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The Complete Guide To The Home-Operated Bicycle Business

Part 2. The Simple Plan

 

Let's start by assuming that your time is limited and you have no space to work in. You therefore cannot repair bikes, and you don't have time to sell them. What's left?The most basic form of this business is to go to yard sales, buy a few bicycles, and consign them to a retailer for more than you paid. Its that easy! And it works! I call it the Simple Plan, which is the subject of the first part of this course.Most of you have some facilities to do more. If you have facilities for storing parts, painting and repairing bikes, or greeting the public, you can make even more money. In Section 2, this course tells you all about that.If you don't have the tools or the room that you need, if you don't like to sell or to fix bikes, you can form a partnership with someone who has what you need. (Grandfathers make good partners.) This book talks about partnerships too.Before long, you can make enough money to tell your boss to jump in the trash chute. You can have your own home- operated business. Your business can grow very large, and I'll tell you all about that, too. But don't quit your job yet. You can make some money right away, but it will take practice before you can make lots of money. You have to crawl before you can fly.

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CONSIGNING

If you had some bikes for sale, but did not want to sell them yourself, you could consign them to a store. Many folks know about consignment arrangements, but few people use this concept. It is a great concept! In your neighborhood there are probably at least 6 stores that would like to sell your bikes. They gain more inventory without having to pay for it unless it is sold. You get to have your bikes sold, without having to talk with customers, without paying rent on a glass-front store, and without paying for advertising. Your bikes will be exposed to every customer who comes in. The store that sells your bikes is probably open up to 60 hours per week, and a professional salesperson will be there to meet customers at all times, while you eat dinner, watch TV, etc, uninterrupted.Bike shops, and second-hand stores are your obvious choices, but maybe you would do well by bringing some of your bikes to a reputable flea-market seller. Other possibilities may surprise you. Perhaps the owner of the local video rental store would like to supplement his income with your used bikes. How about camera stores, book stores, small grocery stores, even dental offices? Perhaps the dental receptionist would enjoy a commission now and then. I know of a CPA who sells used bikes out of his office.You will have to pay a commission of 20 to 40% with 25 to 33% being typical. As you will see, with the mark-up that you will be able to charge, these commissions will not hurt you much. When shopping for someone to do your selling, consider not only the commission but the "kill" rate. I mean that you must consider how fast the store of your choice will sell the bikes. I would rather pay 33% to someone who can sell a bike in an average of 2 days after I bring it to them, than pay 25% to someone who averages two weeks to sell a bike.Anyone can sell your bikes as long as they are in good condition (the only way they should be), but a professional seller will do better. A bike shop is a better place for your bikes than a drug store because the bike sales person knows the answers to knowledgeable customers' questions. On the other hand, you would do well to consider whether there is damaging competition in the same store. I used to own a bike store where we carried new and used bikes and took consignments. We seldom told the consignors that our salespeople directed customers to our own used bikes first, and only showed the consigned bikes after the prospective buyers declined the bikes owned by us.After you read the chapter on selling, you will be better able to evaluate the effectiveness of the sales people you may want to consign to. To some degree, you may have to take a risk at first.I sold to one store that was very slow to pay me. I used to have to go to their store every day to get $10 today and $20 tomorrow, etc. When I wised up and took my bikes away, it still took almost 6 months to collect the $400 they owed me. I consider myself lucky that they paid at all. Check reputation. Maybe you can find someone who has consigned to a certain store in the past and can give you advice.Consider the risk of theft seriously. Most stores will not be responsible for theft of consigned merchandise. You must take that risk yourself. Still, perhaps the risk is worth while. If you were to have as many as one out of every ten bikes stolen, you would still make money. In some cases it is practical to display the bikes outside day and night because moving them all into a building every night, and out in the morning, would be too much work. In the middle of a city, with no people around your bikes at night, would be a stupid place to do this, but in many other places, with big cables locked through the frames and wheels of the bikes, it works out OK.Interestingly, there is greater profit in lots of less valuable bikes, than in fewer more expensive models. Listen carefully, you will do better with $20 to $75 children's bikes, 3- and 10-speeds than with $200+ mountain bikes and racing machines. This is because there are more people who can afford the lesser bikes, and there are more children who have to settle for what their parents get for them, than there are people who buy the fancy stuff. The folks who will spend hundreds on a single bike have very specific notions of exactly how the bike must be equipped, and will shop far and wide for just the right one, and therefore you have small chance of having the right one. The buyers of the cheaper bikes are happy to get any bike that works. Their specifications are much less demanding. Many of your potential customers willing to spend the bigger bucks will tend to buy new bikes. Also, the higher value used bikes are valued more by the people who would sell them to you, so they will want too much money for them.The reason I bring this up here, is that you have less risk of theft in the case of the lesser bikes. You can leave ten $50 bikes out overnight with less chance that someone will mess with them than if you were to leave out three $300 bikes. Looking at numbers, the ten $50 bikes are the kind that cost you $5 each. If the worst thing happened, if someone stole them all, you lose $50 investment. If they steal your three $300 bikes, which cost you $200 each, you lose $600! By the way, if you were to sell all your mountain bikes, you get $900 for your $600 invested, a $300 profit. If you sell all your American 10-speeds, and it is easier to sell 10 inexpensive 10 speeds than it is to sell 3 expensive mountain bikes, you get $500 for your $50 invested, a $450 profit!You want to work as a partner with your consignment sellers. You may want to bring the locks and cables to the seller, but demand that the seller use them all the time.Don't put all your eggs in one basket. If you put a few bikes here and a few bikes there, you can't get burned too badly no matter what happens. Breaking up your collection also gives your inventory more exposure. You might as well expose your bikes to as many people as possible.(On the other hand, having a huge collection at one or more locations brings many extra buyers to that location. Most people shopping for bikes would rather shop from a huge inventory than a small one.)It is easier to sell guaranteed bikes, although not essential. If you have repair facilities, you can offer a guarantee through your consignment sellers. When they sell a bike, or when a customer returns with a problem, the seller can give the customer your phone number. It helps sell, but it can be a workout for you, especially if you have sold a lot of bikes.We have found it best to guarantee the bikes but not advertise it. In other words, if someone returns with a problem, we fix the bike for free, but do not state that there is a guarantee unless asked. This way, the people will tend to fix their own bikes, unless the problem is beyond their means to repair. This frees your time of making small warranty adjustments for customers.If you are unable to repair bikes, selling with no warrenty works out ok as long as you make sure your consignment sellers specifically tell each customer that they are buying the bike 'as is.'To summarize, taking your bikes to consignment sellers is a good way to turn them into cash, without spending your own time doing it. Look before you leap, it is better to try a few bikes left with each of many sellers, than all your bikes at one location. Later, after you have had time to analyze their performance, you can increase the number of bikes you have at your best sellers' places.To get started doing business with a seller, just go to their store or office and simply explain what you want to do, and especially how it will benefit them. Most people will be very open to trying the idea.

