Ask Uncle Dave - Bike Shop
Ask Uncle Dave

Ask Uncle Dave: Should I Buy a Bike Shop?

Words Dave Tolnai
Date Oct 24, 2017

Dear Uncle Dave,

I need your help. My local bike shop, the shop I’ve gone to for 14 years, is at risk of dying a long slow death. The original owners are stuck in a long drawn-out divorce legal battle which is going to kill the shop. My question to you is, can anyone really make decent money owning a bike shop? I ask, because I’m seriously considering pulling out my savings to partner with the current shop manager to buy the shop.

I grew up as a teenager hanging out and working in bike shops and I love bikes. My day job now is in corporate finance M&A, I buy other companies. All of those company acquisitions are based completely on cold hard logic. But, this acquisition (buying the shop) is full of emotion and risk. While the shop is currently profitable, in my head I know my money would probably earn a better return if I leave it in the stock market. But, my heart is still drawn to living the childhood dream of owning a bike shop.

So tell me, am I fooling myself by believing that in the age of Amazon I can be the outlier and make it long term with a brick and mortar bike shop? Does the excitement of being a bike industry insider and getting pro-deal on all my dream bikes outweigh the lower risk/potentially higher returns of the cold & impersonal stock market? Is owning a bike shop still a dream worth living?

Titan of Industry


Dear Ti...Dear Titus:

So here's your first mistake: You're asking a guy on the internet for serious life advice. This already suggests that your judgement is compromised, and you should immediately walk away from any ideas that you've had recently. They're probably terrible.

But, just in case you want a second opinion, we reached out  to not one, not two, but three (wait...four!!!) tax cheats/small business owners of what could be described as bicycle shops. We gave them the chance to remain anonymous, hoping that we'd get the real dirt on the hard life they are living, but they all seemed pretty eager to let everybody know who they are and what they have to say.

First up, James Wilson, owner of Obsession: Bikes.

Long ago my Dad told me, “Son you are so fortunate, you love your job. This is rare, most people hate theirs.”

 Less long ago I joked, “Me? I haven’t worked since the year 2000. (when I started buying my current shop).”

Yes, today’s retail landscape is changing at an unprecedented rate and yes it is rife with pitfalls and risk. And yes there are plenty of safe jobs. But watch out, many of those safe jobs are no longer safe; Layoffs, global meltdowns, buy outs, changes in government. So many aspects of safe employment are out of the employee’s control. Many of these safe places are also boring or dangerous after all, “Sitting is the new smoking. “.

Many in my parent’s generation could keep the same place of employment for their entire life but this has really changed, now risk is everywhere.

I can’t speak directly to your location or circumstances but here is what I get from a busy day at work – Happiness. I get to help people take their hard earned cash and turn it into something tangible. Not some pie in the sky speculation that it may lead to some way off in the future cash benefit. We in the business of selling bikes sell the vehicle of flight, the idea that this two wheeled machine can carry our friends to the health, happiness or the thrills that they desire. That a kid can go from a couple block radius to the wide world of exploration and wonderment. That a person with an otherwise crippling injury can continue to breathe in deep the fresh air of the world around. To be able to facilitate this is a dream come true.

Is this a challenge –YES!

Is this satisfying – YES!

Is this dream worth it – YES!

Holy shit. What have I been doing with my life? That sounds amazing! Yikes.

Next, we have a man who has never done anything but swim upstream. Jeff Bryson is the owner of Bikeroom, where he trains bike mechanics and service managers and does high-level service for select customers. He's also the mechanic for the Rocky Mountain EWS team. So. You know. Think about that for a while.

Over half the students I get through the Bikeroom all have a dream of opening a bike shop/coffee shop (my dream too)  Lots of those students are currently employed and have a dream of retiring to a bike shop or downsizing their life (one less car, smaller house, less overhead) to not have to go back to the rigs, oil sands or desk jobs. 

A lot of what this guy is asking is very tough to answer depending who you talk too. A big part of why the shop is struggling could also be a part of internet sales taking a lot of the shops business, and maybe that is why the owners are getting divorced, money problems I bet are a huge part of any divorce.

That all being said. I think there is lots of money to be made in the bike industry. Even in Bikeroom's part of the market, I personally work to the lifestyle I need. When taking over this shop you have to look at the different revenue streams and be very entrepreneurial about it all (whatever that means). A lot of the brick and mortar bike shops that are going out of business were started on passion and love for bikes with no business mind attached. To run a successful business you need both.  A lot of these shops are going out of business because they are not adapting to the industry and taking advantage of what is happening now.

