How to Run a Profitable Bike Shop
When you want to learn how to run a profitable bike shop, you listen to a person who has actually done it. In this episode, Scott Chapin of Marsh & McLennan interviews David DeKeyser, former owner of The Bike Hub in De Pere, Wisconsin, and author of the Positive Spin series on Bicycle Retailer and Industry News magazine. David discusses how he built a successful and profitable bike shop and shares tips on what he thinks other bike shops can do to build their profitability.
About David DeKeyser
My name is David DeKeyser and my wife Rebecca Cleveland and I sold our highly profitable bike shop in DePere Wisconsin on 2/28/19.
We owned the shop and commercial real estate for 18 years and were profitable every year we were open. Prior to owning The Bike Hub I had been with Stadium Bike in Green Bay for 10 years and spent the last 5 years there as the General Manager of three stores. I and the eventual buyer of The Bike Hub tried to purchase that business, but could not come to terms. After being involved in a company with multiple stores and for two years an off-site spring sale I had ideas about running a business aimed at profitability and a great customer service experience. In 18 years we never ran a spring/summer/fall sale etc. we resisted the urge to open another location successfully many times as well. We wanted to have a certain quality of life and engineered that into our decisions on how the business was run.
The unfortunate part about all of the above was my wife and I had always held our desire to live in the Western USA in check to own and operate our business. We knew that eventually, we would relocate, and for various reasons, the timing became right for us to sell. Based on our profits, and prime retail spot it was a fairly seamless transition to sell to my old partner and competitor. We have since relocated to Fruita Colorado.
I have a streak in me that makes me question things and ask ‘what if’ and ‘why’ on a regular basis. I experimented often with things in our business always aimed at being as profitable as possible while delivering a great customer-focused experience. The phrase that did and still does drive me crazy is do you know how to make a million in bicycle retail? Start with two!†I feel many in our industry view retail as a noble cause, but do not feel it is a great way to earn a living. I believe and know first hand that bicycle retail can provide a great living, perhaps better than many retailers realize.
David DeKeyser
Thu, 8/20 11:48AM • 41:28
SUMMARY KEYWORDS
business, profitability, buying, people, shop, charge, bike path, bike, years, rates, labor, discount, sale, margins, lease, customers, thought, Wisconsin, point, retailers
SPEAKERS
David DeKeyser, Rod Judd, Scott Chapin
Rod Judd 00:10
You are listening to Bicycle Retail Radio brought to you by the National Bicycle Dealers Association.
Scott Chapin 00:17
Hello, this is Scott Chapin. And we are going to conduct one of the first Bicycle Retail Radio shows. For those of you who don’t know me, I’m run our bike shop insurance program and other insurance programs. I’m worked for Marsh & McLennan, and a proud partner and of the NBDA for many years and I am going to be interviewing David DeKeyser, former owner of the Bike Hub. He and his wife Rebecca Cleveland had owned that for many years and I’ve actually David was a client of mine for quite a while and I always thought it was really interesting in our conversations, discussing sort of the business practices and now that he has more free time, he gets to do things like this. So, David, you want to just talk a little bit about your, your background, how you got into the bicycle industry, and then how you ended up owning your own shop for many years?
David DeKeyser 01:23
Well, I was hoping you weren’t gonna ask me a first question that could take an hour to a day answer.
Scott Chapin 01:29
I’ll give you a little much less than an hour.
David DeKeyser 01:32
Okay, I’ll try to make it as quick as possible that I grew up racing BMX bikes in the early 80s and then transitioned to mountain bikes, and I think it was my freshman year in college at the University of Wisconsin Green Bay. I started working at a bike shop and just kind of fell in love with it. After college, started working full time and within a few years We were trying to friend of mine and I were trying to buy that business. After about 10 years of that, it just, it wasn’t panning out. So my wife and I decided to open up the bike hub in Superior, Wisconsin. And we ran that successfully for 18 years. And we sold it in February of this year.
