Profitability of fill stations?

[fppf]

I keep hearing how dive shops loose money on there air systems. I really really don't see how. I can buy gas from industrial gas suppliers way cheaper than any dive shop. They some how make a whole business out of it.

The last time I calculated the cost of doing fills it was profitable. Taking into account of a whole system install ($30,000) average system life (15,000 hours), power used, filter changes, system maintenance, labor to hook up the tank and turn the knobs. It costs about 1-2 cents per CF of air processed. Seeing that your average size tank is 80 CF and most shops are charging around $5 a fill, there was a $2-$4 profit on each tank filled. The numbers I used where on the high side.

I think the reason the perception is loosing money is from accounting issues. If you look at what tanks are getting filled the most, its for training. You figure your typical class of 10 students to get them through pool classes is 50-60 fills. Those don't get directly charged, so are they accounted for?

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A ScubaBoard Staff Message...

Split from thread on PCDC storage bottle blowing (Link)

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[PhilEllis]

If there is this much profit potential in your area, and if your costs are correct, and if the volume is there, you should open a fill station.

Phil Ellis
Discount Scuba Gear at DiveSports.com - Buy Scuba Diving Equipment & Snorkeling Equipment

I keep hearing how dive shops loose money on there air systems. I really really don't see how. I can buy gas from industrial gas suppliers way cheaper than any dive shop. They some how make a whole business out of it.

The last time I calculated the cost of doing fills it was profitable. Taking into account of a whole system install ($30,000) average system life (15,000 hours), power used, filter changes, system maintenance, labor to hook up the tank and turn the knobs. It costs about 1-2 cents per CF of air processed. Seeing that your average size tank is 80 CF and most shops are charging around $5 a fill, there was a $2-$4 profit on each tank filled. The numbers I used where on the high side.

I think the reason the perception is loosing money is from accounting issues. If you look at what tanks are getting filled the most, its for training. You figure your typical class of 10 students to get them through pool classes is 50-60 fills. Those don't get directly charged, so are they accounted for?

 

[mike_s]

as for the tank that blew, it was a 16' long tank I think.

can you even get something like that hydro'd? (I bet not easily).

Many people have questioned the "loss leader" aspects of filling scuba tanks. That is partly correct. Cylinders used for training classes are filled and they represent only a cost. There is not specific revenue attached to those cylinders. In our store, where we fill only slightly more than 100 revenue-producing cylinders per month, the monthly revenue from all other cylinder fills does not come close to covering the monthly expenses from running the compressor. That does not even factor in the capital investment for the fill station

.

Maybe a "vacation destination" shop (like in Key Largo) makes money on fills, but they are doing "revenue producing fills" 7 days a week for people mostly getting on charters.

I can see how small or medium size shop that is inland and doesn't have the "holiday traffic" in a warm tropical location would definately not have as many profitable fills, especially during the winter.

 

[TSandM]

Phil, you guys really only fill 100 revenue-producing cylinders a MONTH? I'd be willing to bet good money that my LDS does that many in a WEEK, and proportionally way fewer class-related cylinders. (And, of course, my LDS is also filling deco bottles and helium, and I suspect there may be a bit more profit in those tanks, as well.)

 

[PhilEllis]

Phil, you guys really only fill 100 revenue-producing cylinders a MONTH? I'd be willing to bet good money that my LDS does that many in a WEEK, and proportionally way fewer class-related cylinders. (And, of course, my LDS is also filling deco bottles and helium, and I suspect there may be a bit more profit in those tanks, as well.)

About 1200-1500 air fills per year. Nitrox fills are not included in this number, but they don't increase it a great deal. Remember, we are an inland dive store, not a coastal location with lots of shore diving and local boat diving. A vast majority of our customers get fills at locations. The majority of our fills are for internal use, and are not "revenue" producing.

As small as it is, this type of fill volume is probably higher than MOST dive stores in the United States. Obviously, California coastal stores, Florida dive operations, and inland destinations are a different story.

I would bet that NATION WIDE, inside scuba and outside, breathing air compressors are among the most under utilized pieces of capital equipment available. Scuba air compressors are designed for high-volume, constant use. Unfortunately, in most cases, they sit far, far more than they are used.

