Best way to estimate costs of running a business?

bikebusiness

Apologies in advance for what will seem a very basic question. I'm in the very early stages of investigating a business idea. Essentially it's a bike shop but with a few twists to try and maximise footfall and customers.

I have no experience in business at all, but have a very keen interest. This is all very preliminary stuff at the moment, but we all have to start somewhere, right?

I believe it's a viable business from the perspective that there is a demand in the area for this kind of shop, but that's obviously irrelevant if you don't put figures behind it. So how exactly do I do that? The only figure I can estimate right now is rent which I can see from available retail units on Daft. But how do I find the likes of the following:

Insurance
Electricity / Gas Costs
Staff wages
Stock cost / mark-up
Accountant fees
Other costs I may be unaware of

I'm not looking for exact figures, just ballpark. Does it mostly come down to talking to people already running that kind of business?

jimmii

Rates and marketing are a couple more to throw in there. Insurance, utilities, accountancy shouldn't be too much maybe a few grand depending on the size of the unit, your turnover, value of stock etc obviously the bigger/higher they are the more it costs. You should be able to get some basic insurance quotes online and likewise for accountants. I would assume the size of unit needed to sell bikes and the revenue needed to support that maybe 5k for just those 3? That would seem reasonable enough. A lot of accounting costs is going to depend on what you are willing to do yourself the more you want them to do then naturally the more they are going to charge. Personally I get them to do as much as possible! Best leave that sort of thing to the experts to leave you to focus on running the business and gives you peace of mind on the end of year filings.

Staff costs will hopefully become a big expense over time once your shop is thriving but are you sure they are going to be absolutely essential starting out? If you think you are really going to need staff then do up a skeleton rota and an ideal rota and calculate what that's going to be and see if you think it's going to be viable don't forget to factor in the extra employer costs. Whether or not you'll need staff is going to come down to the size of the unit and what the customers journey is like. Margin on bikes isn't great are the twists going to be something that's going to create separate revenue?

As a new retailer you will likely find you'll need to pay a couple of invoices proforma so factor that into cashflow forecasts.

Opening a shop is a big commitment are you sure that's right for you? Realistically you will make very little in the first year to 18 months so make sure to factor your living expenses into your plan somewhere as even if you have the best business ever if you run out of cash you're buggered. If theres a way for you to test the waters with a pop up or online it's worth dipping your toe in before you commit to a long lease even though we're probably going to going into the best time ever to be negotiating a retail lease.

Theres quite a few retailers on here so it's a good place to come for tips. Even though our retail business has worked when I look back at the start it really was bad idea and we had no clue what we were getting into. Personally knowing what it's like I would always be wary of suggesting retail to anyone unless they had a very decent passive income already in place that can support them and were fully prepared to give up all plans for holidays and even time off for the forseeable. If you really are prepared to make the sacrifices necessary though it is great fun and its great interacting with a happy customer and hearing that someone has come in because they have been recommended by a friend etc. Even now I always think it's nice when someone takes time out of their day to leave a review somewhere.

silver2020

I assume its a bike shop you are looking at. The market is fairly well served especially with decathlon looking to open several new stores, Halfords expanding their Bike offerings and numerous independents and that's before you take online into account

Margins are not great and if you want to be taken seriously you will need the main brands.

I'm not saying it won't work, but what seems a good idea in the head does not always work out in the real world.

Be especially wary of friends and family telling you it is a great idea - they'll always say that. Put the idea to cyclists and ask them for 3 reasons why it won't work. Then look at all those reasons and if you can overcome most of them, THEN you can start planning.

My own opinion is that a location within a business park such as Sandyford that has a cycle testing area (as decathlon do) may have a chance as the primary market is literally on your doorstep.

beauf

I'm all for experience and all that. But everyone starts with no experience.

Bike shops are all swamped with demand. I would say for a small bike shop the biggest issue is not getting sucked into carrying stock or doing repairs that have too low margins. Then making sure your overheads are low.

Be no harm in doing some small business courses for startups.

Scotty #

IT/POS and security are two other expenses that can be costly.

There are very few bike shops left. They almost all sell bikes as part of a bigger enterprise.

Bandara

Be careful your not letting your hobby/passion be the sole reason to open it as a business. They are very very different things.

Good luck with it if you do decide to go ahead.

PickYourName

Scotty # wrote: »

IT/POS and security are two other expenses that can be costly.

There are very few bike shops left. They almost all sell bikes as part of a bigger enterprise.

What do you call "very few"?

If you type "bike shop" into Google maps for Dublin, you get 200+ places, which I would have thought was quite a lot, certainly compared to other specialist retailers.

NOTE: original had a typo of 20 rather than 200, which kind of ruined the point I was making!

ironclaw

Bandara wrote: »

Be careful your not letting your hobby/passion be the sole reason to open it as a business. They are very very different things.

This is very sound advice. I know plenty of people that loathe their hobby when they turned it into their business, especially if you want to seriously scale and succeed at the higher end of turnovers.

Small community bike shop with low overheads, expense covering turn over and loyal customers in for the chats every so often? Perfect.

A business that has loans, large inventory, a few staff and has to continually make rent/rates? Different fish entirely.

Not saying it's impossible, but the romantic notion of running a shop (or any business) versus the reality is very different.

Buddy Bubs

bikebusiness wrote: »

Apologies in advance for what will seem a very basic question. I'm in the very early stages of investigating a business idea. Essentially it's a bike shop but with a few twists to try and maximise footfall and customers.

I have no experience in business at all, but have a very keen interest. This is all very preliminary stuff at the moment, but we all have to start somewhere, right?

