Business Plan

Mountain Bike Mechanical Support

provided at race venues

40283042 | TSM08120 | Word Count: 2413

Contents

Executive Summary 3

Market Research 4

Management Structure 6

Service Delivery 6

Business Model Canvass 9

Projected Income and Expenditure 10

Sales Forecast 11

References 12

Appendix 14

Executive Summary

Across Scotland on any given weekend, you can find hundreds of people pushing themselves to the limit on bikes. There are several popular race series bringing like-minded people together to test themselves against the course and each other. With races coming down to the second racers equipment must be in the best condition. The bikes are incredible pieces of kit allowing competitors to reach speeds of over 50mph (Wragg, 2014) on tracks like those found snaking their way down the steep slopes of Aonoch Mor. At this speed though and on tracks regarded as some of the roughest in the world (Da Costa & McCarthy, 2017) even the best bike can have a mechanical issue. This is where a gap in the market has been identified: A portable mechanics business providing support to racers at these competitions.

The business will operate at large cycling events providing mechanical support and key spare parts at the venue. It will consist of one or more qualified and well-equipped mechanics providing the service from an EZ up set up (appendix 8).

The value proposition to customers lies in the convenience of on-site support. It will allow racers who have invested large amounts of time planning and preparing for races the peace of mind that there is support available to them. With races selling out up to 6 months in advance (“Odlo Glentress Seven 2018: TweedLove”, 2017), it can be seen how important the ability to race and compete in these events is to the participants.

The business also offers value to event organisers in keeping riders in the event and having the best impression of the event possible. To this end, the majority of marketing will be through the announcement of the presence of mechanics by the event organisers to participants.

The price will be £70 per hour labouring in the first year rising to £75 in the following years. The components will be sourced from trade suppliers and sold at full RRP.

All costs at startup will be from the business owner’s personal savings.

The business will aim to turnover £32,606 in the first year; £90,909 in the second year and £156,121 in the third year. The profit before tax will be £16,493 in the first year; £37,114 in the second year and £46,557 in the third year. The reduced rate of profit growth in the third year is due to rental of a permanent premises and the employment of two full time staff to accelerate the growth of the business moving forwards.

Market Research

Cycle tourism in Scotland is developing into a major sector. Comparing Scotland to the rest of the UK, it can be seen visitors are twice as likely to incorporate cycling into their holiday (Visit Britain, 2013). Scotland is identified as offering the “perfect backdrop for the adventure travel market” (Tourism Intelligence Scotland, 2017).

There are four major race series in Scotland. The Scottish Enduro Series, Tweedlove, Scottish Downhill Association and the Scottish Cross country. The four race series all see average attendances of over 120 riders per race (appendix 1). Despite mountain biking often being presented in the media as “young men throwing themselves off cliffs” (Waterman, 2017). Analysis of the results of the largest event in the Scottish mountain biking calendar, the Scottish Enduro Championships tells a different story. Over 70% of participants are over 30 years old (appendix 2). Unlike students and young people the over 30 year olds tend to be more cash rich time poor, a perfect market for the bike repair service.

A potential obstacle for the business that has been considered is the ability of participants to repair their own bikes. A recent poll shows that 70% of people enjoy working on their own bike and have the knowledge to do so (Levy, 2017). The remaining 30% are without the time or knowledge to complete their own repairs. This 30% will be the easy customers for the business. The other 70% able to do their own repairs are not to be discounted as potential clients though. It is known in all sports that external distraction usually impairs athletic performance (Kremer, 2012). This is amplified in mountain biking with the potential for the mechanical failure of a bike not only potentially ruining an athlete’s race but also being dangerous. Allowing a top racer to focus on their race preparations with having to repair their bike would be an advantage to those athletes.

