How to Start a Bike Shop
Whether it was sport, fun, or fitness that first attracted you to bicycling, heading off on your bike probably quickly became a habit that you looked forward to. Bicycling has become even more popular during the last few years, and it looks like its popularity will continue. If you love bikes and enjoy working on them, then starting a bike shop could help you turn this pastime into a career. You’ll have the chance to help other bicyclists find the products that they need, and you may even have the chance to introduce some newcomers to this great sport.
Bike shops support local cyclists with a variety of products and services. Many shops offer an assortment of different types and brands of bicycles. Shops usually stock additional supplies like new bike parts and equipment, cyclist apparel, helmets, bike racks, and other accessories. Shops typically offer bike sales and bike repair services, ranging from tire replacement to more complicated repairs and rebuilds. Some shops offer customization options, too.
An independent, local bike shop needs to compete with big-box retailers, which often offer lower prices than a small shop can. However, bike shops tend to stock specialty bicycle retail products that big-box retailers don’t carry. They also offer a valuable personal shopping experience. Most shop owners are knowledgeable cyclists who can make product recommendations to help outfit cyclists with appropriate gear and bikes.
Running an independent bike shop can be a challenge, but there are many ways you can increase your chances of being a success. The National Bicycle Dealers Association recommends that shop owners choose their main bike brands very carefully. Some larger brands have greater inventory purchase requirements and might not offer margins as large as small or midsize brands may. Take a look at your competitors and see what they’re selling. It’s best to avoid selling the same products since you could end up trying to outprice your competitors. Consider your local bike riding locations, too. If mountain biking is most popular in the area, road bikes are less likely to sell.
According to IBIS World, the bicycle dealership and repair industry experienced a 1.1% annualized growth from 2015 to 2020. That growth was driven by the increased popularity of bicycling as a leisure activity, workout, and transportation. This resulted in more people using bicycles more frequently. As disposable income also increased during that time, more people were able to buy bikes. By 2020, the industry was a $4 billion market./ A total of 16,461 businesses employed 102,725 staff.
IBIS World predicts that the bicycle dealership and repair industry will continue to grow from 2020 to 2025. Increased consumer spending and health consciousness should mean that consumers spend more on bicycles and repair service. An increased focus on protecting the environment should also prompt more consumers to choose bikes over other methods of transportation.
The bicycle industry is an exciting field, and it’s currently being shaped by new technology and other trends. According to Bicycle Adventures, wearable technology like fitness trackers and wearable airbags are becoming increasingly popular. Smartglasses are also becoming popular, allowing cyclists to accept and make phone calls, access music playlists, track their performance, take photos, and more.
The Next Web reports that e-bikes and hybrids are evolving into more versatile options that can carry luggage and children. Integrated smart tech like GPS tracking makes these bikes more appealing, and increased battery range allows for improved performance. We’ll likely see more e-bikes on the road in the years to come because of these increased benefits.
The home training sector has undergone significant growth, and the bike trainer market is predicted to reach a $140 million valuation by 2025. Indoor bike trainers and smart trainers can now integrate with online game-training programs. These programs allow riders to compete virtually, driving interest and entertainment in these training products.
Even 3D printing is affecting the bike industry. Manufacturers use 3D printers to create unique accessories and bike components that are much more customizable and even custom-made. These components come at a higher price point, but unique features can make them appealing.
A bike shop’s target market will largely depend on the bike shop’s specialization. A shop that provides more general products and services may market to consumers who ride bikes for entertainment and health benefits, including families with kids and hobby cyclists. A shop that specializes in high-performance bikes and equipment will market to competitive cyclists.
Checklist for Starting a Bike Shop
If you’re thinking about starting a bike shop, it’s important to do your research first. Here is a checklist to help you get started.
Step 1: Write a Business Plan
After coming up with the idea, the next step in starting your own bike shop 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, projecting sales and expenses, and much more.
Not only will a bank require you to have a business plan, but multiple studies have shown that a business plan helps increase the odds of starting a successful business.
Related: How to write a business plan
Step 2: Name the Business
Finding the perfect bike shop name can be challenging. Not only does the name have to resonate with your customers, it also has to be available to use.