Scott Chapin 02:23
Fantastic. And I’ve actually read a few of the articles that you’ve recently posted or written. And it was kind of interesting how you had definitely had a succession plan in and I’m wondering when you sold the shop, how long have you actually been thinking about and planning for that or did it happen really quickly?
David DeKeyser 02:48
I would say probably 10 years, so about seven or eight years into the business. My wife and I had always had a desire to live in the western United States someplace in Green Bay, Wisconsin is obviously not that it’s colder and darker and wetter and all that stuff. So about eight years into the business, we actually went through the process of trying to sell the business a little bit and things didn’t feel right. It felt it just it, I guess, for lack of better words, it just didn’t feel right at that point in time. But when we kind of wrapped that up, and we decided, what do we want to do next? As far as the business, I started concentrating on profitability, because the business broker that we were working with, it became really obvious to me quickly that you are only as good as your last two or three years’ worth of financials. And if you could build that business up, then you had something to sell and you can’t sell a business that isn’t profitable. Unless you find you know, the needle in the haystack type of thing. So we just really worked on becoming profitable. And in that, we started really harvesting every little bit of data that we could out of our point of sale system. And the last four to five years, we really ran the business with the intent that we wanted to sell it. And that was, you know, we were successful in the end. They’re
Scott Chapin 04:26
interesting. And did you get so we’ve had some conversations and I’ll ask you to tell a story about kickstands because I just I thought that was really interesting how, how you actually had drill-down data on that but you know, before I have you tell that little story, what resources did you turn to actually try to figure out how to become very profitable and to be able to have your books be so detailed to the nth degree of for any type of products? Service etc Did you try to figure out a lot of that on your, your own? Or did your accountant help you or tell me a little bit about how you actually became good at that?
David DeKeyser 05:10
Yeah so on the books end of things, we had an accounting firm that I had my accountant and then a QuickBooks pro advisor so I had somebody kind of on-call all the time that could log into my software and tell me if I had something goofed up but you know, the books part of it is is actually pretty easy. If you have a good accountant and a QuickBooks Bertie, we use QuickBooks Some people use something, you know, a different program. But if you have somebody that’s good, kind of watching your stuff and kind of tuning you up, you know once or twice a year before tax season, you know, so kind of late spring and then early fall it would only take a half an hour so for my pro advisor gal to go through everything and kind of make sure that it looked right for the business side to have things we use lightspeed point of sale which you know, is I’m thinking now is getting to be one of the bigger ones along with ascending. And through kind of trial and error. So you know, going back I said it took about 10 years to feel confident to sell the business and those last five years so that five years leading up to that we were really honing in on making sure that all the data that was in our point of sale was was really good. And I think it takes a while to start to understand what you’re actually looking at and pulling up reports and all of that, you know, it’s not something that happens overnight. And if you are putting in junk data, and just using your point of sale as a cash register, you’re never really going to get what you want out of it and it becomes so easy. You know, becomes second nature after a while to know what you’re looking at how to pull up those reports. But I loved to experiment, you know, with you know, we talked about the kickstands a couple of times. But you know, you would take a service item, you know, changing a flat tire or doing a tune-up and you would experiment with you know, could you get a few more dollars, could you add items on to that labor item on and that type of thing and you have little successes and you just start spreading those over, you know, the rest of your, your business, and that’s kind of how we got to that point, I think of you know, figuring out our point of sale and QuickBooks and all that was we just we made a conscious effort to really immerse ourselves in it.
Scott Chapin 07:49
So did with looking at, you know, hard goods, soft goods service, in that last 10 years of doing business? What’s sector actually grew the quickest once you started tinkering with, you know what you can charge was it the service side of that become from a growth standpoint, once you talk a little bit about that and maybe how you decided to look at that sort of carte blanche for everything that they’re doing, having a charge for that and how that really, overall affected your, your profitability on that side of things.
