What is the ROI of a float center? – DSP 27

What’s the return on investment for a float center?

That depends on a bajillion things, like rent, wages, capacity, staffing, etc.

Ashkahn and Graham deftly maneuver this minefield of a question and explore a range of ways that profits are affected while planning, starting, and running a float center.

FTS Blog — Why ROI Calculators Suck

Planning a float center business — Float Center Business Plan

Building a float tank center — Construction Packet

Listen to Just the Audio

Transcription of this episode… (in case you prefer reading)

Graham: Today’s question is, “What’s the return on investment per tank for a successful float center?”

Ashkahn: It’s a question we get a lot, right?

Graham: It’s not an uncommon question.

Ashkahn: People ask this question …

Graham: In various forms. Sometimes it just comes as like, “What’s your return on investment?” which is even more general. But it’s confusing because there’s a lot of different things that can mean.

Ashkahn: It sounds like a good question. I mean, it’s very businessy, and it seems like the type of thing you’d want an answer to were you to open a business.

Graham: And the sentiment makes sense, right? Like someone is about to pour money into a really expensive venture, and they want to know, “How much money am I going to get back?”

Ashkahn: Right. But it’s just too generic, I think, to answer in a set way, right? Like how do you determine at what point you’re ending your consideration of your return on investment. Like, is it after one year, after 10 years? Are you looking for how long it’s going to take to pay your loan back? What’s the context of this question?

Graham: Yeah, and in addition the things that you actually do to run your center. You know, even if it’s successful and you’re at like 75-80% capacity — are you running 24 hours a day like we are at Float On, or are you only running 12 hour days? What’s your price? Are you managing to pack up that 75-80% with $80 per float, or are you packing it up with like $40 per float, right? All of these things can seriously affect the outcome of the question and your overall return on investment.

Ashkahn: Right. You know that what you do is determined in terms of pricing — at some point you will just fill all the float tanks you have to fill, and your price is gonna be capped at that point, or your income will be capped.  There’s a lot of variables — you can’t just be like “Here’s 12% — that’s your return on investment.”

And the other thing I’ll say is that what your investment is, I think, can differ so much from place to place. We’re talking about huge build out processes and some people go in a very different direction with their build-out. People are spending four times as much as other people to build-out a float center, and maybe those who didn’t spend as much are then two years in spending a bunch more to do reconstruction and stuff like that. How does that affect this question of return on investment?

Graham: Yeah. Those are all really good questions as well. This is more like a daily questions podcast, I guess, where we get a question and immediately toss it back at the audience. One of those reasons why it’s really hard for us to answer this even just when we get it on a daily basis of running a float tank solutions or just new centers who contact us looking to start up. Again it’s a very understandable one, and we always kind of hmmm and hah around like we are on this podcast because it’s so dependent upon all of these different variables — even down to questions like,  are you working the shop yourself, and are you paying yourself for your time in the shop? That question, alone, can have a gigantic impact on your return on investment.

If you’re expecting to just set up a float tank center, pay a staff from day one, and you’re not actively participating in it, that’s a lot of expenses going out. Similarly, if you’re working a shop and not counting paying yourself as part of your expenses for that month, then your return can look a whole lot better without that extra staffing on the books, right?

Ashkahn: Right. So you know, these are maybe questions that can be answered in a more general way where we’d have like a much bigger industry where you could just say like, “Okay. Well, you know there’s all these variables, but we took a generous average of these places and here’s kind of an answer to this,” or if you just had more consistency. You know, if you’re asking a franchise, or something like that, they’d probably be able to give you a much more concrete answer, because they’re like, “Well, this is how we set it all up, and we do it this way every time and, with that set up, this is your return on investment.”

Graham: Yeah, totally. Like if they recommend a set number of tanks …

Ashkahn: Right. Set pricing. Set staff…

Graham: Yeah, yeah, exactly. So, once the entire model has kinda been spelled out then the question becomes a little more answerable. The return on investment per tank is also an interesting way to ask that because it doesn’t break down like that. You don’t make the same amount of profit per tank on a one tank center that you do per tank on a five or six tank center, for example.

And, you know, one of the things we see is that one, two, and even three tank centers have a lot harder time generating a profit. And this is with pure float tanks, not with additional services or anything, like if all you’re doing is floating. It’s kind of a difficult prospect to really generate some heavy duty profits out of a limited number of tanks. So then really, I guess, it gets into that four, five, or six tank area is kind of what we’re talking about for a larger business that’s expecting a certain return on investment per tank. And then hopefully that would be higher. In a successful one, I guess, the profitability of a business can be something like, what would you say, 20 to 30% profit? Like if a business is really crushing it?

Ashkahn: Of that higher size, like four or five, six tanks, yeah. Maybe more like 20%. Something like that.

Graham: Yeah, so somewhere in that range, I guess, if you’re doing really well. If you’re generating 20% profit off of your revenue per month, I would say your kind of on the “doing well” side of that. And of course, then it goes to anything lower than that, right? So, either your prices are lower, your capacity is lower, or your expenses are higher, or all of these different things can come up and start driving it down from that point as well.

Even if you are successful (which is also an interesting part of this question too) because you can have a successful float center that just didn’t plan out their own expenses well. They’re paying their staff $20 and hour, like every single person on shift, and they have four people on shift. Even then, if it’s successful it’s not going to be making money because your expenses are too high. So, it’s kind of a lot of different angles, I guess, that that can be effected by as well.

So, there you have it. It’s a tricky question, and so you get a tricky answer.

Ashkahn: Alright. Well, if you have any other tricky questions for us feel free to send them along. You can go to floattanksolutions.com/podcast. Submit questions for us that we’ll answer on this show. 

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