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Business PlanForBoros Bike Shop
Kurt RussMBA 599May 4, 2009
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Abstract
Boros Bike Shop is an idea for a new business opportunity in downtownWaynesboro, PA. The shop will be a specialty bicycle store, offering retail sales of newbicycles, parts and accessories, and maintenance and repair service. It is to be located
along the heavily trafficked Main Street. The primary market is the greater Waynesboroarea. The plan assumes the shop will be started as a sole proprietorship with Kurt Russbeing the owner and manager. Waynesboro is a growing town in a rural area, with lots ofgreat places to ride bikes. There was a bike shop located in Waynesboro, but it was movedto California last year. Waynesboro is in need of a bike shop. This plan investigates thelocal area and the opportunities that are available. There is grant money available thatmakes starting a store in downtown Waynesboro an attractive idea. Included in this projectare details to how the store will operate and the startup expenses. The plan expects thatpersonal savings will be used to cover the startup expenses and then income fromoperations will cover the bills. No loans are expected to be needed at this time. A cashflow and income statement are included to show the viability of starting a shop.
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Table of Contents
I. Introduction .. 3
II. Research Approach.. 4
III. Mission Statement 10
IV. Company Description .. 10
V. Legal Form of Business 12
VI. Products and Services 14
VII. Market Analysis 18
VIII. Competitor Analysis. 21
IX. Marketing Strategy. 23
X. Operational Plan 26
XI. Startup Expenses 28
XII. Financial Plan 30
XIII. Opportunities. 34
XIV. Conclusion. 36
XV. Appendix 38
XVI. Reference List 44
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I.Introduction
The nature of the project I chose to pursue is to create a business plan for a retail
shop that specializes in cycling. I live in a small town that does not have any specialty
bike shops. This sport continues to grow and there are only a few shops located in South
Central Pennsylvania that offer the service and expertise that is needed for the people that
enjoy cycling.
The goal of this project is to determine if starting a specialty bike business in a
small town would be a profitable and worthwhile venture. What will it take to make this a
successful business? How can I start small and grow the business into a community
staple? I will need to research the process for creating a small retail business. I will also
need to research how the specialty bicycle shop works. The knowledge I have gained from
life experience and graduate school will help guide me through the research project. My
passion for the sports as well as my friends and contacts knowledge will make this project
a success.
There are several reasons why I am interested in creating a business plan for a
specialty bike shop other than my own curiosity. I live in a great area to ride bike. The
beautiful Appalachian Mountains are right out my front door. If I could make a living
riding a bike ten hours a day I would drop everything and go ride. Because of this passion
I chose to research a project that would keep my mind on the sport I love. Another reason
for my interest is that it never ceases to amaze me how sports such as BMX, mountain
biking, and other cycling continues to grow no matter how big or small the town. I want to
start a shop and build it to the needs of my town.
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One final reason for my interest in a bike shop is the fact that the one small shop
that was located in my town has moved to northern California. This move has created an
opportunity to step up and create a local bike shop that is a perfect fit for my small town.
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II. Research Approach
This was a very interesting research project for me to undertake. For this research
project a majority of the research came from talking to people that know about specialty
bike shops and people that have knowledge of small business. I did quite a bit of
interviewing and checking things out first hand for this project which is a form of primary
research. From this primary research I was able to collect a great deal of information, but
the research also led to secondary resources such as websites, articles, and surveys.
To begin this project I decided to look for the best shop location available.
Because I want to start a shop in or near my hometown of Waynesboro, Pa I took a drive
on Route 16 from Greencastle to Waynesboro to look for a possible storefront.
Waynesboro presented the best opportunities and many options whereas Greencastle had
nothing that stood out as a good location.
Mainstreet Waynesboro, Inc is the realtor for all the downtown options. I talked to
Bruce Driesbach, Manager of Mainstreet. He gave me a lot of good information on the
available locations. Bruce said that Waynesboro needs a bike shop, and he was happy to
give me the available info I needed. He gave me the new Waynesboro brochure that
advertises the town to potential small businesses. He also informed me of the grants
available for new businesses. These grants were the tipping point to choosing a location in
downtown Waynesboro. In addition to the downtown office Main Street Waynesboro, Inc
maintains a website, www.wbopa.com, with pictures and additional info on the available
locations.
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Greatful State, LLP in the Golds Plaza was contacted by phone about a possible
store location they had available. They were not very helpful and, because of the price,
their property was not considered.
The next step was a phone conversation with Will Mahler. I met Will through
mutual friends, and he was without a doubt my most useful resource. Will has worked in
the bike industry his entire life. He worked 15 years in a bike shop, three years of which
he managed the shop. He thought long and hard about starting his own shop before he
took his current job with bike maker Bianchi USA as a factory representative for the
Eastern Pennsylvania, Maryland and Virginia area. In a phone conversation we discussed
how to run a shop, but he also gave me his sales pitch for why Bianchi is a good choice for
selling. Will was gracious enough to give me his insights and also a number of additional
resources.
Will told me about the National Bicycle Dealers Association (NBDA). NBDA has
a website with extremely useful information about what it takes to start a bike shop and
what to expect once one gets started. One section titled Want to Start a Bike Shop,
written by Ed Benjamin, provided me with a number of questions that essentially create an
outline for creating a business plan.
Another resource obtained from NBDA was a cost of doing business survey. This
biannual survey is sent out by NBDA to its members. This study is designed to serve as
an easy-to-understand tool for industry firms to evaluate their own company's operating
results in order to pinpoint strengths and weaknesses, and improvement opportunities
(National Bicycle Dealers Association [NBDA], 2008). It worked out to be a useful
financial estimating and planning tool.
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The next step was to research the local market. I first decided to check out the
closest shops to Waynesboro. There are three bike shops within a 30 minute driving
distance: Hub City Sports in Hagerstown, Family Cycling Center in Chambersburg, and
Gettysburg Bicycle and Fitness. I have dealt with all of these shops before so I knew a
little bit about them already. Hub City Sports and Gettysburg Bicycle and Fitness both
maintain websites with shop and product information. The two websites provided some
marketing strategy information. Family Cycling Center does not have a website. I decided
to drive to all these shops and take some observations of my own for this project. The
information I attained from these shops was helpful to make decisions about product lines
and to price services and repairs.