David DeKeyser 08:26
So I think the industry as a whole, what I always experienced was when people did tune-ups, somebody would come in and they’d get a tune-up and, you know, your say your tuneup is $50 or 75, whatever, whatever you’re charging, but then they would buy a pair of brake pads or get some new tires, you know, or what bar tape whatever it was, and nobody was charging to install the bar tape or the brake pads but if somebody came in and they just needed brake pads, we would charge him for the brake pads and in an installation fee, and even that was new Probably 10 years ago, you know, it used to be if you bought it, you got it installed for free. So we just started tack, you know, our labor skews, basically in the computer went from a couple of tuneups and like flat labor to all of a sudden there were 50 items in there and you are charging for each of those items. And it is you as anybody that’s worked in a shop can imagine it, you know, on a tune-up if you’re getting a bottom but you know, if it’s a good tune-up, you go from a $50 tune-up and, you know, 25 $30 worth of parts to all of a sudden you’re double or tripling that that repair ticket by adding these things on. The scariest part was I thought for sure people would push back at it. And the exact opposite happened. We had zero pushback and I think people are used to it. You know, if you went to the dentist or the car repair plate, you know, everything is itemized, and consumers expect that it doesn’t shock them, but in our industry, it’s just, you know, people throw everything on for free. We even got to the point where, you know, if somebody was buying a basket or something with a new bike, some of those things we would charge to install if they were, you know, hard training wheels were one of those things that were always hard. So we, you know, we started, if something took a little more time, we would, we would start tacking on a labor charge to it. So labor was the big one that opened it up to us. And so,
Scott Chapin 10:27
so that sort of you my next question you sort of alluded to, so you didn’t necessarily increase your shop rate per hour. It was it more just you’re getting more just by doing everything carte blanche.
David DeKeyser 10:41
Yeah, just making sure that we’re kind of line item and everything was the term that was always in my head as if a mechanic was going to do a tune-up, and you know, there are the items that are included in the tune-up. If something was going to be done extra, from a labor standpoint, then we charged for it and if that answers that question,
Scott Chapin 11:02
it does not do you think just in general, that a lot of shops feel that if they were to either do like you by actually individually having charges for specific service items, or just, in general, increasing their labor rate, do you think that’s that fear is unwarranted that the customer will push back? I mean, I know what your experience was. But if you talk to others and where they’ve had a similar experience, like I thought that we’d lose customers or I thought they would get upset at us or go to a different shop. How real or not real is that? Is that fear?
David DeKeyser 11:40
I think it’s a really unwarranted fear. And most of the dealers You know, when you talk to a shop, you get kind of two answers. There’s no way I could do that. My customers would push back I can’t rip them off. This is you know, everybody, all of my customers have smartphones and they know what everything costs. Well. That’s a funny argument. Several Everybody’s got a smartphone no matter where you are. And then the other side of it is the dealers that have started to implement, you know, making sure that they’re, they’re charging for things that are being done it from, from what I have experienced, I don’t think anybody’s really had much pushback. And if you do, it’s small enough that it’s, you know, it’s not going to warrant going backward.
Scott Chapin 12:24
Right. So you wouldn’t want to dictate Yeah, you don’t want to dictate your shop policies and procedures for the one half of 1% of people who may say something under their breath about the rate.
David DeKeyser 12:36
Yeah, and I think there’s a lot more that would say something under their breath about, I experience a lot of dealers retailers, that are really, really afraid that they’re going to offend that one out of 100 customers and instead of harvesting the 99 out of 100. There, they’re kind of bowing down to that one that might say something And I get and I get that it’s you know, you remember the one bad situation? You don’t remember all the good ones usually.
Scott Chapin 13:09
Right? Now, did you? Did you ever have a bike team like a lot of shops have where you fly the shop’s colors wear the jersey and you get a percentage off? Or did you? Did you just avoid doing that all together? Tell me a little bit about that.
