Bike shop advice

Meets Melbourne
1

I have been working in the bicycle industry for quite a long time, seen a lot of different things come and go, had shares in successful shops and was actually starting to consider opening my own shop with a bit of a difference.

I would like forum users to let me know what they honestly thought about what I was planning to do and if there would be much interest from Melbourne’s cycling culture.

I would not be opening the shop to make mega millions of dollars, covereing my basic overheads and a bit of extra cash for a nice lunch would be more than enough to keep me happy.

I would basically be selling whatever my customers were after at just above the wholesale price.

If the customer wanted a full Super Record groupset I would sell it at almost what it cost me, if they wantd Dura-Ace hubs I would do that too, if it was a simple set of spokes I would sell them for exactly what they cost me and then charge them $50.00 to build the wheel.

I think that all of the shops in Melbourne have high overheads that need to be paid for each week and this explains why they have to charge the way that they do just to survive. My shop would only be operated by me and my overheads would be very minimal.

The shop would probabaly be more workshop specific although whatever the customer wanted I would gladly get it for them.

This obviously excludes bikes as getting bike accounts with wholesalers is a different thing all together.

I know many of the people on the forum may find this idea a bit crazy and that’s great, let me know about it and we can see how it goes.

2

in order to avoid overheads, you can’t really afford to have a lot of stock on hand, so you’re just going to order stuff as needed?

sounds like you want to be the internet.

3

Doesn’t William Jetnikoff do this ATM? Works for him dude.

4

I think if you can get your prices to come near to those of the big online retailers you’ll definately provide some stiff competition to other local retailers. However, How will your plans sit with suppiers? Or do you plan to parallel import and personally cover warranties? Sounds like a fair bit of risk and that not everyone in the industry will be happy with your plans.

Personally, I find myself frequenting bikeshops that do keep their markups at a reasonable level, I’m thinking Abbotsford Cycles and Commuter Cycles in particular. Of course price is not always the determining factor, knowledge, expertise and workmanship are equally if not more important. I’m the sort of person that would pay $25 labour more than the cheapest wheelbuild if I knew that I would get me a kickarse wheel at the end of it.

5

Quite a few wholesalers have a minimum rrp of their products and wont sell to you for fear of ‘devaluing’ their product. This will be the hardest bridge to cross.

There is a couple of community type workshops around that let people use their tools and guide them to fix their bikes, sounds like you want to do similiar but also supply parts?

Other peoples wages are a VERY small part of overheads. Rent/electricity/phone/rates/insurance/consumables will usually ad up to a couple of grand a week regardless of where you are. Thats a whole lot of stress to stay above water to earn enough for a ‘couple of lunches’ and you can see why bike shops charge the way they do to survive.

6

You all make fair points.

The mechanical aspect to the business would be a far cry from a community workshop.

If the customer was paying me $50.00 to get a wheel built it would be built very well, with over 10 years experience as a mechanic and a solid background in all aspects of the bike industry I think that my expertise, knowledge and ability would probably be better than most bike shops anyway.

I think the bike industry has been great at fooling people into thinking that the more they pay for something the better it it actualy is.

The RRP issue is something to consider although the bike industry has changed a lot these days and a lot of the cheaper generic wholesalers have great products and they don’t seem to care about who gets an account with them and how much they are selling the stock for as long as the rep can get his commission and the wholesaler is selling stuff.

I think the idea that I have is more based on the potential to do higher volumes at a lower price which is something most/all bike shops seems to avoid.

How many forum users can walk into any bike shop and get products at a touch above the wholesale price and then get it professionally fitted for a low price without having to be best mates with the guy in the shop?

7

Best of luck with it titanium if you decide to go down that route.

Sounds similar to what Quality Bike Repairs in Surrey Hills are doing by focussing on wrenching and parts only. They are fine with people bringing in internet purchases and just charge a wrenching fee, though they can and do source parts if required.

8

Things to keep in mind:

You will have to turn over a hell of a lot of stock with such minimal margins, you will need to get a lot of people through the door and thusly will probably need to spend a lot of money on advertising (or if you are clever free viral marketing?) cutting into your small margins

Having no money sucks anus, make sure you can go into this venture with some back up plan, hidden cash

Don’t go into debt if you can avoid it, I have gone into business and not spent a cent that I havent earnt

Expect business to be slow for a while when starting off, expect to be in the red for a while

Good luck!

9

There is a good reason for this. Using round numbers so its easy. You purchase a tube for $5 and retail it at $10. Selling 10 tubes will get you $50
same tube at a heavily reduced price of $7.50 you now have to sell 20 tubes for the same gross profit, not including the extra handling costs. Not hating just making sure your going in with yours eye’s wide open. Same principal applies across the board.

