Get ahead with Cycle Sale for small businesses

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this is something I've wanted to do for a long time I just thought it would be a cool video and kind of interesting to see had I known uh the economics of running a bike shop when I was a consumer 10 years ago probably would have viewed things a little bit differently these are off the top of my head the things I pay for every single month that cost me money so let's run through this like economics of a bike shop like how much money do I need to sell as a bike shop every single month just to break even [Music] obviously these numbers will change but this should give you a pretty good idea of what your local shop actually needs to do to to break even or if you're thinking about starting a shop how much business you actually need to do to break even so first thing you need to get any suppliers that are worth working with especially in Canada is a bricks and mortar storefront you cannot get away with operating out of your garage and expecting to open uh with SRAM or Shimano it's just it's just not how the game is played and to be honest rightfully so you can replace this lease payment with your van rental whether you're a velofix franchisee or an independent Mobile Mechanic those are totally fair game as far as the industry is concerned but it better be a new van would be my first thought credibility is kind of important every time you're talking to a supplier they want to know where is this where are you opening what are you doing how much money do you have and they're feeling you out for do you does this person actually have what it takes to make this work or am I going to open them they're going to provide poor service poor quality and ultimately make people not ride their bike and hurt the industry and hurt the existing bike shops in the area signing a lease in an area where signing a lease in a proper commercial building and running your proper business license and doing all those sorts of things is really going to help you get those kind of key accounts for an average release price per square foot I can only speak to my local area obviously you can do your own race search and kind of see leases in West Kelowna average about 20 to 24 a square foot when we first opened we were 1200 square feet right now we're 2 000 square feet so 2 000 times 20 is why Logan fourth forty thousand yeah forty thousand dollars yeah we're forty thousand dollars a year um and just lease so you calculate the lease is we're going to do this annually because this is going to be easier for me to do annually than it is to do monthly so your lease is forty thousand business insurance for a bike shop there's very very few insurance providers that will actually do everything you want them to do there's very few insurance providers that will do group rides bike repairs to ensure your inventory ensure you to be out on the trail ensure you do e-bikes is another big one some will discriminate between class one class two class three some will discriminate based on is it a Shimano or a Bosch motor or is it something different it's every year my insurance seems to go up uh currently from my own shop and what we pay in insurance and what most shops paying Insurance you're anywhere depending on the size of sop and the volume you're doing from four thousand to ten thousand or more if you want to do e-bike rentals and bike rentals triple net this is not your residential lease for those of you that don't know triple net it's this lovely thing they've added on to commercial leases where you actually pay Hydro a management fee uh in my case natural gas property tax building insurance basically you cover all of your landlord's expenses as well typically that's somewhere between six and eight dollars a foot for argument's sake right now I'm gonna write this down as fourteen thousand that's actually probably lower than what I what I actually am I think I'm probably closer to 18. point of sale system there's there's lots of them there's huge numbers of them largely the standard for bike shops has been light speed I think they both said they're running in about 50 of bike shops that's what we use here that's what I found it's not perfect but it does most of what we do really really well and offers a bunch of Integrations and third-party connectors that allow us to kind of get what we need to get done done pricing will vary on average let's call it 100 bucks a month that's 1200. for us we actually run Shopify as our website it's a way more powerful e-commerce platform than what Lightspeed offers you can either run it totally independent or pay for a connector as well but our website costs us about twenty four hundred dollars a year to keep up and running as well so those three things a little 3 600. marketing this is a funny one because I used to sell marketing anyone that tells you Instagram and Facebook don't cost anything or full of you can spend countless hours building out mediocre content which just distracts you from repairing bikes and regardless of what your shop hour rate is I guarantee your posts on social media aren't making as much money as they are working on stand on bikes so if you have the option work on bikes first find somebody