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How To Start A Bike Shop

How To Start A Bike Shop

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How To Start A Bike Shop

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. Cycling 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.

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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, 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 the most popular in the area, road bikes are less likely to sell.

Industry Summary

According to IBIS World, the bicycle dealership and repair industry experienced a 5.3% annualized growth from the five years to 2023. That growth was driven by and continues due to 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 cycling 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 through 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.

The bicycle industry is an exciting field that is experiencing growth, and it’s currently being shaped by new technology and other trends. According to Bicycle Adventures, wearable technology like fitness trackers and wearable airbags is 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.

According to Zippia, with a market size of $6.9 billion and 7,000 companies across the US, the average revenue for a bike shop is $985,000 per year.

Road and mountain biking is the third most popular outdoor activity in the US with 47.5 million people taking at least one ride per year or 16 percent of the population according to GOALLOUTDOORS. 

The Next Web reports that electric 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. Auto-gearing systems and commercial disk brake rotor drives are also slated for mass production according to Electric Bike Report. 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 also undergone significant growth, and the bike trainer market is predicted to reach $362.6 million in sales by 2031. 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.

Steps To Start A Bike Shop

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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: Craft 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.

A few sections that I recommend focusing on in a bike shop business plan include:
Identifying your target market: understand the needs of different types of cyclists (commuters, off-road, road cycling, children, etc).
Detail the products and services you’ll offer: for instance, selling new and used bicycles, offering repairs, and providing accessories.
Understand your competition: study what they offer and how you can differentiate your shop.
Financial projections: calculate your startup costs and create forecasts for revenue and expenses. Learn more about creating financial projections.

Not only will banks and investors 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: Register the Business

Starting a bike shop, like any business, requires following the legal procedures to ensure the business is registered and legitimate. This process can vary significantly from state to state, so it’s crucial to research local laws and regulations. Here’s a general guide:

Forming a Business Structure: Before you register, you first need to decide on the structure of your business. Will it be a sole proprietorship, a partnership, a Limited Liability Company (LLC), or a corporation? The structure you choose will affect taxes, liability, and other aspects of your business. Consult with a lawyer or accountant to understand the implications of each structure.

Related: Comparison of business structures

Name Registration: You’ll need to choose a name for your business. Do some research to make sure your chosen name isn’t already in use. Once you’ve chosen a unique name, you’ll need to make sure it is available to use and register it with the appropriate agency. Usually the County Clerk’s office for sole proprietors and partnerships and the Secretary of State’s office for corporations and LLCs).

Related: Tips and ideas for naming a bike shop

Employer Identification Number (EIN): This is essentially a social security number for your business, used for tax purposes. Not every business is required to register for one. You can apply for an EIN from the IRS for free.

Business Licensing: You will need to obtain the necessary business licenses and permits to operate a bike shop. This can vary greatly depending on your location. You might need a sales tax permit, a local business permit, and/or a signage permit. Check with your local city and county government to find out what’s required.

Related: What licenses do bike shops need?

Step 3: 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.

Before seeking funding, you need a clear understanding of how much money you’ll need. Consider everything from rent, inventory, and equipment, to staff wages, marketing, and unexpected expenses. Always include a contingency in your budget for unforeseen costs.

All of this should have been started in the business planning step, but if it hasn’t you will want to begin seeking financing so ensure you have the money you need to open your bike shop.

In addition to traditional sources of funding such as personal savings, friends and family, traditional bank loans, and Small Business Administration (SBA) guarantees, there are a couple of other options. While these can be very difficult to get for a new bike shop, it’s worth looking into equipment financing and supplier credit.

Some equipment manufacturers or distributors may offer financing options, which can reduce your upfront costs, while building a good relationship with your suppliers may lead to a small line of credit, which can help manage your cash flow.

Related: Finding the money to start a business

Step 4: Set Up Operations

When setting up operations for a bike shop, there are several aspects to consider.

Choose a Suitable Location: The location of your bike shop can significantly affect your success. Look for a place that’s easy to access, has good visibility, and is near popular cycling routes if possible. Consider factors like parking availability for customers who want to transport their bikes for service or pick-up.

Consider the Size and Layout: The space should be large enough to display bikes and accessories, have a counter area for sales, and include a workshop for bike repairs and maintenance. Think about the customer’s journey through your shop – you want the layout to be logical and user-friendly.

Evaluate the Lease Terms: If you’re renting, pay close attention to the terms of the lease. Can you afford the rent even in slow months? Does the lease lock you in for a long time, or does it give you the flexibility to move if the location doesn’t work out?

Plan Your Workshop: Your workshop needs to be equipped with the tools and parts necessary for common bike repairs. Consider efficient layouts that keep tools and parts organized and easily accessible.