I would sit down and do some serious sum’s as to some rough minimum costs of a shop and what it needs to keep running. And then to say pay you a wage of $600pw (including super/workcover/etc)

10

^^^^^ solid advice^^^^

11

Ok this is an interesting idea. Have you ever stopped and thought why nobody has done this already?.
The problems I see with this is that you are:

  1. You still will not be able to sell anything cheaper then CRC/ Wiggle
  2. Distributors will crack the shits with you once the shops they have been dealing with for the past 20years wont stop complaining about how much your undercutting them.
  3. GST is a bitch the tax man will make more money then what you will after you pay overheads.
  4. You are asking an internet forum for business advice.
  5. Banks will laugh your ass out there door if you take this business plan to them and ask for money to get this off the ground.

Last time we talked you had a well paying secure job? Why give that up to pay customers to take product off you in exchange for them to pay you a little money to get there shit installed. Doesn’t make sense to me.

Go back to the drawing board. Think of something better and watch more Dragons Den.

12

From a macro economic perspective, it is not a good time to be entering the discretionary retail market.

13

Thanks for your advice kenoath.

I think you have made some interesting assumptions.

I was certainly not asking anyone on the forum for direct business advice, it was merely a basic idea and I wanted to know what the forum users thought about it.

My well paying job in the past has no relevance to my initial post on this topic and I have no idea why you would think that displaying personal information about me here would help you to prove whatever point you are trying to make.

I am not an idiot.

Borrowing money from banks to operate a basic bike shop is not really what I was planning, maybe as a simple bike builder (yourself) you would probabaly see this as a standard procedure although as you know I did have a high paying job and that has given me the financial freedom to not bother going to a bank.

I have no idea what Dragons Den is although I am guessing from the way you display yourself it’s some type of idiotic tv show?

The last (and only) time I spoke with you was because I was kind enough to offer you a place to stay and although I don’t usually offer homeless bike builders a room I actually felt sorry for you and figured you may need the help.

I may come across as someone who is not so smart as you seem to imply in your post and maybe you are right about that but when you look out from under the cardboard box where you may now be living please don’t assume that everyone is as dumb as you.

14

That’s okay! First time is free after that I will bill you a consultancy fee.

The Dragons’ Den is a series of reality television programmes featuring entrepreneurs pitching their business ideas in order to secure investment finance from a panel of venture capitalists.
The contestants are usually product designers or service operators who have what they consider to be a viable and potentially very profitable business idea, but who lack funding and direction. They pitch their idea to five rich entrepreneurial businesspeople, the eponymous “dragons”. The contestants have, before the show, named an amount of money that they wish to get, and the rules stipulate that if they do not raise at least this amount from the dragons, they get nothing. In return, the contestant gives the dragons a percentage of the company’s stock, which is the chief point of negotiation.

Once the contestant has made the presentation, the dragons probe the idea further, often revealing an embarrassing lack of preparation on the part of the contestant, or uncovering troubling facts and consequently rejecting the investment, or revealing a sound business proposition and offering to invest capital in return for equity.

And it’s on ABC2 now!

Since you were uninformed please note

15

Think about the very minimum amount of things you would expect to see in a bike shop, if you were to walk in. Now think that you will have to purchase all of that, just to have things on hand, in order for people to not walk out and go down the road.

$2000 for tube stock
$2000 for tyre stock
$10,000 per shoe brand, just be a dealer
$1,800 for the tools to be a campy pro shop
$10-20k have to be paid upon delivery (no terms) for your shimano account
$3000 for chains (8,9,10, 11v, different product levels too)
Probably $5000+ for workshop tools that you need, but which won’t really pay for themselves
$15,000 for a small amount of expendibles, such as bartape, cassettes, looms of cables and housing.
$5,000 for j-bend spokes (2 colours, straight gauge + DB, 100 box each…)
$3,000 for a small number of proprietary spokes (mavic spoke book is ~$2000, for example)

I estimate that for a small selection of products, you will need $100,000. And you don’t even have any bikes yet.

If you’re thinking of opening another bike shop in Melbourne, you’ve got rocks in your head. A large number of big shops have accounts on hold (overdue) and credit terms are getting shorter and shorter. Lots of places are running on the leanest margin they can, hoping to outlast the guys around the corner, until the glut of shops clears. Didn’t one of the big Speshy dealers just have their stock siezed as well?

To make it in the bike trade in 2012, you need to run like a professional. This sounds like a lifestyle decision. You may have worked in a shop for any number of years, but being able to fix bikes is a far cry from understanding the business side of the trade. Lets look at an example:

$50 to build a wheel
Becomes $45 after GST
Takes, say 1 hour including measuring spokes, lacing, calling the client.
You’re making minimal money on parts, or none, if the client is supplying parts.
Phone rings, put down tools. Job blows out to 1.5 hours
Between booking it in, discussing parts and ordering parts, you’re looking at atleast another 30mins.
10 minutes to true the wheel. I presume you offer a free wheel true, since you seem so customer focussed.