who's good at marketing pay them to do your marketing you don't have the option and need to do it all like I did at the start well that's what you got to do so the other flip side of that is marketing can include things like Google AdWords and paying for ads on Facebook and Instagram and radio and I mean if you're really old in archaic newspaper a tick tock whatever the hell you want to spend your money on to promote your shop for us we actually spend a fair bit of money with Trail organizations just trying to stay affiliated with them and a lot of shops do and that's what honestly I think that's a really nice way to get our name out there and support the networks that ultimately bring money back to the shop so it's kind of this like symbiotic relationship in my opinion on average I'm Gonna Leave This one just blank for the purpose of this video um our shop spends between one and two percent were pretty low I think I think we should actually be closer to three percent of sales on marketing but we're not quite there somewhere between one and two is what we do so get more money we could pay Logan more but that's not an option phone we use a Voiceover IP system it costs us 65 a month and I don't mind telling the whole world that it includes two phones it's from an awesome company in Kelowna BC called talktel Joe and his team have like unreal service they're Wicked internet I am dirt cheap and Frugal is all hell that cost me fifty dollars a month with 65 times 12. we're gonna edit we're gonna do a cut scene to where we total all this up um payroll per employee you used to work in the industry would you make peanuts oh peanuts yeah yeah so peanuts is good so let's take and I'm not about to tell the world how much my staff make because I don't think that's very professional but we'll take we'll take twenty dollars an hour and multiply that by 40 hours a week and we'll multiply that by let's say for the argument's sake of this you only kept them seasonally and kept them on for eight months of the year and then let's say employee number two was Logan and you didn't like him as much so you paid them less and you pay them 17 an hour times 40. and let's say you only kept them on seven months I'll give you a total for what all this equals annually uh bookkeeping depending on if you want to do this yourself which again I wouldn't recommend because your time's probably better spent working on somebody's bike than trying to figure out how much money you spent last month I I just recently hired a really good bookkeeper once a month you should put halfway through the month following I get an email saying here's how much money your shop actually made last month and here's your cash flow position and here's where all your money went and here's where it all came in Wicked love it allows me to make like educated decisions move forward with that said I've usually got a pretty good handle on that already it's rare that they sent me anything that I'm not shocked by um or not shocked by or shocked by whatever uh good bookkeeper we're in West Kelowna cost of living in BC is a little bit higher anywhere between three and four hundred a month I'm going to estimate this on the low end because presumably somebody who's thinking about starting a shop is going to look at my numbers and go oh hey well maybe I can make this work or maybe I can do this better and my alarm also cost me 65 dollars times 12. on top of this what do they call it in California OSHA something like that like you've always got like a workman's comp board or worksafe BC or some sort of like you got injured at work I cut my hand off um as an employer you pay for a portion of this uh I think it's going to cost me two percent of whatever this is this year two and a half I just got the thing in the mail we're actually getting a discount now because we haven't had a claim the other thing to keep in mind with a lot of this is if you're planning on starting a shop there's things you should spend money on even if you have tools at home that are you know kind of what I had which were okay tools is a big one I would instantly out of the budget for tools I would instantly out of the gate budget for fixtures I'd instantly out of the gate if I could do it again would have budgeted higher for leasehold improvements and fixture displays and like display cabinets and getting cabinets built in um we have some products by Gap we have some products that have long lived in like boxes and shelves and when people feel like oh I'm thinking about buying this I'm like oh yeah we have those they're like wait what I didn't know you had that for the first year and a half we just had a collection of like eight or nine Forks that I kept in stock for bike builds we were doing or just ready to have on standby they didn't sell as well the moment I pulled them out and put them on the wall at the back it was like all of a sudden we were selling a fork every three weeks four weeks which is pretty rare I don't think there's too many shops that actually sell a whole lot of suspension over the counter like that yeah so those would be the things I would would have invested in heavier at the start if I could go back and do it again and that would be my advice so if you took the time at home