Consider the Local Climate: If your shop is in a region where cycling is seasonal, think about how you can generate income during off-peak times. This could influence the type of bikes and accessories you stock, and the services you offer.

Check Zoning Laws: Make sure that your shop complies with local zoning laws, which could affect signage, operating hours, noise levels, and more. You don’t want to sign a lease or buy a property only to discover your business isn’t permitted there.

Obtain Insurance: There are several types of insurance to consider when starting a bike shop. A few of these include general liability insurance, commercial property insurance, and worker’s compensation insurance covers expenses (required in most states if you have employees).

Create a Comfortable Atmosphere: Make your shop welcoming and comfortable. This could involve things like seating areas, bike-themed decor, good lighting, or even a coffee station.

Accessibility: Your shop should be accessible to all customers. This includes adequate parking, accessible entrances, wide aisles, and accessible restrooms.

Neighborhood Compatibility: Make sure your shop fits in well with the neighborhood and complements surrounding businesses. You might be able to partner with them for mutual benefit.

Remember, the goal is to create a space where customers want to visit, browse, and spend their money. This will require a combination of strategic planning, careful design, and ongoing adjustments based on customer feedback and changing trends.

Step 5: Stock Inventory

Now that the business registration, financing, and location are complete, the next step is to start stocking the shop.

When setting up the shop, really dig into what your local community 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.

Once you have determined what type of bikes, parts, and accessories you’ll carry, start researching brands and their distributors. Look for reputable companies that produce high-quality products. You can find many of these through trade shows, bike magazines, online searches, and networking with other bike shop owners.

If it’s in the budget, attending trade shows and industry events is a great way to meet potential suppliers and see what products are available. You can also get a sense of trends in the industry and meet other bike shop owners and get tips from them.

While it’s important to keep costs low, don’t sacrifice quality for a slightly lower price. Your reputation will be tied to the products you sell. If you sell low-quality goods, it could hurt your business in the long run.

Step 6: Hire and Train Staff

When hiring staff for a bike shop, you will optimally look for individuals who are passionate about cycling and have good customer service skills. They should be able to communicate effectively and be knowledgeable about different types of bikes, accessories, and the latest trends in the industry. Being able to connect with customers and understand their needs is paramount. Mechanical skills are also important, particularly for positions that involve bike assembly and repair. Some employees may need to be proficient in specific tasks, like tuning high-end road bikes or fixing flat tires quickly.

Common positions in a bike shop might include sales associates, mechanics, and a store manager. Sales associates are usually responsible for helping customers find products, answering questions, and processing sales. Mechanics assemble new bikes, perform repairs, and maintain the shop’s rental fleet if applicable. A store manager oversees operations, manages staff, and handles tasks like inventory management and ordering.

Typical costs for these roles can vary widely depending on the area, the specific responsibilities of the position, and the individual’s experience. For example, sales associates might earn around $14 to $17 per hour, while experienced bike mechanics might earn $15 to $20 per hour or more. A store manager’s salary can range greatly, from around $30,000 to $60,000 per year or higher. Always check the most recent wage data in your area and industry to ensure you offer competitive pay rates.

In addition to salary costs, a shop’s budget must 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 7: Develop a Marketing Plan

When developing a marketing plan for a bike shop, the first thing to nail down is who is the target market. A bike shop’s target market will dictate the marketing plan and even 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.

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.

Participate in local cycling events and consider sponsoring a local cycling team or race. Offering workshops or group rides can also attract potential customers and create a sense of community around your shop. Networking with other local businesses and cross-promoting each other can be beneficial as well.

Remember that online bike shops are making it difficult for local bike shops to compete on the sales of bikes and equipment as their cost to operate is much lower. By supporting your local biking community, your shop offers something that online retailers can’t. One of the quotes from The Bike Girl that is especially relevant – “To my customers, it also meant the difference of shopping with a local business that was having an impact versus shopping with a large corporation that had free shipping.”

Other common marketing techniques for bike shops include social media marketing on multiple platforms, online advertising, print advertising, and direct mail ads. A bike shop might even explore radio or audio streaming 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.

Related: Low-cost ideas to market a new business

Step 8: Set up a Point of Sale (POS) System:

A Point of Sale (POS) system is a combination of software and hardware that allows businesses to conduct sales transactions and manage other related operations. It can process payments, track inventory, manage staff, generate sales reports, and provide customer relationship management (CRM) capabilities. In essence, it’s the central hub for managing transactions and operations in any retail setting, including a bike shop.

In the context of a bike shop, a POS system is important because it helps manage inventory of bikes, parts, and accessories, keep track of sales, process transactions quickly and accurately, and can even assist in managing repairs and services. Some POS systems also include features to track customer preferences and buying habits, which can inform marketing and sales strategies.

Examples of general POS systems that are popular and widely used include Square, Shopify POS, and QuickBooks POS. These systems can be used by a variety of retail businesses and offer features like inventory management, sales reporting, and integration with online stores.