To continue to get a feel for the local market and to determine what products would
be the best to offer I decided to check out the local bike events. Through internet searches
I was able to obtain a lot of information on the different bike races and events that are held
in the local area.
Cumberland Valley Cycling Club, based in Maryland, maintains a website with
information on charity rides and competitive road races that they sponsor. Visiting
Gettysburg Bicycle and Fitness I discovered they promote a set of three mountain bike
races every year called the Michaux Endurance Series. Another website I stumbled upon
was gtownbmx.com. This forum is maintained by local BMX enthusiasts. The site
provides information about the yearly BMX event held in Greencastle. This information
was helpful in setting a marketing strategy and deciding on products.
After checking out the nearby shops and what the local area had to offer, it was
time to undertake what I thought to be the most difficult decision in starting a bike shop,
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deciding on which bike lines to carry. All the major bicycle manufacturers keep their
available products up to date on their websites so I started there. Trek, Specialized, Haro,
Gary Fisher, Cannondale, Kona, GT, Bianchi and Redline were the bikes lines that I
compared. After comparing specs and prices online I tried to contact the companies I had
the most interest in with further questions in order to help make a decision on the best lines
to carry.
David Chancellor from GT Bikes replied to my email question on why I should sell
GT Bikes over the competition. His timely and informative reply gave me a high opinion
of this companys customer service as well as how the company does business.
Brad Clough, East Coast regional sales manager at Redline bikes, also replied to
my email in a timely manner. Brad helped me get a better understanding of the
relationship between bike manufacturers and specialty dealers.
I called Kona by phone and spoke to Jen. She was no help, but told me to email
[email protected] and I would receive a reply within a day. I went ahead and emailed a
question to Joe, and I received an automated reply with a lot of links to general
information, which was only marginally helpful.
The final bike company I contacted by phone was Specialized. Specializeds
customer service was much more informative. I spoke with Andrew on the phone at length
about Specialized and was able to obtain useful information about the company. I also
used their website for product information.
After I decided on the bike lines to carry I started my research into the legal and
financial areas. Greg White, manager at Manufacture and Traders Bank in Waynesboro
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was contacted by phone about a business line of credit. He was able to give me
information regarding SBA backed loans.
John Lisko was contacted to discuss the legal issues for starting a business. He is
currently the Washington Township attorney along with several other townships and
boroughs in Franklin County, but previously he worked as a business lawyer. John gave
me information on small business types and prompted me to look online for additional
resources.
Pennsylvania Department of State provided a number of resources about starting a
business in Pennsylvania. A Guide to Business Registration in Pennsylvaniawas an
important handbook that provided much needed info about applications, filing guidelines,
and fees.
PA Open for Business is an informative website maintained by the Department
of State. They say, This site gives round-the-clock access to forms and information
crucial for individuals seeking to register their new business, expedite entry and take
advantage of the Commonwealths favorable business climate (Pennsylvania Department
of State, 2007). On this site I foundEntrepreneurs Guide Starting and Growing a
Business in Pennsylvania. This guide is a helpful checklist for getting my business plan
completed.
One final phone call was made to an insurance representative. Greg Bitting of Ray
M Bitting Insurance Agency talked about the needed liability insurance for small
businesses and the cost.
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III. Mission Statement
Boros Bike Shop is spreading the love, enjoyment and knowledge of cycling. We
offer a professional level of quality at affordable rates. We always put the customers
interest first and use our expertise to fit the customer with their needs.
IV. Company Description
Boros Bike Shop will be a specialty bicycle retailer with one principal owner. The
shop will be located in downtown Waynesboro and offer bicycle sales, part and accessory
sales, and a full line of bike services. The idea of starting a bike shop in Waynesboro came
to me when The Bike Store moved their business out of town in 2008. The majority of
people that ride bikes do business with their local bike shop because of the personal
experience and knowledgeable people. I grew up in Waynesboro and realize the need for a
local bike shop.
The goal of Boros Bike Shop is to be the only place anyone in the local area thinks
of when they are interested in bike sales or service. The business philosophy we will use
to achieve this goal is commonly referred to as the three Cs. The three Cs are customer
service, credibility, and community involvement. We will use this philosophy to grow
monthly sales from year to year to create a healthy and profitable business. When all is
said and done Boros Bike Shop will increase awareness and love of the sport in
Waynesboro and the surrounding area.
Keys to success of the shop are customer service and knowledgeable staff.
Customers will spread the word about the business to ensure success. Another key to
success is the location of the store. By locating the store in a high traffic area everyone
who sees it will become a potential customer. Waynesboros Main Street has a number of
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stop lights that keep traffic moving slowly. Another key to success is the local area does
not have a lot of competition to a specialty bike shop. I will discuss these advantages more
in the marketing section of the business plan.
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V. Legal Form of Business
The legal form of ownership will be a sole proprietorship. Kurt Russ will be the
only owner of the shop for now. A sole proprietorship will be used because it allows for
less paperwork and a minimum of legal restrictions. This will allow the owner to focus
more on the business and also keep an informal profile. The owner retention of all the
profits is another positive to the sole proprietorship.
Disadvantages include unlimited personal liability for all debts and liabilities of the
business. Another disadvantage is less ability to raise capital if needed. Neither of these
disadvantages is enough to make incorporating the bike shop that much more beneficial
than starting as a sole proprietorship. Later, if needed or desired, a partnership or
corporation may be formed in order to grow the business.
After choosing the form of business the next requirement for the shop is to register
a fictitious name with the Pennsylvania Department of State. The name, as already stated,
will be the Boros Bike Shop. This name was chosen because it is informal, and it sounds
like it is owned by the town. Placing the nickname of the town in the business name
should help gain acceptance from the community.
After a name has been filed we need to apply for an identification number in order
to pay taxes. Every employer subject to employment taxes is required to have a federal
Employer Identification Number (Center for Entrepreneurial Assistance, 27). This
number needs to be obtained from the Internal Revenue Service.
All products sold at our bike shop are sporting equipment and will be subject to
sales tax. Before any sales can be made in Pennsylvania we need to have a Sales Tax
license (Pennsylvania Department of Revenue, 3). This license is required by and obtained
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from the PA Department of Revenue. It is the responsibility of the shop to collect sales tax
at the time of sale. The Pennsylvania sales tax rate is six percent.