I fully understand where Titus is coming from. I would say "go for it!"   But when you do make sure you have a good plan attached. Remember, just like you, the community wants you to succeed so ask for their help, find a good staff and pay them fair, work hard and smart while trying not to burn yourself out.

Holy shit. Is he selling a book that promises to lay out in detail this secret advantage that he speaks of? What are we supposed to be taking advantage of? What is going on?

Okay. Now we reach our third owner. Matt Juhasz, owner of the greatest bike shop ever created, North Shore Bike Shop. That's what his website says, anyhow.

Yes, it is a great career and I wouldn’t have it any other way. 11 years in, I am excited to come into work and do the best job I can to meet the needs of my customers. I pay bills, I hire staff, I manage inventory, I deal with issues like any other business owner. Each night I go home exhausted from a hard day of work and spend time with my family. So far, sounds to me like many other jobs. However my widgets are bikes, and most of my customers are genuinely happy to be conducting business with me. I don’t think that a government worker comes home to their family proudly talking about how many passport applications they processed that day.   A good friend once told me that the guy in the appliance store doesn’t have 5 freezers at home. He’s not selling his 2017 fridge because the 2018s are being shipped from the manufacturer. What we deal in for our daily business is a passion product that provides a fundamental joy with every transaction.

The other point I always find fascinating is people’s obsession with death of bicycle retail stores. What’s the big deal? Those unfortunate souls panhandling at the street lights aren’t former bike shop owners. Sears just went out of business; I’m sure none of the people working for the company are now homeless. Businesses have a life cycle. They open, they live, they close. It’s natural. Once the business tapers down to the point where it’s no longer worth conducting, the owner will shut the doors, liquidate remaining assets, and move on to the next project in their life.

Well fuck me! I had no idea the secret to career fulfillment lied in bike shop ownership! Thank god I never tried to be a doctor! Or freezer salesperson. Although, five freezers sounds pretty sweet, if you ask me. That's a lot of perogies and Haagen-Dazs.

Last, we have Mr. Kim Steed, freeride/trials pioneer and owner of Steed Cycles. His advice borders on practical.

YES! This dream of owning a bike shop is certainly a dream worth living! However, no bike shop has it easy and big challenges are in your future. If you consider the online competition for example they will almost always beat you on price. What you need to focus on is giving consistently amazing customer service, going the extra mile and not focusing on discounting to lure your customers into the shop. 

Being a passionate cyclist and bike shop owner also should lead to contributing to the local community. This would include adopting trails to help support the trails that support you, starting a riding club and sponsoring local events that bring riders together socially. This is the kind of thing that builds a loyal customer base as well.

The most difficult job of the bike shop owner is building a rock solid staff team that stays with the shop year in and year out and has a similar level of devotion to the customer experience, really caring for each customer's needs. Finding and keeping great staff can get expensive, so to grow your business, be prepared to pay well and maintain a yearly pay raise structure so the staff can financially move forward in life and enjoy a real career in the industry.

One important aspect to consider is that one persons idea of being “profitable" or "successful” can be different from someone else's. If you are running the business on your own, you have less help and will work many more hours, but may make more money as you do not have to share it between owners. Having partners also means that you may not see eye to eye on important decisions. Be prepared to work long hours and that in paying the suppliers and staff first, the owner(s) get paid last. Bear this in mind when calculating if the risks are worth it. 

 As time progresses, if you play your cards right, pay your suppliers on time, build a solid sales and service team, consistently keep the customers feeling like they matter to you, and make a commitment to community activities, you will be on the right track to your dream! The fact is, it takes time to put the recipe together. Once you have the recipe you will need to tweak it all the time to keep the balance in check.

So. There you have it. Buy the damn shop. I can't believe you haven't done it yet.

Sorry,

Uncle Dave


Uncle Dave's Music Club

Oh man. We've already passed 1800 words. We'll keep this one short. Go listen to some Swingin' Utters. One of the comments I saw on Youtube while searching out these videos said "I found this after going through my father's disc collection, he has some really good taste in music."  Jesus Christ I'm old.







Congrats Titus! You have won a sweet pair of shoes from Giro. The Terraduro Mid. And it's the right season as well because this AM/enduro shoe is highly water resistant and has an aggressive Vibram sole for getting your adventure on. Send us an email to collect your spoils!

Terraduro mid 2017

The Terraduro mid comes in these two colour ways and vermillion for flashier types. More info here...

