This article is part of a seven-chapter story following Drew on their journey to start a Scuba Diving Shop. Inspired by the guide How to Start a Scuba Diving Shop: Step-by-Step Guide, the series blends practical steps with storytelling to show what starting a business really feels like.
Facing the Numbers Behind the Scuba Diving Shop
Where Dreams Meet Dollar Signs
What happens when passion collides with spreadsheets?
Drew stared at the blank Excel template on his laptop screen. The cursor blinked in cell A1, waiting for him to transform his diving dreams into hard numbers. His coffee had gone cold again, but he barely noticed. The reality of starting a business was about to get uncomfortably specific.
His phone rang. Elena, calling from Cozumel as promised.
“Ready for the least romantic part of opening a dive shop?” she asked with a laugh.
“I think so,” Drew replied, though his stomach suggested otherwise.
“Good. Because this is where most people discover if they’re really ready to be business owners or if they just like the idea.”
The Reality Reckoning
Elena walked Drew through her approach to startup budgeting. “Think in categories, not line items. You don’t know exact prices yet, but you can estimate buckets. The goal is to see if the math works before you commit to anything expensive.”
She continued, “I see too many new operators get paralyzed trying to price every mask and fin. Start broad. Get specific later.”
Drew opened a fresh spreadsheet and created two main sections: Startup Costs and Operating Costs. Under each, he’d build category totals that would give him the big picture without drowning in details.
“Start with startup costs,” Elena advised. “Everything you need to spend before you can open the doors.”
Startup Costs: The Launch Investment
Drew’s first call went to his potential landlord, Mike Peterson, to clarify exactly what the Upper Key Largo space included and what renovations would be needed.
“The space is basically a clean shell,” Mike explained. “You’ve got electrical, plumbing, and HVAC. But you’ll need to build out retail displays, classroom setup, equipment storage, and any specialized installations.”
Drew took notes as Mike continued. Retail fixtures, classroom tables and chairs, white boards, storage racks, compressor installation, rinse station setup. The list grew longer than he’d expected.
Next, he called David Park, the insurance specialist. David’s estimate for startup deposits and first-year premiums was sobering. “Dive operations carry significant liability exposure. You’re looking at comprehensive coverage for equipment, premises, professional liability, and marine operations.”
Drew’s equipment needs proved the largest category. Laura Klein, his attorney, had connected him with Tony Rodriguez, a dive equipment consultant who helped new shops select appropriate inventory.
“Your equipment investment splits into two parts,” Tony explained during their phone consultation. “Rental fleet and retail inventory. Rental gear is your money-maker but needs constant maintenance. Retail inventory ties up cash but generates higher margins.”
Tony outlined the basics: Complete rental sets in multiple sizes, from snorkel gear to full scuba equipment. Safety equipment including first aid supplies and emergency oxygen. Compressor system for tank fills. Basic retail inventory of popular items. Maintenance and repair tools.
By the end of the week, Drew had gathered enough information to build his startup cost categories:
Physical Setup and Renovations: Buildout costs for retail displays, classroom configuration, storage areas, rinse stations, and compressor installation.
Equipment and Inventory: Rental fleet, retail inventory, safety equipment, compressor system, and maintenance tools.
Legal and Registration: LLC formation, permits, licenses, insurance deposits, and professional fees.
Technology and Systems: POS system, booking software, website development, and computers.
Marketing and Signage: Initial advertising, grand opening promotion, business signs, and print materials.
Working Capital Reserve: Cash buffer for unexpected expenses and early operational needs.
Drew tallied his research and estimates. Startup Costs — Total: $125,000
The number hit him like cold water on a warm day. Six figures to get started. More than he’d saved, more than he’d hoped, but within the range Elena and other operators had suggested for a full-service dive center.
Operating Costs: The Monthly Reality
“Startup costs are scary because they’re big,” Elena had warned. “But operating costs are what actually kill businesses. These expenses continue whether you have customers or not.”
Drew began mapping his monthly obligations. Some were fixed and predictable. Others would vary with business volume. All were inescapable once he opened the doors.
His largest fixed expense would be rent at $3,500 monthly after the six-month startup discount period. Insurance premiums, loan payments, software subscriptions, and basic utilities would add consistent costs regardless of how many students walked through the door.
Variable costs presented more complexity. Inventory restocking, equipment maintenance, marketing expenses, and temporary staffing would fluctuate with business levels. But even during slow periods, minimum expenses would continue.
Drew called Robert, his potential accountant, for guidance on expense categories and tax implications.
“The key is separating fixed from variable costs,” Robert explained. “Fixed costs determine your breakeven point. Variable costs affect your profit margins. You need to understand both to price services appropriately.”
Robert helped Drew identify several expenses he’d overlooked. Workers compensation insurance, professional development requirements, equipment depreciation reserves, and tax obligations. Each added to his monthly burden.
After a week of research and quotes, Drew’s operating cost categories emerged:
Facility Expenses: Rent, utilities, maintenance, and facility insurance.
Equipment and Inventory: Gear maintenance, tank fills, inventory restocking, and equipment replacement reserves.
Professional Services: Accounting, legal, insurance, and continuing education requirements.
Marketing and Technology: Advertising, website maintenance, booking system fees, and communication costs.
Staffing and Benefits: Drew’s salary, temporary instructor fees, and payroll taxes.
Loan Payments: Principal and interest on startup financing.
Drew’s research suggested: Operating Costs — Monthly Total: $8,200
The Revenue Reality Check
Numbers without context meant nothing. Drew needed to understand if his projected revenue could support these costs while providing him a reasonable living.
He called Carlos, the manager from a distant scuba diving shop, who’d offered to share some industry insights.
