Buying a bike shop – suicidal in current climate?

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

    indeed , but its not like your standing there scanning items through a till , you are the product and the service.

    Its like running a garage without mechanics.

    not gonna work.

    But thankfully accounting convention makes your books look good if you remove the main cost of realising that profit when your a service industry.

    Premier Icon wwaswas
    Subscriber

    The thing with Gross profit is as the small business owner you can work out how much to pay yourself and what roi you’ll get.

    If you look at Net profit you have no idea what the fixed costs are?

    trail_rat
    Member

    sort of ,

    you’d need both net and gross as a minimum

    peters example looks great because he only gave us gross. it is misleading without knowing the fixed and unfixed costs to realise that gross.

    Peters quoted numbers are meaningless.

    poolman
    Member

    There’s a bike shop in a small northern town i go to thats expanding.  No business rates as its a regen area.  They sell cheap new and secondhand, I doubt much is over 150 quid.  Recently moved to larger premises, 2 guys.  I was in there once and they bought  few old wrecks for 20 quid, strip them for parts.

    Cops are always in there tho….checking out the stock i should think.

    Actually looks like a sound business to me.  Cheap rent, no business rates, just 2 guys, buying and selling cheap stuff.  Fits the local market.

    Premier Icon P-Jay
    Subscriber

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

    I can’t imagine that’s enough to sustain much in the way of salary in retail.

    As for the question in general. Look which way the wind is blowing, retail in general is in the decline. The cycle industry has managed to buck the trend to a degree up to now, but a lot more LBSs are closing than are opening these days.

    Financial considerations aside, do you really want to work with bikes? Seems like a good way to ruin a hobby to me.

    footflaps
    Member

    There was a great thread linked to on here from Pink Bike? about the guy who set up a bike shop and was detailing his trials and tribulations…

    That’s a good read.

    Trimix
    Member

    I once got offered a bike shop to buy, looked into it and realised the owner was earning a tiny amount of money but having to work pretty much every day.    So despite the fact he got a shiny new bike to ride, he was stuck serving customers all weekend.  The shop got sold and turned into Leisure Lakes Daventry, but that was pre internet.

    The other thing to consider is you have to deal with customers, a lot of them will drive you mad.

    Personally I reckon you will go broke fast, never have any free time to actually enjoy riding a bike and end up suicidal when you have to deal with annoying customers.

    trail_rat
    Member

    actually i do know one guy who’s doing quite well out of the trade.

    BUT he lives abroad and is bringing high end bikes into a country that doesn’t have easy access to them.

    works hard but does well from it.

    rene59
    Member

    If I had a spare £50k the last thing I’d be doing is buying a bike shop. It would be like betting it on the horses.

    Premier Icon Pierre
    Subscriber

    I’ve got a few questions:

    – How long is the lease and how long is that rent guaranteed for?

    – How many staff are you planning on having? If it’s just you, and most of the turnover is in repairs, are you a good enough mechanic? I don’t mean that cruelly, but although most of the readers on here think they’re as good as a professional mechanic, most of them are nowhere near as fast, as experienced or have the breadth and diversity of knowledge as full-time professional mechanics who work on all sorts of bikes every day. If you don’t have the skills and the experience, you’re going to need to pay someone who does – and you’re going to need them to be good, because your shop’s reputation relies on the quality of your servicing and customer service.

    – What’s the customer base like? If you’re buying an established business that was essentially dependent on its previous owner (which I’m guessing you are, based on the low valuation), you’re really only buying a name and some stock, and some customers’ visiting habits. You’re going to have to do all the hard work yourself to re-build the business, which means knowing what sort of shop you want, how you want it to run and which customers you want to appeal to from the start. If the business has a lot of loyal (or local) customers, that’s a good start because you won’t have to start from scratch, but you’ll have to serve their expectations from the start.

    – What’s the stock and tooling you’re buying? As someone else said on here, it’s only worth something if you can sell it or use it. If it’s a load of knackered grubby tools that you’ll need to replace, they’re worth nothing. And shops up and down the country have boxes of 7-speed Altus brake / gear lever units they can’t shift or stupid-size shoes in rubbish colours, or quill stems, or bar ends, or cheap suspension forks, or obscure disc brake pads, or…

    – What was the previous owner taking from the shop as a salary? And what do you expect to pay yourself? And if there are other employees, what’s their salary – and how much extra do you need to include for the new auto-enrolment pension stuff, etc? Don’t just look over the accounts, spend time poring over them. They will tell the story of the shop.