David DeKeyser 13:27
So, my wife, Rebecca was a very avid and fairly high level, you know, regionally, right bike racer. So she, she was kind of the driving force behind the teams. And as time went on, and she kind of faded away from the racing scene. We did continue with the teams Yes, with discounts and you know, the shop flag and all that type of thing. And that was one of the biggest experiments. I think for me One of the scariest was we basically just stopped. We’re done. We didn’t do teams anymore. And all of the people that were on the teams that you thought were your best friends, they disappeared
Scott Chapin 14:15
overnight. So they are just they’re just doing it for the discount. Is that safe to say?
David DeKeyser 14:20
Yeah, I mean, we had a handful of people over the years that were on the discount program, you know, that was on our grassroots teams or mountain bike team, we had a triathlon team that we were sponsoring. There was a handful of people that I think understood what their role was in relation to the shop was to be an ambassador for our store, right? But it was such a small It was literally, I could count him on on one hand, and
Scott Chapin 14:48
so you would have been better off if you knowing what, what you eventually learned. Maybe there were three or four people who were good spokespeople. And if you were to give anything at all, just give it give them The discount because they were doing all the marketing and PR are we Yeah,
David DeKeyser 15:04
basically, you know all the referrals. So when you sponsor a team, you know, what are you really looking for, you know, the team, the racers are going to races where everybody else is sponsored, right? So they’re kind of preaching to the choir and they’re preaching to people that are in different churches, so they’re not going to come to your church anyway. So you want those per you know, the person during the week when they’re at work, and they’re a bike racer, and they’re there, you know, the person in the cubicle next to them says, Hey, I’m thinking about buying a bike instead of that person saying, Hey, I know where you can get a good deal because this is where I get my good deals. They say you want to go down there and talk to them because that’s the place to go, you know, they’re going to help you out. Price is not an issue, you know, that that shouldn’t come up. They’re sent, you know, they’re asking an expert where to go and they’re sending them to an expert. And that usually, you know, that usually doesn’t happen. So but for me, it was during this increase in labor, income. was where I started to realize that our best mechanic who is also our store manager, was doing the lion’s share of the teamwork, team mechanical work. And a lot of times that was, you know, no charge because it was somebody tubeless mountain bike tire that wasn’t holding air. I mean, he was just stuck in this time sinks all the time. And then if we were charging, it was at a discount. So I was tying up my, my best person on this discount rate business, and it was terrifying to cut it off. Because you know, you’re supposed to be, you know, that’s what you’re supposed to do if you have a bike shop is you’re supposed to sponsor racers and be involved and be, you know, part of the community in parentheses and all that stuff. And for us, as soon as we cut that off, it was a noticeable increase in our margins that you know, you can’t really so you’re able to track that right
Scott Chapin 16:57
away. I mean, how long did it take you to realize Like, oh, we would have been better off if we had never done that.
David DeKeyser 17:03
I would say, you know, so I think we stopped doing the teams in the fall of probably 2014 or something. I think it was probably by July of 2015. I could see the data right there are our gross dollars were the same, but our margin had shot up incredibly. staff was much more relaxed. They weren’t dealing with, you know, the Friday night emergency racers Yeah, yeah, yep. And I don’t have anything against racers or anything like that. I think that there are shops that probably do have it figured out but I think that if they looked at it as far as what it’s doing to the bottom line, I don’t I just can’t I can’t find the math to work for me personally. A be I just don’t know another industry that takes what should be its best customers and gives them discounts right on everything. You know, I have one of my closest friends on the fly fishing store, and he always laughed at me. He’s like, my best customers come in and buy stuff all the time. But you know, nobody gets sponsored, really for fly fishing. Yeah, you know, but so he had these great customers were in biking. It’s like they go through this progression where all of a sudden, now they’re a racer, they buy your shop jersey, and you give them a discount, and they’re your best customer.
Scott Chapin 18:24
No, and I can’t around because I used to be a sponsored racer myself. And I keep thinking about all the times the day before the race like something’s not working some like they never charged me for any of that. I’m thinking back of like, gosh, you know, that’s ridiculous and in for that, it just, it just seems strange that I would even ask that and this was, you know, 20 years ago, and now it’s like, No way like I just, you know, charge me more. charge me more to help me on Friday before.
