How to Start a Bike Shop: The Definitive Guide (2021)

  • by Brandon Boushy
  • 4 months ago
  • Blog
  • 1
Man in the bike shop

Starting a bike shop is a rewarding career if you have the passion and skills. A bike business is a line of work where even a simple operation can generate substantial profits.

Want proof? We interviewed two business owners who took different approaches to starting a bike shop. Armen, founder of the Glendale-based Bicycle Pit Stop, started his business in high school to make some extra money and fill his time. He used the common garage to business strategy that many entrepreneurs use.

 Meanwhile, Troy Rarick started Over the Edge Sports (OTES) using a business-minded approach that involved creating a business plan, securing investors, and developing a marketing strategy to pull people into his small town on their way to Moab, Colorado. From there, Troy has expanded OTES to multiple locations across the globe.

Whether you are more like Armen or Troy, there is opportunity for you to start a shop focused on bikes. We’ll discuss the steps to start a bike business and share insights from both Troy and Armen.

The cycling industry generated over $12 billion dollars in 2020 and is expected to grow 5% by 2029, generating opportunity to find your niche in the industry and help other enthusiasts get on bikes. If bicycles are your passion, this guide will help you start a bike shop.

An operational bike shop often comes with the equipment, inventory, and location all in one, and is a faster way to get started. UpFlip’s business listings are a good place to start if you’re considering this option.

Step 1 : What bike business is right for you?

Man in a bike shop

Conduct research to determine what is right for you. Your bicycle store should be run in a way that works for you, but will also satisfy your customer’s desires. You may want to run a store focused on professional cyclers, one that caters to local riders, or you may want a warehouse where you focus on online sales. You aren’t limited to just one type, but the type of business you choose will impact every decision you make going forward.

Bicycle Pit Stop, focuses on all bicycles including electric ones, but excluding motorcycles. Meanwhile Over the Edge rents and sells mountain bikes to ride on their trails.

Many consumers start their shopping experience online so a shop that can sell a bike in person or online is a good way to start your bike business.

Mountain Bikes

Mountain Bikes are the largest segment of the bike sales, with over 25% of cyclists saying their next bicycle purchase will be a mountain bike. Make sure you have a good variety because mountain bikes will be an easy sell.

In fact, mountain bikes were what inspired Troy to start his business. While he was working on getting the funding to start the business, he was also buying land and building trails to give a unique experience to bike riders.

To learn more about bike terms check out the glossary of terms.

Step 2: Bike Business Name

I can’t stress the importance of a bike business name. Keep reading for best practices when naming a bike business.

Does the name explain the bike business?

Bicycle Pit Stop includes the products serviced as well as what it does, Pit Stop (a reference to the quick service provided in racing)

Is it easy to spell?

Make sure your business name is easy to remember when using a search engine. A crazy name like Quasimodo Bikes makes searching for your business difficult. Register domain names for common misspellings and forward to your website.

Location

Including your state, county, or city  identifies you as a local business. For example, Las Vegas Mountain Bikes would be a business located in Las Vegas.

Branding

Does your name fit your branding? Some business owners focus on visuals ideas for a logo before a name. Las Vegas Mountain Bikes might have a logo with mountains, the strip, and bikes. It’s about communicating ideas, right?

Register a .com

Find a name for which the .com domain is available. It’s the most recognizable. You can conduct a search by clicking here.

Give it a go!

See how people like it. Make sure to check what happens if people shorten it. You wouldn’t want to name a business Destin Off-Road Klub because it would get shortened to DORK and that isn’t what you want to communicate. Check Google Trends. Read articles like Five Tools for Naming a Business. Finally, register your business name with the government.

Step 3: Write a Business Plan

Business plannig for a success business

You need a bike shop  business plan to help define your vision, objectives, and strategy. It’s purpose is to drive the direction of your business by guiding decisions, securing financing, and developing partnerships with other businesses. 

Armen told us,

In the beginning there was no plan. Just make everything as nice as possible. Then the plan started forming. I looked at it as the future of the business. I always stuck to service. The plan always changes.  It grows and evolves into an art.

Having a flexible business plan that is constantly evolving is a great approach to the process and allows for businesses to pivot when necessary. Here’s some resources to help with this step.