    – What’s the security of the shop like? If it doesn’t already have an alarm, shutters, bars on windows, CCTV etc, you may well need to shell out for them if you want to sleep at night or not pay high insurance premiums. More than one bike shop has closed in the last year after a significant break-in wiped them out irrecoverably.

    Yes I’m in the trade, and I know how much the trade is struggling. Buying a bike shop at the moment is a very risky move, but not necessarily a stupid one if you’re prepared and you know what you’re doing – and where you want to go. PM me if you have trade-specific questions and / or want an inside view.

    Trimix
    Member

    Didn’t Ubyk get broken into earlier this year ?  I think I read in the local news a van turned up and took all their bikes.

    TiRed
    Member

    “Why? Well, in the last shop I worked in I personally turned over just over £100k in the workshop,”

    PP was fitting Di2 to trick Cervelos for the triathlon crowd in a rather well-heeled (actually silly well-heeled) area! 😉

    Personally, if the books look sound, and you have a passion, why not? Oh an since you have a consultancy business on the side, just offset the losses when it all goes wrong against the profits from that side of the business. IAMAA

    Premier Icon one_bad_mofo
    Subscriber

    There is a list on a private/closed forum for the cycle industry that details IBDs that have closed over the past 12 months. At the last count it was 133 and rising.

    Glad I got out of retail when I did.

    Premier Icon duncancallum
    Subscriber

    **** me thats some return….

    Money laundering Doesn’t return that…

    Who are the customers?

    if they are bringing in poor quality supermarket bikes to fix then you could be wasting your time,

    trying to fix bikes that aren’t fit for purpose new let alone 6 months down the line is a ball ache.

    remember we are a vocal minority who own expensive bikes and ride with friends who ride expensive bikes, 95% of the U.K. population would have a heartattack If you told them how much your bike cost ;0(

    Premier Icon tomhoward
    Subscriber

    remember we are a vocal minority who own expensive bikes and ride with friends who ride expensive bikes, 95% of the U.K. population would have a heartattack If you told them how much your bike cost ;0(

    From that bikebiz article, 46% of folk with a bike are sport or enthusiast cyclists, so whilst it’s a minority in literal terms, it’s hardly insignificant to sales. They are just more fickle about where and what they buy.

    @tomH

    i was trying to say, a lot of repair business is working on crappy bikes that haven’t been oiled or lubed since purchase, it’s hard work.

    premium bikes and components are easier to work with but few and far between for a standard bike mechanic/ shop, especially if they don’t have the big American or premium bike brands

    and certainly up north some people wouldn’t pay the brass to have a bike fixed to a good standard.

    demographics and customer base is a key consideration,

    u could open a shed in a small village outside London and sell 10 premium bikes a day , but if you opened a bike megastore in a northern town u may only sell 5 a week , Grimsby it’d be less

    bukobuko
    Member

    op “Am I mad”, Yes you are sir.

    Premier Icon FuzzyWuzzy
    Subscriber

    I was good friends with an LBS owner in a crappy area, most of his trade was crap kids bikes (he used to hate Christmas, he’d spend weeks building up dozens of shit bikes for thankless parents complaining £50 is too much for  a bike). He did have some trade from the local roadie club but not enough to make it a flourishing business. He ended up retiring with a dodgy back and neck from too much time in the workshop, he did sell the business on but it closed not long after as the new owner didn’t want to do the cheap bike stuff and there wasn’t enough higher end business.

    Unless you’re a multi-millionaire, can afford to employ decent staff and don’t care about making a profit so you just turn up for a coffee, chat and free stuff I wouldn’t go near owning a bike shop.

    woffle
    Member

    The only ‘bike’ shop I know that’s doing well (outside of London) is more of a coffee shop than anything else. I think that’s a good business model – location is key but I’d imagine the margins in the cafe subsidise the shop (or at the very least guarantee footfall)…

    A bit unreasonable.

    Seems an unrealistically high margin for any business.