Starting a bike shop is rather simple compared to other businesses. The only other
requirements to start selling bikes are those required by bike manufacturers. These include
providing pictures of the retail store front and liability insurance info. Once we get this
info we can establish an account number with the bike manufacturers we choose to use
(Brad Clough, personal communication, Feb 16, 2009). One additional note is that bike
manufacturers do not like to flood an area with their products. This is not a problem when
there are only a few competitors, which will be discussed in section VIII.
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VI. Products and Services
The products and services offered by local bike shops are often very similar no
matter where the location. There are three broad categories of what a local bike shop
offers: bikes sales, parts and accessories, and repair. The three basic styles of bikes are
mountain bikes, BMX and road bikes. I have been in contact with several vendors and
distributors. The bike lines I plan on carrying must have a broad range as well as offer a
great value. I have done extensive research on possible bike vendors that I feel would be
the best fit for Waynesboro. The brands of bikes sold at the closest competing shops were
also compared before choosing which line to carry. It is important to sell a product that has
some distinction from the competition whether its better value, price or quality. Choosing
the bike lines to carry is one of the most important decisions to make when starting a shop.
The bikes must be both desirable and affordable.
Specialized is one of the top three most popular names in bikes. They offer a great
range of bikes that include mountain bikes, commuter bikes, road bikes and womens
specific bikes. Specialized also offer a high quality at a nice price point which makes them
suitable for this market. Specialized bikes offer the best technology at the best price
compared to other bike brands. Bikes range in price from $500 to well over $7,000, but
for the best value most of the bikes stocked will be in the $500 to $2000 range. Special
orders will gladly be taken to accommodate the enthusiast who wants a $5,000 dream
machine.
Another reason for choosing Specialized is that they are a privately owned
company. Since they are not publicly held they do not have to pay off shareholders with
profits they can instead put the money back into research and design work (Andrew,
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personal communication March 15, 2009). Trickle down technology is the term used when
the entry level bike is designed similar or with similar components as the high end bike.
This strategy ensures that their products have the newest and best technology making their
bikes easier to sell. Andrew also told me part of his job as customer service is to police
dealers from selling Specialized bikes online to ensure the larger retailers do not steal
business from the smaller shops (personal communication, March 15, 2009).
The Gettysburg Bicycle and Fitness shop also carries Specialized, but they do not
carry a large variety of Specialized bikes. The rest of the competitors are discussed in
section VII. By carrying Specialized, Boros Bike Shop will have a distinct brand.
For a BMX line Boros Bike Shop will carry a quality product that also has a
popular name. GT Bikes fit into both of these categories. Kids and parents will recognize
this name from the X-Games and Olympics on TV and realize that they can get a bike like
the pros without having to pay a fortune.
GT is owned by a larger company which gives them slightly deeper pockets for
research, development, and marketing (Chancellor, David, personal communication,
March 9, 2009). They make high quality BMX bikes as well as mountain bikes and road
bikes. At this time I only plan to carry BMX bikes. GT is part of Cannondale Sports
Group which also includes Schwinn and Mongoose. Through one account our shop will
have the opportunity to stock these bikes and appeal to a wider range of customers if we
choose to in the future. At this time our shop will not carry Cannondale, Schwinn, or
Mongoose because these brands are sold online and in some large retail stores such as
Target and Dicks Sporting Goods. The competition will be analyzed in this Section VII.
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Along with the new bikes this shop will sell and restore used bikes. We will
purchase quality used bikes for restoration and recycling as an alternative to a new bikes.
Trade-ins are also a possibility depending on the bikes condition and brand. For trade-ins
and purchases we will only consider quality bikes that are worth while putting work into.
Examples of restored bikes can be found in Appendix A. Bikes sold at Wal-Mart and
Kmart such as Huffy and Next will not meet this criteria.
Boros Bike Shop will be a full-service bike shop. We will offer everything from
basic tune ups to complete over hauls. All new and used bikes purchased from the shop
will be given a free tune up anytime within the first year of purchase. We will do quick
repairs such as flat tires and broken chains immediately. We will install all accessories
purchased at the store for reduces rates or free depending on the amount of work.
We will offer a nice range of parts and accessories. Accessories kept in stock will
include, but not be limited to, digital speedometers (computers), headlights, water bottles,
helmets, gloves, pumps, handlebar grips, bar tape and energy bars. Parts for tune-ups will
be kept in stock at all times. These parts include tires, tubes, chains, brake pads, cables
and many other parts. Some avid cyclists like to do their own work so these parts will also
be available for sale.
The common way for specialty bike retailers to buy parts inventory is to make
purchases through one specialty bike distributor or another. There are so many brands and
different parts on the market that dealing directly with a parts manufacturer is nearly
impossible. The parts distributor to be used is Bicycle Technologies International (BTI).
BTI is a highly respected distributor by the dealers I have spoken to. Benefits of working
with BTI include not requiring huge investments or large quantities for purchase. This
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makes them ideal for a new shop to test the market with different parts. The other positive
of BTI is their selection. They carry hundreds of name brand parts and accessories.
Examples of the top brands that BTI distributes include Shimano, SRAM, Campagnolo,
Ritchey, Truvativ and many more.
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VII. Market Analysis
The plan is to start Boros Bike Shop in downtown Waynesboro. This is an ideal
spot for a number of reasons. Whether one is a seasoned pro, an avid commuter, a
weekend warrior, or out for the occasional family ride this area is absolutely amazing for
riding bikes. Nearby Michaux State Forest offers some of the finest mountain biking trails
the Appalachian Mountains have to offer. The other nearby parks with bike trails include
Pine Hill Recreation Area in Blue Ridge Summit, Pen Mar Park in Maryland, and Cowens
Gap State Park located near Fort Loudon. In addition to the trails there are a ton of low
traffic and scenic roads throughout Franklin County that make road riding safe and fun.
The market is growing and predicted to grow for the next several years according to
Explore the Opportunity (2008):
The Waynesboro local market area consists of the Borough of Waynesboro,
surrounding Washington Township and a number of smaller satellite villages that
together have a population of almost 30,000. Our residential population is expected
to grow by 5% of the next five years. Disposable household income is expected to
increase 13% over the same time frame. (p. 6)
Since I grew up in Washington Township I have a strong feeling these numbers accurately
reflect the growth and its potential.