Templates

These business plan templates focus on helping small businesses succeed. Want to know the best part? They are all free!

  • One-page business plan
  • U.S. Small Business Administration (SBA) Business Guide
  • State-specific templates
  • Business Plan Template for a Startup Business

Resources

It gets better! Enjoy free and low-cost resources about writing successful business plans:

Step 4: Establish a legal structure

You have a business plan and name. Now you need to establish the legal structure for your bike business. For best results, hire legal representation that has experience starting a business like an attorney, accountant, or tax specialist. They’ll help you get your business started quicker so you can start selling bikes faster.

Licenses, permits, and tax forms

Permits needed for starting a bike business

Each location has different licenses, permits, or tax forms required. Use the SBA License and Permits page to identify what your bike shop needs. Let’s look at different legal structures for bike businesses.

Sole proprietorship

A sole proprietorship is the easiest way to start a bike business. The bike company doesn’t protect the owner’s personal assets, meaning if the company has legal issues, you could lose your home as well as your business. This structure should only be used if you cannot afford an LLC because bike companies have work that can cause injuries.

To start a sole proprietorship, fill out a special tax form called a Schedule C. Sole proprietors can also join the American Independent Business Alliance.

Limited Liability Corporation (LLC)

LLC is the most common business structure used in the United States because the company protects the owner’s personal assets. It’s similar to partnerships and corporations, but can be a single member LLC in most states. An LLC requires a document called an operating agreement.

Partnerships and corporations

Partnerships and corporations are typically for massive organizations or legal firms. Unless there is a specific reason you need a partnership, it is better to do a multi-person LLC. Investopedia has good information about partnerships and corporations here.

Franchise

There are several opportunities to purchase bike franchises. Franchising.com has two franchise opportunities in the United States and two in Australia that allow you to start a bike business using a reputable company’s name and business processes. This makes it where an entrepreneur can benefit from the reputation of a bike business that has already worked out many of the kinks of starting from scratch.

Step 5: Getting Ready for Cycling Customers

Customers buying bike in a bike shop

Your bike business is an entity now, but you still need more. The order you do the rest of the steps will depend on the resources you have, your skill sets, and the type of bicycle business you are running.

There are five areas of business you will need to focus on to get you shop running:

  • Location – Where will you be working?
  • Inventory – What will you have in stock and how will you pay for it?
  • Employees – Will you have employees and how will you make sure it is a safe environment?
  • Finances – How will you keep track of transactions and financial records?
  • Marketing – How will you find customers?

Step 6: Location

Finding a location will vary based on the bike business. For instance Armen started repairing bikes out of his garage, while Troy was building trails for people to ride their mountain bikes.

When deciding to rent a space for a bicycle-based business consider:

  • How will I store equipment and parts?
  • Is there space for a home-based office?
  • Will customers be coming to my location?
  • How much inventory will I have?
  • How much display space do I need?
  • How much space is needed to perform repairs?
  • Will I be doing mobile repairs?

When opening a bike shop, you will probably need to rent space in your city. To find spaces to rent in your area contact a local commercial real estate agent. You can search for them by your area here.

Know the local ordinances

Each city and state has different requirements for where a business is allowed to be located. Local ordinances might not allow a bike business to be home-based. How am I supposed to start my shop with so many rules about bikes? Just search Municode Library to find your city regulations.

Finding a good spot

Pins on a map

When looking for a space to rent, take into consideration your ideal client and what stores they might frequent. For instance, they might want coffee or a smoothie after a long bike ride. Finding the right place will take some research which will be much easier after considering your marketing efforts.

Step 7: Inventory, Tools, and Product Displays

A new shop requires inventory. Whether it is new bikes, replacement parts, or product displays for your store, there will be some costs associated with selling and repairing bikes. Each of the business owners we talked to while researching this article took different approaches.

Armen started his business with virtually no inventory. He’d order it off of Amazon when he needed a part. This kept his upfront costs low. Troy decided to go a different route and have inventory upfront so that people could rent or buy bikes to ride the trails he’d built.

To find a list of major bike manufacturers, check out this article.

