How to Start a Bike Shop

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Quick Reference

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.

Business Overview

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, 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.

Industry Summary

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 services. An increased focus on protecting the environment should also prompt more consumers to choose bikes over other methods of transportation.

Industry Trends

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.

Target Market

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.

Skills, experience, and education useful in running a bike shop

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.

Costs 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 expensive 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 – $??

 

Steps to Starting a Bike Shop

Step 1: Write your 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
Free sample business plans

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.

Related: Tips and ideas for naming a bike shop

Step 3: Form a Business Entity

A business entity refers to how a business is legally organized to operate. There are four primary business entities to choose from, which include the 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.

Related: Comparison of Business Entities

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

While there aren’t licenses specifically for bike shops, 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 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.

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 shop will need to set aside a budget to cover marketing costs on a continuous basis. 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. Marketing costs will depend on the activity performed and its volume.

Related: Low-cost ideas to market a new business

Step 9: Get Insurance

A bike shop needs several types of insurance for full coverage:

  • 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.

Insurance policies will vary in cost depending on 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.

Related: Common types of insurance a business may need

Step 10: Hiring 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.

Related: Setting up accounting for your business

How much can you potentially make owning a bike shop?

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.

Things to consider before starting a bike shop

Running a bike shop is 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.

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.

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 what inventory should be stocked.

The National Bicycle Dealers Association also recommends creating a team of professionals who can help to guide you through the process of starting and managing your shop. This team should include a bank, an accountant, a bookkeeper, an attorney, an insurance agency, and business mentors who you can trust. Try to connect with the owners of bike shops in locations that don’t compete with you. Your local Chamber of Commerce can also be a valuable resource to help connect you with other business owners who can advise you.

 

Resources:
League of American Bicyclists
National Bicycle Dealers Association (NBDA)
National Interscholastic Cycling Association

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