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How To Start A Bike Shop And Succeed

Written by David DeKeyser

1. Know Your Market

Having a solid understanding of your marketplace and its potential and limitations will go a long way towards success. You want to play to your area’s strengths. Having great Rail-to-Trails or world-class mountain biking, for example, will go a long way towards getting things right in your inventory selections, store model, and what will work in your area. Ideally, you will have some type of riding that is good near you, as bike paths, mountain bike trails, or scenic low traffic roads all will be of help - all three? You're in luck!


2. Securing Funding & Writing a Business Plan

You will need an initial source of funding to get your bike store off the ground. This is a critical part of the equation. If you have personal resources, good for you, but you will still need a good plan and you will want to put a limit on what you're willing to inject. If you need to obtain a bank loan, you will need to write a detailed business plan that has at least three years of projections amongst a host of other information you can find on the SBA’s website. Do not become complacent if you do not need a loan; consider going through the process to make sure your plan is sound first. You will need enough cash to secure an initial inventory buy, lease payments, store buildout, insurance, workshop buildout, and a variety of other expenses that will add up quickly. Going through the process of getting a loan and securing a line of credit will do two very important things for you. First, you will be vetted by a financial institution and have some very seasoned eyes looking at your projections. This will help you to understand more about what is required from a business knowledge standpoint, and get you accustomed to reading financials. Second, having some funding is always helpful, and having a line of credit can go a long way towards smoothing out bumps in the road. It is also very important to develop a relationship with your bank. In times of crisis such as the COVID-19 pandemic, retailers with easy access to their bankers and with relationships already built seemed to fare better navigating the stimulus-money waters. It is never a bad thing to have a banker in your corner should you need one. One of the main sources of credit bike shops use daily is through their vendors. Most bicycle brands will establish a line of credit for you to buy a product and pay for it later. You have to be very careful with this line of credit as it is easy to get in over your head quickly, especially with long-term dating that can sometimes be 10 or more months down the road. Buying large quantities of inventory on credit terms that you initially feel you will have no problem selling can be a big surprise come Spring. Being in “credit jail” and unable to buy due to poor planning is a very common scenario in the bike business. 


3. Building a Team of Experts

Bank - Choose your bank wisely. Make sure they are good at working with small businesses and have the experience to guide you. Get some referrals from other small businesses and ask around. The difference when you need help fast is critical.

Accountant - Perhaps there is no other person on your team that can be of more help or hindrance than your accountant. Again, shop around and find the right fit. I think many retailers look to their accountants like they would their doctors and never second guess the information. Ask lots of questions and set expectations. If you use QuickBooks, I would suggest you have a QB Pro Advisor you can utilize. They can help you with day to day accounting and bookkeeping questions to keep you on track.

Bookkeeper - Many shops have a bookkeeper. I would suggest that the person doing your books be a very trusted person. The best description of that person is you! If you have your QuickBooks set up well, you can get advice and help quickly from an advisor. The average shop owner can probably do the books in as little as 10 hours a week, maybe even less. I know that sounds impossible, but the knowledge one gains by doing the bookkeeping in a timely and accurate manner cannot be overstated. No one cares as much as you, and the information is not as important to anyone but you. 

Attorney - Having an attorney that you can use when needed is important. Don’t be scared by the expense as you will hopefully be using them very little. An attorney that specializes in business and has experience in mergers and acquisitions is very important. Never sign a lease without an attorney’s review. 

Insurance Agency - Another critical piece of the puzzle. A great insurance agent is a very valuable member of your team. Having an agent who understands the special circumstances and nuances of the bike industry is key and the NBDA has long recommended Scott Chapin from the Marsh and McLennan agency. Scott Chapin writes “In a nutshell, we created a bike shop insurance program 12 years ago as virtually every insurance carrier excluded many of the common exposures that retailers have.  These include Shop Sponsored Ride Liability, Bike Rental Liability, Voluntary Property Departure.   Our coverages continue to evolve as the bicycle industry changes, whether it is covering ebike sales/service, mobile repair, demo days, and beer/wine/food sales.” As you can see, they have thought of things the average insurance agent may not be familiar with.

Business mentor(s) - This is an overlooked aspect of running a small business. Join the local Chamber of Commerce or some other local small business group. Get to know the owners of other bike shops, as many as you can. Join the NBDA’s Profitability Project to gain insights into what other successful owners are doing. The bottom line is to build a network of folks you can bounce things off of and whose opinions you can trust.


4. Finding a Location

This will be one of the hardest of your initial decisions. It takes into consideration your projected sales from your business plan projections and market analysis. You want the store to be big enough to handle your projected sales, while not becoming a burden by overshooting those projections. Use guidelines such as how many dollars per square foot you need to sell to have your rent or mortgage fit within the key performance indicators for occupancy expenses. You also want to be in a great location if you can while simultaneously being affordable. You can see where there are a lot of moving targets in location considerations! You must also be flexible with your expectations of what your store's size is, particularly in areas with high rental rates. You may need to be a smaller than ideal retail location and then utilize off-site storage in order to keep your lease rate within the parameters you identified while writing your business plan.