NSGA statistics show 35.6 million people age 7 and older rode a bike at least six
times in 2006 (Formosa, 2008). 35.6 million people is over 11% of the United States
population. For Waynesboro the estimate will be slightly reduced to estimate the portion
of the local market that rides a bike often. This calculation is shown in section IX.
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The 2006 Median Household Income was estimated to be $50,254, slightly higher
than the national average (Franklin County Area Development Corporation, 2008). The
cost of living index as found on city-data.com shows it doesn't cost as much to live in this
area as compared to the national average across. These two bits of info can mean a couple
of things. Lower cost of living means people expect to pay less and get value in their
products. People in this area have some savings and are looking for areas of interest to
spend.
An additional market that needs to be highlighted is the Waynesboro Area School
District (WASD). The WASD has an enrollment of approximately 4,000 students
(Pennsylvania Department of Education, 2007). Once kids start driving they often forget
about their bikes for transportation so the 16 year and younger group will be a target
market for selling BMX bikes. The 16 years and older group potentially becomes a target
market if the gas prices increases again to $4.00 per gallon.
These days everyone is thinking more about commuting expenses and even
considering their carbon footprints. When the gas prices soar and the economy sours it
actually presents a great opportunity for bike shops. Even in a rural area such as this
people that live close to work will realize how beneficial it is for their entire lifestyle to
ride a bike instead of driving. Will Mahler (personal communication, February 20, 2009)
said, The commuter biking trend is growing at a faster rate than road or mountain biking.
The other specialty bike shops around do not carry many commuter style bikes, and
focusing on this target could present a prime opportunity in a niche market. The commuter
bikes look like mountain bikes without the suspensions and with skinnier tires more
suitable for pavement (see Appendix A). Commuter bikes are also great for rail and trail
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riding. Commuter bikes offer something for everyone and are generally the least
expensive bike to buy and maintain. The commuter market will be a major focus at Boros
Bike Shop.
The target market for local bike shops is usually 20 to 40 year old men. The
median age in this area is 40 years old (U.S. Census Bureau 2007), but biking can be
enjoyed by anyone in their 50s and 60s as well. The one market I believe to have serious
potential in the future is women. Often women have to ride bikes that are built for men
and these bikes are not fitted well making it uncomfortable to ride. There does not seem to
be as many women that ride bikes, but I think this is often times because they do not have
the right bike. By carrying womens specific models and catering to their needs the
amount of women that ride in the area is sure to increase and thus will increase the
potential market size.
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VIII. Competitor Analysis
Besides that fact that the Waynesboro area is an exceptional place to ride a bike
there are no other specialty bikes shops within 12 miles of downtown Waynesboro which
makes it an ideal place to have a shop. There are three specialty bike shops located in the
nearby area. I drove around to these shops and put together a simple spreadsheet to show a
side by side comparison.
Name Hub City Sports Family Cycling CenterGettysburg Bicycle &Fitness
Location Hagerstown, Md Chambersburg, PA Gettysburg, Pa
Distance (drive time) 12mils (20mins) 15miles (25 mins) 30miles (40min)
Bike Offerings
Trek, Felt, Gary Fisher,
MirraCo, Haro,DiamondBack and Redline
Trek, Gary Fisher,MirraCo
Trek, Gary Fisher,Specialized, Haro, Yeti
Focus BMX bikes Mountain Bikes Mountian Bikes
Website Yes No Yes
years in service 35 years80 (20years currentowner) >15years
Accessories Yes Yes Yes
Service Yes Yes Yes
Parts Yes Yes Yes
Hub City Sports is the largest shop and the closest competitor. They have been
very successful at making a name for themselves. Half their shop is focused on BMX style
bikes and the other half is a mix of road and mountain bikes. Since Hagerstown is a more
urban area their product mix is directed more towards the street. Chambersburgs and
Gettysburgs shops are in more rural areas and their product mix is focused more on off
road mountain bikes. The town of Waynesboro is similar in size to Gettysburg, and the
surrounding areas are similar in respect to the mountains. One other important note is that
none of these shops offer online sales.
The only other places a person can choose to buy a bike in Waynesboro are from
K-Mart or Wal-Mart. These two large retailers carry low cost bikes, Huffy being the most
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familiar name, made with the cheapest components and often poorly assembled. The bikes
purchased at these large discount stores often need to be reassembled and serviced by a
specialty shop. This creates additional business for a specialty bike shop because the
discount stores do not offer any service. These cheap bikes are usually the most difficult to
work on as well. In the bike industry you almost always get what you pay for.
Dicks Sporting Goods located in Hagerstown is another option to purchase bikes,
parts and accessories. The bikes they carry are only slightly better than K-Mart and Wal-
Marts brands. Dicks also services bikes, but because they have a broad focus of all sports
they do not have the expertise or the customer service level that a local bike shop offers.
Dicks customer service consists of only slightly knowledgeable staff. The reason people
come to a local bike shop over these large retailers is because they want friendly and
knowledgeable service.
The final competitor that needs to be identified is internet sales. Online sales
companies often offer the best prices because they buy large quantities and they have less
overhead. As a small shop it can be difficult to compete with online sales and large
retailers. The niche that the local bike shop fills is the installation or customer service that
the large retailers do not.
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IX. Marketing Strategy
The bikes will be priced per industry standard. Depending on the brand and model
most bikes have a markup between 35% and 40%. The sales price for BMX bikes sold at
the shop will be around $250 up to $350 depending on the model. Commuter bikes will be
priced in the $500 to $800 dollar range. Mountain bikes will be slightly more expensive
starting at $700 and ranging up to $2000 for the full suspension mountain bike. These
bikes will be targeted towards the trail enthusiast. The few road bikes stocked will be
about $1000. This price is about standard for a high quality entry level road bike.
These prices are much higher than the $75 bikes purchased at Wal-Mart and
slightly more expensive than $300 bikes purchased at Dicks. While bikes stocked will be
more expensive than Dicks or Wal-Mart they will be in the lower end price bracket
compared to most bike shops. Even though these bikes are not the high end machines that
the pros ride, they will display much of the same technology. Specialized bikes are
designed with a lot of high end quality, but the prices remain affordable.
The ideal location will be downtown with high volume slow moving traffic. All
downtown locations are in close vicinity to the middle school and high school which is
another positive. The building will have a huge display window for advertisement.
Attractive displays presented in the window are a necessity.