So we’re looking at 190mins to make $45 (for the business)

If you pay yourself legitimately, you’ll have to pay work cover(0.5-2%, depending, so $1-2), super (9%=$4)

Which means that you’re down to $40 for two hours work. That’s $20/hr and you haven’t even payed personal income tax, rent, power, water, loan interest, business insurance, stock insurance…

All of the places I know of, where mechanics are working solo, charge an hourly rate of $150+. They are worth every single penny. They are mostly ex-institute or pro-tour types. Ever changed a battery and re-calibrated an SRM? Ever done a damper service on a shock (not just airbagging it and waiting two weeks)? From what you’ve described, the fact that you’re asking the questions here, and the fact that I’ve not heard of you, I doubt you’ve got the experience or reputation to command a month of advance bookings at $150/hr. Ultimately, to cover costs this is the kind of income you’ll need to be looking at. Your retail ‘business plan’ will send you broke.

FWIW, an average bike shop, on a break even day, needs $2000 of income for every staff member. Even if you do somehow keep your overheads low, becuase you propose to operate on a low margin basis, you will need to sell $1500-$3000/day. 300 trading days a year and all of a sudden you’re running a ~$750,000/year turnover business, dealing with cash flows etc.

16

Michaeljacksonpopcorn.jpg

17

It seems the information that I am getting from some forum users is becoming quite amusing.

I did not start working in a bike shop last week.

How do you get $2,000.00 for tubes? I am not planning to open a Schwalbe tube concept store.

$2,000.00 for tyre stock would be an ideal budget if I was planning to specifically sell Continental Competition 22 tyres and nothing else.

If I spent $10,000.00 on Shimano shoes alone I would have enough shoes to start my own cycling team and maybe even two.

Of course I was planning to specifically open as a Campy Pro shop, I was actually expecting to be repairing at least three sets of Bora wheels in my first week of trading.

Last time I opened a Shimano account the minimum initial order had to be at least $1,000.00. Maybe because of the internet that price has increased a bit to now become between $10,000.000 and $20,000.00 according to your advice.

With my $3,000.00 chain budget I will have to increase the space of the shop because looking at the wholesale prices of chains I am going to be getting enough chains to fill half of the workshop.

Luckily I already have a very good tool collection (better than many shops), maybe I could get some more chains with the $5,000.00 I just saved on tools.

The $15,000.00 on bits and pieces should be interesting…

Spending $5,000.00 on spokes alone is a great bit of advice, I should increase that to $10,000.00 just incase heaps of customers want things like DT Revolution/Alpine etc. in the first few days of trading.

$3,000.00 on those hard to get, expensive aero type spokes is a fantastic idea, I can use the fact that I have Shamal spokes in my advertising and because of the high demand for this type of thing this will surely make the business successful.

Guy Thompson (part owner of Groupe Sportif/Mavic Australia) will be pleased that the price of the Mavic spoke book has now increased to $2,000.00. Maybe I should get two of those just incase I run out…

It seems that the bike shops in Adelaide are much better that those in Victoria. We don’t have many Campy Pro shops here and not so many of the mechanics have Pro-Tour experience.

I’m not sure how many of my customers will need to get SRM batteries changed although when that does happen I will send them to your mates in Adelaide.

Of course because you have not heard of me I feel that the business is sure to fail, you know every experienced mechanic in Australia and you make a good point. Would you like to be my friend?

I know that you are trying to be helpful with your advice although from my experience the figures you have given me are not too accurate.

It may be better for me to note that I have managed successful bike shops in the past, worked as a mechanic both nationally and also internationally for professional racing teams and managed various bicycle workshops. I have invested reasonable amounts of my own money ($350,000.00+) in bike shops and feel that I probabaly do have the capital/experience etc. to open a bike shop regardless of what some people on the forum think.

It’s funny how placing a simple message on a bike specific forum about a basic idea all of a suddem makes me an idiot who is doomed to fail.

18

titanium,

you asked an internet forum for advice and suggestions. people are replying to that. either take on board what they are saying, or don’t. please don’t write long winded replies to posts you disagree with in such a manner, because you are coming across as the kind of person no one will want to take their bike too, regardless of how cheaply you can fix it.

tokyo drifter may be listing prices you think are inflated (i have no idea), but surely that is based on some kind of experience and he didn’t pluck the figures from the air.

like i said, take it or leave it, but either way, don’t be a dick about it.

19

Maybe focussing on selling your skills and experience is a better approach than selling products?

Stuff like assembly and adjustment (for people buying stuff online), wheel building, repairs, aiming at the commuter market maybe?

Loads of people (here at least) seem to be buying parts on pretty much price alone and you’ll never compete with the others on price.

Personally, and I know a bunch of people with a similar attitude, I’m happy to pay good money for quality mechanical service and advice. Whether there’s enough for you to sustain a business, who knows?

If you can afford to take the risk, then do it. You’ll certainly learn and get valuable experience in the process.

20

Too late.