David DeKeyser 18:55
Exactly. There’s just there are so few industries that have that mentality. We’re going to take the people that are coming in the most and start feeding them discounts.
Scott Chapin 19:06
Right. Interesting. Was your shop on a bike path? Yes. Yep. How does being on a path? I mean, was that like a pretty, you know, a fairly high dependent variable and your profitability or tell me a little bit about that because I talked to a lot of retail clients and there were like one of them that I work with, they’re about to move to a new location and it’s because they want to be buying the bike path. I’m just kind of curious what your sense of the value of being in that location.
David DeKeyser 19:37
So that’s one of the things that I never really felt like I was able to put a finger on really help other people. It’s a net positive for sure. Because you have such an incredible test ride experience, you know, somebody’s not riding around in a parking lot dodging cars. So so it’s an It’s a nice experience. We were on a very busy bike path. It’s a paved rail-trail the fox River Trail from Green Bay, way south in Wisconsin, it’s next to the fox River. So it’s you know, a lot of it’s pretty it’s in an urban area. So there’s, you know, lots of neighborhoods, so it’s extremely busy. You know, and you’d get the odd person that comes up with a flat tire or something that you know you would fix but it was so hard to quantify because it’s just one of those things that feel so good about being on that path. You know, you’re where things are happening. The flip side was the front of the store is on a really busy road. And I think that the exposure there was probably more important in the bike path, but I had a lot of people that would argue the exact opposite to me that would say that the bike path if you have a bike shop, and you can be within spitting distance of a place where people can ride it’s always going to be positive. I just don’t know how to measure it. Exactly.
Scott Chapin 21:13
Yeah, how to quantify it, but for sure from us, from our customer experience on the specific to the test, ride, and safety. It’s all it all makes sense. It just feels good. Yep. All right. So I self admittedly have a DD so I’m just jumping all over the place. And that’s just how this is going to be. So I want you to tell me the kickstand story with the buyer of you’re the individual that purchased your shop. And I think they were questioning whether or not they should be throwing in kickstands. But I just think that having these metrics is just a perfect example. So I’ll let it go from there.
David DeKeyser 21:52
Yeah, so I don’t want to give away too much here because the buyer still you know, right on it, give away any trade secrets or anything like that, but The wit I’ll go way, way back in time. So the kickstand story started. We were at a, I think I think it was like a trek event years ago. And there was everybody who gave away kickstands. When you were back in the 90s. You know it was when you bought a bike, you got a kickstand bottling cage. And you just threw that stuff in even though you had to pay for it. And we had some seminar and they brought this dealer out and he had started charging for kickstands. And this was a really high volume place. And the guy I would love to say who it was, but I don’t know I’ll get it wrong. Anyway, I think he bought a Cadillac or something based on him. You know what he had made and kickstands in a year or two. And it that always stuck with me. So we started charging for kickstands, obviously right away. So I’ve been charging for kickstand for years. And you know kickstands are now like 15 bucks or shops that you know are Getting 20 bucks for like a Greenfield kickstand. And if you’re a high volume recreational shop, you get to sell a lot of kickstands. And when we were selling the store, the buyer he hasn’t he owns another store in town and i and I think either they had been in he had recently bought that store as well. And I don’t remember if he was charging for kickstands or not for sure at that time, but I pulled up the data and it was, you know, I think he was pretty shocked at what those numbers were, especially when you go back, you know, five or 10 years do you think wow, I left all that money on the table. So to be able to pull up that information to know how to get it on on your kickstands or your grips or your you know, finish line lube or whatever it is, is so incredible because you start to see those little successes and I think that’s kind of the moral of that story. Right? is is is a CEP there are several models so that story number one charge for the things that you can which is basically everything consumers are expecting it. B track all of that data so that you can go back and see and see that success because it really makes you want to experiment with other things and kind of see what you can do. And I’m excited to see kind of what he does with the business as time goes on because you know that was exciting for him to see that. You could have success with just these little shifts in mentality and not just giving things away. Those little things that I think the general in the bike industry that people give away is where all of the hidden profits are.
