Buying a bike shop – suicidal in current climate?

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  • Buying a bike shop – suicidal in current climate?
  • beer247
    Member

    Thoughts?

    Owner wants circa 50k, includes all stock, shop fittings etc.

    £400 a month in rent, no business rates.

    Looks like it does a decent trade in repairs with bike/part sales a secondary concern.

    Location wise its a bit hidden, but is quite close to a main commuter route and student areas.

    I’m in the enviable position that i have the cash and can also consult for the company i currently work for, so the shop wouldn’t be the sole source of income.

    Am I mad?

    “If you want to make £1M out of owning a bike shop… start with £2M” – said someone famous, once, or an approximation of this.

    Dunno, I know a couple of bike mechanics, not sure they love it tbh.

    Rockhopper
    Member

    Why’s he selling would be my first question followed by a very close look at the books.

    beer247
    Member

    Retirement is the main reason stated.

    Thoughts?

    Get someone to value the stock and the shop fittings independently.

    Otherwise , whats to stop you buying £40k of stock and shop fittings and renting somewhere else for a similar  monthly amount and achieving the same thing but for ten grand less?

    ctk
    Member

    Can you start your own bike shop near by spend 30K on stock and go from there?

    beer247
    Member

    120k a year turnover for the last 3 years according to accounts

    ctk
    Member

    Lol PP beat me to it

    globalti
    Member

    Don’t do it unless you have a firm business plan, which includes some good brands. I know a guy who has a small shop and for years he’s been teetering on the brink of faliure, depressed as hell and making very little money from repairing bikes and selling a few accessories. His problem is that he’s too small for any of the major brands and they don’t want to upset their existing distributors. You will never make good money repairing bikes because you will never be able to charge what it really costs and to add insult to injury people will buy parts off the web then expect you to fit them.

    Premier Icon wwaswas
    Subscriber

    120k a year turnover

    gross profit?

    Premier Icon molgrips
    Subscriber

    120k a year turnover for the last 3 years according to accounts

    And profits?

    Premier Icon thisisnotaspoon
    Subscriber

    Why’s he selling would be my first question followed by a very close look at the books.

    Remember it needs to be making whatever the interest would be on £50k + your wage.

    Otherwise just put £50k in a savings account and go work in someone else’s bike shop.

    mulv1976
    Member

    Stock is one thing, the goodwill and reputation of the shop is another which no doubt the owner has worked hard for years to build.

    Starting a business from scratch is hard work, so you need to work out the cost of the stock plus the goodwill and profitability of the business. It’s not as simple as buying some stock and setting up somewhere else for less cost.

    120k a year turnover

    If an average bike is £1.5k then that’s only 80 bikes a year or 3 a fortnight

    Premier Icon howsyourdad1
    Subscriber

    Do we get discount?

    Premier Icon wwaswas
    Subscriber

    an average bike is £1.5k

    I get the impression this is yer bog standard LBS. average bike will be £150 tops.

    My guess is that majority of income comes from maintenance (and associated parts) though.

    Stock is one thing, the goodwill and reputation of the shop is another which no doubt the owner has worked hard for years to build.

    Absolutely, but my point was more that  at least a proportion of the existing stock will be dead stock i.e. unlikely to sell at the valuation that the owner has put  on it and that that needs to be factored into a realistic valuation of the business by someone that knows what they are talking about

    Premier Icon w00dster
    Subscriber

    Interesting topic this one, I’ve also thought about this but could never get the figures to add up to enough to make a comfortable enough living.

    So your £50k, buys all existing stock, retains the current rental agreement and all of the existing shop fittings? When is the rental agreement up for renewal? Any commitment to keep rent low?

    What do you think you need in order to make the shop a success (financially)? How does this meet against the current shop takings? I presume they have staff now, would they continue or new staff needed? Would you be liable for any liabilities the current shop has? As the shop is out of the way, what would you do differently to bring in customers?

    Also, £50k to buy an existing business might not seem like much. But what cash would you have for the first 12 months to cover your first year running costs? £50k could quite easily be a need to have readily accessible £150k or more. (Shop fitting improvements (security/CCTV, workshop and shop floor), advertising, wages, new stock, insurance, web site, usual rates (electricity, water, telephone etc), and last but not least business taxes. Can the business pay back the money you are going to need to sink into it?