The main competitor identified is the presence of a permanent bike shop close to the race venue. 14 of the 22 race weekends identified as being visited in the first year are in close proximity to permanent bike shops. These shops, from the business owner’s personal dealing and employment in several of them, hold loyal followings from locals and offer generally good service. They are however not ideally set up to cater to racers. These shops fall generally into two camps. Small shops with minimal staffing that tend to be unable to accommodate all the servicing needs of racers. The other type of store is larger with a broader focus on hire and repairs for all riders, these stores tend to again struggle for time. Race weekends do not bring enough money compared to their normal operations to justify increased staffing or affecting their normal day-to-day running. It is thus determined that although inevitably some trade will be lost to these stores there current poor accommodation of racers needs will allow the business to not be overly affected.

The pricing of the labour rates and the components stocked is key in maximising revenue from the events. From research carried out the average hourly rate for existing businesses was found to be £56 (appendix 3). The highest hourly rate was for Ronde at £70. It was chosen to go above average with the pricing and match Ronde at the top end of the market. This will then be increased to £75 in the second and third year as value is proven to the customer. The value proposition to the customer of the convenience of being at the event and the time and money invested by competitors allows the high cost to be justified. The component line carried was carefully considered as well. The Shimano XT model was chosen this is 2^nd from the top in Shimano’s five tiers of mountain bike componentry. This was chosen as the components are not prohibitively expensive for the more budget-minded customer but of a good enough quality to please the top end customers.

A major threat to any new business venture with an original idea is copycats. With low startup costs and no way to copyright the idea, this business is highly susceptible to this form of competition. The key to combat this is in brand development. The memorable name “Race Repairs” will stick with people and will be the center of the brand image. Alongside this, the high quality staff and rigorous quality control will ensure that Race Repairs will cement itself as the only option in the market.

Several areas of expansion have been identified for the business beyond the three year plan. Other forms of bike racing outside of mountain biking exist and would be obvious areas of expansion. Cyclocross racing runs counter seasonally to the mountain bike events and would be a prime example. Another area would be supplying mechanics to hotel chains for their hire fleets. With the increase in cycle tourism, more hotels are starting to acquire hire fleets of bikes (“Hydro Bike Hire”, 2017). The businesses position in the market as well-known qualified mechanics and the owner’s previous knowledge of a hire centre would make this a reasonable area of expansion. A final potential area would be running maintenance classes to pass on servicing knowledge to customers.

Management Structure

The business has a clear development plan over the three-year period. This growth will require a change in the operation of the business and its management structure. The first year will operate as a sole trader operating at the four major mountain bike race series in Scotland. Year two will see the use of experienced freelancers sourced through existing relationships with people in the bicycle mechanic trade. This will allow the potential labouring hours to be fully exploited at the same events visited in the first year. The third year will see continuation of the second years trading activities and the addition of events elsewhere in the UK being targeted. A facility in Edinburgh will be rented as full time offices to train and co-ordinate new mechanics. New mechainics will start as solo mechanics at races to gauge the market elsewhere in the UK. These will be full time employees with an expectation of them looking for new races and making relationships with free lancers to be sent for training at the offices outside of the event attendances.

In the first two years the business owner will be in attendance at all events allowing a simple structure as identified by Mintzberg (appendix 2). This will allow direct supervision and the maintenance of very high standards. Moving into the third year where the direct supervision will not be possible the business will move towards a professional bureaucracy (appendix 3). The ability of the business owner to step back and provide more training to staff ensures an emphasis on the standardization of skills. This training support will be able to replace the direct supervision by ensuring high skill sets amongst all staff members.

Service Delivery

Freelance mechanics will be required to hold a Cytech level two or higher. The Cytech is seen as the “benchmark in bicycle maintenance” (Cytech training, 2017), it will give an assurance to customers and ensure a high quality of staff. Each mechanic will be supplied with a full toolbox and will work from out of an EZ up for protection from the glorious Scottish weather. All work will be charged at a flat hourly rate of £70 per hour in the first year, increasing to £75 in the second and third years. The full time employees in the third year will operate at £70 per hour in their first year to avoid price objections when exploring the new market.