All sales will be done at the store. A website will be maintained to contain
available products, services and hours of operation. The website will be a content only
site. There will not be any online sales in order to get the customers into the shop and to
avoid competing with large online retailers.
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There are other ways to sell products online such as EBay or Ecommerce. EBay
offers a way to sell products quickly by auction or to start an online store. The problem
with starting an EBay store would be the stiff competition. EBay stores can sell at reduced
rates because of less overhead expenses. Boros Bike Shop will avoid EBay sales except
as a possible exit strategy. Moreover, Specialized does not allow dealers to sell online so
this rules out EBay.
There is no precise formula for estimating sales forecasts for a startup specialty
bicycle shop. Since there is no historical data a formula had to be created. During a
conversation with Bruce Dreisbach we came up with the following formula. We can
multiply the number of people that regularly ride more than six times a year by an
estimated average amount they will spend at the local bike shop.
Census information was obtained from US Census Bureau and National Sporting
Goods Association to help calculate sales. The total market size in Waynesboro and the
surrounding was estimated in section VI at 30,000 people. Children under seven and
people over age 65 were subtracted from this total. This reduced the amount of people
realistically able to ride a bike by 25%. The National Sporting Goods Association
conducted a survey that found slightly over 11% of the population rode a bike at least six
times last year.
Yearly Revenue CalculationTotal Market Size 30000(-) Children U7 -2400(-) Senior Citizens -5100
22500Est. bike riders *11% = 2500Spend yearly at LBS * $50Total Estimated Revenue = $125,000
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No census data could be found on how much people spend yearly on bike riding or
at their local bike shop. I have friends that spend over $1000 a year on cycling products
and I have spent several thousand dollars on bikes and cycling related products over the
past couple of years. An estimate of $50 is used as a realistic amount that is spent yearly
by people who enjoy riding. This produces a result of $125,000 in total revenue.
As an additional reference the National Bicycle Dealers Associations survey of
shops located in a rural area shows a middle range of $282,374 - $1,005,385 in total store
revenues. This is additional verification that $125,000 is a realistic estimate. The typical
percent change in revenues from the prior year was 8.93% for these rural area shops
(NBDA, 2008). An 8% projected growth in sales revenue will be used in the financial
plan. Through social rides and community involvement the market size will expand, as
will the customer base.
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X. Operational Plan
44 East Main Street is a perfect location for a bike shop. With approximately 2,900
sq. ft. and a huge display window there will be plenty of room to show off products and
service bikes. This building also has a backroom for additional storage or possibly
refurbishing used bikes. (See Appendix A)
Store Hours will be:
Monday - Thursday 10:00am to 6:00pm
Friday - Noon to 8:00pm
Saturday Noon to 5:00pm
Sunday Closed
Personnel Kurt Russ will be the only full time employee starting out. He will be
responsible for both sales and repairs. A part time employee with little or no experience
may be hired within the first year if necessary. The only qualification the part time person
will need is a love for riding. Preferably this will be a high school student or young adult
willing to work evening and weekends.
All sales must be paid by cash or credit card. Even though some new bikes can be
expensive there will be no credit plans offered. As an incentive for purchasing a bike from
Boros Bike Shop all new and used bikes purchased will receive a free tune up anytime
within the first year.
Service prices will be the most reasonable in the area. All repairs will be done in a
timely fashion with simple repairs done immediately. Being around the local bike scene I
have overheard people complain that Hub City Sports is expensive and slow to complete
bike services. This level of service must be avoided. Boros Bike Shop will offer lower
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prices at the same quality as the nearest competitor, Hub City Sports. Effectively the rate
charge by Boros Bike Shop works out to be about $37.50 per hour for repairs. Attached
in appendix B is the service packages of Hub City Sports. Their rates work out to be close
to $50 per hour.
The inventory level of new bikes for sale will remain modest for the startup. Bike
styles kept in stock will be BMX style, mountain style with front suspension, mountain
bike with full suspension, commuter style (no suspension), and road bikes. Womens
specific will be kept in stock in all but the BMX style and full suspension mountain bikes.
Suppliers for sales inventory will be Specialized Bikes, GT Bikes, and Bicycle
Technologies International. These are subject to change and additional suppliers may be
added at a later date.
Additional equipment needed, including a computer and specialty tools are already
part of current inventory. Some additional tools and bikes stands will have to be
purchased. This list of anticipated purchases is included in the startup expenses.
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XI. Startup Expenses
The startup expenses have been estimated to anticipate what the initial cost of
starting the business will be and just how much capital is needed. An important reason to
estimate the total startup costs is to determine what cash reserves or contingencies will be
needed. A general rule of thumb is to keep an amount equivalent to 20% of the total
startup costs in the bank for contingencies. Not surprisingly, the majority of the costs are
sales inventory, but it is surprising how much additional money is needed.
The number of bikes for initial startup will include six BMX bikes, 15 mountain
bikes (6 womens, 5 mens front suspension, and 4 full suspensions), ten commuter bikes
(4 women, 6 men), and four road bikes. This inventory is chosen to provide a wide range
of bikes for customers to see whats available. The inventory selected also focuses on the
target markets; a small selection of BMX bikes for the younger riders and broad selection
that are women specific. The bike portion of the start-up inventory will be approximately
$17,000.
The parts and accessories to be initially stocked will cost $8,000. These will be
purchased from the distributor Bicycle Technologies International (BTI) along with bike
stands, work stand and tools. The work stand and tools are included in equipment costs.
The bike stands are included in furniture costs.
Display cases and wall displays are also included in the furniture costs. The other
equipment needed to start the shop includes a cash register. Cash registers cost about $500
for small business application. The total amount set aside for decorating the shop will be
$500. This will be spent on posters, displays, and other in store attractions. A display sign
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with company name, business cards, and brochures will round out all the original
expenses.
All build-out and equipment purchases are eligible for grant money. The
Downtown Business Incentive Grant will match dollar for dollar money spent for build-out
and equipment purchases (Downtown Business Incentive Grant). The total build-out and
equipment money to be spent is $4,000, so half will be reimbursed from grant money.
The Downtown Business Incentive Grant has an application fee of $250. This
expense is included in the licenses, membership, and application section. A membership
to the National Bicycle Dealer Association costs $150 per year which will keep the shop
up with the trends of the industry. This membership also offers discounts to helpful
industry resources such as the Cost of Doing Business study used for this business plan.
