How to start a bicycle shop
- Henk Herkink
- 12 Sept 2021
- Edited 14 Feb 2023
- 8 min
Inexpensive, healthy and sustainable. The bicycle has been a popular mode of transport for 200 years. Bicycle sales increase year on year, and every year consumers spend more money on bikes. Would you like to seize the opportunity in this growing market and become an independent bicycle repair shop? The business plan details all the steps involved in opening a bike shop.
The Netherlands could be considered the bicycle capital of the world: it has higher per-capita bicycle ownership than any other country in the world. Collectively, as a nation, we rack up nearly 900 kilometres per person per year. Bicycles account for one-quarter of all transport in the Netherlands (source: Fietsersbond, an organisation representing the interests of cyclists in the Netherlands).
While there is no reason to assume that the bicycle (or any type of biped, for that matter) will lose popularity in the foreseeable future, this fact alone does not guarantee success if you are looking to open a bicycle shop. This article sheds light on a number of other success factors: an understanding of the sector, personal skills, and effective market research.
Bicycles on the rise
According to data provided by industry association BOVAG, a total of 923,000 bikes were sold in the Netherlands in 2021 (in Dutch). More than half of these were e-bikes. Because of ongoing supply issues, sales fell by 16% from 2020. Mopeds are rapidly becoming more environmentally friendly. Electric mopeds are popular with consumers, as shown by data provided by Rai Vereniging (Rai Association) and industry association BOVAG.
Number of bicycle shops in the Netherlands (2017-2022)
Source: KVK Business Register
Proprietor Wim Dik of Bike Centre Dik in Groningen sells large numbers of electric bikes. “Racing bikes and sports bikes below €2,000 are selling like hotcakes, to the point where manufacturers are unable to keep up with the high demand. Sales of traditional city bikes, by contrast, have been declining.”
Corona pandemic boosted bicycle sales
Demand for bicycles increased during the corona pandemic, when there was less car traffic due to the large number of remote workers. Now that people have started returning to the office, we are following the government’s advice of using public transport as much as possible and using our bikes (in Dutch) whenever we can.
Accell Nederland B.V. develops and manufactures brands such as Batavus and Sparta. The company’s Marketing and Communications Manager, Barbara Frumau, has seen an increase in the sale of e-bikes since May. “Bicycles are increasingly regarded as alternatives to public transport. And more people are now spending their holidays in the Netherlands and decide to buy a bicycle. Also: cycling is a good alternative for keeping fit now that many other forms of exercise have become more restricted.”
Dik identifies a pattern: “Many of our customers tell us that they are using their newly-bought electric bike to get to the office and to avoid traffic.”
Notwithstanding the Covid restrictions, the Dutch government promotes bicycle use and is committed to increasing the number of bicycle kilometres by 20% over the next decade. It has documented this, together with other organisations, in the Tour de Force (fietsberaad, in Dutch) programme.
Writing a business plan
While the bicycle business may be booming, it takes more to start a successful bicycle business. For one, we recommend that you write a business plan clearly outlining what you intend to do. This will give you a clear idea of what to do, and you will be able to make informed decisions. Your business plan addresses all aspects of doing business for your specific situation. You should also answer questions as to whether your future shop is viable, what you need to organise, and how to manage your finances.
You can also use your business plan when applying for a loan from a bank or your local council (or the UWV Employee Insurance Agency if you keep your benefits when starting a business).
Essentially, these are the four components you should describe in your business plan:
1. You as an entrepreneur
Your business plan should start with your personal details and what is driving you to start your own business. You make the reader aware of your business skills (in Dutch), including your professional expertise, decision-making skills, and administrative knowledge.
The personal section of your business plan is especially important if you need to involve an organization (for example, a bank or benefits agency) in launching your new business. They will want to know who they are dealing with.
Your product, price, place, and promotion: we refer to this as the ‘four Ps’ or the ‘marketing mix’. The impact of this marketing mix covers the second part of your business plan.
3. Your product
You are opening a bicycle shop, so your product is clear: bicycles, accessories, and repairs. But how much do you earn on your bicycle sales? What is the average amount spent per customer? What sort of sales do you need to hit your minimum revenue? How many square metres of floor space do you need? How much revenue does each sales assistant generate?
You can find this and other data from the average key data for the bicycle sector. Banks, industry associations, and research agencies also publish key industry data once a year. You can compare this data against your own plans.
Sales revenues for a bicycle shop are more than €2,300 per square metre of floor space (source: Retail Insiders). The key data for sales revenue excluding VAT is 100. Average purchases comprise 63%, while profits are 37%. Your business plan calculates that your required income from the business, plus your business costs, adds up to a specific amount. In this case, your amount must approximately be equal to 37%. This is your way of proving to yourself or to the bank that your business is viable.
4. Your rates
Are you planning to set up shop in the city centre? And does your audience consist of students buying basic or second-hand bikes? You may have a reason to sell bikes from well-known or premium brands based on your chosen audience. You should be aware that for manufacturers, purchasing is not an automatic process. According to Frumau, for example, Accell looks at both the qualitative and quantitative aspects of the dealer in question. “What is the shop’s floor size? Is there sufficient floor space, minimum sales revenue, and what are the hours of operation? Are you not located too close to another bicycle dealer?”