Used tools and product displays

Tools and product displays can often be found at huge discounts if you buy them used. You can find used tools and product displays through most online markets, pawn shops, going out of business sales, and other places. If you are considering buying an existing business, they should be included in the purchase price. Learn more about valuing an existing business in our guide about buying businesses.

Step 8: Employees

Bike shop mployee holding a bike wheel

Troy emphasized the importance of good people, saying

“Hiring good people. I see now that once you get good people, honor that beyond all else…Honor your people and never keep disruptive people no matter how short staff you are. Good people HATE lame Coworkers.

An open bicycle shop might need employees. Depending on your financial position when starting, you can work all the hours yourself or hire employees. Either way there are some things you’ll be required to do. Keep reading for more info.

Employer Identification Number

Get an Employer Identification Number (EIN) from the IRS to identify your company. Apply here or call 800-829-4933.

Tax filing and withholding

Federal and state tax filing requirements apply to new employers. You must keep records of employment taxes for at least four years, including special forms and accounting for state taxes. Don’t worry! We’ve got you covered! Check out the IRS guide for employers here.

Unemployment Insurance Tax 

 Unemployment Insurance Tax  is required. It is a program under the Social Security Tax for employers.

Federal employment and labor law posters

All employers must display Workplace Posters, which you can download from the website.

Other requirements include:

  • Employment Eligibility Verification (Form I-9)
  • State’s New Hire Program
  • Worker’s Compensation Insurance
  • Disability insurance, varies by states
  • Occupational Safety and Health Administration (OSHA)

Job Posting

Recruitment process for hiring employees

Hiring people requires posting “now hiring” signs and posting on prominent job boards.  Some places you can start posting job requirements are:

Interviews

Having a prepared list of questions for interviews can make hiring the right people easier.  Indeed offers a variety of resources to help you make better hiring decisions. Read their guide, How to hire your first employee.

Compensation

Employees are typically a company’s biggest expense. Let’s take a closer look.

There are three common pay structures in business. Each fits different scenarios.

Salary

Man holding payroll record of employees

Flat weekly/monthly rate based on a person working a specific number of hours. This is typically reserved for owners, managers, and some admin roles. You might want to assign this to yourself for budgeting purposes.

Hourly

This pay structure just tracks the hours an employee works and pays them a set hourly rate. This pay structure is solely based on time, not performance.

Fixed Rate

This pay structure is used for mechanics and other tradespeople where billing is based on the expected time it takes to complete a task. This is a way of combining performance and time into the pay structure because those who complete a job successfully in less time have more opportunities to work on other projects. This also protects the company from over compensating for the learning curve.

Commission

Typically used in sales to give employees a percentage of revenue. It is a strictly performance compensation model.

Hybrid Models

Hybrid models combine two pay structures for instance hourly and commission to compensate for time and performance. The hourly rate will typically be lower than an hourly rate without commission, but the commission should make it where good performing employees make more than they would without commission. These structures also help reduce the variability of pay from week to week.

Paying employees an hourly wage works for most positions if your new bike business doesn’t require salespeople. The article, “How to Create a Pay Structure That Promotes Team and Company Growth” offers some insights into thinking about pay structure.

Step 9: Financial Management

Man using a calculator for business

A crucial portion of successfully starting a small business is managing the financial aspect of the bike store. Armen told us when he started his bike shop

I opened a business credit card and that is what got me started. Also supporting myself through other side businesses also helped.

That is a pretty risky way of starting a business that requires financial discipline because credit cards have high interest rates.To find banks that work with small businesses, use this resource.

 Let’s look at some tricks you can use to help your bike shop become profitable.

Budget! Budget! Budget!

A budget is the most important tool you can use in business. Without it your bike shop might not make it through the first few years.

While Armen started Bicycle Pit Stop with a shoestring budget, Troy says:

I borrowed $10,000 from my parents, recruited an investor partner and begged credit from vendors

Troy spends a good bit of time discussing his budgeting strategy so I’ve put together a table to help you understand how he budgets. Basically he uses rules of thumb to keep his net profit margins around 10%. The table below shows what each of his budgets would be for $100,000 revenue in a bike business.

