Since no one has thrown any figures around, I'll give it a crack:

Assumptions:
- 250sqm shop @ $300psm
- 2 month period before sales kick-in.


Stock: $30,000

Rent/Outgoings: $15,000

Other Overheads: $5,000

Buffer: $15,000

Repayments on fit-out / business purchase: $5,000

TOTAL: $70,000

[moderated]

in reality around $300,000.00

If you only invested $70K, you will almost certainly fail within 12 months, maybe even sooner. The reality is that a well run business can achieve a NET profit of around 15-20% in the kitesurf industry (but many struggle to achieve 10-15%). So if you had a $1mill turnover, you would net $150K,

So for an investment of $300k you can make $150k / year. 50% ROI sounds pretty atttractive! I presume that doesnt include a wage to the owner which reduces the ROI a bit. Plus more risk than you can poke a stick at of course.

Kitepower Australia said..

Shops here advertising product on Seabreeze for $0, should be banned from the practice, its deceptive and I'm sure it illegal too, someone with a legal background should take them to task on it, I'm fairly sure they will force the shop to supply the advertised product for $0!

Err pardon my snappy-ness prior.

Yes you are correct. I rang FairTrading and the QLS, and yep.. the product is technically for free!

I might just call one up tomorrow and get a free board.

eppo said..

Kamikuza said..

I love how this place can go from discussing the facts to "personal attacks" for absolutely no good reason at all.

Switch has been around what, 2 years now? Might be a bit early to call it, either way.










I'm intrigued to see how switch go when their volume of sales worldwide reach a certain threshold, without on the ground support mechanisms in place.

Product is decent though, no questioning that, but will their distribution and support model hold up.

Interesting space to watch. 3 Years I think isn't it overall, given they have the V3?

Yep def 3 years, It was early Feb 2011 when I got my first quiver of Switch kites.

Loftywinds said...

Kitepower Australia said..

Shops here advertising product on Seabreeze for $0, should be banned from the practice, its deceptive and I'm sure it illegal too, someone with a legal background should take them to task on it, I'm fairly sure they will force the shop to supply the advertised product for $0!

Err pardon my snappy-ness prior.

Yes you are correct. I rang FairTrading and the QLS, and yep.. the product is technically for free!

I might just call one up tomorrow and get a free board.

Send them a PM. I just did for the 17m dyno... shipping is also free but i offered to pay for that. Only fair right?

Also pm'd about the naish skater (sorry lofty, if that was the board you were purchasing ). At its advertised price, its a bargain and even comes with a free board cover worth $100. Bargain

If colesworth advertised milk at $0 they'd get nailed hard instore.

No replies from either shop yet..

I bet they'd reply quick fkn smart when told it can be illegal to 1) sell a product advertised at $0 for $2000 (they can however withdraw it from sale) or 2)continual bait advertising.

ITL n co, its not fair on users and other advertisers. Time to stop taking the piss

Hi guys,

Interesting read, and amazing that so few people know what it's like to really run a business and the returns it delivers (or doesn't).

Start up costs or a shop with a half a chance of making it out of the blocks?
You'd need a minimum of $150,000-$200,000 and that's conservative estimate for a small shop.
Rent? Rent in Perth will set you back around $50,000 + outgoings of around $9,000, so budget $60K.
Wages? We pay around $250K in wages each year for shop and school.
Advertising, legals, insurance, vehicles, office and infrastructure, add another $100,000

I think Steve's Profit percentages are what we'd like to earn. We have put a lot of time and money into POS and accounting software, and other upgrades this year including name change etc and will be lucky to break even this year.

General Dude asked about a shop closer to the North of Perth. We are moving from Scarborough to Balcatta. The old building is being sold to developers and is being torn down so we had to get out. We knew it was coming and have been out of our lease for 18 months, so we have decided to move this winter whilst it is quiet. New premises have been secured and we are currently fitting out. We are going to be VERY close to the Freeway making it much quicker for customers to come and see us if you are from the North or South and will be only 10 minutes from Scarborough.

I am also putting the business on the market for sale, so if anyone is interested, you'll see an ad appear with a broker next week. Time to put your money where your mouth is, here's a chance to buy a well established business. Fresh lease, loads of current stock.

Things you need to know about kiteshops, you don't buy them because you want to work less, you don't buy them to earn big money, you don't buy them to kite more often. I can count the number of times I have been on the water with a kite on both hands this season. You don't buy them to have more free time. There are benefits though, all your kite gear comes at cost! It is a fun lifestyle, but it isn't easy by any stretch of the imagination.

If you are seriously interested in buying the shop, PM me. No tyre kickers please! The business was recently valued at $455K including stock and plant, but am looking at best reasonable offer. PS, doesn't include the school permit as it's non transferrable.

There have been many kite shops come and go in WA, it is a hotly contested market and I suspect if several of the ones I know could sell for any reasonable price they would sell too. It may be for you though .....?

DM

Kitepower Australia said..

Dave Whettingsteel said..

in reality around $300,000.00

If you only invested $70K, you will almost certainly fail within 12 months, maybe even sooner. The reality is that a well run business can achieve a NET profit of around 15-20% in the kitesurf industry (but many struggle to achieve 10-15%). So if you had a $1mill turnover, you would net $150K,

So for an investment of $300k you can make $150k / year. 50% ROI sounds pretty atttractive! I presume that doesnt include a wage to the owner which reduces the ROI a bit. Plus more risk than you can poke a stick at of course.