“Revenue in dive operations comes from three main streams,” Carlos explained. “Instruction generates steady money but requires significant time investment. Retail has good margins but inventory risk. Guided trips offer high per-customer revenue but depend on weather and seasonality.”
Carlos shared some general industry benchmarks. Beginner certification courses typically generated $300-500 per student. Advanced certifications ranged from $200-400. Guided trips averaged $75-120 per person. Retail margins varied widely but typically ran 40-60% above wholesale costs.
Drew built conservative revenue projections based on his instruction-heavy model:
Monthly Instruction Revenue: 12 Open Water students, 6 Advanced students, 4 specialty courses.
Monthly Retail Revenue: Mix of equipment sales and rental income.
Monthly Trip Revenue: 8 guided eco-tours with average 4 participants each.
His calculations suggested monthly revenue potential of $12,500 during peak season, $8,000 during shoulder months, and $5,500 during slow periods.
The seasonal variation was sobering. Peak months would generate healthy profits, but slow periods would barely cover fixed expenses.
The Cash Flow Challenge
Elena had been emphatic about cash flow management. “Profit on paper doesn’t pay bills. Cash in the bank does.”
Drew created a simple monthly cash flow projection for his first year. The exercise revealed uncomfortable truths about seasonal businesses.
Months 1-3 (January-March): Slow startup period with high expenses, moderate revenue. Monthly cash flow: -$2,200
Months 4-6 (April-June): Building season with increasing revenue. Monthly cash flow: +$1,800
Months 7-9 (July-September): Peak tourist season with maximum revenue. Monthly cash flow: +$4,300
Months 10-12 (October-December): Declining season with weather challenges. Monthly cash flow: -$700
The projection showed Drew would need significant cash reserves to survive the startup period and seasonal fluctuations. Even with profitable peak months, the business would require careful financial management to maintain positive cash flow year-round.
Building the Financial Buffer
“The advice from Robert, Drew’s accountant proved crucial: ‘Undercapitalization kills more small businesses than competition—build a bigger buffer than you think you need.’ “Drew calculated three different financial scenarios:
Optimistic Scenario: Revenue projections met, no major equipment failures, favorable weather patterns. Required startup capital: $125,000 plus 3-month operating reserve.
Realistic Scenario: Revenue 15% below projections, normal equipment maintenance issues, typical weather disruptions. Required startup capital: $125,000 plus 6-month operating reserve.
Conservative Scenario: Revenue 25% below projections, major equipment repairs, extended weather problems. Required startup capital: $125,000 plus 9-month operating reserve.
The conservative scenario suggested Drew needed $200,000 total to launch safely. The number made his chest tighten, but Elena’s voice echoed in his memory: “Better to start strong than to fail because you cut corners on capitalization.”
The Loan Reality
Drew’s personal savings totaled $35,000. Even with optimistic projections, he needed significant external financing. Time to understand his borrowing options.
Maria Santos at Key Community Bank walked him through small business lending basics during their phone consultation.
“SBA loans offer favorable terms but require extensive documentation,” Maria explained. “Equipment financing works well for boats and compressors but won’t cover working capital. Personal guarantees are standard for small business loans.”
Maria outlined typical requirements: Detailed business plan, personal financial statements, credit scores above 650, collateral or personal guarantees, and proof of industry experience.
Drew’s diving credentials helped establish industry expertise, but his lack of business ownership history would require stronger financial projections and possibly higher interest rates.
“Start with an SBA loan application,” Maria advised. “Even if it takes longer, the terms will be better for your cash flow.”
The Moment of Truth
Drew printed his financial summary and spread the papers across his kitClark table.
The numbers told a clear story:
- Total Capital Needed: $175,000 (startup costs plus realistic operating reserve)
- Personal Investment: $35,000
- Required Financing: $140,000
- Monthly Breakeven: $8,200 (operating costs)
- Peak Season Profit Potential: $4,300 monthly
- Annual Profit Projection: $16,600 (after paying all expenses including Drew’s salary)
The business would work, but margins were tight. Drew would earn a living wage, but wealth-building would require growth beyond the initial model.
He called Elena for a final reality check.
“Those numbers look reasonable for a startup dive center,” she confirmed after reviewing his projections. “The first-year profit estimate is conservative, which is smart. Most operators see growth in years two and three as reputation builds and repeat customers develop.”
Elena paused. “The real question is: are you comfortable with those cash flow swings and that debt load? Because once you sign loan documents, you’re committed.”
Drew stared at the financial projections. The numbers represented more than money. They represented early mornings, late nights, and the constant pressure of making payroll while managing safety underwater.
But they also represented something else: the possibility of building something meaningful. A business that could employ other diving professionals. A platform for marine education and conservation. A way to share his passion while earning a sustainable living.
“I’m ready,” Drew said, surprising himself with the certainty in his voice.
That evening, Drew walked the docks where his entrepreneurial journey had begun. The same pelicans dove for their dinner, but his perspective had fundamentally shifted. He no longer saw just a beautiful sunset over the water. He saw a business environment with seasonal patterns, customer demographics, and revenue potential.
The transformation from dreamer to entrepreneur was nearly complete. The financial reality had tested his commitment and refined his vision. Ocean’s Edge Dive Center wasn’t just a passionate idea anymore.
It was a viable business plan waiting to be executed.
Chapter 3 Summary: Why Financial Reality Builds Stronger Foundations
Drew discovered that honest financial planning reveals both opportunities and constraints. By understanding true costs and realistic revenue potential, he could make informed decisions about debt, growth, and operational sustainability.
See the guide Drew used: How to Start a Scuba Diving Shop: Step-by-Step Guide
Next Step: Transform financial projections into a comprehensive business plan for lenders and partners.