Something in the world of floating have you stumped?
Show Highlights
“When should I start making money?” is a deceptively simple and anxiety inducing question that every business owner has to face. Sometimes the answer is straightforward. There are lots of franchises that have near endless amounts of market research and profitability trends that point to a sensible timeline of when and how much you can expect versus a given investment.
Float centers aren’t like that, unfortunately. There’s simply not enough data out there to create predictability in a market. The good news is that given the relatively low overhead excluding opening costs, float centers have the potential to be profitable almost immediately. Graham and Ashkahn break down this question and provide some tips on the issue.
Show Resources
FTS Product – Float Center Business Plan
Listen to Just the Audio
Transcription of this episode… (in case you prefer reading)
Graham: Today’s question is, “when should my float center be profitable?”
Ashkahn: Hmm.
Graham: I mean, probably as soon as possible, right, like ideally before you open-
Ashkahn: Got to get food.
Graham: … you’re turning a healthy profit.
Ashkahn: If you’re making a choice between profitable now or later, yeah, I would usually go with now.
Graham: And “should”, isn’t it … I mean, I guess “should” is sort of the defining word there, right? Like obviously as any business owner, you’re just trying to make your business as profitable as possible as quickly as possible while not compromising your base morals.
Ashkahn: or sometimes, by compromising them.
Graham: I think depending of the company.
Ashkahn: But yeah, you know, there’s expectations from banks if you’re taking out a loan, or investors, they’re often expecting certain types of businesses to not be profitable for X amount of time.
Graham: Yeah, I guess that is true.
Ashkahn: And there seems to be like industry standards for other industries as well.
Graham: Yeah, just not this one.
Ashkahn: Just ’cause it’s small, you know, like there aren’t as many float centers as there are restaurants for us to pull like huge, huge aggregate data numbers on. So, let’s talk about being profitable.
Graham: So you were just focusing on different words in the sentence until it makes sense, that’s good.
Ashkahn: No, here’s really just the thing, I think, the point I want to make. Are we talking about being profitable like you’re making more money each month than you’re spending? Or are we talking about profitability including making up for the startup costs that you spent to open the business in the first place?
Graham: Right. In my mind, I guess we were talking about profitability of ongoing month-by-month making more money than you’re spending.
Ashkahn: Okay. Great.
Graham: The straight like P & L profits.
Ashkahn: So in that case, it seems at least from talking to other float centers, our experience, and stuff like that, it seems like float tanks are pretty decent compared to other industries in terms of how fast they can become profitable.
Graham: Yeah, and I’d say the operative word there is “can.” So let’s talk about that word for a second.
Ashkahn: It’s like a small tin that can hold things-
Graham: Get out of here.
Ashkahn: -sometimes food materials.
Graham: Shut the front door. So it’s because the cool thing about float tank centers is that they totally are able to achieve an early profitability. Like when we opened, we were booked pretty solid. Like our first few months, those months were profitable for us. In not a lot of other businesses you can do that, or with restaurants it takes a lot of settling in it seems like. You really don’t expect to be profitable with a restaurant for a few years often. But a lot of centers also are unable to fill their tanks and don’t get profitable right from the very beginning.
Ashkahn: So yeah, if things are going well, I think float tanks tend to be ahead of the curve compared to other businesses, which is nice. When we talk to float centers that have been around for a while and kind of had really good launches and stuff like that, they generally are profitable in their first month.
Graham: Did you say lunches?
Ashkahn: Launches, launches, yeah.
Graham: Launches, got you, okay. Yeah, I’m there. We’re on the same page.
Ashkahn: Right usually … yeah, “A good lunch is what gets you to a good launch,” is what I always say. So that’s really cool, that’s like the cool thing about the float industry, that’s probably what you’re shooting for. You’re not going into opening your business being like, “I’m probably not going to do a great job for the beginning.”
Graham: Yeah, yeah, exactly.
Ashkahn: So yeah, you definitely have the possibility of turning a profit pretty quickly, which again, compared to other industries is often not what people are even expecting a business to do.
Graham: I guess there’s another part of that, too, which is a lot of people are working in the business themselves.
Ashkahn: Right.
Graham: And for calculating profitability, whether or not you’re including your own wages or salary or dividends into that is, yeah, maybe questionable. Even whether you’re paying yourself what you would pay for an employee, if they were taking on all of the roles and responsibilities that you have, is an interesting one. Like to a certain extent, we didn’t really know how profitable Float On was as a company until we personally were out of there, you know, and we actually have regular staff and independent contractors that can fill in all of those little filler roles and just do hours that we were sort of taking onto ourselves, you know.