Dave I'm not sure where you are getting the 50% ROI??
I've stated in my post that a very well run store might net 15-20% from a 1 mill turnover, but also that most struggle to achieve 10-15% (or worse I suspect! The shops that fail are achieving negative returns on investment)

For an investment of $300K, you could expect to get a return on your investment of somewhere between $30 and $60K Tops (And if you are a sole operator expect to then pay Income Tax on that amount too!) This is another reason smaller shops close, because for $30 -$60K people can get an unskilled or semi skilled job, with all the benefits, 10% super, workcover, and 38 hr working week, compared to at least 50-60hrs a week working in a kiteshop as the owner.

I understand net profit to be after expenses, but I think you are saying 150k profit before expenses hence the discrepancy. I was being a little flippant and do understand the challenges having built and sold several businesses over the last 25 years.

Dave Whettingsteel said..

Kitepower Australia said..

Dave Whettingsteel said..

in reality around $300,000.00

If you only invested $70K, you will almost certainly fail within 12 months, maybe even sooner. The reality is that a well run business can achieve a NET profit of around 15-20% in the kitesurf industry (but many struggle to achieve 10-15%). So if you had a $1mill turnover, you would net $150K,

So for an investment of $300k you can make $150k / year. 50% ROI sounds pretty atttractive! I presume that doesnt include a wage to the owner which reduces the ROI a bit. Plus more risk than you can poke a stick at of course.

Dave I'm not sure where you are getting the 50% ROI??
I've stated in my post that a very well run store might net 15-20% from a 1 mill turnover, but also that most struggle to achieve 10-15% (or worse I suspect! The shops that fail are achieving negative returns on investment)

For an investment of $300K, you could expect to get a return on your investment of somewhere between $30 and $60K Tops (And if you are a sole operator expect to then pay Income Tax on that amount too!) This is another reason smaller shops close, because for $30 -$60K people can get an unskilled or semi skilled job, with all the benefits, 10% super, workcover, and 38 hr working week, compared to at least 50-60hrs a week working in a kiteshop as the owner.

I understand net profit to be after expenses, but I think you are saying 150k profit before expenses hence the discrepancy. I was being a little flippant and do understand the challenges having built and sold several businesses over the last 25 years.

No worries Dave, sorta suspected you were having us on, but I replied more for the education of the less well informed/experienced. I seriously doubt that any kite/windsurf/watersports retailer is achieving 50% Gross Profit margin.
I think you'd agree that the only way to look at a business's performance is the bottom line, so all expenses are deducted from the Gross Profit, as its impossible to just take home/spend the Gross Profit.
The Nett Profit figures I've quoted are from my own experience, but I also know of businesses that achiever better and less. Higher volume businesses like supermarkets typically work with a Nett profit percentage under 10%, but they are usually medium to larger retailers with turnovers in the 5-50mill range and 5-12% of those numbers would still be a reasonable ROI, when the cash rate is 3-4% in this country.

If anyone in WA is serious about getting into kite/watersports retail then they should have a look at Action Sports WA, its a well run business, based on my experience and observations travelling around Australian doing my job.

Loftywinds said..

Right. Only two kooks left with $0 and not mentioning anything about offers or a price anywhere.

www.seabreeze.com.au/Classifieds/Kitesurfing-Kites/~awnep/2012-Cabrinha-Nomad-7-metre.aspx
www.seabreeze.com.au/Classifieds/Kitesurfing-Kites/~aw5td/2009-Ozone--5-metre.aspx

Crusade to evade the pests almost complete.

I've called one guy and I got the verbal diarrhea but he changed his ad.

Lofty - fighting for you the consumer!

Now onto the other ads. Gee.. Shouldn't Laurie be doing this?

$0 is a fair price for both of those kites, so maybe its staying.

Forget all the bull**** figures and stats, if your passionate and work at it in the correct location you'll do ok, take aks now adventure sport, someone with drive passion and a respected rider will take this and prosper, a slack arse looking to make a quick dollar with little experience will close in a couple of years

I just had a thought. How many of you guys that are "loyal" to your local kite shop ride australian kite gear, BWS Griffin ect? I bet almost none. How come? would you rather give your money to an over seas company?

ActionSportsWA said..

Start up costs or a shop with a half a chance of making it out of the blocks?
You'd need a minimum of $150,000-$200,000 and that's conservative estimate for a small shop.

Absolutely right - try it for any less and you're dreaming. And doomed to fail.

ActionSportsWA said..

Things you need to know about kiteshops, you don't buy them because you want to work less, you don't buy them to earn big money, you don't buy them to kite more often. I can count the number of times I have been on the water with a kite on both hands this season. You don't buy them to have more free time. There are benefits though, all your kite gear comes at cost! It is a fun lifestyle, but it isn't easy by any stretch of the imagination.

Absolutely right - I wouldnt need too many more hands to count up my total kite sessions over the past 4 seasons either. May sound unbelievable - I find it hard to understand myself & it certainly wasnt part of my plan - but thats the reality.
It is also the major reason for KSS selling up (Yep KSS is also selling if you havent heard yet).
Love the job. Smile on the dial everyday Im driving to 'work'. But probably havent got many more years of kiting ahead of me so its just a matter of priorities. Time on Water is what its all going to be about for this little puppet from now on.