The estimated start-up costs total $33,500 to be paid out before starting the shop.
As stated previously a working capital will be kept in the bank as a contingency plan. A
sufficient contingency fund should be $7,500 bringing the total cash needed to $41,000.
Start-Up Costs
Deposit for building (1st month rent) $ 1,500
Decorating $ 500 buildout
Furniture (Bike Stands, display cases) $ 2,000 buildout
Equipment $ 1,000 buildout
Bike Inventory $ 17,000
Parts and Accessories $ 8,000
Initial Inventory $ 25,000
Utilities (installation and deposits) $ 500
Advertising/Promotion $ 500
Signs $ 500 buildout
Licenses, memberships, applications $ 500
Insurance $ 500
Legal/professional services $ 1,000
Working Capital $ 7,500
Total $ 41,000
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XII. Financial Plan
The figures used for the financial plan are based on industry research from
NBDAs Cost of Doing Business Survey along with sales forecasts from section IX.
Averages from rural area shops were used to make profit calculations.
The grant program available for new business startups in downtown Waynesboro
will be a great benefit for the first three years. The market based rent rebate is for $1,000
per month for the first 12 months, $660 per month for the second year, and $330 per month
for the third year. The monthly rent for the proposed location is $1500. This grant money
is important to help the business pay the bills while establishing sales.
Along with the grant money, personal savings will be used to pay for the startup
expenses. If additional capital is needed, a home equity loan will be the most likely option.
In order to acquire initial business lines of credit from the bank home equity lines are often
used until yearly sales have been established (Greg White, personal communication, March
10, 2009).
I will try to avoid a home equity loan at this time. As the shop grows it may be
necessary to take out loans or form partnership to provide additional capital. The plan is to
have enough cash from sales and service to pay all the bills and purchase new inventory
without any credit. To determine if this will be possible an estimated cash flow statement
was made.
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Twelve-Month Cash FlowBoro's Bike ShopFiscal Year Begins: Mar-10
Pre-
Startup
EST M ar -10 Ap r -10 M ay-10 Ju n-10 Ju l-10 A ug -10 Se p-10 Oct -10 No v- 10 De c-10 Jan -11 Fe b-11
Total
Item EST
Cash on Hand (beg inning
of month) 41,000 2,000 2,375 4,035 5,695 7,355 9,015 8,390 8,765 9,140 8,372 7,604 6,836 47,068
CASH RECEIPTS
Cash Sales 8,875 16,875 16,875 16,875 16,875 8,875 8,875 8,875 4,875 4,875 4,875 4,875 122,500
Grant Money 2,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 14,000
TOTAL CASH RECEIPTS 2,000 9,875 17,875 17,875 17,875 17,875 9,875 9,875 9,875 5,875 5,875 5,875 5,875 136,500
Total Cash Available
(before cash out) 43,000 11,875 20,250 21,910 23,570 25,230 18,890 18,265 18,640 15,015 14,247 13,479 12,711 183,568
CASH PAID OUT
Purchases (merchandise) 25,000 5,000 10,715 10,715 10,715 10,715 5,000 5,000 5,000 2,143 2,143 2,143 2,143 96,432
Purchases (Buildout) 4,000 4,000
Gross Wages 750 750 750 750 750 3,750
Payroll Expenses 250 250 250 250 250 1,250Advertising 500 500
Accounting & legal 1,000 1,000
Rent 1,500 1,500 1,500 1,500 1,500 1 ,500 1,500 1 ,500 1,500 1,500 1,500 1,500 1,500 19,500
Telephone 100 100 100 100 100 100 100 100 100 100 100 100 100 1,300
Utilities 400 400 400 400 400 400 400 400 400 400 400 400 400 5,200
Insurance 500 500
Grant Application 250 250
Other (Memberships) 250 250
Miscellaneous
SUBTOTAL 33,500 7,000 13,715 13,715 13,715 13,715 8,000 7,000 7,000 4,143 4,143 4,143 4,143 133,932
Reserve and/or Escrow 7,500 7,500
Ow ners' Withdraw al 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 30,000
TOTAL CASH PAID OUT 41,000 9,500 16,215 16,215 16,215 16,215 10,500 9,500 9,500 6,643 6,643 6,643 6,643 171,432
Cash Position (end of
month) 2,000 2,375 4,035 5,695 7,355 9,015 8,390 8,765 9,140 8,372 7,604 6,836 6,068 12,136
The cash flow for the first 12 months shows that there will be adequate cash on
hand to pay all the monthly expenses as well as to restock inventory. The assumptions
made were that service and repairs would equal 50 hours of service work per month at
$37.50 per hour yielding $1875 per month. Service work is predicted to remain steady
throughout the year. Sales are predicted to fluctuate throughout the year. The spring and
summer months will be the best months for sales revenue, equal to 60% of the yearly
revenue in less than five months. The fall and winter months sales are predicted to be
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much slower. This is because biking in Pennsylvania is a seasonal sport. Despite slow
sales in the winter cash flow should remain favorable.
As the only owner I have chosen to pay myself a monthly salary of $2,500 per
month. This amount will be enough to pay personal expenses and it leaves adequate cash
to operate the business.
The income statement for the first four years was created to show the growth of the
company. The bike shop should create a steady stream of growth from year to year as the
word gets out and the market grows. The plan assumes an increase in sale revenue by 8%
from year to year. This assumption came from the CODB survey, the typical rural area
shops was able to grow sales by 8.93% over the previous year. The plan assumes that
bicycle repairs will bring in $22,500 for the first year and increase by 10% annually. It is
also assumed that part time help will be $5,000 the first year and increase by 10% yearly.
The first year sales were calculated using the turnover margins typical for a rural
shop. Bicycle Sales average a 36% margin and a turnover of 2.4 times per year. Parts and
accessories margin averages 48% and a turnover of 3.0 times per year. Using these
averages sales from bikes should equal $56,000 and sales from parts and accessories
should equal $44,000. This brings the total net sales from merchandise to $100,000.
The cost of goods sold would be $60,000 for the first year. The rent is the second
largest expense at $18,000 per year. The utilities bill is estimated at $5,000 per year and it
is not expected to increase. Subtracting the total expenses from total revenue a positive net
income of $43,000 is produced.