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BUYING

 

You are probably starting to visualize the simple plan, and how easy it is. Basically, you get as many bikes as you can, pay as little as possible, then expose them to as many potential buyers as you can, at a higher price. Then you will make money. Not only can the sales person save your time and use his overheads to sell your bikes, but the professional seller may have a greater kill rate, making you more money. (After you read the chapter on selling, you may actually become more professional than the professionals). You can, of course sell your own bikes, but that is not the simple plan, so we'll cover the selling later. In order to have inventory to sell or consign, you need to buy. You need to buy carefully, because wrong bikes can stay in your inventory forever, and there's no money in that! If you are using the simple plan, you have to buy even more efficiently because you cannot fix broken bikes and you cannot paint or modify bikes that don't sell well, but there are still bikes out there for you to profit from.The way I got almost all my bikes when I started was by going to a million yard sales. (Now, my store is well known in the community and many people come into the store every day to sell bikes to me, so I don't have to go to yard sales; but I still do, because I have always liked the shopping end of this business.)THE BASIC IDEA: As the weekend approaches, your newspaper will list yard sales and flea markets. If you have $5 or $10 to spare as an investment in your new business, go to some of these sales and look over the bicycles that people are selling. Most of them will be out of style or too much money. You don't want to buy an American-made ten-speed bike for $45 (unless it is a mountain bike) because that is the amount of money you want to get when you sell such a bike. What you are looking for is a bike that is being sold for $5. There are plenty of these deals around because many sellers have replaced the bike with a new one, or their kids have outgrown it, or for any reason have lost interest in that bike. Instead of keeping it, they just want it out of the garage, at any price!If you are not going with the "simple plan" but are able to repair bikes, you will have lots of bikes to choose from. So many people will sell a bike for next to nothing if it has a flat tire or a broken brake cable and they have lost interest in it.If you are working within the simple plan, you may do well with a mountain bike that you buy for $200 and sell for $300. You are risking $200 all at once, but you can get a bike already in good condition. Still, it is better to start with smaller risks. There are many children's bikes and single-speed cruisers available for small dollars that are in fine shape. Especially look for old cruisers or newspaper bikes. Many of these are sold by people who don't realize there is nostalgic interest in them. They are easy to buy and easy to sell.Here is a typical deal: I bought a 10-speed ladies model Huffy without a front wheel for $4. I had a front wheel in my (by now very large) parts pile. I spent about 1/2 hour tuning up the bike and fixing the puncture in the rear inner tube. I sold the bike myself for $38 two days later. My profit was $$34! If I had put the $4 in a money market account, then waited a whole year, I would have had a profit of about 88 cents.To look at it from your point of view, lets say that you had to buy a front wheel. You can get these from yard sales for about $1 or $2. Of course, a better approach is to get a bike that has all the major parts, and needs only repairs that you can do with the tools and knowledge you have. For a bike that's in better shape, you may need to pay $10. If you decide to consign the bike, you may only get $25 (at 33% commission). Still, that's a 150% profit, or $15 in your pocket!Start with just one bike and test the business. For all you know, I'm crazy, and you're crazy too for buying this disk. But if that bike sells for a profit, you can buy a couple more bikes, and if they sell...well, you know the rest.And guess what? It will sell, and they will sell! But still, don't take my word for it, try just one. Maybe you live in a strange community where everyone hates bikes. I doubt there is such a place, but I would hate to see you lose hundreds of dollars on a big pile of bikes just because I told you to.Seriously, I have seen several people who decided they were going into the bike business, and really got in, deep! More than once I have fallen into a windfall, someone who tried the business, didn't profit, and then sold everything to me, cheap! Usually these people buy a large inventory all at once from someone else who decided to get into the business, etc. You do have to take your time and learn about what you can sell and what bikes are dogs. You also have to learn the idiosyncrasies of selling, who to consign to, how many of what kind of bikes, or how to sell them yourself, etc.There are two differences between these losers and you. They never got a copy of this book, and more importantly, they never had a sense of proportion. You can't start with a 1,000 square-foot glass-front store with $2,000 per month overhead, fill it with all the wrong bikes and parts (out of date is the most common problem), and spend your last dollar on advertising, hoping to make it all work out. You can't even buy 10 bikes, all American-made 10-speeds needing new paint for $40 each, and expect to make a profit. This would just waste a $400 investment.IT IS BEST TO START SLOWLY, SO YOU CAN LEARN WHAT TO BUY AND WHAT NOT TO BUY! Throughout this course, I will explain the proportions and prices in the bike business, so you will be able to avoid costly mistakes.chapter end.


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