How to Start a Bike Rental Business

As people grow more concerned about climate change, they are looking for eco-friendly transport options. Bikeshare is booming in cities around the world, with the global bike and scooter rental industry set to quadruple by 2027. 

Starting a bike rental business, through a traditional bike shop or bike-sharing app, could be a great way to provide people with a fun, healthy and green way to get around and ride the growth wave to success. 

But before you hop on board, you’ll need to learn how to start, market, and grow a business. You’ll also have to put in some hard work and have a passion for what you do, but this step-by-step guide will provide all you need to know to start a thriving bike rental business. 

Step 1: Decide if the Business Is Right for You

Pros and cons

Starting a bike rental business has pros and cons to consider before deciding if it’s right for you. 

Bike rental industry trends

Industry size and growth

• Industry size and past growth – The global bike and scooter rental industry was worth $2.5 billion in 2019 after strong growth the previous five years.((https://www.marketsandmarkets.com/Market-Reports/bike-scooter-rental-market-122654882.html)) 
• Growth forecast – The global bike and scooter rental industry is projected to grow more than 400% by 2027 to reach $10.1 billion.

Trends and challenges

Trends in the scooter rental industry include:

• Environmental concerns, as well as the desire for convenience, are driving increased bike rentals.
• Electric bicycles, or e-bikes, are booming, making many bike rental companies offer those instead of, or in addition to, traditional bikes.

Challenges in the bike rental industry include:

• Rented bikes from bike-sharing apps face vandalism, poor handling, and overuse, creating excessive maintenance demands. 
• Large bikeshare firms are growing fast, getting millions in venture capital to expand and gain more market share, crowding out new entrants. 

How much does it cost to start a bike rental business?

Startup costs for a bike rental business range from $9,500 for a traditional shop to $85,000 or more for a bikeshare business. The largest expense for bikeshare is the development of the app. 

You’ll need a handful of items to successfully launch your bike rental business, including:

• Bikes
• Helmets
• Bike chains and locks

Start-up Costs	Ballpark Range	Average
Setting up a business name and corporation	$150 - $200	$175
Business licenses and permits	$100 - $300	$200
Insurance	$100 - $300	$200
Business cards and brochures	$200 - $300	$250
Website setup	$1,000 - $3,000	$2,000
App development	$0 - $70,000	$35,000
10 to 20 bikes	$5,000 - $10,000	$7,500
Location for a tourist bike rental business	$0 - $3,000	$1,500
Total	$9,550 - $87,100	$46,825

How much can you earn from a bike rental business?

Prices for bike rental are about $60 per day. Your profit margin for a traditional bike rental business should be about 60%. 

In your first year or two, you could rent five bikes a day 280 days a year, bringing in $84,000 in annual revenue. This would mean $50,000 in profit, assuming that 60% margin. As your brand gains recognition and you get referrals, you could rent 15 bikes a day, 280 days a year. At this stage, you’d hire staff, reducing your profit margin to around 40%. With annual revenue of $252,000, you’d make a great profit of more than $100,000.

What barriers to entry are there?

There are a few barriers to entry for a bike rental business. Your biggest challenges will be:

• The high startup costs if you choose bikeshare 
• Competing with large bike rental companies

Step 2: Hone Your Idea

Now that you know what’s involved in starting a bike rental business, it’s a good idea to hone your concept in preparation to enter a competitive market. 

Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.

Why? Identify an opportunity

Research bike rental businesses in your area to examine their products, price points, and customer reviews. You’re looking for a market gap to fill. For instance, maybe the local market lacks a reliable bikeshare service, or a shop that offers hourly rentals of traditional bikes, e-bikes and scooters. 

This could jumpstart your word-of-mouth marketing and attract clients right away. 

What? Determine your services

You need to decide which types of bikes you want to rent, and if you want to rent them from a physical location or an app. You could offer regular bicycles, e-bikes, scooters and more, as well as additional services like tours. 

How much should you charge for bike rentals?

The average price for bike rentals is $60 per day. Your profit margin for a traditional bike rental business after rent and overhead should be about 60%. 

Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Who? Identify your target market

For bikeshare, your target market will tend to be younger. For a traditional bike rental business, the market will be broad. You should spread out your marketing to include sites like TikTok, Instagram, and Facebook. 

Where? Choose your bike rental location

Choosing the right location for your bike rental business is crucial for attracting customers and ensuring its success. Look for an area with high foot traffic and high demand for outdoor activities, such as near parks, beaches, or tourist attractions.

Consider accessibility and convenience, ensuring that the location is easily reachable by public transportation or has ample parking.

By strategically choosing the right location, you can establish a profitable and popular bike rental business that caters to a wide range of customers. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.

When choosing a commercial space, you may want to follow these rules of thumb:

• Central location accessible via public transport
• Ventilated and spacious, with good natural light
• Flexible lease that can be extended as your business grows
• Ready-to-use space with no major renovations or repairs needed

Step 3: Brainstorm a Bike Rental Business Name

Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.

Here are some ideas for brainstorming your business name:

• Short, unique, and catchy names tend to stand out
• Names that are easy to say and spell tend to do better 
• Name should be relevant to your product or service offerings
• Ask around — family, friends, colleagues, social media — for suggestions
• Including keywords, such as “bike rentals” or “e-bike rentals”, boosts SEO
• Name should allow for expansion, for ex: “Rolling Wheels Bike Rentals” over “Mountain Bike Rentals”
• Avoid location-based names that might hinder future expansion

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.

Step 4: Create a Bike Rental Business Plan

Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:

• Executive Summary: A brief summary outlining the core elements of the bike rental business plan, including its purpose, key offerings, and financial projections.
• Business Overview: A concise description of the bike rental business, highlighting its mission, vision, and the specific market it intends to serve.
• Product and Services: Detailed information on the types of bikes and related services offered by the business, emphasizing unique features and benefits.
• Market Analysis: Examination of the target market, including customer demographics, trends, and potential growth, to justify the viability of the bike rental business.
• Competitive Analysis: Assessment of competitors in the bike rental industry, analyzing strengths, weaknesses, opportunities, and threats to inform the business’s competitive strategy.
• Sales and Marketing: Strategies for promoting the bike rental business, including pricing, distribution, and promotional activities to attract and retain customers.
• Management Team: Introduction of key individuals responsible for the bike rental business’s success, emphasizing their relevant skills and experience.
• Operations Plan: Details on how the bike rental business will operate, covering logistics, supplier relationships, and other operational aspects crucial for smooth functioning.
• Financial Plan: A comprehensive outline of the financial aspects, including startup costs, revenue projections, and profit margins, to demonstrate the business’s financial feasibility.
• Appendix: Supplementary materials, such as additional data, charts, or documents, providing supporting information for various aspects of the bike rental business plan.

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.

Step 5: Register Your Business

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business! 

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you’re planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to bike rental businesses. 

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state. 

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your bike rental business will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

Here are the main options:

• Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
• General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
• Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
• C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
• S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.

Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN. 

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

It is important to consult an accountant or other professional to help you with your taxes to ensure you’re completing them correctly.

Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

• Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
• SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
• Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
• Venture capital: Venture capital investors take an ownership stake in exchange for funds, so keep in mind that you’d be sacrificing some control over your business. This is generally only available for businesses with high growth potential.
• Angel investors: Reach out to your entire network in search of people interested in investing in early-stage startups in exchange for a stake. Established angel investors are always looking for good opportunities. 
• Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
• Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
• Personal: Self-fund your business via your savings or the sale of property or other assets.

Bank and SBA loans are probably the best option, other than friends and family, for funding a bike rental business. If you have a unique and innovative concept and a great bikeshare plan that could really stand out in the market, you might be able to attract venture capital or angel investors. You’d have to show a way that you could compete with existing big players.

Step 8: Apply for Licenses and Permits

Starting a bike rental business requires obtaining a number of licenses and permits from local, state, and federal governments.

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Step 9: Open a Business Bank Account

Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your bike rental business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account. 

