How to Start a Bike Rental Business

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Quick Reference

Are you a biking enthusiast?  Maybe you know how to work on bikes as well.  If so, a bike rental business could be an opportunity for you to use your skills, make some money, and be your own boss.

Business Overview

A bike rental business rents bikes by the hour, usually to tourists to travel the area and see local landmarks and destinations.   They may also rent to college students or anyone who needs short-term, short-distance transportation.

Industry Summary

According to Markets and Markets, the bike and scooter rental industry totaled $2.5 billion in sales during 2019 and is expected to grow to $10.1 billion by 2027.  The bike sector of that market is the largest and expected to grow at the fastest rate.  Increasing traffic congestion and the desire for emission-free travel options are factors behind the growing demand.

Industry Trends

The dockless segment of the bike rental market is expected to grow at the fastest rate.  With the dockless (or e-bike) model, bikes can be found and unlocked using a smartphone application.  Offering dockless bikes expands your geographic market and provides more convenience and flexibility for customers.

Target Market

Your target market will be mainly tourists to your area or college students if you are close to a university.

Skills, Experience, and Education Useful in Running a Bike Rental Business

There are several specific skills that you will need to open a bike rental business.

  • Experience.  Experience with bikes and some knowledge of how to maintain and repair them is a must.
  • Local knowledge.  Knowledge of local tourist attractions and the general history of your area will help you with customer service.
  • Business knowledge and experience.  You will need to have at least some basic knowledge of marketing, finance/accounting, and human resources.
  • People skills. You’ll need to be able to build rapport with your customers so that you retain them as customers and keep them coming back.

Startup Costs for a Bike Rental Business

Here are the typical costs you will face when you open a bike rental business.

  • Bike fleet, part inventory, and related equipment (helmets, bike locks, etc.) $7,000 – $10,000
  • App development for a dockless system $1,000 – $5,000
  • Space rental $1,500 – $3,000 per month
  • Insurance $200 – $600

Steps to Starting a Bike Rental Business

Step 1: Write your Business Plan

After coming up with the idea, the next step in starting your bicycle rental business should be to write a business plan.  The business plan will make you focus on some important aspects of the business, such as who your customers are, how you plan to reach them, tourism trends, projected income and expenses, and more. You’ll also need to do some research to calculate exactly what your startup expenses will be and what your ongoing expenses will be.

Not only will a bank require you to have a business plan if you need financing, but multiple studies have shown that having a good business plan increases the odds of starting a successful business. Writing the plan helps you to think through all the aspects of the business and then serves as a guide as you begin.

Related:
How to write a business plan
Free sample business plans

Step 2: Name the Business

Finding the perfect bike rental company name can be challenging. Not only does the name have to reflect what you do and be appealing to customers, but it also has to be available to use. You can check your state’s website to see if the name is available and register your name.  Your name should make you stand out, reflect your brand, and tell potential customers exactly what you do.

Step 3: Form a Legal Entity

A legal entity (also called a business structure) refers to how a business is legally organized to operate. There are four primary business entities to choose from, which include a sole proprietorship, partnership, corporation, and Limited Liability Company (LLC).  Each type of entity has its own pros and cons, such as liability exposure, costs, and administrative requirements.

RelatedComparison of Business Entities

Step 4: Select your Location

Your location is critical.   You need to be in an area where tourists frequent and near hotels and other attractions.  You may even be able to partner with a hotel to rent your bikes from their location.

Related: Choosing a business location

Step 5: Apply for Business Licenses and Permits

Several cities require specific licensing for a bike rental business.

Additionally, there will be general business licenses and permits your business may need, such as a business license, sales tax permit, and an Employer Identification Number.

Related: What licenses do bike rental businesses need?

Step 6: Find Financing

Coming up with a good business idea and having the skills to run it are one thing, but getting the funding to start a bike rental business is another.  In order to get a loan, the borrower(s) will need to have good credit and be able to invest 15-25% of their money towards the total start-up costs.

Related: Finding the money to start a business

Step 7: Open a Business Bank Account

Keeping your business and personal finances in separate business bank and credit card accounts makes it easier to track the income and expenses of the business.

Step 8: Get your Marketing Plan in Place

A bike rental business will need to set aside a budget to cover marketing costs on a continuous basis. Common marketing techniques for a bike rental business include using social media accounts like Facebook and Yelp and online advertising, as well as brochures and flyers.  Developing a website can be a significant expense, but it can also give your bike rental business greater visibility online and the ability for customers to book a rental online.

Related: Low-cost ideas to market a new business

Step 9: Get Business Insurance

Especially considering the customer of bike rental business is likely an inexperienced rider, be sure to look into the purchase of insurance to protect the business:

General liability insurance can help protect you from third-party claims of bodily injury and property damage.

Professional liability insurance protects you from claims of professional errors or negligence that result in a financial loss.

Worker’s compensation insurance covers expenses like medical bills and legal fees that a business might face if an employee were ever hurt while working.

Insurance policies will vary. To get the most accurate idea of what to budget for insurance, request quotes from multiple providers. When comparing the quotes, consider not only the premiums but also how the plan exclusions, coverage limitations, and deductibles compare.

Related: Common types of insurance a business may need

Step 10: Hiring Employees

You will need employees to help you run your bike rental business.  Make sure that you select people with appropriate experience.

In addition to salary costs, your budget will also need to include other employee-related expenses. Workman’s comp insurance, unemployment insurance, and paid time off are common expenses that a business will need to cover when hiring staff.

Related: Hiring your first employee

Step 11: Set up an Accounting System

Setting up an accounting system for your bike rental service is critical to the long-term success of your business.

Staying on top of taxes not only keeps the business out of trouble with the government but the numbers can be used to track and monitor trends and cash flow in the business and maximize profits.

Related: Setting up accounting for your business

How Much Can You Potentially Make Owning a Bike Rental Business?

The prices for bicycle rentals are generally between $8-10 per hour, depending on where you are located.  If you rent 20 bikes 6 hours per day two-thirds of the year for $9 per hour, you would make $262,800 in revenue per year.

Things to Consider Before Starting a Bike Rental business

Running a bike rental business or any business will have its challenges.  You need to be prepared and make sure that you know what you’re getting into.

Marketing and acquiring customers will be your biggest challenge and an ongoing expense.  You may face competition, so your marketing will need to make you stand out, and your prices will need to be competitive.

You will need to have a liability waiver for customers to sign to protect you from liability if someone is injured while riding on your bicycle.

Your business will be seasonal, depending on your location.  You will need to be prepared for the slow times and plan accordingly.

Plan for ongoing expenses for maintenance and bike and equipment replacements.

You will be risking money opening a bike rental business. It will take time and hard work to see a profit.

Talk to other business owners for tips on starting a business and do your homework to determine costs.  Research other bike rental businesses to see what they offer and what prices they charge.

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