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How to Buy a Bike Shop

Bikes are now big business, but how do you go about buying a bike shop?

The bike business is booming due to a number of factors. Team GB’s cycling success at the 2012 London Olympics, congested city centers, and the popularity of outdoor health and fitness, have all helped.

There’s also a better range of high-quality, low-cost bikes now on the market, when other everyday costs, such as rail travel and fuel prices, are rising.

Additionally, the popularity of the bike is not region centric, or confined to the big cities. Both urbanites and country dwellers are enjoying moving around by bike – So, the reign of the bike looks set to continue.

Cycling UK calculated that 15% of the UK (about 6.6 million people) cycle once a month and 42% of the population owns a bike. With figures like these it looks like buying a bike business is a safe bet. But, how do you go about buying the right bike business and how do you make the most of this growing trend?

Choose the right location

The most important consideration, which you must prioritise at the very beginning of your hunt for the perfect bike business, is location. As with any other type of business you must make sure that your chosen location will bring in customers.

Choose a location that will attract your target audience; if you’re selling mountain bikes it would make sense to choose a shop in a countryside setting. If you’re selling children’s bikes make sure there are lots of families nearby, with cash to invest in bikes for the whole family.

Research how many people live within a five-mile radius, as this is usually the maximum distance people will travel to a bike shop.

Think about your local demographic – which towns, villages or cities are included in that radius and who lives there? Are they pro-cycling? Are there a lot of cyclists on the roads already? Is there an established outdoor culture?

Consider the competition

You must also examine other bike shops in the area you are considering, do your research, and find out what they offer, at what price, and to which customers. 

Can you compete with this competition – is your offering better, or more suited to your desired clients? Can you bring something new and different to the table? Is there enough business for two bike shops?

Find your perfect premises

Location and near-by competition, are not the only things to think about, you must also make sure that your potential business provides all you need to run the kind of business you want.

Bikes need regular maintenance, and the increasing use of bikes for commuting means that maintenance has become a key part of the independent bike shop offering, providing a solid revenue stream.

If you wish to offer bike servicing and repairs, you’ll need to look for a space big enough to work in. You may also need an office area and a stock room to store goods and do paperwork.

Also, consider how much stock you can fit in your shop, while still ensuring that you can create an attractive display. Shops with too much stock can seem overwhelming and all the customer will see is a tangle of bike wheels and equipment.

Can you display bikes and other merchandise on the walls? Are there separate areas for bikes and merchandise? Is there secure storage space for surplus stock and mechanical kit?

Many bike shops now include a café area, or a coffee machine, so that customers can rest and enjoy a beverage while waiting for a repair, or even come in and have a drink as an excuse to chat with fellow bike enthusiasts. This can be a clever way to bring in additional revenue – is this something you could do in this space?

Bike in Shop

Check licenses and permissions

So, you’ve found a business that you think ticks all the boxes – you still need to check you have the relevant licenses and permissions.

Check that your potential bike business will meet all legal, and health and safety requirements, especially if you are planning on providing bike maintenance services. ACT can offer bespoke advice and support.

Write a business plan

Now you have carefully considered the pros and cons of your chosen business property, and checked all the legal requirements, you now need to raise money and take the next steps towards buying your business. You can go no further without a well-thought through business plan.

You will need to go through the following points and address them within your business plan.

  •  What is your USP (unique selling point)?
  • Who is your target customer base?
  • What are your fixed (rent) and variable (overheads) costs?
  • What will be your monthly profit margin?
  • What are your sales targets?
  • What’s your marketing plan? 

To help raise finance you will need to prove to a bank, or independent financier, that you can make money, and show how. You should also prove that you are aware of the areas of risk, and be proactive about reaching out to customers.

It is therefore vital to include your marketing ideas within your business plan – will you have a website, will you use social media, how will you advertise?

Raise finance

With your detailed and intelligent business plan in hand you can now approach banks and investors for a loan to help you buy and launch your business.

Be prepared to try a number of avenues before you get that all important ‘yes’. Consider that finding the right investment partner is worth waiting for – you shouldn’t just rush into it.

Also, be emotionally prepared, banks often say no, so, you may have to try again, and again, and make multiple changes to your business plan.

Make an offer

Once you have finance in place, you can make your offer. This is an exciting step but there is still a lot to think about.

You should carefully consider the offer you can afford to make, and check that this is a fair and realistic price. To come to a well calculated offer, you may wish to engage specialist help.

During the negotiating process that follows, you should still be conducting your own research and must now engage in formal due diligence with the aid of legal support.

This will help you find out any previously unseen business pitfalls, any negatives may help you negotiate a lower buying price.

Conduct due diligence

The questions you will need to ask during due diligence are:

  • What existing insurance does the business have?
  • What are the existing business rates?
  • Where are the fire escapes and fire alarms?
  • Is there efficient rubbish disposal?
  • What relationship does the business have with nearby business?
  • What reputation does the business have?
  • Have you seen audited or management accounts that show current overheads and sales?
  • If it’s a leasehold, have you inspected the terms of the lease? How much time on the lease is left?

This can be a complex process and most people will seek the aid of a specialist who has been recommended by a trusted source.

Seal the deal

Following due diligence, and when you and the seller have agreed a final price, you can seal the deal. At this point you will definitely need an experienced solicitor to help you with paperwork and to bring the deal to a close.

Sophie Mitchell

About the author

Sophie has contributed to, and over the two years she worked at Dynamis House.

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