Phil Ellis
Discount Scuba Gear at DiveSports.com - Buy Scuba Diving Equipment & Snorkeling Equipment

 

[DA Aquamaster]

If there is this much profit potential in your area, and if your costs are correct, and if the volume is there, you should open a fill station.

In terms of profitability, I think the numbers nearly always work if you do the analysis based on cost and service life of the system - but the killer is that most systems do not operate anywhere near capacity and/or a large percentage of the fills are for internal use and are not revenue generating.

This gets worse when you consider most shops do not need a brand new 15-20 CFM compressor and instead could get along just fine with a rebuilt 7 CFM compressor and a modest air bank. But they invest in more capacity than they need both in terms of compressor and in terms of storage and then have fixed acquisition, operating, maintainence and inspection costs that eat up any potential profit from the small volume of gas they actually sell.

We had an air club that turned a very nice profit on what were very low member fees. So much so that the person managing it upgraded to a nice new and large compressor and doubled the size of the air bank. None of it was needed as the membership did not get larger and the available gas was enough to meet everyones needs - as long as everyone did not show up on Sunday and try to get fills from a bank depleted by the compressor not running all day. But the new large and automated compressor solved all that, but then started running the club in the red, resulting in a viscious cycle of increased fees that led to declines in membership that led to even greater fees and even greater declines.

So...profitability requires a very careful matching of system capacity with the actual volume of gas you need.

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In terms of air banks, it makes sense to set them up with modules of 4 to 6 300 to 440 cu ft bottles that are easily portable and can be VIP'd and/or hydro tested in stages, so you never lose more than 1/3rd to 1/2 the bank capacity and don't break the bank with an inspection program. But the inital purchase costs can be a lot higher than just using a couple large surplus tanks.

 

[fppf]

I know this is getting of subject.
But Phil you raise a good point. Sizing of an air system is the most critical item. Given your volume of air sold, if you have a 5 CFM compressor it would only need to run about an hour a day. Talk about a total waste of capital, the compressor would rot before you wore it out. When ever a system is designed, compressor size, bank size, filter capacity, and fill station is critical to making your investment turn positive.

Also, there should be no such thing as non revenue fills. The cost of fills for classes, instructors and dive masters should be taken into account in the cost of the per student classes.

DA beat me to it

 

[Diveral]

Phil, you guys really only fill 100 revenue-producing cylinders a MONTH? I'd be willing to bet good money that my LDS does that many in a WEEK, and proportionally way fewer class-related cylinders. (And, of course, my LDS is also filling deco bottles and helium, and I suspect there may be a bit more profit in those tanks, as well.)

Phil runs a diveshop in North Alabama, we've got one nearby commercial quarry, one close part-time commercial quarry, a couple of nearby private quarries, and a couple of more distant commercial quarries. Fills are available on location at all commercial quarries. The nearest salt-water is about a six hour drive.

Phil fills my tanks for most of the quarry dives and prior to and after my salt water dives. As a matter of fact he's giving me 5 fills as we type for my North Carolina trip next week. He'll give me four fills when I get back and the shop in NC will give me at least 12 fills while I am there. So Phil is the service provider. He checks my tanks and gear out and makes sure its working and in good shape. He fixes it when its broke, sells me new stuff when he can't fix it, and fills my tanks before and after my trips.

Unfortunately for him we don't have any high volume divesite nearby.

 

[mike_s]

Also, there should be no such thing as non revenue fills. The cost of fills for classes, instructors and dive masters should be taken into account in the cost of the per student classes.

you think that most LDS's make money directly on open water courses?

most sell the classes at a loss to get the customer in the door with hopes of follow on sales of gear, etc.

as Phil suggested in an earlier post, if you think there is profit in air fills in your area, maybe you should open a fill station. I'll add to that by saying that if you think that there is profit in Open Water courses directly, perhaps you should open a training facility also?

 

[mike_s]

THREAD NOTE:

The above posts were spun off from http://www.scubaboard.com/forums/accidents-incidents/289554-pcdc-storage-bottle-blows.html by Uncle Ricky.

just wanted to post the thread that they all originated from in case people had questions later.