Step 3: Choose a Business Structure
A business structure (also referred to as a business entity) refers to how a business is legally organized to operate. There are four primary business structures to choose from, which include the sole proprietorship, partnership, corporation, and Limited Liability Company (LLC). Each type of structure has its own pros and cons, such as liability exposure, costs, and administrative requirements.
When deciding on which business structure is best for a bike shop, it normally comes down to the sole proprietorship and Limited Liability Company.
A partnership opens the owners up to unnecessary personal liability because if a partner does something to get the business sued, or runs off with cash from the business, the other partners are personally liable to repay.
The corporation can be a good choice to minimize liability risk because it separates the business assets from the owner’s assets. If the corporation is sued or certain business debts can’t be paid back, the owners aren’t personally responsible to repay them. The downside to the corporation is that it is more complicated than all the other entities and requires more administration than the LLC. If you plan on raising a lot of investment though, the corporation is usually the better choice.
That leaves the sole proprietorship and LLC.
The sole proprietorship is the least expensive and easiest entity to start which is appealing. The downside is the owner is personally liable should anything happen to the business, which is an important consideration. The LLC offers the ability to operate as a sole proprietorship with the liability protection of a corporation. Depending on the state, the cost to form an LLC runs from $40 – $500, which is pretty inexpensive for protecting the owners from business-related lawsuits and certain debts.
Related: Guide to forming your LLC
Forming an LLC sounds complicated and expensive, but using an entity formation service guides you through the process so you know it was done right.
Some popular LLC formation services include:
IncFile - $0 plus state fees & free registered agent for 1 year!
IncAuthority - $0 plus state fees & free registered agent the first year!
ZenBusiness - $49 plus state fees & free registered agent for 1 year!
Step 4: Select your Location
Rental costs will depend on the shop’s square foot size, location, and amenities. A shop in a high-traffic area will cost more to rent, but it can also generate walk-in business and general public awareness.
Related: Choosing a business location
Step 5: Apply for Business Licenses and Permits
A bike shop owner will need to obtain certain business licenses and permits to legally operate. These permits and licenses will vary based on the state and town where the business is located. A few common registrations include a sales tax permit, Employer Identification Number, Occupancy Permit, and more.
Related: What licenses do bike shops 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 shop 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.
Step 7: Open a Business Bank Account
Keeping your small business and personal finances in separate bank accounts is important to track the income and expenses of your business and identify trends.
Many banks offer free business checking accounts, so be sure to find a cost-effective option for your business.
Step 8: Get your Marketing Plan in Place
When it comes to building your brand, consider hosting activities and events that other stores don’t offer. Many stores will hold group rides, but offering beginner rides is a different, lesser-known strategy that’s likely to get you noticed. By focusing on kids, you can help build bike enthusiasts early while also getting their families introduced to your store. Children who engage with your store at a young age may become customers for years and years, making this strategy a wise investment.
When setting up the shop, really dig into what your area has to offer to cyclists. If your area favors mountain biking trails, bike paths, or being close to a college campus, knowing your marketing will make it easier to narrow down what inventory should be stocked.
Common marketing techniques for bike shops include social media marketing, online advertising, print advertising, and direct mail advertising. A bike shop might even explore radio advertising, too. Creating a customer loyalty program can help to encourage repeat customers. Developing a website can be a significant expense, but it can also give a shop greater visibility online and facilitate online sales.
One important task while working on the marketing is developing an online presence. A website developer may be out of the budget, but Wix makes it easy for non-technical people to get a website running quickly and affordably.
Step 9: Get Business Insurance
There are several types of insurance to consider when starting a bike shop. A few of these include:
– General liability insurance protects the business from expenses like medical and legal bills that it could face if a customer is ever hurt while on the business’ property.
– Commercial property insurance can cover expenses and losses that the business could face if the shop is ever damaged or destroyed by a fire or other type of event.
– Worker’s compensation insurance covers expenses like medical bills and legal fees that a shop might face if an employee were ever hurt while working.