Comments

JBV
-1
James Vasilyev  - Oct. 24, 2017, 10:15 a.m.

great question from Titus and nice answers, however, none answered his question directly- lemme try. as an M&A guy, Titus is either a CFA, CPA or lawyer or combination of all 3. with his education and knowledge of both private and public companies he knows, FOR A FACT, that he can't beat the average long term returns of a globally diversified basket of stocks, this much we can be sure of. this would be around 8% over almost any rolling 10 year period you care to measure (before tax).  i just got off the phone with one of my successful entrepreneurial buddies and asked him if he would be satisfied with 8% on 100 grand reinvested in his company. he nearly laughed me off the phone. so the easy answer is this: if you think you would enjoy the hard work involved (clearly all the other respondents do) you should best the rate of return available to you in the 'cold impersonal stock market'.

Reply

mammal
0
Mammal  - Oct. 24, 2017, 12:46 p.m.

You only partially answered one of his three questions.

Can I make it long term? Do the pros outweigh the cons? Is it worth living the dream?

You can't answer those questions with cash investment data alone.

Reply

natbrown
+2
natbrown  - Oct. 24, 2017, 3:54 p.m.

Judging this relative to what one could make in the financial sector is obviously one dimensional, and that's about as good a thing as I can say about that analysis. What the fuck does that sector contribute to broad society aside from disproportionately distributing the abstraction of work and resources that we call money? Hey Titus, go ahead and do something real. Even just trying to do something real has to be considered a victory relatively speaking.

Reply

JBV
-2
James Vasilyev  - Oct. 24, 2017, 7:24 p.m.

so you're going to throw shade at the guy for his line of work?  classy. clearly you're grinding it out every day for the good of mankind, how social of you.

Reply

dddd
0
dddd  - Oct. 25, 2017, 9:21 a.m.

if the shade fits...

Reply

natbrown
-1
natbrown  - Oct. 25, 2017, 1:36 p.m.

You're welcome.

Reply

oldmanbike
+1
OldManBike  - Oct. 24, 2017, 1:30 p.m.

Those are all heart-warming responses, but they don't shed much light on whether owning a bike shop is financially viable. I'm sure plenty of bookstore owners in 2007 would have gone on about how fulfilling their job was. Ditto neighborhood video store owners in 2003. Fulfilling doesn't keep the lights on when the market craters.

I have no idea whether buying a bike shop makes financial sense today. If all you've got is this column, neither do you.

Reply

chris
0
Chris  - Oct. 24, 2017, 4:19 p.m.

I can relate to Titus' conundrum as I have found myself pondering the exact same scenario many times.  Great article but it suffers big time from selection bias.  Of course all the successful proprietors are going to say go with your passion.  I'm sure you could find many times more who followed their hearts only to lose their financial stability, home, future, etc and end up with nothing but an experience.  That's not to say don't do it, just realize there are serious consequences of failure.

Reply

doug-hamilton
0
Doug Hamilton  - Oct. 24, 2017, 6:12 p.m.

I've been in the bike retail business on and off for 27 years and this is what I have learnt.  The best way to make a retail shop work these days is to have a real point of difference to your local competitors. Having a high level of experience in repairing modern bikes (lots of training for your staff) knowing where to source the correct parts, having the right tools to do the job (very important) and charging a price that goes with the quality of service you provide, are the best tools to have to making any shop profitable, as well as not carrying to much stock. You're not going to get really rich running a bike shop, but you make a lot of people happy along the way and it's generally a fun environment to work in. Maybe do a little stock market dabbling on the side for some extra fun coupons!

Reply

JVP
0
JVP  - Oct. 24, 2017, 11:09 p.m.

Let's see, you'll work all weekends, holidays, and you'll be working instead of riding whenever the weather is good.  You'll probably just break even on your investment.  

That said, it could still be worth it for the quality of life.  If anyone should be in the biz it's someone with corporate M&A experience and financial literacy.  Most bike shops that fail are people without a shred of business sense - those folks don't stand a chance.  No "head mechanic" should ever run a shop unless they've got unusual amount of biz sense.

Ah hell, just go for it!

Reply

alexdi
0
Alex D  - Oct. 31, 2017, 6:56 a.m.

How does such a romantic end up in M&A?

To reiterate what you already know: no, it's a terrible idea (assuming the goal is stay personally solvent). It's a labor-intensive business with high capital requirements selling a luxury product that's becomingly increasingly harder to differentiate from direct-sale alternatives. 

If you want be an industry "insider," just download this year's TBS catalog. That'll tell you the trends you're likely to see next year.

Reply

gdharries
0
Geof Harries  - Oct. 31, 2017, 12:40 p.m.

In general, this sounds like running your average, every day private business. In some cases you'll get rich, but most times it's just a way to (hopefully) pay the bills and avoid negative work environments that for your mental well-being you don't want to be part of. Nothing wrong with that as your motivation.

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