Outstanding customer service is key to good word of mouth marketing. Customer satisfaction will be a focus for the mechanics and the business owners experience in the sector will help to supervise its provision. The above average pay rate of £10 per hour will aim to draw many candidates and allow a level of choice to choose the highest quality candidates. All transport will be provided to events. Multi day events will see hotel room and food covered for each staff member at a rate of £90 per night. The more remote nature of these locations normally means cheaper bed and breakfasts, and hotels are easy to come by so the £90 will easily cover costs. The full time staff introduced in the third year will be paid based on a 35-hour week at the living wage of £8.75 giving an annual wage of £15,925. Along with the provision of a van and the plans for rapid expansion and wage increases, this seems like a fair wage.

The author believes that the value proposition to the organizer will lead to their cooperation on several aspects. The use of their mailing list to inform competitors of the availability of mechanical support and a central location at the event. The upcoming changes to the Data Protection Legislation will need to be taken into account to ensure compliance when using people contact details in this manner.

The components being sold at events will be sourced from Madison the trade supplier of Shimano in the bike industry. Access to trade prices will allow profit to be made on the components sold. Typically there is a 40% margin on all products.

Key Partners SDA, SES, SXC, Tweedlove Madison Customers, Exposure, Components Organise races to gather customers Provide Trade price on components	Business Model Canvass Key Activities Repairing customers bikes and replacing damaged components Direct to customer at events Revenue through charging for labour and componentry	Value Proposition Convenience Ability to ride the event after their significant investment of time and money Organizers pleased at competitors being able to have fulfilling event experiences	Customer Relationships Customers expect efficient professional service Reliability across all events attended High quality staff employed Close monitoring of staff	Customer Segments Over 30 Cash rich Time poor Focused on race performance Not able to complete their own mechanical work
Key Resources High quality staff High quality components	Channels Through event organisers as part of the event package
Cost Structure Costs: Staffing, Van hire, equipment, stock, property lease Activity cost: Overnight stays, travel	Revenue Streams Aimed at the high end of the market Mobile card reader payments Majority of revenue through labour the rest through component sales

Projected Income and Expenditure

The Projected income and Expenditure has been completed for a three-year period. This model will be adjusted as information is gathered through the operating of the business.

Several estimations have been made to achieve these figures based on the author’s knowledge and experience working at events and in bike shops. These are bullet pointed below.

• There will be 10 hours of mechanical work per 100 customers at an event. I would expect around 10% of competitors to suffer a mechanical with an average repair time of 1 hour
• There will be one rear mech, four chains, one brake and six brake pads sold per 8 hours of labour. The cost of this is shown in appendix 4. This estimate is based off the sales seen during events by the author.
• There will be a 40% margin on all components sold, this is typical across the industry.
• Where the number of potential mechanical work allows the mechanics will be able to work at full capacity for the entire 8 hour work day.
• Breakdowns of the figures for year 1 and 2 are to be found in appendix5 and 6
• Year 3 figures are taken as a continuation of the second years figures for the Scottish market plus a replication of the first years figures for each of the new employees.
• Breakdown of an individual mechanics toolkit can be found in appendix 7

As can be seen from the figures the business starts profitably and continues on that path. This gives room for a margin of error and a contingency for unexpected costs

Income	Year 1	Year 2	Year 3
Labour	19040	54600	92680
Component Sales	13566	36309	63441
Total	32606	90909	156121
Expenditure	Year 1	Year 2	Year 3
Van contract Hire	4968.84	8171.4	16342.8
EZ UP	400	800	800
Tools	1175.97	5879.85	2351.94
Stock	8139.6	21785.4	38064.6
Staffing	0	10240	42230
Accommodation and Food	1080	6390	8550
Fuel Cost	348.29	527.83	1224.41
Offices			5400
Total	16112.7	53794.48	109563.8
	Year 1	Year 2	Year 3
Profit	16493.3	37114.52	46557.25

Sales Forecast

References

Buy 3m x 3m Gala Shade Pro-40 Compact Gazebo (Red) 3x3m Pop Up Instant Tent Awning. (2017). Galatent.co.uk. Retrieved 30 November 2017, from https://www.galatent.co.uk/more_details.asp?itemcode=10328