    Watching with interest what other experience folk have had.

    Premier Icon njee20
    Subscriber

    Is it Ubyk? A friend of mine sent me a link about an hour ago from a site selling assets of insolvent businesses which appears to be them!

    Premier Icon w00dster
    Subscriber

    Agree with Perchy here, for example £40k of stock might actually only have £10k of gear that will sell. Old 8 speed Claris for example, would have been useful 10 years ago, but unlikely to sell now. Similar to clothing, especially if its road related gear. Its important to look at the stock and to decide whether you think it has a correct resale value and not the value of what it was purchased for.
    So £50k to buy the shop and the stock may actually be a big loss. The business has to repay the £50k purchase price at some stage and dead stock won’t help it do that.

    If money was no object and you fancy a “toy” business to run, then I’d go for it. Unfortunately for me it would have to be profitable enough to provide a living wage so I couldn’t justify sinking in x amount of £ that I’d probably never see again.

    Premier Icon lucky7500
    Subscriber

    can also consult for the company i currently work for, so the shop wouldn’t be the sole source of income.

    Be aware that running a shop properly is a full time job. Unless you plan to employ other staff, what will happen to the shop while you’re doing outside consultancy work?

    Do you have any experience of retail or other customer facing industries?

    Are you willing to be in the shop all day every weekend?

    As above, find out what the profit has been (and whether or not that takes account of the current owners wage) for the last few years.

    Surely depends realistic value of stock? And make sure the current owner actually owns all that stock and isn’t on sell or return or an account that isn’t fully paid up

    Premier Icon wwaswas
    Subscriber

    Is it Ubyk? A friend of mine sent me a link about an hour ago from a site selling assets of insolvent businesses which appears to be them!

    I’ll bite, what’s the link?

    philjunior
    Member

    Stock is one thing, the goodwill and reputation of the shop is another which no doubt the owner has worked hard for years to build.

    Starting a business from scratch is hard work, so you need to work out the cost of the stock plus the goodwill and profitability of the business. It’s not as simple as buying some stock and setting up somewhere else for less cost.

    This is true, but unless the current line of business is what you want to be involved in, you will have to continue to run that (which might be emotionally tricky) whilst also trying to move the business into your desired arena.

    A “bike shop” is a very broad term.

    That said, repairs etc. can’t be threatened by cheap internet sales/brands going to direct marketing.

    Premier Icon epicyclo
    Subscriber

    beer247

    …Am I mad?

    Have you ever worked in a bike shop?

    A year of doing that would give you your answer.

    trail_rat
    Member

    business plan.

    Ill be surprised if anyone continues beyond it if they have a realistic business plan for a bike shop……

    those that do are either going to be green or looking back with rose tints on.

    spent 10 years of my youth working through doing the whole kit and caboodle in a shop workshop/shopfloor/stockcontrol ordering and min/max levels/accounts.

    Ive done a few business plans for shops and while i see the demand – the level of comitment required out of my coffers doesnt match the reward or the lifestyle.

    Speaking to others who have tried and speaking to others who have looked at it – we all came to same opinion – its a subsistance business at best today. 15-20 years ago it was a different story.  If your established in life and have a partner with a stable income that covers the bills then you could force it through on a love but its not a growth sector – nor have you a differentiation from anyone else doing the same near by….

    You’d need to be radio rental imo – and ive come close a couple of times.

    Premier Icon duncancallum
    Subscriber

    Turnover = vanity

    Profit = sanity

    40k of stock? Why so much and as above is it Any good

    Premier Icon njee20
    Subscriber

    I’ll bite, what’s the link?

