How to Start a Bike Shop

Alternative Small Business Funding

If you’re interested in opening a bike shop, you’re considering the venture at a great time. While twenty years ago experts would have told you to save your money, we’ve come full circle and bicycles are popular again. As a bike shop, you can provide an important service to the community as it goes green and enjoys the improved infrastructure for cyclists around town.

In this guide, you’re going to learn the following:

• Reasons to move into this niche
• The steps to open a bike shop
• Financing solutions

With the last step, you’ll get help for your bicycle shop business even if you have a poor credit score and need alternative financing.

Reasons to Enter the Bicycle Shop Niche

Before looking at how to start a bike shop, you might need the inspiration to enter the industry. Is it a good time? Will you have support? Is the business viable? Here are some of the biggest reasons to enter the bike shop niche this year!

Changes in Consumer Habits

Perhaps the biggest reason why you’re reading this article is that consumer habits have changed in recent years. As mentioned, consider this idea 20 years ago and people would have told you that the days of cycling were over. Now, the buying power of Millennials is stronger than many other generations…and they’re spending their money on green initiatives.

Right across the United States and the world, Millennials are leading the charge toward greener solutions, and cycling is just one of the spokes on the wheel (pun intended!).

As well as using bicycles to commute to work, families are also investing in bicycles to enjoy time with loved ones. During the pandemic, people looked around the room while everyone was at home and realized that they rather enjoyed spending time with loved ones. In a bid to keep pandemic-related habits, families will get out on bikes to stay fit and enjoy quality time.

Bike-Friendly Infrastructure and Legislature

As consumer habits change, we’re also seeing huge transformations in infrastructure and legislature. For example, bike lanes are being placed around Florida and the United States to accommodate the increased number of cyclists on the road. It’s a positive spiral whereby more people buy bikes, lawmakers need to keep them safe so introduce more bike lanes, which encourages more people to ride bikes because of the improved safety, etc.

Not so long ago, Honolulu lawmakers introduced bike barriers onto its streets. Shortly after, statisticians found that the number of people using bikes to commute increased by 70%.

As well as introducing barriers and cycle lanes, lawmakers are also reducing speed limits in some areas to keep cyclists and pedestrians safer. These positive trends will continue to benefit your bike shop.

Safety and Efficiency

In addition to the improved infrastructure and legislature, safety is also improving in other ways for cyclists. For example, this includes the quality of accessories and safety equipment. With the quality of accessories only increasing, it makes cycling an attractive mode of transport.

Lastly, the efficiency of cycling is improving and an example of this is seen in bicycle design. For those who live in an apartment, they can now find folding designs and other clever solutions. Suddenly, they don’t need to choose between a bicycle and a bed (although this is a slight exaggeration, the opportunity cost of owning a bicycle no longer exists in terms of space!).

Positive Trends

We’ve alluded to positive trends in the bicycle industry, so here are some statistics to show that you’re right to consider this niche.

• Annualized growth of 1% in the five years to 2020
• Market is now worth $4 billion
• Nearly 103,000 people employed in the industry
• Expected growth between 2020 and 2025 (according to IBS World)
• $140 market value for indoor bicycle trainers by 2025
• More wearables will improve the experience for cyclists

How to Start a Bike Shop

In the next section, we’ll talk about alternative funding and how you stand a chance even with a poor credit score. But first, how do you even get to this stage? Here are some integral steps to plan and strategize your bicycle shop business:

Step 1 - Create a Business Plan

If you want to fail, forget the business plan. Often, new business owners think that this stage is optional (it’s far from it!). A business plan shows investors and banks that you’re serious about your goals, but it also acts as a guide for decision-making. A detailed business plan will consider the following:

• Pricing
• Services
• Competition
• Opportunities
• Threats
• Target Market
• Marketing
• Contacts
• Finances

With a business plan in place, you know all about the competition, the services you’ll provide, the biggest threats to the business, your finances, and the profit you need to make to survive. Often, new business owners think that they should dress up the business plan and hope that investors don’t notice gaps. In reality, they want to see that you’ve understood the obstacles and have a plan to overcome them. Without considering the potential challenges, they will feel nervous about lending money.

Naturally, a huge step during this process is research. You’ll need to explore all the competitors within a certain radius, their presence online, how much they charge for services, and more.

Step 2 - Partner with Professionals

Although the market has progressed over the years, you still shouldn’t try to do everything alone. With this in mind, work with professionals to make your life easier - this includes a bookkeeper, accountant, attorney, insurance company, and bank.