Scott Chapin 24:49
Right. And did you Is it safe to say for the last 10 years have you won in the shop you in just about every situation sold? All everything at full margin
David DeKeyser 25:05
Yeah, that drove me nuts when so that’s another one of those things that you know is really common in the industry is when you’re buying a bike you get a bunch of stuff for 10% off, you know or, or even 15% off and I fought that tooth and nail you know don’t even give the person that deal and I don’t know why the bike business is still like that But you knew when somebody had been to one of your competitors who still was kind of giving away the farm on every sale so yeah, our goal was no discounts on anything, you know, the margins have gotten tighter the prices have, you know, been in business have continued to rise in the margins have kind of come down. There’s just not the room to be giving away everything to get a bike sale anymore in my opinion. So we didn’t do the discounts and we really never had an ad advertised sale and the 18 years that we own the business which could be, I think several podcasts. But yeah, we never ran a spring sale or a Summer Sale or an end of season sale or anything like that. The entire time that we were open.
Scott Chapin 26:17
Interesting. And there’s something you just said about margins profitability, it made me think of you so you did you own the real estate at your DePere location the whole time or did you end up buying a separate place or buying a place that you’d been leasing
David DeKeyser 26:40
so when we first opened up, we were in a strip mall, and we opened in March of 2001. And by about 14 months later, it would have been may of 2002. We made the offer on the on-property That we ended up buying. And that was obviously, I think, a great decision because it was on a bike path, which wasn’t even open really at that point in time. But yeah, so we, we, we rented in a strip mall and then moved just a year later to our location where the business still is.
Scott Chapin 27:20
Got it. So in my world, I review a lot of leases, mostly for the insurance and indemnification sections, but I see what the lease rates are. And I can only speculate that knowing what I see lease rates are in certain parts of the country, certain cities, that that is definitely a big problem for many retailers. I mean, what are your thoughts on is that really a determinant for profitability if you are unable to get into a position to purchase your own real estate, or what are your overall thoughts on that?
David DeKeyser 28:04
Yeah, I think that I think that this might be one of the elephants in the room as far as the industry kind of going forward is if margins continue to shrink, labor rates continue to rise. I mean, there’s an article every other week about mechanics aren’t making enough money. And I don’t disagree with that. But as a retailer, those things are all coming for your bottom line, you know, whether it’s your lease rates or the mechanics needing more money, etc. The sad part is in a lot of areas of the country it’s starting to feel like you can’t afford you know your occupancy expenses basically because Lisa Siri, they’re so expensive or commercial property is so expensive. It there’s a lot of areas of the country where it’s still in my mind a bargain and yeah, I can make a bunch of money. But I think that there’s there is some Really, I don’t have an answer to it, but I can’t imagine being someplace where you know, you’re, you’re spending an exorbitant amount of money compared to your, your peer that’s in Iowa, you know, and you’re in California margins
Scott Chapin 29:16
are the same if you’re ordering city of Hayward, Wisconsin and exactly a different Yeah,
David DeKeyser 29:22
yeah, everybody’s buying the stuff for the same price. So now when you’re in one of these kinds of the high cost of living areas, your labor rates are going to be a lot higher, your occupancy expenses are going to be a lot higher. So it’s a huge deterrent, I think, to not only profitability but to those areas being served by, you know, retailers eventually because they’re just going to kind of get priced out of the market.
Scott Chapin 29:48
So you’d recommend if, if possible if you can figure out a way to purchase your own real estate without burying yourself long term due to potential appreciation of the building. Cross lease agreements between the two different legal entities, those are all ways to help the bottom line.