I believe it's a viable business from the perspective that there is a demand in the area for this kind of shop, but that's obviously irrelevant if you don't put figures behind it. So how exactly do I do that? The only figure I can estimate right now is rent which I can see from available retail units on Daft. But how do I find the likes of the following:

Insurance
Electricity / Gas Costs
Staff wages
Stock cost / mark-up
Accountant fees
Other costs I may be unaware of

I'm not looking for exact figures, just ballpark. Does it mostly come down to talking to people already running that kind of business?

Insurance I'm not sure, in the lap of the gods. Your stock value will dictate this. You'll need EL qnd PL too.
Electric and heat, depends on sq footage of shop. Base it on your home but remember you'll have more lights on more of the time
Staff, I'm guessing retail would pay 25k for 1 full time staff member
Accountant, 3k + a year to prepare accounts and do filing. An accountant with similar clients in retail may be able to advise you on the other costs. An initial consultation with one might be wise before start up.

beauf

PickYourName wrote: »

What do you call "very few"?

If you type "bike shop" into Google maps for Dublin, you get 200+ places, which I would have thought was quite a lot, certainly compared to other specialist retailers.

NOTE: original had a typo of 20 rather than 200, which kind of ruined the point I was making!

Could you post a link to the search. I'd love to check out these 200+ shops in Dublin. Google Search and maps is far from accurate source of information.

PickYourName

beauf wrote: »

Could you post a link to the search. I'd love to check out these 200+ shops in Dublin. Google Search and maps is far from accurate source of information.

https://www.google.ie/maps/search/bike+shops

I've no doubt nothing like all 200+ of them are actual stand-alone bike shops and as you suggest Google is certainly not infallible, but the point is I think it reasonable to say there are more than "very few" bike shops, at least in Dublin.

I'm sure the same is the case elsewhere in the country.

Scotty #

What I mean is, 25-30 years ago almost every street had a bicycle shop. Now, your lucky if there's one in the whole town. There may well be over 200 in Dublin but how many were there?

A quick scan of North County Dublin...
Balbriggan - 1 shop and also does angling,
Ashbourne - 1 shop,
Swords - 3 shops
Malahide, Lusk, Rush, Donabate - 0 shops

Some of those listed on google maps seem to be private houses with online only shops (dropshippers I presume).

I'm not suggesting it's a non runner, but it is a difficult marketplace. You're up against, Smyths, Halfords, Eurocycles, Online. I would imagine it's very difficult for any offline retailer to survive on bike sales and repair alone but that doesn't mean they can't!

PickYourName

Scotty # wrote: »

What I mean is, 25-30 years ago almost every street had a bicycle shop. Now, your lucky if there's one in the whole town. There may well be over 200 in Dublin but how many were there?

A quick scan of North County Dublin...
Balbriggan - 1 shop and also does angling,
Ashbourne - 1 shop,
Swords - 3 shops
Malahide, Lusk, Rush, Donabate - 0 shops

Some of those listed on google maps seem to be private houses with online only shops (dropshippers I presume).

I'm not suggesting it's a non runner, but it is a difficult marketplace. You're up against, Smyths, Halfords, Eurocycles, Online. I would imagine it's very difficult for any offline retailer to survive on bike sales and repair alone but that doesn't mean they can't!

Not sure what you're getting at with the numbers - do you want me to list them out for you? There are at least in the 10s of actual bike shops in Dublin.

I think we're coming at it from a slightly different place: for sure there were more than there are now decades ago (though I suspect more now than say 10 or 20 years ago), but compared to other specialist retailers (e.g. fishmongers), where there really are very few left, I'd say they were reasonably plentiful.

There's some good advice here for someone starting out and words of caution that are entirely appropriate, but I really don't see any evidence that there's next to none left, quite the opposite.

beauf

Thus far one bike shop I know is listed at least 5 or 6 times in that list another 4 times and another than I know is closed for a couple of year 2 or 3 times. A couple of fields and private houses.
In a thread about a new business, you'd wouldn't want to be looking at google.

In my own area in a 5-8k radius in the past we had 3 or 4 small local shops, one decent sized one. I'm going back decades.
We now have 5, one is Smyths, which doesn't really count. The rest are all decent. All are back ordered for 3 months or more on new bikes, repairs takes weeks, with long waiting lists.
Covid made this worse. But tbh honest for the last 7yrs or so they've never been able to keep up with demand. We now see mobile repair guys going around.

So I'd say there is demand. But I would no idea what parts of that business are profitable. I would guess that new bikes sales only make money if you move a lot of them. Repairs make slim margins for the time and resources consumed. Since the big shops don't focus on repairs and the smaller shops don't carry much stock. If you have good mechanic, and can attract high spending customers, on expensive bikes. But then you have pay a good mechanic a lot to keep them, and not burn them out.

Wouldn't be a bad idea to do 3 months in a busy bike shop and look at whats bringing the money.

PickYourName

beauf wrote: »

Wouldn't be a bad idea to do 3 months in a busy bike shop and look at whats bringing the money.

That's one of the best pieces of advice on here.

I'm constantly amazed at people who say they want to open something (usually a coffee shop) and they've never worked in one so have no concept of what it's actually like.

I'm not saying that's the case here, but in case it is, that would definitely be my starting point.

Next would be to talk to the local LEO. I'm not sure at the moment, but they certainly ran courses to cover general business issues for startups (including how to answer the original question). They also run mentorship programs, which, depending on the quality of the mentor, can be extremely useful.

There seems to be a reasonable amount of competition, which is a good sign that there's business there and overall it's a growing sector. It's not just retail, having a service element to it too, so that's an advantage over other types of retail.

Retail is a tough, tough, game, though and to suceed you have to give someone a reason to do business with you. Generally, that involves having some particular vision about what that reason is: an inexperienced person opening up a "me-too" operation with nothing distinctive to offer is very likely to fail.