Additionally, we recommend finding a mentor with experience in the field. They can help with decision-making while helping to avoid common mistakes. For example, is there no bike shop in your chosen location because it’s an unviable business? Your research, business plan, and professionals will give you the answer to this question.

Step 3 - Choose a Location and Entity

As we’ve just touched upon, location is critical because you need to know your audience before launching a bicycle shop business. Choose a home for your business and consider how it fits into your business plan (location, competitors, customers, etc.).

Once you have a location, the next step is to select a business entity. While some choose to form a sole proprietorship, others launch a partnership or LLC (limited liability company). Research the benefits and drawbacks of each before choosing a route.

Step 4 - Implement the Business Plan

This sounds rather vague, so what does this mean? Well, put all your plans into action. For example, you’ll need to apply for all the relevant permits and licenses, open a business account to keep your finances separated, launch your marketing plan (including social media channels), think about your services, buy inventory, sort financing, advertise for jobs, get a POS (point of sale) system, make your website, arrange insurance, and start engaging with prospective leads and consumers.

While this might seem overwhelming initially, take it one step at a time and get your bike shop off the ground in the right way. Launch your social media channels and get people excited about the shop before it’s even open.

Often, we speak to business owners that waited too late to engage prospective customers. They did everything behind the scenes, opened the business, and then thought about customers. Ultimately, this means opening your doors and getting no visitors in the first few days. If you want to get people in from the first few minutes, you need to launch campaigns early (talk to people on social media, send leaflets to the community, and hold an opening event).

Naturally, all of this is only possible with the right funding. Therefore, it makes no sense to delay this topic any further. How do you finance a bicycle shop business? Even with a poor credit score, you have options.

Financing a New Bike Shop

So, the trends are all positive for the bicycle niche. People are getting back on bikes all over the country and you’ve seen a step-by-step guide on how to start your business. However, everything you do is underpinned by money. If you have funds, it takes the stress away for everything else. Here are some of your funding options:

Bank Loan

Although this isn’t available for those with a bad credit history, we would be remiss to ignore it for this list since it offers the best rates and terms. Assuming you qualify, you can enjoy healthy interest rates and repayment terms.

For many business owners, the problem extends beyond credit score though because the application process is extensive, and you can wait for several months before accessing funds.

SBA Loans

Once again, SBA loans are attractive to new bike shop owners because the interest rates are strong, and you can repay the amount over 25 years. If you fail to repay the loan, the SBA secures up to 80% of the amount. As a result, it makes business owners more attractive to lenders. With the SBA securing a high percentage of the loan, the risk for the lender reduces.

The reason this guide will offer alternative funding options is that SBA loans tend to suffer the same fate as traditional bank loans. For example, the application process is extensive, you may have to wait several months, and you also need a respectable credit score.

Merchant Cash Advance

If a poor credit score is an issue, you may be able to secure a merchant cash advance. As the name suggests, this is where a lender gives you an advance on all future income. You borrow an amount of money before then repaying as a percentage of future revenue. Generally speaking, you’ll need to repay the amount within three months to two years.

For those who haven’t yet launched the business, you might need another option from this list because lenders might look at your past performance for security.

Equipment Financing

Ultimately, the viability of this option will depend on the services you offer. If you plan to only sell bikes, you might not have too much equipment in the business. Yet, this changes if you want to offer bike repair or similar services. If you need equipment to run any of the services, explore equipment financing (or leasing).

While leasing sees you rent the equipment for a fee, you’ll split the cost of the purchase over several months or years with a financing agreement. Financing is the better option if you want to own the equipment throughout and after the agreement. In either case, you’ll lose the equipment if you don’t pay the monthly fee.

This is a great alternative financing method because you get essential equipment for your bike shop without having to find money to buy it outright.

Secured Business Loan

Another area in which the South Florida Funding Group can help is with secured business loans. If you have assets, you could borrow money using these assets as collateral. Thankfully, this negates the need for a good credit score. Of course, it also comes with lots of risks because missed payments could lead to problems for your asset.

Business Line of Credit

Finally, another form of alternative funding comes in the shape of a business line of credit. Essentially, this is a source of finance that business owners can dip into whenever they need it. Rather than a loan, it’s like a credit card in that you pay interest whenever you borrow from the account. If you’ve funded the opening of the business but now need funds for contingencies and other small expenses, this is often the most reliable solution.

So long as you keep paying the amount off each time, you’ll have the money available when you need it next time.

With this in mind, we’ve seen how to start a bike shop, financing with a poor credit score, and lots of information regarding the bicycle shop business. If you need assistance, contact the South Florida Funding Group as soon as possible. We’re here to help - it’s time to realize that dream!