David DeKeyser 30:07
Yeah, yeah, hundred percent. I think that if you have any chance to buy real estate to run your business out of I can’t really think of too many reasons why he wouldn’t. You know, I’m sure there’s something out there somebody could trip me up with but I just don’t see it, you know, because that’s not going to go away, you’re always going to have that and the beautiful part about it is that if you buy something and you can afford it today, it’s not going up your you know, your mortgage is not going to go up in price. And that was one of the things that I always kind of laughed about to myself was when we bought our property we paid our monthly mortgage payment was $600, less than I was paying in rent. And it was it wasn’t more space and you know,
Scott Chapin 30:56
that X for X amount a year and it was
David DeKeyser 30:58
it was fixed where That, you know, the lease was going to keep going up. And that’s, you know, in our market, I think we were, you know, I remember thinking $10 a square foot was kind of the going rate for good retail that was 20 years ago, 25 years ago and, you know, now these little strip malls that go up in kind of the,
31:19
the
David DeKeyser 31:20
retail ish type areas, I mean, they’re getting $25 a square foot, you know, that’s, that’s more than doubled what I always thought was the appropriate amount to pay. So, yeah, if you can buy and I think there’s a lot of areas of the country where commercial real estate is still affordable. I think we also get trapped as an industry, by people wanting to be in the best building or the best location and retail you know, I wouldn’t go in a back alley if you can avoid it, but people are going to find you a few. You know, if you have either A brand you know where they’re on the dealer locator and they punch it into their phone, they’re going to drive right to your door anyway, I just I don’t know if having to be in those best locations is really feasible in the future because the rates have just gotten so high.
Scott Chapin 32:14
Yeah, and we’re seeing a lot of, we actually are seeing a lot of the newer shops, basically say we’re not in the prime retail space, we’re a block off, our lease rates are significantly less. And we’re going to try to start out with a small, smaller footprint and make it work and they’re generally again starting from scratch. So there, they’re just trying to make sure they can get over the hump and a lot of our service-centric bricks and mortar locations, and it’s, it’s pretty interesting. And the clients that I’ve spoken to, they’re like, Well, yeah, people will go a block off, and oftentimes you have better parking too, so it’s easier to get it. Exactly. Yeah. So so with your little your internal science experiment Financial science experiment with all of the tinkering you’re doing with service and charging full retail. How great of a difference did that affect your profitability over say the last five years that you own the shop? What did it continue to improve? Or was there sort of a leveling off after you had done all these changes?
David DeKeyser 33:27
So I think it leveled off probably about five years ago, you know, as far as profitability, what we could kind of get out of it, where we were comfortable. I think we I think if we had wanted to carry on the experiment, I think we could have possibly gone up higher. But there you know, you do hit some points where you’re thinking, I don’t know if I can charge any more for this or that, you know, or you’re not going to be able to charge more for the product itself. Real You know, there are a few places where you can kind of write your own rules. But, you know, you’re kind of hamstrung by the vendors and what their advertised pricing is on things and then on labor there, there’s a certain point, you know, and going back to the beginning where I said that people aren’t surprised or at all about you their repair ticket being like line items, where they’re, they’re paying extra for the things that would not have been included in the tune-up. But there’s a point where I think, it does start to feel like you’re gouging you know, and, and, and so many retailers, I think to feel like that’s if they charge at all and that I’d argue is absolutely not the case. But those the 10 years that we had our point of sale system, and we’re working with it, the first five years were really kind of the experimentation. And then the last five years, it just, it became, you know, it just made it so much easier to run the business that then I think we were enjoying kind of the fruits of the labor, of having really dialed in the point of sale. were ordering was no longer a lot of work, you know, it becomes so easy that then I think we were just enjoying the, what the point of sale was given to us in terms of making it easier to run the business.