    It’s on here, you have to sign up (hence not sharing it), I’m guessing, but can’t see it being anyone else. Text is:

    Business ID: 1605

    Business Category: Retail sale in non-specialized stores

    Additional Categories: <span class=”x_m_-3921980056114059188gmail-container-confirm-text”>Other sporting activities
    Other recreational activities
    </span>Turnover: £1m to £4.99m

    Employees: 10 to 99

    Location: National

    Posting assets: <span class=”x_m_-3921980056114059188gmail-container-confirm-text”>Leasehold property</span>

    <span class=”x_m_-3921980056114059188gmail-container-confirm-text”>Stock</span>Description: <span class=”x_m_-3921980056114059188gmail-container-confirm-text”>Opportunity to acquire the Business & Assets of a Well Established Online Retail Store with Two Boutique Stores Based in the UK

    Unique visual custom bike builder website (own built software)
    Two Award Winning Showrooms (Leasehold)
    Established International High -End e-commerce website, very well optimised in Google
    Huge range of brands represented : AX Lightness, Cannondale, Colnago, Cinelli, Cipollini, Parlee, Look, Orange, Scott, Yeti, Santa Cruz and many more
    Stock of bikes, components, helmets, clothing and accessories
    International potential with websites in Australia, US, France, Spain, Denmark and Sweden</span>

    IHN
    Member

    Turnover = vanity

    Profit = sanity

    Cash = king

    How come there are no business rates?

    Premier Icon wwaswas
    Subscriber

    njee20 – ta, it’s a shame – I know they were looking to close the Brighton store last summer but it didn’t seem to happen. As you say, given the description and brands it’s the most likely candidate.

    My guess is that majority of income comes from maintenance (and associated parts) though.

    Makes it even more concerning that there seems to be about third of the annual turnover sitting in stock.

    Premier Icon njee20
    Subscriber

    Wwaswas – agreed, AX Lightness and the customer bike builder leapt out, not exactly common! A shame though if they do go, always had good dealings with them, and everyone likes pimpy stuff.

    trail_rat
    Member

    a number of councils have decreased or abolished rates if your business is in a town/area of the town targeted for regeneration or is ailing to encourage business’ to stay / come to the area.

    unfortunately none of the areas in my locality are them – and they are actively putting them up almost as if to incentivise out of town shopping centres…..  the rates alone on local suitable locations would be more than my mortgage a month – and we aint talking a big unit.

    Premier Icon maccruiskeen
    Subscriber

    How come there are no business rates?

    Depends where you are in the country but in some areas you can get a rebate up to 100% on rates for lower valued premises. That’s not ‘no business rates’ as such, you have to apply for that rebate annually. Also… as a plan going forward – regardless of whether that rebate is in place you want to know what the cost would be if that rebate were to vanish. They’re not carved in stone and a change of heart (or a change of local / national government) could see the rebate vanish.

    And you want proof of what those rates would be, not an assurance.

    PeterPoddy
    Member

    This business sounds to me like it’s repairs and accessories only, no bike sales?

    To be fair, if I got the money and and an opportunity like that I’d give it a shot. Why? Well, in the last shop I worked in I personally turned over just over £100k in the workshop, so a similar size and a similar commuter market too. That was me on my own, sole mechanic. The split is roughly 50/50 parts and labour, and we made good margin on the parts too. I reckon around £70k gross profit from that £100k + turnover. Not unreasonable. £5k a year for rent? Sounds cheap to me. (I realise there’s other stuff that eats into your profit) I think I could make a good job of it personally.

    Its very easy for the average STWer to make assumptions about the average price of a bike in the average LBS but the commuting market is where the money is to be made IME. I now work in a high end shop and the workshop turnover is much much lower than in my previous job. Commuters don’t care about bikes. They just want one that works. Explain to them that the £150 service on their £400 bike (that’s a very common figure on a well used commuter) will set them up for at least a year and £12/month is a LOT CHEAPER than a travel card and they just pay up without batting an eyelid. Do the job right and they come back.

    But yeah, a repairs and accessories only shop with a good solid base of commuters passing the door is right up my street. I’d go for it. 😀

    PeterPoddy
    Member

    “Makes it even more concerning that there seems to be about third of the annual turnover sitting in stock.”

    And tools. And shop fittings. Etc etc….

    Easy to spend £10K on bike tools. A Kestrel workstand must be £5-600 these days, for example.

    I reckon around £70k gross profit from that £100k + turnover. Not unreasonable.

    A bit unreasonable.

    Seems an unrealistically high margin for any business.

    trail_rat
    Member

    “I reckon around £70k gross profit from that £100k + turnover.”

    working for free were you ?

    There is a difference between gross and net profit .

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