    +1.  Suggests a complete lack of business understanding.  Stick to fitting pedals.

    footflaps
    Member

    There are over 20 bike shops in Cambridge (pop 120k), plus multiple mobile bike repair vans, so there is plenty of business in the right places for the right demographic.

    We have an Evans, a Halfords, three Rutland Cycles Stores, a Giant Store, a dozen or more independents (several on the same street). The Rutland store nearest us does a roaring trade in e-bikes, selling multiple multi £k electric town bikes every week. Customers are mainly older people as far as I can tell.

    Premier Icon andybrad
    Subscriber

    cambridge is far from the norm though. You can see more bikes in  a day there then ill see in 2 years in huddersfield

    strike
    Member

    The list of closures via the BikeBiz link is a year old – I wonder how many more are now on the list?  Stand-out shop on that list was Simply The Bike in Torquay – that shop had been around years.

    Premier Icon AlexSimon
    Subscriber

    I think for a one-man-band (with a ‘Saturday Boy’) running a local bike shop that can appeal to locals for Christmas bikes and isn’t afraid to get it’s hands dirty with typical family/commuter bikes, there is still a good living to be made.

    Repairs can be pretty lucrative, but you have to be comfortable doing the work that other people can’t be bothered with – it’s not glamorous.

    I think the trouble comes from trying too hard to be cool and stocking too many £300+ bikes and too much bling. You’d be better off making it clear that these are available, but only ordering when needed.

    Unlike some opinions up there – 40k of stock doesn’t sound like a lot to me – anyone who has run a shop will know how quickly it adds up.

    If you want to have a large boutique shop with lots of high-end bikes, I think that’s a much riskier proposition and would be much more particular to location/competition. Even award-winning shops with an established niche and access to successful brands are having to pull every trick in the book to stay afloat.

    neilnevill
    Member

    My neighbour took redundancy and used the pay out to start a bike shop near by.  Must have been 4-5 years ago now. His wife works full time and kids are adult and left the nest so he’s able to plod along but I think he makes little money.  Another bike shop a few hundred metres away went out of business after he set up, but another, rather large one opened.  It must be tough.

    Premier Icon w00dster
    Subscriber

    UBYK had a turn over of £3.2m but still went into insolvency.

    https://www.eddisons.com/assets/uploads/MBA/Project%20Ride/Business%20For%20Sale%20Notice.pdf

    I imagine the administrators will want more than £50k though to buy the business.

    orangeboy
    Member

    Times are hard for many of us in small bike shops. The shop I work in would be seen as out of date by many of you. It’s cluttered with to much stuff and there is no posh coffee machine plus we can be a little disorganised but we are still open

    we have always just got on with fixing what ever comes through the door , a fair chunk of our customers are not cyclist just people that ride a bike

    we do sell the odd nicer £1000 plus bike but mostly this last few years it’s the workshop that keeps things going day to day.

    It’s taken a few years to educate the younger mechanic at work that his wages are very much linked to being able to fix bikes that he thinks belong in the skip.

    I guess what I’m getting at there is still a living to be made just it’s not always with shiny stuff. Depends on location of course

    mboy
    Member

    As someone who’s done it, I couldn’t recommend it… 15yrs ago maybe. 5yrs ago when I started it was OK, I wasn’t going to get rich, but by being a bit unique and providing good service and securing some good products, it was turning over a small profit.

    The industry has changed BIG time, their hand forced by the political and financial climate that we are in mostly. Retail outfits are struggling full stop (and it’s not like the online boys are having it easy either, they’re struggling right now too!) and anything that is seen as a luxury rather than a necessity goes out the window so to speak.

    As an example of how volatile the bike trade is right now… On 1st November, in 1 sale, I took almost twice as much money through the till as I had done in the entire of October! OK so that’s a very high end custom full sus build dripping in bling that’s been ordered, but October was so quiet, we barely sold a bike and the workshop wasn’t busy either! Most of the smaller shops within a 25 mile radius of mine have closed down in the last 2-3 years too, and the shops that are still open are all struggling! There’s a few shops that are bucking the trend, but that won’t last long once their novelty has worn off (newly opened in one case near me, and another one has thrown hundreds of thousands of £’s into e-Bikes and has become a bit of a mecca for them). I have very nearly decided to jack it in several times in the last 12 months, which is crazy considering how 3 years ago we were so busy that I could barely cope!

