How to Start a Bike Shop: Cost & Profit Potential

Important elements to think about when starting your bike shop:

1. Location — Choose a strategic location with high foot traffic and easy accessibility. Consider areas near parks, trails, or urban centers where cycling is popular.
2. Insurance — Obtain insurance to protect your business, including liability insurance, property insurance, and insurance for your inventory. This will safeguard your shop against potential risks and damages.
3. Spare parts and accessories — Stock a variety of spare parts and accessories to meet the needs of your customers. This includes tires, tubes, chains, helmets, and other essential cycling gear.
4. Suppliers — Establish relationships with reliable suppliers to ensure a consistent supply of high-quality bicycles, parts, and accessories. Offer a range of quality brands to cater to different customer preferences and budgets.
5. Security — Implement robust security measures to protect your inventory. This includes installing surveillance cameras, alarm systems, and secure storage for high-value items.
6. Niche and specialization — Define a clear niche or specialization for your bike shop. This could include focusing on mountain bikes, road bikes, electric bikes, or offering custom bike builds.
7. Register your business — A limited liability company (LLC) is the best legal structure for new businesses because it is fast and simple. Form your business immediately using ZenBusiness LLC formation service or hire one of the best LLC services on the market.
8. Legal business aspects — Register for taxes, open a business bank account, and get an EIN.
9. Online store — Develop an online store to reach a wider audience. Ensure your website is user-friendly, with detailed product descriptions, high-quality images, and an easy-to-navigate layout.
10. Bike repair services — Add a bike repair service to your shop to attract more customers. Offer professional repair and maintenance services to keep bikes in optimal condition.
11. Marketing and promotion — Use a mix of online marketing, local advertising, and community events to promote your bike shop. Highlight your expertise, quality brands, and range of services to attract customers.

You May Also Wonder:

Is a bike shop business profitable?

Yes, a bike shop can be profitable. A good location helps, and you also need a marketing plan that will attract cyclists.

What happens during a typical day at a bike shop?

At a bike shop, customers come in to shop for bikes or accessories. They also may come in for bike repairs, or to look for spare parts or new tires.

What is the growth potential of a bike shop?

A bike shop can grow by adding new products, or expanding to new locations. A successful bike shop could even franchise.

Can you start a bike shop on the side?

Owning a bike shop is a full time job. However, you could buy used bikes and refurbish them for resale. You could do that from your own garage.

Step 1: Decide if the Business Is Right for You

Pros and cons

Bike shop industry trends

Industry size and growth

• Industry size and past growth – The U.S. bicycle dealership and repair market is worth $8.2 billion in 2023 after growing by 5.3% annually for the last five years.((https://www.ibisworld.com/united-states/market-research-reports/bicycle-dealership-repair-industry/))
• Growth forecast – The U.S. bicycle dealership and repair industry is projected to grow .2% in 2023.
• Number of businesses – In 2023, 11,246 bicycle dealership and repair businesses are operating in the U.S.
• Number of people employed – In 2023, the U.S. bicycle dealership and repair industry employs 76,410 people. 

Trends and challenges

Trends

• Road bikes are trending as the most popular bicycle option, as opposed to mountain bikes.
• Clearly electric bikes are a growing trend, providing another product opportunity for bike shops.

Challenges

• Supply chain issues are causing inventory shortages for bike shops.
• The rising cost of bikes are pricing some people out of the market. 

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

Startup costs for a bike shop range from $40,000 to $70,000. Costs include space rental and preparation, and inventory. 

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

• Shelving for bike accessories
• POS system
• Bike repair tools

Start-up Costs	Ballpark Range	Average
Setting up a business name and corporation	$100 - $500	$300
Business licenses and permits	$100 - $300	$200
Insurance	$100-$500	$300
Website	$200 - $1,000	$600
Space rental	$5,000 - $10,000	$7,500
Space preparation	$10,000 - $20,000	$15,000
Inventory	$25,000 - $35,000	$30,000
Marketing budget	$500 - $1,000	$750
Total	$41,000 - $68,300	$54,650

How much can you earn from a bike shop business?

How much you charge for bikes depends on your cost to acquire them. In a bike shop, the average price for an entry level road bike is about $1,500. Your profit margin after the cost of goods sold and overhead should be about 20%. 

In your first year or two, you might sell an average of three bikes per week, bringing in $234,000 in revenue. This would mean $46,800 in profit, assuming that 20% margin. 

As you gain traction, sales could climb to eight bikes per week. With annual revenue of $624,000, you’d make a tidy profit of $124,800.

What barriers to entry are there?

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

• Funding the startup costs
• Creating market awareness for your shop

Step 2: Hone Your Idea

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

Market research could give you the upper hand even if you’ve got the perfect product. Conducting robust market research is crucial, as it will help you better understand your customers, your competitors, and the broader business landscape.

Analyze your competitors 

Research bike shops in your area to examine their products and services, price points, and customer reviews.

• Make a list of bike shops that offer similar products and services. 
• Review your competitors’ products and services – their features, pricing, and quality – and marketing strategies.
• Check out their online reviews and ratings on Google, Yelp, and Facebook to get an idea of what their customers like and dislike.
• Identify your competitors’ strengths and weaknesses. 

This should identify areas where you can strengthen your business and gain a competitive edge to make better business decisions.

Why? Identify an opportunity

You’re looking for a market gap to fill. For instance, maybe the local market is missing an independent bike shop that offers electric bikes, or a bicycle shop that offers bike parts and repair services.

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

What? Determine your products

In addition to bicycles, you could offer all sort of bike accessories including helmets. You could also offer bike parts and bike tires, as well as bike repairs.