Troy loves Quickbooks because it lets him “develop budgets quickly without an accounting degree.” To learn more about budgets, check out low cost courses from Udemy 

Consider the many funding options

Starting a bike shop doesn’t cost a fortune. Initial investment in owning a bike shop can be one year of savings.

Funds to start your bike shop can come from:

  • Personal funds
  • Loan from family or friends
  • Business partner(s)
  • Government programs

The SBA offers free courses on financing options and funding programs. For info on using personal funds to start a business check out this article from The Hartford.

Alternative sources of funding include:

  • Crowdfunding
  • Credit cards
  • Home equity loan
  • Rollover for business startups (ROBS)

Develop a pricing structure

Woman searching for the best pricing for bike shop business

How you price your bikes and services will impact how many people you draw to the shop. If your prices are too high, they’ll go elsewhere. Too low, you’ll lose money. Based on the rules of thumb presented by Troy in his interview, you’ll make about $10-27k for every $100k sales if you use a 50% markup, which is pretty standard amongst businesses.

Don’t undersell to get new customers

Shops will often sell their products or services for a lower price to bring in new customers. Be careful about this. If you sell your bikes for a discount and they tell others, you might have to sell another bike for the same price. People love a good deal! Just make sure it is sustainable for your bike shop.

Increase prices every year

Inflation occurs every year. To keep your business running, raise your prices 5% per year. It gives you room to increase wages and to make some extra money. Makes sense, right?

Step 10: Marketing

Your Bike shop is open. You have bikes to sell, parts to fix bikes that people bring in, but no clients!

How are you going to let people know about your company?

Marketing is crucial for all new businesses. Both Armen and Troy spent a good bit of time discussing their marketing strategies with us. Let’s look at what they have to say!

Bicycle Pit Stop Marketing

Armen tells us he started with Yelp, then gradually added Google. Overtime he has also added Instagram to market his bike shop. He thinks:

Yelp has been there the entire time. Yelp was the best thing that could ever happen. I don’t like paying them. Lately I have just been paying the minimum.

It sounds like Yelp’s pricing forced him to look for less costly alternatives and drove him to Google My Business and Instagram where he can do marketing without paying to show off his shop and bikes to people.

Over the Edge Sports Marketing

Marketing team for bike shop business

Troy uses a variety of methods to market his bike company. While he doesn’t discuss his social media marketing, a little research shows each of their locations has thousands of followers and hundreds of posts. It’s obvious that they put some effort into social media to advertise their shop. Bike enthusiasts can share their photos as well.

Troy uses some innovative ways of marketing as well. He discusses how his bike company got to be known throughout the biking world by hosting the lunch at bike convention:

I couldn’t afford big marketing or a trade show booth, so I started hosting a lunch at the annual bike trade show, I called it the “show lunch”. It became iconic, we poured more tequila than we served food but the “who’s who” of the MTB World came to lunch. They brought friends and other VIP’s and people still tell me “it was the best part of the trade show”. I remember when that lunch bill reached $5000; I was terrified, could I afford this? Yes, now I know, go all in and love your people, it made us what we are and it’s SO important to never let up on that honest effort to honor your people.

Influencers

USA Cycling offers resources for clubs which can help with marketing influence. You can join one or start your own. Another common marketing tool is social media influencers. For a list of cycling influencers, check this article out or use a hashtag generator to get the attention of cycling enthusiasts on your social media channels.

Conclusion

To recap this guide on how to start a bike business, ask yourself the following questions:

  • Do I know how to start a bike business?
  • Is it worth it for me to start a bicycle business?
  • Will I be comfortable speaking to clients ?
  • Am I starting a bike business this year?
  • Why am I starting a bike business?
  • Do I need employees or advice?
  • What will I need to feel successful?

Take the next step. Now that you know how, start a bicycle sales or repair business! The truth is, all it takes is a great idea, some skills in repairs and sales, and a good marketing strategy to get started. As Armen told us:

There is no such thing as right or wrong. If it works for you let it be. There is no such thing as mistakes in business. Mostly I look at everything as a learning curve.

Let us know in the comments below if you have any questions, we’ll be more than happy to help!

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One thought on “How to Start a Bike Shop: The Definitive Guide (2021)”

  • Em Orata

    Are 2 to 3 employees good enough to start a bike shop? Thanks!

    Reply

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