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Income Statement Year 1 Year 2 Year 3 Year 4
Net Sales from Merchandise 100,000 108,000 116,640 125,971
Income from sales of Used Goods 2,500 5,000 5,000 5,000
Income from Bicycle repairs 22,500 24,750 27,225 29,948
Rent Rebate Program 12,000 8,000 4,000 -
Reimbursement from grant money 2,000 - - -
Total Revenue 139,000 145,750 152,865 160,919
Expenses
Rent 18,000 18,000 18,000 18,000
Inventory 60,000 64,800 69,984 75,583
Utilities 5,000 5,000 5,000 5,000
Telephone 1,500 1,500 1,500 1,500
Advertising 500 500 500 500
Professional services 1,500 1,000 1,000 1,000
General Liability Insurance 500 500 500 500
Other (equipment) 4,000
Part time help 5,000 5,500 6,050 6,655
Total Expenses 96,000 96,800 102,534 108,738
Net Income 43,000 48,950 50,331 52,181
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XIII. Opportunities and Threats
Weekly rides are a great way to get involved with the community and spread the
word about the shop. There was a new club formed in Chambersburg last year. With an
ever-increasing membership of over 130 Summit Health employees, affiliates, and area
cycling enthusiasts, an average of 35 members rode each Tuesday night from May through
September (Summit Health Bike Club, 2008). Hosting social rides that would start from
the shop does a couple of things. First it presents an opportunity to tune up the bikes or to
help someone with a pressing need for a new part. It also presents an opportunity to work
with a large employer that wants to start a health program such as Summit Health has
done.
A healthy lifestyle can be an excellent determining factor in persuading people to
get into biking. Employers are starting to realize that healthy workers are more productive
because of fewer missed days and which reduces health care expenses. There are several
employers in Waynesboro that could be approached about starting something similar to
Summit Healths club.
Another opportunity is to stock skateboards and skate accessories to add additional
sales revenue to the shop. Many Waynesboro area children skateboard and with the
addition of a skate park to Pine Hill Recreation Area a few years ago the number of
skateboarders in town continues to grow.
One major threat to the success of the startup could be slow sales in the winter. In
order to conserve funds in the first year we would open the shop in March, right before the
weather breaks. April thru August is normally the busiest time for cycling and sales.
Starting out with strong sales will allow the shop to remain open the next winter. Another
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strategy that a lot of the shops around the area use is to cut back hours in the winter to save
a little cash. This reduces utility expenses and also allows time for the owner to pursue
other activities.
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XIV. Conclusion
I learned a lot from this project and I had fun while doing the research. I never
imagined starting a business would be easy, but I had no clue to what exactly would be
difficult or why. In writing a business plan I have come to realize how many difficult
decisions there are to make prior to starting a business and what I would struggle with the
most.
There are so many difficult decisions to make after deciding on a business type,
starting with where to locate the business. I believe one of the most difficult and important
choices to make before starting a small retail shop is choosing what products to sell.
Products do not sell themselves, but customers still have to have a desire or need for the
goods being offered. I have come to the conclusion that writing a business plan and
researching the area prior to making important decisions is the best way to make sure the
decisions made will produce the desired results.
These results, or sales forecasts, are also very difficult to estimate, but it is
important that they be accurate in order for the business to succeed. I believe the forecasts
in this plan are reasonable. The specialty bike shop is not a get rich quick business. In
fact most startups fail during their first few years because of the competition, small
margins, and lack of business knowledge. I believe the plan I have put forth would create
a successful business.
That being said, this plan will remain academic for now. I love biking and it is
tempting to go into business for myself and become my own boss, but I have other factors
in my life that are preventing me from pursuing this plan. First, I do not have the capital
that I would need to start the business. Second, I have a three year obligation to my
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employer for reimbursing my tuition, and I believe I will have opportunity for
advancement after graduation. Finally, I have a mortgage to worry about.
I left personal finances out of this plan because the plan is academic. If the
business plan were to become more than academic my personal finances would need to be
added to make the plan complete. Even though I will not be starting my bike shop right
now I am optimistic that the things I have learned from this research will help both me, and
my friends in all of our future business ventures.
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XV. Appendix of Supporting Documents
Appendix A Bikes
Enlarge in Gloss Charcoal/Silver or Gloss Gold/Charcoal
2009 Crosstrail Models MSRP
Crosstrail Comp $1050
Crosstrail Elite $720
Crosstrail Sport $580
CrossTrail $440
Crosstrail Sport
COMBINING FAST-ROLLING 700C WHEELS with an efficient aluminum mountain bike chassis and Body Geometrycomponents, the Crosstrail is a true hybrid built to inspire a blend of off-road exploits and smooth-rolling fun, forwhatever mood you're in.
Features
The 75mm-travel fork features mechanical lockout and an external preload adjuster so you can easily fine-
tune the ride.
The A1 Premium Aluminum frame features fender and rack braze-ons, forged dropouts for strength, and a
kickstand mount for quick and easy parking.
The CT 700c rims are double-walled for strength and feature machined sidewalls for a better braking
surface.
The Shimano Acera 8-speed rear derailleur offers sure, precise shifts.
The front and rear 700x45c Borough XC Sport tires have a smooth center section that rolls fast, withshoulder knobs for added traction in corners
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GT bike pictures courtesy of http://www.gtbicycles.com/usa/eng/Products/BMX/
2009 Air - MSRP: $269.99BMX Style
Enlarge in Gloss White/Red or Satin Black KL
2009 Allez Models MSRP
Allez Elite Compact Double $1550
Allez Sport Compact Double $1300
Allez Double $880
Allez Triple $880
Allez Compact $880
Road Bike
Allez Sport Compact Double
OVER 20 YEARS AGO, we named our first performance road machine after the Frenchword for 'go.' With an entirely redesigned alloy frame reminiscent of the Tarmac, the newAllez delivers the light weight, efficiency and precision handling demanded by enthusiastroad riders everywhere, regardless of how they say 'fast.'
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Enlarge in Gloss Yellow or Satin Charcoal
2009 Rockhopper
ModelsMSRP
Rockhopper Pro $1350
Rockhopper Expert Disc $1100
Rockhopper Expert Disc 29 $1300
Rockhopper Comp Disc $770
Rockhopper Comp Disc 29 $940
Rockhopper $640
Rockhopper Comp Disc
FOR OVER TWO DECADES the Rockhopper has been the best hardtail for any rider looking for thrills and adventureover a wide variety of terrain. The Rockhopper's M4 alloy frame and premium specs deliver category-leading
efficiency, value and dependable handling.