Your city and your premises
Funda in Business, business brokers or the business desk in your place of residence will help you to get an idea of the features of retail premises and local rents.
Some questions to consider:
- What is the composition (for example: age, income, type of bicycle user) of the neighbourhood where your shop is based?
- Are you establishing yourself in the vicinity of DIY stores or garden centres that sell bicycles on the side?
- Or are you focused more on repairs and are you opting for a small shop in the city centre?
- Are you easily accessible to your target audience,
- or do you intend to repair bicycles from home?
Tip: Use the KVK Locatiescan (in Dutch) or the KVK Company Counter and explore the market potential of your future location. What about the competition, and what are the demographic features?
The rent of retail premises is arranged by law (in Dutch). The assumption is that you rent a retail premises for a period of 5 years. During the first rental period, you can agree to rent the space for 2 years or less. If you decide to stay on after 2 years, the lease is automatically converted into a 5-year lease.
Your location and municipal regulations
A zoning plan describes the purpose(s) of buildings or specific geographic areas (for example, residential purposes or as an industrial area). You can contact your local council to get information about your retail property (in Dutch). For example:
- requirements for the size of advertising signs
- are consumer sales allowed
- is it allowed to display bicycles outside your shop
You should promote your business in the geographic area where your customers are located (this is known as the ‘catchment area’). Users of bicycles have certain characteristics: They engage in physical activity/exercise (i.e. racing bikes), do the school run (cargo bikes) or live a little farther away from their workplace (electric bikes). If you are aware of these characteristics, you can develop a strategy for reaching these potential buyers. This will help you decide how to use what form of promotion. For example, you might choose to advertise in a club magazine for recreational cyclists, reach out to young people through Instagram, connect with parents through Facebook, or offer a discount promotion for students.
Managing the financials
If you want to open a bicycle shop, you will need to be willing to invest: in your initial stock, a remodel, inventory, or goodwill during a takeover. This ‘to-do list’ section of your business plan is known as an investment budget.
Can you cover your investments out of pocket, or do you need to borrow money? This list, which is also included in the business plan, is known as a financial plan.
The investment budget on the left and the funding plan on the right together constitute the opening balance sheet.
Based on the marketing section you previously described, you can comment on future revenue. The number of customers x an average amount spent. The key numbers for the industry will tell you what your gross profits will be – this percentage gives you an amount, from which you can then deduct all your costs. This includes purchasing, building rent, staff, or audit fees. You will eventually arrive at a net profit, which essentially constitutes your own ‘gross salary’. Note that you will still need to pay taxes on this amount. You will end up with the net amount that will enable you to generate an acceptable income.
The calculation above: revenue - costs = profit constitutes what is known as the operating budget in your business plan. This is important, as it tells people whether your bicycle shop is viable.
General terms of supply and payment terms
Before a customer decides to purchase one of your products, they must be familiar with your general terms and conditions. This can be as simple as putting up a clearly visible sign in your workshop saying ‘cash-only delivery’.
If you repair bicycles, use invoices, or manufacture products on demand, it is a good idea to draft detailed general terms of supply and terms of payment. This includes, for example, warranties, terms of payment for invoices, or purchase commitment. If you would like to take out business liability insurance, your insurance carrier may require that you set a clear list of terms and conditions for your customers.
Maintaining stock records, quarterly VAT returns, and updating the everyday accounts: there is a lot of administrative work you can do yourself.
Tip: download the VAT Alert app (in Dutch) offered by the Dutch tax authorities to remind you when to file VAT returns.
When launching your new business, it is a good idea to consult and meet with an auditor. In order to help you on your way with your admin, make arrangements for costs, and determine discounts or hourly rates.
Your shop is open 60 hours a week. You also take care of bookkeeping and purchasing. There is every reason to assume that you cannot do all this alone, so this is a good time to think about the commitment and implications of having staff.
Tip: Are you looking for a sample business plan or looking to have one drafted? You can download a blank business plan free of charge from Qredits.
Taking over a bicycle shop
KVK’s Business Register contains nearly 3,050 bicycle shops. Several proprietors of these shops are likely toying with the idea of selling their business, either because they have reached the retirement age or for other reasons. Have you ever considered taking over a bicycle shop?
Entrepreneurs who take over a business often turn out to be more successful than businesses starting from scratch, since the company already has customers, brand awareness, and a reputation. Other benefits of business acquisition include:
- Existing companies will often find it easier to obtain financing than startups.
- You can take over the business gradually, in a series of steps: by working together temporarily or by paying the purchase amount in instalments.
- Some practical arrangements have already been made, including the shop layout and design, dealerships, or permits.
Before contacting a seller, it is recommended that you learn about the business acquisition process. Bicycle shops are offered for takeover in a number of different ways: Actively or passively through databases, industry associations, auditors, or takeover specialists.
Apart from all the above, starting entrepreneurs will also have to deal with the following:
A list of some of the rules you will need to comply with when starting your own online retail business is included in the action plan for starting your own online shop.