Cytech training. (2017). Cytech training. Retrieved 1 December 2017, from https://www.cytech.training/courses/technical-two/

Da Costa, O., & McCarthy, A. (2017). What’s the hardest DH World Cup track in history?. Red Bull. Retrieved 29 November 2017, from https://www.redbull.com/gb-en/what-is-the-hardest-dh-world-cup-track

Hydro Bike Hire. (2017). Peebles Hydro Hotel & Spa. Retrieved 1 December 2017, from https://www.peebleshydro.co.uk/things-to-do/cycling-scottish-borders/

Kremer, J. (2012). Key concepts in sport psychology (p. 105). London: Sage.

Levy, M. (2017). Pinkbike Poll – Do You Enjoy Working On Your Own Bike? – Pinkbike. Pinkbike. Retrieved 29 November 2017, from https://www.pinkbike.com/news/pinkbike-poll-do-you-enjoy-working-on-your-own-bike.html

Odlo Glentress Seven 2018 : TweedLove. (2017). Tweedlove.com. Retrieved 1 December 2017, from http://tweedlove.com/2018-event-info/glentress-seven-2018

Tourism Intelligence Scotland. (2017). Adventure Travel in Scotland (p. 4). Retrieved from http://www.visitscotland.org/pdf/TIS%2005%20adventure%20travel.pdf

Visit Britain. (2013). Inbound tourism to Britain’s nations and regions | September 2013 (p. 76). Retrieved from https://www.visitbritain.org/sites/default/files/vb-corporate/Documents-Library/documents/Regional_Activities_report_FINAL_COMPRESSED.pdf

Volkswagen Caddy Maxi 2.0 TDI BlueMotion Tech 150PS Startline Van | Van Leasing | Nationwide Vehicle Contracts. (2017). Nationwide Vehicle Contracts. Retrieved 30 November 2017, from https://www.nationwidevehiclecontracts.co.uk/Volkswagen_Caddy_Maxi-2-0-tdi-bluemotion-tech-150ps-startline-van-76117.htm

Waterman, A. (2017). When did it all start to go downhill for mountain biking?. The Independent. Retrieved 1 December 2017, from http://www.independent.co.uk/environment/green-living/when-did-it-all-start-to-go-downhill-for-mountain-biking-9202637.html

Wragg, M. (2014). Results: World Cup Round 3 Fort William DH – Qualification – Pinkbike. Pinkbike. Retrieved 29 November 2017, from https://www.pinkbike.com/news/results-fort-william-dh-qualification.html

Appendix

Appendix 1-

Race Series	Average Attendance 2017
Scottish Cross Country	123
Scottish Enduro Series	293
Scottish Downhill Association	175
Tweedlove	352

Information from Roots and Rain

Appendix 2-

Appendix 3-

Company	Mobile/Fixed	Hourly Rate Estimate
Just Bike Repairs	Mobile	£65
All Bikes Edinburgh	Mobile	£50
Wheels 2 Wheels	Mobile	£60
Alpine Bikes	Fixed	£30
Evans Cycles	Fixed	£60
Edinburgh Bike CO OP	Fixed	£55
Ronde	Fixed	£70
	Average	£56

Appendix 4

Component	Model	Cost	RRP	Number use	Total Cost	Total RRP	Profit
Rear Mech	Shimano XT	54	90	1	54	90	36
Chain	Shimano XT	16.8	28	4	67.2	112	44.8
Brake	Shimano XT	75	125	1	75	125	50
Brakepad	Shimano XT	7.2	12	6	43.2	72	28.8
				Totals	239.4	399	159.6

Appendix 5 Year 1 Breakdown

Appendix 6Year2 Breakdown

Missing columns found in the year 2 graph are the same as those found in year 1

Appendix 7

Mechanics Toolkit	Price
Park Tool Pro kit	629.99
Park Tool TS-4 Wheel truing stand	349.99
Feedback Sports Repair Stand	195.99
	1175.97

Appendix 8

An example of an EZ Up set up with a bike stand and customers.

Picture taken by author.

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