The Complete Guide To The Home-Operated Bicycle Business
Part 6. The Business of the Business
Develop a friendship with your local bike shops. If they know what you are doing, rather than feeling competitive, they may be supportive, offering you a discount on parts, advice, etc. Sometimes they will send people to you if they do not have what the customers want.
Once your bicycle business grows to a profitable size, you will probably want to start keeping records. If you start your bookkeeping right from the beginning, it may be fun to look back someday. _____________________________________________________________
It does not really matter how you keep your paperwork, as long as you keep it.
You must protect yourself against stolen bikes as discussed in the buying chapter. A good idea is to file on cards, every bike you buy. You can organize those cards by serial number in ascending order. You can do it by the date you bought the bike, or alphabetize by brand name. Organizing by serial number is best, because the number will not change, but the color may, or the brand name become obscured if someone removes the decals. If a inquiry is made of your files you may not remember the date you bought the bike. If your police department requires that you fill out paperwork on bikes purchased, they are doing your job for you, no need to duplicate it.
You should keep track of your expenses and your income if your business starts to grow big. I recommend Dome's Monthly Bookkeeping book, available in almost any office supply store. Dome's contains easy instructions and has charts that line up all your information so that you can see trends in your business, and so that an accountant can make sense out of your doings without having to charge you a whole bunch of money to figure it out.
Anything else that you want to keep track of is your option. Some people like to make voluminous charts, or hook up a computer to everything. This can be fun, but if it takes up too much of your time, you will make less money. _____________________________________________________________
Your bike shop charges you double on any items under $10. They pay $5 for a $10 item. Tires go for 3 to 1. If they pay $3, you pay $9. Small parts under $1 cost the bike shop about 17 cents.
There is not a very good mark-up on new bikes. A $300 mountain bike costs the shop $220. They have to pay for the shipping which is about another $10. Then the bike shop has to pay one of their mechanics to put the bike together, they pay a salesman to sell it, which takes about an hour typically, and the shop pays for warranty labor which averages $10 per bike. As you can see, you have to spend quite a bit for a small relative profit with new bikes.
The bike shops cannot charge less. They have to pay rent, but they also have to tie up lots of money to stock all the specialized parts that they can manage in order to be full service. They also have to hire people competent to give you free advice.
If you support your local bike shop as much as you can, they will support you. They will be able to advise you on tough cases, and they may give you a small discount if they know you are a volume buyer. The discount is a good business expense if they know you will be faithful to their store. They do not profit if all you buy is a spoke here and a bolt there. In order to stay in business, they have to sell what they can, and you need to send them customers for big ticket items. If you have a customer that needs a tire or even a bike that you can't provide, send that customer to the store that helps you the most. Surprise, they will reciprocate! If they know you have something that they don't have, you could get a recommendation from them.
If you compare prices at department stores, you may be surprised. Often department stores charge you close to the wholesale price bike shops pay. But the department stores do not have experienced advise, they do not carry specialized parts. The department store is a good source for tires, tubes, and some standard replacement parts.
As business gets bigger, you may want to start selling new parts, or even bikes. One advantage of this is that you can order things for your own bike and pay less than retail. Most wholesalers will try to screen you out if you do not have a real store. They may ask you for a sales tax permit number, they may ask for a photograph of your store, they may want a commercial credit application filled out.
You can get a sales tax permit (aka resale certificate), just go downtown with $5 and bop around from one office to another until you get to the right place. Fill out a form or two, be willing to collect sales tax and mail a check to the government every 3 months.
You can mail the wholesaler a picture of your barn or whatever if they ask for a picture, or you can tell them you are interested for future reference, when business increases. You can just tell them you are doing a business out of your living room, many wholesalers will accept this, because, they are in business primarily to make money, just like you.
When a credit application comes, fill it out as well as you can and then write C.O.D. where it asks for credit limit desired. They like that, since there is no risk for the wholesaler.
Many wholesalers will send you their catalog and open an account even if you have the sketchiest looking business. You may have a problem selling some bikes however. There is a system in the business called protected dealership that makes it so if one bike shop handles a certain brand of bikes, all other shops within a certain radius cannot sell the same brand. If you want Raleigh bikes, for instance, and there is another Raleigh shop within 5 miles of yours, sorry. Not all brands have protected dealership, and not all brands are spoken for.
Seattle Bike Supply, 1-800-283-2453 SBS will do business with the smallest dealers, no minimum
West Coast Cycle, 1-800-252-0580 Remarkably low prices, hard to do business if small
KHS, 1-800-KHS-BIKE General wholesaler, no peculiarities
Security Bicycle Accessories, 32 Intersection St., Hempstead, NY, (1-800-555-1212) This company specializes in high-ticket, high-tech
Peugeot, 1-800-262-1591 Peugeot bicycles, general parts and accessories.
Specialized, 1-800-245-3462 Stumpjumper bikes, Specialized tires, Crossroads, Ground Control, Tri-Cross, mountain bike parts and accessories.
Merry Sales, 1-415-871-8870 General parts and accessories
There are hundreds more wholesalers. Think of a bicycle brand name, dial 1-800-555-1212 (toll-free directory assistance) and ask if there is a phone number. Most brand wholesalers have a parts and accessory department. There are a few trade journals that you can subscribe to for free. These magazines have ads from wholesalers. They have to believe you are in the industry, not just a retail buyer looking to find out the inside scoop. Here is an address: Bicycle Business Journal, Box 1570, Fort Worth, TX 76101.
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