Posted by Ken Kurtis on September 18, 2000 at 22:57:18:
In Reply to: Re: razor thin profit margins posted by Eins on September 13, 2000 at 19:11:20:
Without getting too specific, according to the Small Business Administration, the average sporting goods store has a profit (can't remember if it's pre- or post-tax) of 2-5%. The DEMA average yearly gross for a store (and it's probably higher here in SoCal) is $350K. So at the end of the year, that owner/operator makes a whopping $7000-17,500. (And my personal guess is that many shops just barely break even, and that's only becaused the owners are usually the main employee so they save that expense.)
Many of you focus on the profit margin in scuba merchandise. It's true that the margin there (wholesale/retail price as a %) is relatively high, usually in the 35-45% range. (And some stores try to operate as low as 25% - they're usually on the "What Ever Happened to . . . ?" list.) But that margin supports other categories at the store, as well as paying for "general" overhead (rent, employees, utilities, etc.). For those interested, these are the income categories tracked at Reef Seekers:
BASIC GEAR
SNORKELING GEAR
SCUBA GEAR
ACCESSORIES
L.A. CITY CONTRACT
LOCAL BOAT TRIPS
REPAIR PARTS/LABOR
LENSES
SUNDANCE
BASIC CLASSES
ADV/OTHER CLASSES
UPS/FRIEGHT
RENTALS
REEF SAVER CARDS
GIFT CERTIFICATES
RSD/OTHER VACATIONS
CALIFORNIA SALES TAX
LAYAWAY PAYMENTS
(-) NEW RECEIVABLES
(-) BAD CHECKS
REDEPOSIT BAD CHECKS
MISC. INCOME
And these are the expense categories:
Officer's salaries
Staff salaries
Payroll taxes
Work comp/other tax
Employee benefits
Rent
Telephone (w/yellow)
Alarm
Utilities
Office supplies
Store expense
Acct. & legal
Advertising (ads)
In-store flyers
Newsletter
Bulk Postage
Postage
Capital expenses
Insur./PADI mbrshp
Loan interest
Bank charges
UPS/shipping charges
Entertainment/meals
Rental gear purchase
Website expenses
Miscellaneous
Repair parts
Rental repair parts
Merchandise purch.
VISA/MC fees
AMEX fees
Local boat trips
Service/repair exp.
Perscription lenses
Instr. fee - O/W I
- Adv/other
Supplies - O/W I
- Adv/other
Pool rental
Sundance Apparel
RSD foreign trips (tran. to trav.)
Corporate travel
Calif. sales tax
Refunds
Consulting fees
So don't get too hung up on how much we might make on merchandise. It helps pay for a lot of other things that make a full-service shop worth going to.
Ken Kurtis
NAUI Instr. #5936
Co-owner, Reef Seekers Dive Co.
Beverly Hills, Ca.