How much should you charge for bikes?

Your prices will depend on market prices in your area, but they’ll also depend on your cost to acquire the bikes. 

Once you know your costs, 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

The target market for bikes is broad, but bike shop quality bikes are likely to appeal to millennials or those who are slightly older. You may want to focus your marketing on Instagram and Facebook.

Where? Choose your bike shop location

You’ll need to rent out a space for your bike shop. 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 Shop Name

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” or “bicycle”, boosts SEO
• Name should allow for expansion, for ex: “Cycle Hub Superstore” over “Urban Commute Cycles”
• A location-based name can help establish a strong connection with your local community and help with the SEO but 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 and reserve your business name with your state, start the trademark registration process, and complete your domain registration and social media account creation. 

Your business name is one of the key differentiators that sets your business apart. Once you pick a name, reserve it and start with the branding, it’s hard to switch to a new name. So be sure to carefully consider your choice before moving forward. 

Step 4: Create a Bike Shop Business Plan

Here are the key components of a business plan:

• Executive Summary: Provide a brief summary of your business plan, highlighting your shop’s unique selling points and potential for success.
• Business Overview: Describe the nature of your bike shop, its location, the types of bicycles and accessories you plan to sell, and any additional services you’ll offer, such as repairs or rentals.
• Product and Services: Detail the range of bicycles (mountain bikes, road bikes, city bikes, etc.) and accessories (helmets, locks, etc.) you’ll stock, as well as any repair and maintenance services you’ll provide.
• Market Analysis: Analyze the local market for bicycles and cycling accessories, including identifying your target customer demographics and assessing the demand for biking in your area.
• Competitive Analysis: Identify other bike shops or competitors in your vicinity, highlighting your shop’s competitive advantages, such as unique products or exceptional customer service.
• Sales and Marketing: Explain your strategies for attracting customers, which may include online and offline marketing, community engagement, and promotions.
• Management Team: Introduce key team members involved in running the bike shop, emphasizing their expertise in biking, retail, and business management.
• Operations Plan: Describe the day-to-day operations of your shop, covering inventory management, customer service, and maintenance services.
• Financial Plan: Present financial projections, including startup costs, revenue forecasts, and expected profitability, along with any funding requirements or potential sources of investment.
• Appendix: Include any supplementary materials, such as supplier agreements, photos of the shop location, or marketing materials, to support your 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 are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to bike shops. 

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 shop 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. Here’s how to form an LLC.
• 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. Read how to start a corporation here.
• 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 are 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.
• 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 shop business. You might also try crowdfunding if you have an innovative concept.  

Step 8: Apply for Bike Shop Business Licenses and Permits

Starting a bike shop 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 shop 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 Lightspeed, Netsuite, or Hubtiger, to manage your inventory, orders, repair workflows, and purchases. 

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.

Create a 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 services like WordPress, Wix, or Squarespace. 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.

Your customers are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. SEO will help your website appear closer to the top in relevant search results, a crucial element for increasing sales. 

Make sure that you optimize calls to action on your website. Experiment with text, color, size, and position of calls to action such as “Buy Now” or “Order”. This can sharply increase purchases. 

Marketing

To ensure success in a competitive market, consider these marketing strategies:

• Community Engagement Events: Organize group rides, workshops, or charity events to foster a sense of community around your bike shop, creating strong relationships with customers.
• Customer Loyalty Programs: Implement a loyalty program offering discounts, free tune-ups, or exclusive access to new products, encouraging repeat business and customer retention.
• Social Media Challenges: Launch engaging challenges on platforms like Instagram or Facebook, encouraging customers to share their biking experiences using your products and creating buzz.
• Strategic Partnerships: Collaborate with local businesses, such as coffee shops or fitness centers, to cross-promote each other, expanding your customer base.
• Referral Discounts: Incentivize word-of-mouth marketing by offering discounts or freebies to customers who refer friends, family, or colleagues to your bike shop.
• Seasonal Promotions: Create special promotions around seasons or holidays, such as discounts on winter gear in colder months or bike maintenance packages in the spring.
• In-Store Events and Demos: Host in-store events or product demonstrations to showcase the latest gear, provide expert advice, and create an immersive shopping experience.
• Customization Services: Offer customization options for bikes, gear, or accessories, allowing customers to personalize their purchases and fostering a unique selling proposition.
• Email Marketing Campaigns: Develop targeted email campaigns to keep customers informed about new arrivals, promotions, and maintenance tips, maintaining regular communication.
• Local SEO Optimization: Optimize your online presence for local searches, ensuring that your bike shop appears in local directories and search engine results when potential customers are looking for bike-related products or services in your area.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that sets 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 shop 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 shop business could be: 

• Get on the road with a premium road bike
• Large selection of bicycles to meet your needs
• New bikes, refurbished bikes, bike parts and repairs

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 shop business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in bike shops 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 shops. You’ll probably generate new customers or find companies with which you could establish a partnership. 

Step 12: Build Your Team

You will likely need workers to fill various roles. Potential positions for a bike shop business include:

• Store Clerks – customer service, make sales
• Repair Technicians – repair bikes
• Marketing Lead – create and implement marketing strategies
• General Manager – accounting, scheduling, inventory management 

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 Shop – Start Making Money!

The bike shop industry is growing, making it a great time to get in on the action. You’ll be following your passion, meeting fellow bike enthusiasts, helping people improve their health, and making a good living. Perhaps one day you could even franchise your bike shop.

You’ve got some business knowledge now, so you’re ready to pedal your way to bike shop entrepreneurship!