The cost to insure a bike shop will vary depending on several factors like the shop’s location, the value of its inventory, and the number of employees on staff. 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.
Step 10: Hire Employees
Most bike shops have at least a few employees. According to PayScale, bicycle mechanics earn an average of $13 per hour. Bicycle shop sales associates earn approximately $12 per hour, while retail store managers earn about $17 per hour.
In addition to salary costs, a shop’s 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 shop 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 shop 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.
The thought of accounting can be intimidating for a lot of new entrepreneurs. There are a number of ways of handling bookkeeping, from DIY to hiring a bookkeeper. These include:
- Pen and paper - Low expense, but difficult to track.
- Spreadsheet - Low expense, but easy to make errors.
- Accounting software - Medium expense, but owner typically inputs expenses. Some great accounting software programs include Freshbooks or Wave Accounting.
- Hire a bookkeeper - Higher expense, though very affordable at $100-$200 per month in most cases. A dedicated bookkeeper will probably save money because, in addition to handling all of the bookkeeping (so you can focus on the business), they also provide personalized tax advice and ensure the business is in compliance.
Find bookkeepers in your local area or use a service like 800Accountant.
How much does it cost to start a bike shop?
The cost to start a bike shop can vary tremendously depending on the shop’s size and specialty. A bike shop that offers repairs and some basic inventory can cost as little as $20,000 to start. A large specialty shop focusing on high-end sports bikes will face much greater inventory costs and can cost closer to $200,000 or $300,000 to start.
Some of the more startup costs for a bike shop include:
– Initial Inventory – $25,000 – $75,000
– Bike repair tools and equipment – $2,000 – $5,000
– Display shelves and racks – $3,000 – $15,000
– Signage – $1,000 – $5,000
– Working capital for first 6 months of rent, utilities, internet, payroll, etc – $10,000 – $30,000
– Renovation costs – $??
How much can a bike shop owner make?
Business profits will depend on many factors, including the shop’s profit margins, years in existence, and location. A shop that offers both bike and supply sales and bicycle repair services can increase its potential profits. PayScale notes that a bike shop’s chief operating officer, presumably the shop’s owner, makes an average of $48,000 per year.
Seasonality is an important factor for most bike shops. Depending on the area in which you live, the bicycle business may ebb and flow as the weather changes. Harsh winters may cause an empty store if your inventory solely comprises bikes and bike accessories. Consider expanding your inventory and varying the stock with the seasons. General fitness and outdoor leisure equipment can be a secondary stream of income when bicyclists are in hibernation during the winter.
Are there grants to start a bike shop?
It’s extremely rare to find a grant to start a bike shop. If you search for business grants, you will come across a lot of scams and misinformation. Occasionally an organization will offer grants to start a business, however, be skeptical and don’t provide any sensitive personal information or pay money to get more information.
Legitimate federal grants can be found at Grants.gov and you can check on your state’s economic development office to see if they have any grants available.
What skills are needed to run a bike shop business?
Starting a bike shop doesn’t require a business degree, but certain skills and experiences can increase the chances of that business becoming a success.
Bicycling experience. Experience bicycling, whether for sport or entertainment, is important when running a bike shop. In addition to experience with bicycling, a love of the sport will help to keep the business owner enthused and invested in the business.
Knowledge of industry trends. A bike shop owner who stays aware of industry trends will be better able to ensure the shop stocks the products and offers the services that will be most in demand.
Troubleshooting skills. When offering bike repairs, a shop owner may deal with challenges and problems. Troubleshooting skills will help an owner to navigate these challenges on a daily basis.
Customer service skills. Running a bike shop involves interacting with customers daily. A shop owner who can provide a great customer experience and build valuable relationships with customers can encourage customer loyalty.
Management experience. Previous experience in hiring, training, and managing employees will be beneficial for any shop with staff.
What is the NAICS code for a bike shop?
The NAICS code for a bike shop is 451110, which is classified under Sporting Goods and Bicycle Shops.
The NAICS code (North American Industry Classification System) is a federal system to classify different types of businesses for the collection and reporting of statistical data.
Related: What is a NAICS code?