How to Start a Bike Rental Business

Start a bike rental business by following these 10 steps:

1. Plan your Bike Rental Business
2. Form your Bike Rental Business into a Legal Entity
3. Register your Bike Rental Business for Taxes
4. Open a Business Bank Account & Credit Card
5. Set up Accounting for your Bike Rental Business
6. Get the Necessary Permits & Licenses for your Bike Rental Business
7. Get Bike Rental Business Insurance
8. Define your Bike Rental Business Brand
9. Create your Bike Rental Business Website
10. Set up your Business Phone System

We have put together this simple guide to starting your bike rental business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.

Exploring your options? Check out other small business ideas.

STEP 1: Plan your business

A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:

• What will you name your business?
• What are the startup and ongoing costs?
• Who is your target market?
• How much can you charge customers?

Luckily we have done a lot of this research for you.

What will you name your business?

Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Bike Rental Business Name Generator

If you operate a sole proprietorship, you might want to operate under a business name other than your own name. Visit our DBA guide to learn more.

When registering a business name, we recommend researching your business name by checking:

• Your state's business records
• Federal and state trademark records
• Social media platforms
• Web domain availability.

It's very important to secure your domain name before someone else does.

What are the costs involved in opening a bike rental business?

At the high end, this bike rental manager mentions $175,000 in startup costs for the company with which he’s involved. (It’s also an interesting web article regarding the day-to-day challenges of such an operation.)

Fortunately, this kind of business can be started with a much more modest investment. Let’s imagine a shop with 20 bikes.

• Fleet costs and related gear – If the 20 bike were purchased for $250 each, your startup fleet costs $5,000. This is at the low end of new bike costs, and keep in mind that quality and durability are important because they’re liable to take a beating. You can get one idea of costs by visiting this fleet-sales website. You might also spend another $1,000-$2,000 or more on such related gear as helmets and bike locks.
• Repairs – This is highly variable, but you could spend $5,000 a year or more on tools, parts and replacement bikes. On a related note, make sure you establish a relationship with a bike product distributor so you always have access to replacement parts and quick delivery. None of your bikes should be sidelined for more than two days.
• Staff – This cost can range from your own income expectations if you have no employees to several staffers at a popular venue or more than one. Make sure you at least have one bike mechanic unless you can do the job yourself. Figure at least $18 in pay and withholdings for each hour you’ll need covered.
• Related merchandise – What else can you upsell your customers?
• Rent – This can range from nothing if you’re given space at a hotel for the accommodation of their guests, to prevailing commercial rents. Make sure to rent the smallest amount of space you’ll need for bike storage, display of related merchandise (if any) and customer transactions.
• Liability insurance – Check rates in your area. Although you’ll make your customers sign waivers releasing you from responsibility for accidents, that’s not likely to be effective protection if the condition of the bike is the cause of accident.
• Professional services – You should consult a lawyer, at least for drawing up your customer waiver, and accountant for startup costs. In addition, you might want to consult a graphic designer and web developer for logos, signage and website creation. These costs could be at least $1,000.

What are the ongoing expenses for a bike rental business?

Fleet costs will likely be your major ongoing expense. This includes the need to replace bikes and make major and minor repairs. Employee costs can add up too, so make sure that you schedule a large enough staff to meet needs, but not so many that you are over-staffed.

Who is the target market?

Your customers are likely to be vacationers who appreciate an active lifestyle. They’re likely unfamiliar with the region, eager to be involved with your establishment and very receptive to your advice on sights to see or avoid. You should also be receptive to their after-ride reviews, as these often offer helpful feedback, including what attractions you may want to add to your list of recommended sites.

How does a bike rental business make money?

You’ll rent bikes on an hourly or flat fee basis, or a combination of both. Some bike rental establishments also sell merchandise related to biking or area tourism (mugs, water bottles, t-shirts, etc.) You might also consider selling your fleet bikes when they’ve been replaced by newer models.

How much can you charge customers?

Rental rates will vary depending on location and seasonality, but can typically start at $8 or $9 an hour. Since it’s in your economic interest for each bike to be on rental as much as possible, consider rate discounting for daypart or all-day (or even all weekend) rentals.

Consult this website to see what competitors are charging (and even to see whether it’s in your economic interest to start such a business in a given location).

How much profit can a bike rental business make?

Your profitability is related to many factors, from the length of your season (if your climate is mild, your operation might run year-round, while elsewhere it might be a three-month season at most), to other services provided. In other words, if your rental operation is part of a bicycle sales and service operation, you’ll likely have a longer season than if it’s a standalone rental site.

How can you make your business more profitable?