Scott Chapin 35:15
So would you say that for a lot of retailers, the specific changes that you did, it’s really going to be kind of specific to the market or type of products, but you have to kind of create your own own recipe for profitability is or do you think you’ve done is gonna follow suit for just about
David DeKeyser 35:36
anybody? I think what we did and there’s a lot and I’m not the only guy that that did this, I didn’t kind of invent this wheel. There’s a lot of really savvy retailers out there a lot smarter than I am. It’s basically you get away from the discounting. You know, it’s kind of is one of them you know, there are all these little areas that you do you get away from the discounting, you start charging for things you Get the employees behind it, you know where, I mean, you can have an employee that wants to throw on everything I did a mechanic once that every time he did a basic tune-up, he had the drive train off the bike because it was dirty. And you know, it’s like, they didn’t pay for that. But it’s dirty. You know, see? Yeah, you can’t do that. So you just have to get the employees behind it, where they’re not, you know, throwing everybody a water bottle or discounting you know, everything under the sun. So, it’s it, I don’t think anything was really specific to us. I think it’s just specific across the industry to just, you know, really make sure you’re holding your margin. And if you can’t, what does that telling you? It’s telling you No, is the product bad? Is the product oversaturated in your market? You know, if you’re, if you’re having to fight, if people are coming in and saying they can get, you know, product x down the street for cheaper. You have to look at that really hard because as soon as you start, you know, well I’m gonna I’m going to automatically match that price. If that goes on long enough, you’re gonna be in trouble.
Scott Chapin 37:05
Right? So to kind of back to when you’ve sold the business and having a really good set of books is there. You know, I know in some businesses, there’s, they’re sort of when you’re doing a business valuation, it’s the business itself, plus inventory, but there’s a factor based on profitability. We do you have a pretty clear understanding of what you should be able to get based on profit margins, gross sales, and those specifics?
David DeKeyser 37:41
So yeah, valuing a business is really is I think one of those things that most obviously from people I’ve talked to that nobody understands it but it’s actually a really, really simple formula and it’s based on profits. At the end of the day, your books are going to go to the SBA. really speaking they’re gonna go for a bank they’re gonna use an SBA loan to buy you know bike shop like this and you have to be able to show the profitability and everything just goes into a formula okay if this buyer is you know, they’re bringing some of their own money we’re gonna, the bank is going to give them x and the debt service to that loan has to be able to be shown by the business to cover that and pay the new owner there’s no black magic really in valuing a business inventory is always a separate deal. So and you know that the buyer is going to pay for your inventory. If you have a bunch of dated inventory then you know that’s you’re going to negotiate, you know a percentage off of that but the bank is basically buying the business and what the profits have shown in the past to be right to do there’s no while we think it could do better if you know the new owner. Just was, you know, on-site more or had more enthusiasm or whatever, you know, those are all. That’s all great to talk about. But the only thing that’s going to help you sell the business and value the business is what your profits were.
Scott Chapin 39:16
Alright, I think we’re running low on time. But I have one more question. So if you could go back in time and change a business practice, what’s the single greatest thing that you wish you either hadn’t done or had done?
David DeKeyser 39:34
Wow. Oh, boy, I wish I had been better at managing people. I think I had some really, really amazing employees over the years. And I had one employee that was that I had hired at the previous business and he was with me, Store Manager. He’s still with the business. And he and I really jelled. He, I think it was primarily him because he was just he could deal with me. But I think that if there was one thing I could go back and do better, it would have been able to I would have tried to be better at understanding some of the employee’s needs and wants a little bit better. Because it when you lose a good employee, it’s always really hard to replace them. And I think for me, that was the big thing was I think I was maybe too hard on some people not understanding enough others.
Scott Chapin 40:38
Perfect. Well, thank you. I think we will conclude. Thank you so much, David, and, and we’ll I’m sure you’ll be on another one of these. So
David DeKeyser 40:51
yeah, it’s a lot of fun. I love talking about this stuff.
Scott Chapin 40:53
Great. Thank you. All right.
David DeKeyser 40:55
Thanks, Scott.
Scott Chapin 40:56
Bye-bye.
Rod Judd 41:04
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