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

• General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
• Business Property: Provides coverage for your equipment and supplies.
• Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
• Worker’s compensation: Provides compensation to employees injured on the job.
• Property: Covers your physical space, whether it is a cart, storefront, or office.
• Commercial auto: Protection for your company-owned vehicle.
• Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
• Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.

Step 11: Prepare to Launch

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks. 

You may want to use industry-specific software, such as The Flybook, bike rent Manager, or RENTALL, to manage your scooter fleet inventory, reservations, and payments.

Accounting

• Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero. 
• If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial. 

Develop your website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.

You can create your own website using website builders. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google. 

Marketing

Creating a strong marketing strategy for your bike rental business is essential for attracting customers who are looking for convenient and eco-friendly transportation options. Here’s a strategic approach to pedaling your bike rental services to the top:

Digital Presence and Online Marketing

• Active Social Media Campaigns: Utilize platforms such as Instagram, Twitter, and Facebook to showcase your bikes, special routes, and happy customers.
• Local SEO and Google My Business: Optimize your online content for local searches and maintain an up-to-date Google My Business profile with excellent images and customer reviews.
• Online Booking System: Ensure your website offers a user-friendly online reservation system with clear instructions and easy navigation.

Content Marketing and Engagement

• Cycling Blogs and Routes: Share engaging content about popular cycling routes, bike maintenance tips, and the health benefits of biking.
• User-Generated Content: Encourage customers to share their cycling adventures on their own social media, tagging your business for a chance to be featured on your pages.

Experiential and In-Person Engagements

• Guided Bike Tours: Offer guided tours that highlight interesting places in your area to attract tourists and locals looking for a new experience.
• Community Cycling Events: Participate in or sponsor local cycling events to demonstrate your commitment to the cycling community and environmental sustainability.

Collaborations and Community

• Partnerships with Local Businesses: Collaborate with cafes, hotels, and tourist attractions to offer discounts or combined service packages.
• Local Advocacy for Cycling: Engage with city planning and environmental groups to advocate for better cycling infrastructure, positioning your business as a community leader.

Customer Relationship and Loyalty Programs

• Frequent Rider Rewards: Implement a rewards program for repeat customers, such as discounts on future rentals or a free rental after a certain number of rides.
• Referral Discounts: Offer discounts to customers who refer friends, encouraging word-of-mouth marketing.

Promotions and Advertising

• Targeted Online Advertising: Utilize online ads that target tourists and local residents interested in outdoor activities, fitness, and sustainable living.
• Influencer Partnerships: Work with travel and fitness influencers to reach a broader audience and showcase the ease and accessibility of your rental services.

Kickstart Marketing

• Strategic Signage: Place signs and banners in high-traffic areas, especially where tourists frequent, to direct potential customers to your rental locations.
• Promotional Events: Host events such as a free bike safety workshop or a community ride to raise awareness of your rental services.
• Email Campaigns: Develop an email marketing strategy to engage past customers with updates, seasonal promotions, and biking news.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that set it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your bike rental business meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire. 

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your bike rental business could be: 

• See the sights and stay green with our city bike tours 
• Save your feet, and the planet! Ride our bikes and explore
• Biking’s not so hard — especially with our powerful e-bikes 

Networking

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a bike business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in bikes for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in bike rentals. You’ll probably generate new customers or find companies with which you could establish a partnership. 

Step 12: Build Your Team

If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a bike rental business include:

• Shop Clerks – rent bikes, customer service
• Bike Mechanics – repair bikes
• General Manager – scheduling, accounting
• Marketing Lead – SEO strategies, social media

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. 

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent. 

Step 13: Run a Bike Rental Business – Start Making Money!

Bike rentals are booming around the globe as people look for eco-friendly travel options. Starting a bike rental business could be a great way to help people have fun and make good money at the same time, and you’d also be helping to save the planet. If you have a passion for biking and a desire to do some good, you could build a lucrative bike rental company.

You’re off to a great start, learning a load of business information, so now it’s time to kickstart your successful bike rental business.