Sirrus Elite
Enlarge in Gloss Silver
2009 Sirrus Models MSRP
Sirrus Pro $3100
Sirrus Expert $1350
Sirrus Elite $880
Sirrus Sport $590
Sirrus $500
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IF YOU'RE ONLY GOING TO HAVE ONE BIKE the Sirrus is it. Built for the best balance of speed and control, every
FACT carbon or A1 Premium Aluminum Sirrus combines the low weight, high comfort and easy speed of ourperformance road bikes with the enhanced ergonomics and stability of a flat handlebar.
Restored Bikes by Kurt Russ
Before
After
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Appendix B
44 EAST MAIN STREET
Approx 2900 sq ft.Rent $1,500Huge display window andbackroom for storage. Maybe possible to sub-divide.Owner: Harry Morningstar,Sr. 717 729-6910
Picture of store front - Courtesy of Mainstreet Waynesboro, Inc.
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Appendix C
Our Service Packages...
Maintenance Packages Hub City Sports, HagerstownA tune-up or overhaul may be just what you need to get back in the sadd le.
Basic Adjustment Covers the simple basic adjustment of brakes and derailleurs$24.99
Detail: Inspect cables for wear; align and adjust brake calipers;align and adjust front and rear derailleurs; air tires; no partsincluded in service; frame wipe down included
Preventative Covers most external adjustments and lubricationMaintenance $69.99 Detail: Adjust both hubs; adjust headset; adjust bottom bracket;adjust pedals; true wheels laterally as necessary to allow brake
adjustment; clean rims; set clearance; center calipers.; lube,secure and adjust shift levers; lube and adjust derailleurs; securehandlebars, stem, seat post, seat, crankarms, chainrings, pedals,accessories. Does not include parts that may need replacing.Drivetrain cleaning not included. If cleaning is necessary then APPwill need to be done. No additional labor charge for wiping downbike.
AnnualIncludes removal of grime from the gears.
Peak Performance$99.99
Same as Basic Tune-up, but includes: Remove and cleanchainrings, both derailieurs, freewheel, and chain; lube, secure,and adjust shift levers. No additional labor charges required forinstallation of new cables, chainrings, freewheel, chain, orderailleurs; parts however are extra; No additional labor charge forwiping down bike.
ComprehensiveAn overhaul invo lves the d isassembly, cleaning, inspect ion,replacement (if necesary), and re-installation of most of theimportant parts on your bike.
MechanicalRebuild $149.99
Detail: O'haul both hubs; O'haul headset; O'haul bottom bracket;true wheels laterally as necessary to allow brake adjustment; cleanrims; caliper removal and cleaning, set clearance; center calipers.;remove, replace and lube derailleur cables; lube, secure and adjustshift levers; remove, disassemble, clean, lube and adjustderailieurs; remove and clean chainrings, chain, and freewheel;clean frame, rims, and spokes; secure handlebars, stem, seat post,seat, crankarms, chainrings, pedals, accessories; correct lateral,radial. centering, and tensioning errors in both wheels. Noadditional; labor charges required for installation of new brake and
derailleur cables, brake pads, brake calipers, derailleurs,chainrings, chain, or freewheel. It frequently happens that duringan overhaul, inspection of a component reveals that parts of, or thewhole component needs replacing. Budget on replacing someparts. Re-taping of drop bars is an additional $6.
http://hubcitysports.com/page.cfm?PageID=8
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XVI. Reference List
Benjamin, Ed.Business Planning. http://nbda.com/page.cfm?pageID=65 2/27/09
Center for Entrepreneurial Assistance. (2006). The Entrepreneurs Guide: Starting and
Growing a Business in Pennsylvania. (ISBN #0-0182-0142-8).Harrisburg, PA: Aurthor.
Downtown Business Incentive Grant: Program Guidelines[Pamphlet]. (2007).Waynesboro, PA: Mainstreet Waynesboro, Inc.
Explore The OpportunityWaynesboro Pennsylvania [Pamphlet]. (2008).Waynesboro, PA: Mainstreet Waynesboro, Inc.
Formosa, Nicole. (April 1, 2008). Industry Must Reach Broad Audience to Grow Numberof Riders.Bicycle Retailer & Industry News.Retrieved March 18, 2009 fromwww.bicycleretailer.com
Franklin County Area Development Corporation. (2008). Franklin County Profile.Pennsylvania: Author. Retrieved January 31, 2009, from http://www.fcadc.com/
National Bicycle Dealers Association. (2008). Cost of Doing Business for BicycleRetailers 2008-2009 Financial Survey. Costa Mesa, CA: NBDA.
National Bicycle Dealers Association. (n.d.).Want to Start a Bike Shop.Retrieved February 27, 2009, from http://nbda.com/page.cfm?pageID=70
Norman, Jason. (April 1, 2008). Full-Suspension Mountain Bikes, Hybrids Take Flight atIBDsBicycle Retailer & Industry News.Retrieved March 18, 2009 fromwww.bicycleretailer.com
Pennsylvania Department of Education. (2007).Enrollment Projections WaynesboroArea SD(1-12-28-900-3). Pennsylvania: Author. Retrieved March 19, 2009, fromhttp://www.able.state.pa.us/k12statistics/lib/k12statistics/0708WaynesboroAreaSDR1.pdf
Pennsylvania Department of Revenue. (2006). Commonwealth of Pennsylvania RetailersInformation. (REV-17 AS 12-06). Harrisburg, PA: Author.
Pennsylvania Department of State Corporation Bureau. (2007).A Guide To BusinessRegistration In Pennsylvania. Harrisburg, PA: Author.
Specialized: Designs for Women. [Pamphlet]. (2008).
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Summit Health Bike Club Inaugural Season A Success. (October 6, 2008). Public Opinion.Retrieved March 9, 2009, from, http://www.summithealth.org/cs/Satellite?c=eHA_Content_C&cid=1222715701735&pagename=Summit%2FeHA_Content_C%2FSummit_Press_Release_Content_Page_Template
U.S. Census Bureau. (2007). Franklin County, Pennsylvania. Washington, DC: Author.Retrieved Feb 20, 2009, from http://quickfacts.census.gov/qfd/states/42/42055.html