5. What Products Will You be Selling?

Your main bike brand(s) will determine much about your business. Choose them very wisely. While some of the biggest brands have great visibility and consumer pull, they also have larger requirements for inventory purchases and may not afford the best margins should you be in a low-buying tier. Small to midsize brands can be a great way to get started with lower demands and higher margins. You also want to carefully examine the market saturation, or lack of, for the products you choose. Some brands are very careful with distribution and others are looser. You don’t want to be selling the same things as others if there's a chance of price wars. Your chosen products must also fit with your market's needs. Choosing popular high-end mountain bike brands for your store near a bike path will not work well for you. There are also regionally strong brands that you should look into. Last, for any brand you are looking at, you should contact other dealers out of the area to discuss availability issues, warranty handling, etc so there are no unpleasant surprises.


6. Hiring Employees

This is a tricky balance. While having reliable and skilled mechanics is critical, other staff may be easier to train the way you would like. There's an old saying about hiring for enthusiasm, and that most people are trainable. An inexperienced person that has an interest in cycling as well as enthusiasm and a natural ability to interact may be cheaper to hire due to a lack of actual experience and may be a better employee. Payroll will be your single biggest expense, so spend those dollars wisely. Also, when you first start out, you may be putting in all the hours yourself as you build your business, so be prepared for some very long hours.

"Always treat the business you are building as an asset."

7. Understanding Your Skills and Abilities

It is very important that you play to your own individual strengths as much as possible. Try to understand all aspects of your business, especially the financial side of things. Hire the right people to help you succeed in areas you may have the most weaknesses.


8. Get a Good Point of Sale System and Use it to its Fullest

This cannot be overstated. The data you accurately and consistently collect and input will be the basis of how you run the business in the future and your ability to contact and connect with your customers. The ability to extract the information you need to make decisions is what separates the good bike shops from the best. Having information at your fingertips also allows you to check your emotions when buying products and determining how much to carry while analyzing which items and categories are giving you your best financial returns. 


9. Building a Website, Customer Database, and Social Media Presence

Your website should if at all possible be able to sync with your actual inventory and display only what you have in stock to shoppers. Having the ability to purchase items on your site is important and customers expect the convenience. Online repair scheduling is another quickly growing technology that consumers will expect as time goes on. Social media should be thoughtfully and regularly worked on. Your customer database and continuously building and maintaining it should be one of your most important objectives. The ability to reach your customers via email and text is of immense value, and will also become one of the drivers of your business’s value over time. When or if you should decide to sell your business, having a robust customer list is of great value.


10. Customer Acquisition and Retention

There are many ways of acquiring customers. Advertising and marketing plans fill many shelves in the bookstores. Try as many things as you can, but always keep a strict budget in mind. Attending and getting involved with events is always a good place to start. You can also get good results with good old-fashioned guerrilla marketing: always talk about your store to anyone you meet, hand out cards, etc. Every time you are able to get people's information, do it. The whole point is to get names and emails so you can keep reaching them. Get Facebook and Instagram followers anyway you can. Cross market your web, social, and email campaigns continuously. Link, link, link... Also, be hyper-vigilant in getting information when making sales, regardless of how small they are. 


11. Building Brand and Community

Many bike shops are started by enthusiasts and have a tendency to overlook the entry to mid-level consumers. Everyone knows that bike shops do group rides, but how many stores do beginner rides? This is a great way to get people riding and hooked on your store. Most shops that do any type of basic maintenance clinics see the strongest interest in the most basic items such as flat-repair clinics and basic roadside maintenance classes. Cater to the crowd that has the most potential to help you grow by acquiring customers that can move up the ladder from beginner to enthusiast. In addition to catering to the beginner and intermediate crowds, it should be noted that many bike shops like to organize or sponsor race teams. Word of caution: bike racers usually demand hefty discounts and can monopolize time. Be very careful with discounting as it is always a slippery slope.


Final Thoughts

Last, always treat the business you are building as an asset. Your aim is to be increasing sales and profits while building a dedicated customer base through sound business practices and modern customer service and retention methods. What does that look like from a practical application? Simply put that means maintaining accurate financial, employee, vendor, inventory, customer, and asset records at all times. It also means consistently benchmarking your business’s key performance indicators. By doing these things you will have the data you need to make the decisions that will allow you to act in the best interest of your business. If you want to open a bike shop, you obviously do not mind taking some calculated risk and working extremely hard to do something you love. In order to have a long career, you will need to pay very close attention to the above-mentioned items from day one, long before you ever turn on the open sign for the first time. Bicycle retail has been very good to me personally and to many others I have been fortunate to meet and become friends with over the years. It has financially, emotionally, and even physically been very hard on some. Many will say the work and risks taken is the best thing they've ever done, and others will say the opposite. While there are many things out of people’s hands, there are some very basic trends among those who succeed, and that is that they pay close attention to their business while always trying to improve and grow.


Please reach out to me for help on getting your business started, or to simply explore all the risks and rewards of owning a retail bicycle shop.  I can also help you with initial business planning.


My consulting homepage for the NBDA P2 consult program can be found here.

And you can always email me directly at david@nbda.com.

About David DeKeyser

David DeKeyser and his wife Rebecca Cleveland sold their highly profitable bike shop in DePere, Wisconsin on 2/28/19. 

Dave and his wife owned the shop and commercial real estate for 18 years and were profitable every year they were open. 

Dave currently writes for the Positive Spin Series on Bicycle Retailer and Industry News Magazine as well as the NBDA's blog Outspokin'.

For only $195 per year for dealers, the NBDA offers discount programs, advocacy, education, monthly newsletter Outspokin’ and more.

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