    Good luck whatever you do, but I wouldn’t spend £50k on a bike shop right now…

    Premier Icon canopy
    Subscriber

    run a mile. lots have closed down here in the last few years.

    there are a few mobile and specialist mechanics, actually more than there are shops now.

    tbh I think the future is in setting up a local then regional good reputation personal service drop off r collect/return maintenance service. if i had the capital and inclination i’d set it up.

    Premier Icon edhornby
    Subscriber

    Do something else with the money

    twowheels
    Member

    @beer247 did you take it further?

    The bike shop near where I grew up is being sold (owner retiring). Even after reading this thread again and concluding the numbers don’t stack up I am curious about people who’ve taken the plunge. Seems it’s only worth it as a hobby/social endeavour.

    Premier Icon tomhoward
    Subscriber

    UBYK had a turn over of £3.2m but still went into insolvency.

    I imagine the administrators will want more than £50k though to buy the business.

    Still stand by that statement? 😉

    CountZero
    Member

    John’s Bikes in Bath, where I’ve spent a considerable amount of money over the years, has now closed down, which I would never have thought possible in Bath. A real shame, but poor management and buying choices recently, plus Bath business rates which are very high, seem to have done the business in. ☹️

    locum76
    Member

    Two things to consider that might add sustainability to and LBS.

    Social Enterprise: teach people to ride and fix their own bikes. Do that for specific groups like marginalised youth or people in recovery. Add a cafe to the shop and bring people together reducing isolation and building your community. There are funds about for such things and such activities deserve them.

    EBikes: I believe the govt are on the verge of subsidizing them for commuters.

    Premier Icon superleggero
    Subscriber

    Article in yesterday’s Observer: ‘How millennials have put a spoke in the wheels of Britain’s bicycle shops’. Interesting reading, if somewhat downbeat.

    https://www.theguardian.com/business/2019/jan/12/millenials-cycle-shop-closures

    Premier Icon epicyclo
    Subscriber

    The reality of most small businesses is you are just buying yourself a job. One that you can’t walk away from.

    However, a good operator can turn a small business into a big business – that’s where most big businesses start.

    More important than the figures (and they’re important) are two factors, potential and possible downfalls.

    Two possible downfalls stand out, and they’re both related to govt. What happens if the Bike to Work scheme gets the chop, and what happens if business rates relief gets withdrawn?

    And never underestimate what can happen if you fall sick…

    Potential is entirely up to you.

    Regardless of the above, life is much better if you are your own boss though…

    I like a good bike shop and try to support my decent LBS as much as is sensible even if I end up buying something at a 5 or 10-% premium…the value of the advice I get when I pop in to ask a quick question or kill 30 mins at lunchtime browsing round bikes I cannot afford. But for me if you’re going to buy a bike shop then don’t run it as just a bike shop. I think you need to be trying to attract the cyclists in, especially at the weekend…so needs to be a decent bike shop that sells stuff that local cyclists want and not trying to directly compete with the Wiggle’s of the world, and needs to be a Cafe and whatever else that attracts cyclists in. I think it would depend on location for me…is it right on a popular cycling route where cyclists can pop in mid-ride.

    I think there is still a place for bike shops but not many and they need to be more than just a bike shop.

    Regardless of the above, life is much better if you are your own boss though…

    Well define better. From people I know that own their own businesses there are upsides…i.e. being your own boss, and downsides….unbelievable stress, not knowing if you’re going to be in business next month, no back up in terms of holiday entitlement or sick benefits, long hours, huge risk, often your family home is on the line as collateral, staff and personnel problems that are frustrating etc. My observation from them is that it takes around 20 years from setting up a business to getting to the stage where you actually start benefitting from it…when the business is established, has grown to a level where it is sort of running itself, where there is a critical mass of employees and where the business owners start to benefit from the investment of their time, effort, feel like they can start paying themselves a half decent salary and start to live life again, go on those nice holidays, buy that nice car etc. That is assuming the business lasts that long of course…most don’t. But none of them regret it so it must be immensely satisfying.

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