For bike shops specifically, there are industry-focused POS systems like Lightspeed Retail, Ascend, and Rain Retail that offer additional features tailored to the needs of bike retailers. These might include serialized inventory tracking (important for high-value items like bikes), work order management for repairs and services, and integration with popular bike vendor catalogs.

Step 9: Open the Shop

The path to opening your bike shop is going to be different from the next person. While I’ve covered the major steps, there are probably a few specific to your operation that hasn’t been covered.

Business Insurance: This is paramount for any business, including a bike shop. Bike shops require specific types of insurance such as product liability (in case a product you sell is defective and causes harm), general liability (for injuries or property damage that might occur on your premises), and workers’ compensation if you have employees. Consult with an insurance broker familiar with your industry to make sure you’re covered adequately.

Related: What types of insurance do bike shops need?

Bookkeeping: Accurate financial records are vital for the success of your business. Consider investing in bookkeeping software like Wave Accounting (FREE) or Quickbooks, or hiring a bookkeeper or accountant to handle your finances. They can track sales, expenses, payroll, and tax obligations, helping you stay on top of your business’s financial health.

Bank Account: Opening a separate business bank account is important to keep your personal and business finances separate. It’s easier for bookkeeping, and it protects your personal assets. Look for a bank that caters to small businesses with features like low fees, online banking, and merchant services.

Accepting Credit Cards: Most customers prefer using credit cards, so ensure you have a reliable and cost-effective system in place. Look into merchant services like Square or Stripe that offer competitive rates. You can also consider also a point of sale (POS) system that integrates with your inventory management and bookkeeping software.

Grand Opening: Before you announce your grand opening, consider having a soft opening. This allows you to identify and rectify any issues before you’re in the full public eye.

Greg’s Tip: 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 result in a store without employees 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.

Greg's Business Tip

This material is property of StartingYourBusiness.com

Bike Shop FAQs

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.

Some of the more startup costs for a bike shop include:
– Initial Inventory: $5,000 – $150,000
– Bike repair tools and equipment: $2,000 – $5,000
– Shop setup: (Point of Sale system, merchandising displays/shelves/racks, signage, renovations, etc.) $3,000 – $50,000
– Working capital for first 6 months of rent, utilities, internet, insurance, payroll, marketing, etc. – $5,000 – $60,000 (depending on your market).

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 $300,000 to start.

The importance of a business plan shouldn’t be understated, as one of the key sections is researching the costs to start.

How much can a bike shop owner make?

Estimating how much a bike shop owner could make depends on a variety of factors, including the shop’s location, size, overhead costs, profit margins on bikes and accessories, and the overall demand for bikes in the area.

As an example, let’s use a simple formula to give a rough estimate. On average, the profit margin for selling a bike is between 30% and 40%, with accessories selling for a higher percentage up to 50% according to the National Bicycle Dealers Association.
According to Zippia, with a market size of $6.9 billion and 7,000 companies across the US, the average revenue for a bike shop is $985,000 per year.

So, for this example, let’s say the average profit margin on bikes and accessories is 35%. Earlier, we mentioned that the average revenue for a bicycle shop was $985,000 per year, but since we are looking at the first year for our example bike shop, let’s estimate initial sales of $500,000 worth of bikes, parts, and accessories. This means in its first year, the gross profit would be $175,000.
From this gross profit, you’d need to subtract all the operating expenses such as rent, utilities, salaries, insurance, marketing, and other costs. For the sake of this example, let’s say those total $125,000 for the year.

Therefore, before taxes, the bike shop owner could potentially make a net profit of $50,000 ($175,000 gross profit – $125,000 expenses) in a year.

Managing expenses can make a huge difference in whether you have a successful bike shop or not. According to BicycleRetailer, the average store pays 42.2 percent of gross sales in overall expenses, which means that some fail to cover their costs when they sell a bike.

Remember, this is a basic estimate and the actual number could be higher or lower based on the various factors mentioned. It’s also worth noting that these numbers could fluctuate year-to-year.

Factors such as economic conditions, changes in consumer preferences, and even the weather can affect sales and profitability in any given year. Starting and running a bike shop, like any business, involves risk and uncertainty. However, for those who are passionate about cycling, the rewards can far outweigh the challenges.

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?

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

How To Start A Bike Shop

How To Start A Bike Shop

Greg Bouhl

Greg Bouhl

Welcome! My name is Greg Bouhl, and I am a serial entrepreneur, educator, business advisor, and investor.

StartingYourBusiness.com is here because of the many clients I worked with who made decisions based on inaccurate and outdated information.

Starting a business is hard, but here you will find the practical tools, resources, and insider tips to help you successfully start a business.

If there is a question about starting a business or help finding a resource, I'm here to help!

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