Buying a Scuba Dive Business in the Tropics is something that seems like a bit of a Black Art to most dive instructors and dive centre owners.
Many of them have spent the past 10 plus years in the tropics, living the good life. After a while working as a Divemaster, they progress onto instructor and spend a few years working for a selection of dive centres and liveaboards around the world.
At some point an opportunity pops up that one of these dive centres is looking for investors, or indeed looking for an all out Buyer…
Next thing that pops up is “Right, this sounds good, what do we do now and what information do we ask for now to make sure we’re not buying a White elephant?” (or words to these effects, to be honest, this is normal uttered after a few beers and has a bit more of a fruity flavour to it, lol. We are still scuba divers after all…)
This article is going to look at the All Out Purchase of a Tropical Destination Dive Centre.
Stage 1: First things first…
Have you been there, dived there?
Okay, lets say something right here. If you have not been to the dive centre, or even been to the country in which it is, FORGET IT!
You really DO want to have been to the dive centre, dived with the operators, seen the operation and indeed stayed in the village/resort where it is situated. The info ‘on paper’ is NOT the business!
I am going to make the assumption that we are looking a potential Buyer who is indeed a diver and is looking to set up life in the tropics owning a dive business. If the potential Buyer is looking for a paper investment to make a good financial ROI, then they should read my article The REAL worth of a scuba dive business… for a more realistic view of the dive industry.
You want to have been on the ground, or plan on being on the ground, WAY before you even think about laying out any money or making any offer.
Nuff said, I personally think there is NO exception to this!
What information can realistically get up front?
A “Sales Memorandum” or a “Memorandum of Sale” should be available almost immediately you have stated an Expression of interest.
This document (or nowadays more likely a webpage) outlines everything needed to assess the scuba dive business. The following information is normally included (but there is no rule or law governing this):
- Brief description of the business and its history
- Description of customers and markets (demographics)
- Description of products, services and pricing (a basic run down of courses, dive trips and retail)
- How the business generates new business (Sales and Marketing)
- Description of premises and lease terms
- Financial highlights for at least 3 years (see below for more on financial info)
- Number of Employees and basic wages info
- Asset list owned by the business that are for sale with the business (however not an Asset Register)
- Basic Explanation of contracts with customers and suppliers
- Strengths of business
- Potential for future expansion
- Reasons for sale
- Terms for sale
- Price guide
In addition to getting information from the Dive Centre for Sale, you need to prepare yourself.
You have to have clear answers on following questions:
- What is your price limit?
- What can you afford really?
- If they ask for your more can you get finance?
- What is your exit point from negotiations, maximum acceptable price and terms?
It is also normal for the Seller to ask for some business references from the Buyer.
This is to protect themselves from ‘false identities’ which is not an uncommon practice in the scuba diving business. A competitor will see that the seller is for sale and will set up a ‘dead email’ and a false name and ask for more info hoping that the seller will send sensitive and confidential information.
Seriously? YES seriously, I have seen this any times over the years. They see it as “secret shopping’ and a way to get information on their competition. Of course the Courts and law see it as industrial espionage and fraud…
Anyway, be ready for this, it’s not malicious or meant to be causing you costs before any decisions are made. Remember if you end up being the new owners, you want to be secure in the fact that the previous owners have not given away all this confidential information of the, now, your business, to your new competition!
In my opinion, after the initial discussions and info have passed between the 2 parties, then it’s time for a face to face sitting outside the Dive Centre to take it to the next stage. This is the subject of my next article, actually heading out there and Visiting the Dive Centre.