If your area is particularly interesting to sightseers, consider offering guided bike tours for a flat fee.

You might also provide bike sales and repair services from your same shop. After all, if you have the skills or personnel to service your own repairs, it would be very little additional effort to provide the same services for bike owners.

Also, take advantage of the fact that your customers have an interest in the area surrounding your business. Consider displaying in your shop souvenirs that celebrate your neighborhood or region, such as postcards, t-shirts, mugs, bumper stickers, keychains and related paraphernalia.

And finally, you might be able to make additional use of your fleet, such as for restaurant takeout deliveries.

STEP 2: Form a legal entity

The most common business structure types are the sole proprietorship, partnership, limited liability company (LLC), and corporation.

Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your bike rental business is sued.

You can form an LLC yourself and pay only the minimal state LLC costs or hire one of the Best LLC Services for a small, additional fee.

STEP 3: Register for taxes

You will need to register for a variety of state and federal taxes before you can open for business.

In order to register for taxes you will need to apply for an EIN. It's really easy and free!

There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.

STEP 4: Open a business bank account & credit card

Using dedicated business banking and credit accounts is essential for personal asset protection.

When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.

Open a business bank account

Besides being a requirement when applying for business loans, opening a business bank account:

• Separates your personal assets from your company's assets, which is necessary for personal asset protection.
• Makes accounting and tax filing easier.

Get a business credit card

Getting a business credit card helps you:

• Separate personal and business expenses by putting your business' expenses all in one place.
• Build your company's credit history, which can be useful to raise money later on.

STEP 5: Set up business accounting

Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.

Make LLC accounting easy with our LLC Expenses Cheat Sheet.

STEP 6: Obtain necessary permits and licenses

Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.

State & Local Business Licensing Requirements

Certain state permits and licenses may be needed to operate a bike rental shop. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.

Liability Waiver

It is advisable to provide customers with informed consent agreements to decrease legal liability and encourage transparency. More information on informed consent agreements can be found here.

Certificate of Occupancy

A bike rental shop is run out of a storefront. Businesses operating out of a physical location typically require a Certificate of Occupancy (CO). A CO confirms that all building codes, zoning laws and government regulations have been met.

If you plan to lease a location:

• It is generally the landlord’s responsibility to obtain a CO.
• Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a bike rental shop.
• After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.

If you plan to purchase or build a location:

• You will be responsible for obtaining a valid CO from a local government authority.
• Review all building codes and zoning requirements for your business’ location to ensure your bike rental shop will be in compliance and able to obtain a CO.

STEP 7: Get business insurance

Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.

There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.

Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.

Is this Business Right For You?

Bike rental business owners should be mechanically adept, since customers can be hard on bikes. Also, since bikes are often rented to explore the immediate area, you should be highly familiar with your home base and able to suggest tourist attractions. You should have an engaging personality and be motivated to deliver exceptional customer service.

You must also be based in an environment where your customers will want to rent bikes. This usually means a tourist venue and an inviting landscape for bikers—not too hilly or congested. The terrain should be bike-friendly, with wide streets or bike lanes, or bike paths, for the safety and enjoyment of your customers.

What happens during a typical day at a bike rental business?

Most of your days’ activities will involve customer contact. You’ll rent them bikes and close transactions upon bike returns. Here’s how your typical day might break down:

• Rent bikes for customers or groups, after first making sure the vehicles are in good operating condition. Make customers sign liability waivers and get cash deposits and credit card information to ensure bike returns. Answer questions about location and destination attractions, and try to upsell water bottles, maps, t-shirts, power bars or other displayed merchandise.
• Prep bikes mechanically, making minor repairs for rental availability.
• Schedule staff, which might include at least one bike mechanic.
• Inspect bikes upon return and determine whether customers should be billed for damages.
• Regularly update your social media, with destination photos and news.

What are some skills and experiences that will help you build a successful bike rental business?

Bikes are relatively expensive and your customers can be hard on them, so mechanical skills and/or the ability to hire at least one full-time mechanic are important. An out-of-service bike isn’t earning money and can lead to customer loss if you don’t have enough functional rides available.

You should also be able to promote your business creatively (and inexpensively), and have keen instincts for developing good customer relationships (since their online reviews can make or break your business).

What is the growth potential for a bike rental business?

The bare essentials of a bike rental business are a station to store and repair bikes and conduct business, a small fleet of bikes, and seasonal employees at or near minimum wage. You could hire one mechanic to service bikes at multiple locations, or assume the responsibility yourself if you’re so inclined. Therefore, expansion is relatively easy once you’ve figured out how to successfully run one location.