Ashkahn: Yeah, ’cause it really is. I mean, payroll is just such a huge part of your expenses. So, like being the person who’s running the shop and kind of having that cost be flexible or kind of hurting you personally and not hurting the business, in terms of you not taking that much money home. Those make it so that there’s a huge, huge reduction in your expenses on the books.
Graham: Yeah, so I guess just something to be cautious of. Like even if on the books you’re profitable, it’s worthwhile thinking of what you’d have to pay hour-wise to other people coming in if they were taking on all of the roles that you were doing, and whether you’re still profitable without yourself in the business. I guess the business by itself, not including all of your kind of unpaid owner hours that inevitably creep in there.
Ashkahn: Yeah, and things, you know, even if your schedule is full right at the beginning, you’re probably still going to be able to increase the amount of income you’re making as time goes on. ‘Cause often when people are launching and they’re doing a great job marketing and they’re getting their schedule full, they’re doing it through not selling a lot of full-price floats. They’re either, they’ve run some sort of big discount, maybe it’s Groupon, maybe it’s some other kind of big discount thing they’re doing to get their name out there. Maybe they’re giving away a ton of free floats, they’re floating all their friends. These are the things that help you have a good launch and help you get your float center full and help you do that marketing. That’s the stuff that starts to pay off some months down the line when those people decide to come back and pay full price and decide to actually come and float.
Graham: Yeah, for sure. There’s kind of this reinforcing cycle of keeping your tanks full that we’ve noticed. You know, like chances are if attendance starts dropping at our float center and we don’t do anything to correct it, that attendance kind of keeps going down or stagnating at a certain relatively low point. That’s just because you’re not generating as much word of mouth when you’re not having people come into your tank. So in addition to being able to hit profitability early on and actually fill up your tanks, if you do that, you’re in a really good position to just have that snowball forward and continue to the next month also fill up your tanks and also be profitable. So it is really worthwhile thinking about how you’re going to make a really big impact.
Like one of the things that I encourage float centers to think about nearing opening, is just what can you possibly do to make sure that you can, in that first month as much as possible, just have totally booked-out tanks? I mean in my mind, even if all of them were free floats, that’s still such a good investment in your marketing just to get bodies in those thanks so they can start discussions.
Ashkahn: So how soon should you be profitable?
Graham: As soon as you can.
Ashkahn: Yeah, hopefully pretty soon. Like you definitely have the ability with the float center to be profitable right away, day one. Day one you should spend more money than you spent that day, you know?
Graham: That pre-opening you know, I mean, ’cause you sell floats before you ever open up, too.
Ashkahn: You can, you can do, you have pre-sales and stuff like that.
Graham: And I also, just as a random insert tip, I like the idea of selling memberships at a discount prior to opening, too. I got that from The Float House guys kind of gave a good talk on that one year. But the idea of pre-selling memberships is just such a good in to having that sustainable revenue coming in kind of from the very beginning, rather than one-offs. So, random tip.
Ashkahn: Yeah, and good luck.
Graham: Yeah, good luck. And if you have your own questions and want to send them our way, definitely do. Go to floattanksolutions.com/podcast.
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Latest Blog Posts
Float Quarterly – January 2016
It’s been our pleasure to be actively involved in the float industry for over five years now. In 2016, we’re already on track to have more new centers opening, more press covering floating, and more resources for people just entering our salty world than ever before.
With so much action, we’ve decided to send out brief, quarterly updates on our industry to keep people posted on the all the latest happenings. Welcome to our first installment!
Training to Become a Certified Pool/Spa Operator
Each year at the Float Conference, we put on a Certified Pool/Spa Operator (CPO) training course. At first, that might strike you as an odd thing to have as part of a float tank conference. This post will explain what CPO training is and why we think it can be a really useful certification to have on your belt.
Increase Sales by Offering Retail in Your Float Center
On their own, float tanks have a limit to their profits. Retailing has the potential to bring extra money into your shop, but it also requires a lot of work and attention on your part to really be successful at it. At Float On, our retail contributes 6.5% towards our overall sales and 3% of total profit. While this might not seem like a large contribution, depending on your sales, it could end up paying the wages of a whole extra employee.
The Health Department and Float Tanks… How to get Approved!
If you’re working on starting a float center, chances are you’re nervously anticipating having to call the health department. We’ve all heard horror stories of people being asked to follow pool rules that don’t make sense for them, or having to do costly changes to their pump systems.
float tanks not regulatedBelow is our best advice for working with your health department to get your float center approved, but before we dive into that, it’s important to get a bit of an understanding as to how the health department works.
