Start a bike shop by following these 9 steps:
You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your bike shop. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
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 are the startup and ongoing costs?
- Who is your target market?
- How long it will take you to break even?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a bike shop?
One of the initial costs is obtaining any required business license and permits. Depending on the location and size of your shop, opening a bicycle shop can cost as much as $350,000, or as little as $10,000. Startup costs are usually lower in smaller cities where rents aren’t as high, since a substantial amount of space is required.
Once a suitable space is located, it must be outfitted to effectively display bikes and accessories. Purchasing initial inventory is also costly, but many wholesale bicycle dealers offer shop owners a line of credit at 0% interest for a limited time (usually 3-6 months), which helps finance the initial inventory. Other goods, such as safety equipment, clothing, and accessories must be purchased outright.
Read our bike shop purchasing guide to learn about the materials and equipment you'll need to start a bike shop, how much to budget, and where to make purchases.
What are the ongoing expenses for a bike shop?
Ongoing expenses include:
- License and insurance fees
- Inventory maintenance costs, which can be reduced by advertising more expensive items in brochures, rather than keeping them in stock
- Freight charges, which can be reduced by using local wholesalers whenever possible
- Sale and inventory management software designed specifically for bike shops
- Tool maintenance
- Staff training and salaries
Who is the target market?
Preferred customers are people who enjoy cycling as a form of transportation, a competitive sport, or a recreational hobby.
How does a bike shop make money?
Bicycle shops make money by purchasing bicycles and cycling accessories for resale. Most shops also offer replacement parts and bicycle repair services. Some offer bicycle rentals as well as sales. Customers rely on the extensive knowledge and expertise of bicycle shop staff members to maintain their bicycles in safe riding condition.
How much can you charge customers?
Bicycle repairs can cost anywhere from $10 to $150, depending on the complexity of the job and the cost of the replacement parts. Simple beach cruisers cost anywhere from $199 to $700, while complex, rugged mountain bikes can range from $700 up to $10,000. There are also hybrid electric bicycles. Although they may charge more, most people choose bicycle shops over big box stores for the quality of their products, the superior knowledge of the staff, and the high level of customization they offer.
How much profit can a bike shop make?
On average, the retail profit margin for bike sales is 36%, although the margin is somewhat higher for other types of cycling-related products, such as clothing and accessories. By selling a combination of bikes and other goods, the average bicycle shop earns a profit margin of about 42%.
How can you make your business more profitable?
Many bike shops have begun expanding their businesses, by making their stores available for other types of community events. According to a recent survey of 4,000 bike shops, 12% now have coffee bars, 11% offer cycling/spin classes, and nearly 1% partner with other service providers to offer massage and yoga. Your profits can increase in direct proportion to the community involvement your store makes possible.
What will you name your business?
Choosing the right name is very important. Read our detailed guide on how to name your business. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your bike shop is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
Form Your LLC
Read our Guide to Form Your Own LLC
Check out the Top Business Formation Services from our friends at StartupSavant.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
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!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
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
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Recommended: Find the right bank for you, read our review of the Top 5 Banks for Your Small Business
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment 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.
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 shop business. Learn more about licensing requirements in your state by visiting the Small Business Administration’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
Bike shops may also wish to look into applying for a resale certificate, as a resale certificate allows retailers to purchase goods intended for resale without paying sales tax.
In addition, certain local licensing or regulatory requirements may apply. For more information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources
If a bike shop is considering renting bikes, liability waivers are essential since consumers will be in high risk environments, operating potentially dangerous machinery. For this reason, it is best to require protective gear. Attached is a link to a general informed consent form for a bike shop.
Certificate of Occupancy
A bike shop business is generally run out of a retail store. 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 bike shop:
- 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 shop business.
- 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 bike shop:
- 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 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.
Learn more about General Liability Insurance.
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.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
How to promote & market a bike shop
A great way to promote your shop is by partnering with other local businesses to sponsor bicycle races and other community events for charitable causes. Part of what makes bicycling so attractive to people is being outdoors, interacting with nature and other members of the community. Providing more opportunities for them to do that is sure to increase your customer base.
Social media sites such as Facebook and Twitter are excellent platforms to advertise both community and sales events. Many bike shops also make it possible for their customers to purchase items online by maintaining a page on Shopify, or another sales platform. Creating and maintaining a website is a good way to inform regular customers about new products and services, as well as upcoming sales.
How to keep customers coming back
Purchasing used bikes from local community members is a good way to build a local reputation, establish customer loyalty, and lower your inventory costs. People who sell older bicycles that their children may have outgrown are apt to use the money to purchase a new one.
STEP 9: Establish your Web Presence
A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Start A Bike Shop In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Is this Business Right For You?
This business is ideal for environmentally conscious people who want to promote physical fitness and enjoy interacting with others.
What happens during a typical day at a bike shop?
Bicycle shop owners perform a wide variety of activities, including:
- Tracking sales and inventory
- Purchasing bicycles and accessories
- Scheduling and performing bicycle customization and repairs
- Creating sales promotions
- Arranging and participating in community events
- Researching new products and current trends in cycling
- Training staff
What are some skills and experiences that will help you build a successful bike shop?
Some skills that will help you succeed in this type of business include:
- Bicycle repair
- Customer service
- Knowledge of cycling products and accessories
- Accounting skills
- Managerial skills for training staff
What is the growth potential for a bike shop?
The bicycle industry is demonstrating continuous growth, with the majority of bicycle manufacturers enjoying an increase in profits for 2016. Depending on location, it is possible to achieve enough growth to offer franchise opportunities.
TRUiC's YouTube Channel
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Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
How and when to build a team
It’s important to build a team from the beginning. Typically, a team includes a lending institution, and at least one staff member knowledgeable about cycling products, and skilled in bicycle repair.