just hold up all of those costs 77 360 dollars is what you need to make in cash that's before you paid your staff because I actually decided not to factor staff and for the argument of this and then I also decided not to factor in where you're gonna pay yourself because I can't tell you that I don't really want to close what my shops margin is I will say 36 is probably what some higher volume lower margin shops would probably do and 45 is probably a little bit closer to what your repair only kind of shop would do with that in mind this is this is actually 40 at a forty percent margin you need to do 193 400 just to break even before you paid yourself so if you want to pay yourself anything you want to pay yourself 40 Grand add another hundred thousand dollars to this you need to do three hundred thousand dollars here in sales um the other things that will definitely definitely trip you up when you're like why am I not making any money inventory for one it's a killer uh inventory for myself is always uh you know oh I should just I should just order another 50 bucks or 100 bucks just to hit free shipping oh yeah okay order another 12-speed chain well you said at some point oh we're gonna order a couple tires we'll use those yep okay cool you know you're doing these kinds of numbers if you were trying to you know run a small shop is on your own and trying to hit three hundred thousand dollars a year in sales you're gonna you're just gonna eat it and pay a lot of shipping because you'll go broke trying to hit free shipping all the time it won't matter I chatted with somebody who's much much smarter than myself when I first opened and he said realistically speaking you know five years from now if your Shop's not doing a million dollars in sales or more uh you just you're gonna have a tough time it's not going to be sustainable yeah I'd agree with him at this point if your Shop's not doing a million dollars or more uh short of you working incredible hours or being incredibly focused on what you're doing really really really tricky to be sustainable and everyone seems to think like oh we'll just be hyper focused on high-end mountain bikes yeah man that sounds great absolutely you and everyone in their dog would love to just work on brand new shining 10 12 000 bikes and just build those all day long I personally love building those bikes um and love helping people plan those and build those bikes out the reality is those bikes don't walk through the door every day the bikes that walk through the door every day are entry-level josemuck and three thousand dollar mountain bikes or four thousand dollar mountain bikes or people to ride twice a week once a week once every couple weeks um and they don't care they don't they don't need a ten thousand dollar bike so I guess what I'm trying to say here is if you are thinking about starting a shop you need to start with figure out what this cost looks like for you and your business planning add on how much you want to pay yourself and add on leasehold improvements and add-on inventory and nobody's going to give you credit so don't get your hopes up and think some supplier is going to go nuts and give you credit when you're starting a bike shop it's a high fail industry you're you're truthfully going to need pretty darn close to 200 to 250 000 just to get yourself out of the gate and if you finance that with that that number should actually be a little bit higher because guess what you get to do you get to repay the debt at the same time there's a bike shop yeah you know my family lives comfortably and we're not blowing it out of the water we're not like man let's move to a million dollar home we're still living in the same two bedroom one bathroom Shack we lived in two years ago and I don't see that changing in the next couple years but uh it's enough to be comfortable it's a passion project it's a job I like doing and if this helped somebody somewhere build their business plan so they could do the same sweet if it helped you understand why your local bike shop hates giving you 15 off because the 15 off turns the margin on that part sit between this and 28 or less I take 15 off of 28 I end up with 13 your credit card processing fee eats another three I make 10 percent on your 300. part you just bought I make thirty dollars to sell you something it's it's really really tricky when that happens um again there's a big shop doing high volume you can absorb a few of these every once in a while as a small shop really tricky um so as a consumer hopefully that like lays out why your shops all of a sudden really really tight with giving you screaming deals on everything and hopefully I don't come across as too bitter and jaded I'm sure somebody in the comments section will tear these numbers apart and be like this guy doesn't know anything about anything that's cool this is just react related to my own reality this is just my own bike shop live somewhere in these numbers and survives well and it does enough so anyway that's my TED Talk bike shock economics 101 but realistically speaking you need to be doing probably double that to kind of be sustainable in your first couple years cheers oh I can't do that anymore you think people would watch that no I'd watch it all right