repair & Maintenance: For this, you have to put the hat of a garage manager. You need qualified mechanicians; you need spare parts; you need to manage whether the client pays for the part or if you need to collect from the manufacturer under warranty. It’s another whole business in itself.
Imagine yourself owning and managing a private school, a retail store, a travel agency, a car rental place, a gas station and a garage.
All of these businesses would be at different locations (except perhaps for the garage and the gas station). And with so many companies, you would have a manager for each one of them. Another way of looking at it: You are managing a shopping mall, and you’re also managing all businesses inside that mall.
And it’s even worse than that because, in your case, there are complex overlaps between the six businesses. For instance, you must ensure that the rental department has all the gear you need to teach an Open Water Diver class this coming week. And you want to make sure there is consistency between what you instructors promote during training and what the retail store sells.
The management skills, the software, the tools, the staff, and the key performance indicators are different in each one of these businesses. There are many garages out there with very qualified managers – but these managers probably wouldn’t know how to manage a private school best.
4) You are Superman / Wonder Woman
We’ve started by looking at how difficult it is to manage a small business where you need to take care of all business functions like human resources, marketing, accounting, etc.
Now, on top of that, you own six different businesses, and you can’t afford to hire six qualified managers to run them. That’s why I often joke that as a dive professional, you’ve left a boring “9 to 5” job to work “5 to 9”!
How can you do it? We often hear, in the industry, that the local dive shop is the weak link – it lacks professionalism and consistency in the quality of its operations. Well, no kidding! Why don’t you try doing it yourself? It’s pretty much an impossible task unless you size-up to reach a level of $2M or more in sales. How many dive shops in North American have reached that level? Probably less than 5.
Quality On One Part Of the Local Dive Shop Operations
What we see on the ground is that each dive center has a specialty – that one area the owner is good at.
For instance, in an urban area in which I worked, I knew a dive store owner who was outstanding at servicing regulator, but the rest of the dive shop was in bad shape, and they rarely taught scuba diving courses.
Meanwhile, another dive shop was always fully stocked, with beautiful merchandising and excellent in-store service – but I would never bring my regulator to be serviced there!
And there was another dive center where they were teaching courses almost every day. That’s what the owner liked. But you had to ignore the week-old pizza next to the cash register.
5) What’s Next?
We have very few (if any) local dive shops where we can find all of these six lines of diving products and services under one roof while, also, receiving quality in all 6 of them. Yet, the training agencies and dive gear manufacturers require that you offer all 6 of them to be labeled a real dive center and become a dealer.
Since we have years of experience with dive centers falling short of satisfying customer expectations in all 6 lines of products & services, it’s time we redefine the structure and the role of the local dive shop, with the goal of providing consistency in the quality of the experience all around the globe while increasing value to the client. It will require a new business model.
Consumers expectations and shopping attitudes are not what they were in the 1980s. We need to leave the 80s behind.
Management & Quality Assurance
The Business of Diving Institute can help you establish management and quality assurance systems in your dive center. We would also, gladly, work with investors interested in redefining the dive industry for increased value to customers and better ROI.