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With the developing of new soceity, more and more people are concern more on heath building. bicycle is one of the most popular activites.
Taking over a bike shop is not easy. Are you passionate about taking over a brand but want to make sure you have all the keys in hand to do so?
Here we give you the advice for a successful takeover of your bike store thanks to our 9 steps.
When taking over a bike shop, the first point to consider is the value of the location.
Indeed, your turnover and profitability will depend directly on where you are located, and this parameter is difficult to modify after that.
Your analysis should focus on the catchment area and the store traffic that it will likely bring you. Will you benefit from a natural flow of customers, or will you need to deploy a strategy to market the cycle store?
Your visibility will also be an asset if you plan to engage in repair, and not only in the sale of bicycles and accessories. Being visible to a person who has punctured a tire or derailed a chain could be advantageous depending on where the store is located.
Accessibility is another critical point, especially make sure that your customers can easily park (on bikes or cars) when they come to shop with you.
Your takeover of a bike store will also focus on the competition in the surrounding area. It will be a question of checking that the local market is not saturated with supply and identifying which stores are in direct competition with yours.
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The place must be large enough. You will not only be storing bikes but maybe doing repairs as well.
You will therefore need space both to welcome your customers, display your bikes but also be able to store spare parts and carry out repairs in a workshop if you make this service available.
A customer must have the opportunity to try out the bike. A bicycle is an expensive purchase and an investment over several years.
Therefore, your room should be large enough so that customers can easily access the bikes on display and try them out, ideally without having to leave the store.
The bicycle shop is an ERP (Establishment Receiving the Public), which means that it must meet the standards in force.
These standards include the reception of people with reduced mobility and the various rules relating to fire safety.
If ever your premises do not meet the standards, do not forget to include the investments necessary to make it compliant in your budget and take this into account in the purchase price of the business.
If the transferor does not own the premises, you will need a commercial lease to protect your business.
Do not take this document lightly and study the conditions!
It will also be necessary to be vigilant to the conformity of the lease with the activity of the bicycle shop. Call a lawyer so that you do not make mistakes in the procedures to follow.
You can also consult our guide to the commercial lease for more information on how it works.
The takeover of a bicycle store means that a customer group already exists. And that an offer of products and services is established in the store.
The easiest way is, of course, to keep the current concept to have a clientele already familiar with the products offered by the former manager.
However, do not hesitate to change the concept or modify the offer if you realize another opportunity in the market after analyzing the competition and the customer base.
If you want to sell electric bikes, make sure you can offer a demo to your customers and that you are well informed on the subject.
Buying an electric bike generally represents an investment of around € 1,500 for the least expensive products. If this price can easily make your sales over a day, it is necessary to use your product knowledge to facilitate the sales process.
If you want to transform a bike store by adding a repair service on top of the sales activity, you will also target a different customer base.
However, the repair requires space for the workshop and to store the bicycles to be repaired. So think about anticipating the amount of work necessary to fit out the premises, and the impact of the loss of exhibition space on the turnover of the sales activity.
Do not take a change of concept lightly. Anticipate the investments, and weigh the advantages and disadvantages of the transition to make your decision.
Knowing how to count on your staff is essential. A bike shop usually doesn't have many employees unless you have a large space or exercise franchise.
If an employee is already present in the bike shop you want to take over, consider checking their skills regarding the services you offer.
In addition, if you intend to expand your offering and offer a repair service, you will have to make a crucial decision if the employee present on site is not qualified: train the employee in the repair or well hire another qualified person.
The resumption also involves reviewing the team if there are several: think about the agreement, skills, customer service, etc. Make sure you have qualified staff for your bike store takeover.
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The next step in taking over a cycle store is to analyze the commercial strategy put in place by the former manager:
If you change the concept, you will need to warn customers and attract new ones. Determining an effective business strategy will then be all the more critical.
If you decide to enter a niche market like racing bikes, partnering with a local association would suit bringing customers to the store and building word of mouth.
If you are buying a business, the takeover of a bike shop usually includes the stock and equipment sold by the previous owner.
Remember to check what is included in your agreement and assess the level of obsolescence of the equipment. Are your cash registers up to standard? How old are anti-theft gates? Etc.
Also, make sure that the stock is resalable. It is not old-fashioned or outdated accessories, especially if there is a solid technological component (electric bikes, shopping accessories, road safety equipment, etc.).
Then again, you can always negotiate the trade-in price of the bike shop if you find that the shop's equipment is in a dilapidated condition, and you will need significant investment to refurbish it.
Taking an interest in the historical financial performance of your bike shop is a crucial point for your takeover project.
To have a financial plan that holds up, it will also be essential for you to set up a business plan.
The analysis of the turnover over the last years will be the starting point of your comment. Take a look at its evolution but also its composition:
Take an interest in the reasons behind these developments and draw the necessary conclusions regarding the future sales of the store.
You will also want to consider the seasonality of sales. What are the low and peak periods? As well as on the sales channels: do customers buy only in-store, or do they go through the website?
Then look at the evolution of the gross margin, that is to say, the difference between the cost of purchasing products and their selling price: is it stable? Does it decrease following an increase in competitive intensity in the local market? Is it increasing thanks to a move upmarket? Etc.
Payroll is not the most important part at a bike shop level, as staff requirements are relatively small.
Nevertheless, You should check if it is under control, and that staff salaries are consistent with their level of qualification and experience.
Particular Check that the staff has been increased regularly. You would not want your foreman to leave you after 3 months because he has not increased for 5 years under the former management and offers better elsewhere.
EBITDA corresponds to the cashable operating profit of your bicycle shop. It must be positive (otherwise, you have an enormous operational problem) and sufficient to allow you:
Here again, it is crucial to consider the evolution of EBITDA and its margin (EBE / CA) over the last few years to understand how the company's profitability has evolved to detect possible problems or opportunities. For you as the buyer.
The working capital requirement corresponds to the amount of cash immobilized by cash lags.
If your customers pay you cash, you still need to stock up on bikes to resell them.
Therefore, the cash requirement depends on the payment terms granted by your suppliers and the amount of stock you have.
Here you will mainly need to quantify the amount of working capital, analyze its evolution, and try to identify levers that you can activate to reduce it (reduction of stocks, negotiation of payment terms).
Studying the level of investment is vital to quantify the cost of maintenance to be expected over the coming years at your store.
In this section, it is helpful to analyze both the amounts, their relative weight concerning the turnover and EBITDA of the bicycle shop, and the methods of financing equipment (loan, credit lease, self-financing) used by the former manager.
Operating cash flow corresponds to EBITDA more minor the change in working capital and the number of investments.
It is, therefore, the cash generated by the operation of the company before taking into account corporate tax and cash flows linked to financing (loans, dividends, etc.).
This amount must be positive (otherwise, you risk going bankrupt quite quickly) and ideally as high as possible.
The next step is to put together a business takeover plan for your bike shop.
Several objectives here:
Put it simply, and a bike store-takeover business plan has two main parts:
The next step in taking over a cycle store is to analyze the seller's reasons.
Two goals here. As a first step, you make sure that the seller does not try to run away from the ship because he anticipates a deterioration in the business's future profitability.
If you are not sure, put forward in the transfer contract price adjustment clauses in the event of a significant change in the performance of the bike shop following the takeover, and ask the seller for an adequate guarantee.
Secondly, as in any negotiation, try to identify the levers that will allow you to buy back the business at the best price.
Once you have agreed on the bike shop's business price, you will have one final step to take: finalize the contract for the sale of the fund.
The transferred contract will be the document that will confirm the takeover and what is included in the business.
This contract responds to a specific formalism, and it must in particular contain:
Consider hiring a lawyer to help you with your bike store takeover.
Our article is coming to an end, but we hope to have helped you in your recovery. Please do not hesitate to contact us if you have any questions.