Wholesale Bicycle Distributor Business Plan Example

Wholesale Bicycle Distributor Business Plan

Wheelie Deals is a wholesale distributor serving the retail bicycle industry. We specialize in closeouts, last-year models, and seconds. While other wholesalers occasionally offer closeouts, the availability of special deals is inconsistent. Wheelie Deals aims to fill this gap and become the top source for retail shops, offering above-average margins.

Leading Wheelie Deals is Dan Psycle, MBA, a seasoned professional in the bicycle industry. Dan has based our business model on a successful wholesale distributor and is confident in our ability to quickly capture market share. We anticipate reaching profitability by month eight and achieving comfortable profits by year three.

1.1 Objectives

The objectives for the first three years include:

– Create a company that exceeds customer expectations.

– Increase the number of customers served by 20% per year.

– Develop a sustainable start-up business, surviving off its own cash.

1.2 Mission

Wheelie Deals’ mission is to create the largest selection of closeout bicycle parts, attracting and maintaining customers. By adhering to this maxim, everything else falls into place. Our services will exceed customer expectations.

1.3 Keys to Success

The key to success is unbeatable selection and outstanding customer service.

Company Summary

Wheelie Deals is a wholesale distributor of closeout bicycle parts based in Albany, Oregon. It services the national retail bicycle industry with manufacturer closeouts, seconds, and last-year model parts and components.

2.1 Start-up Summary

Wheelie Deals will incur the following start-up costs:

– Pallet racking.

– Pallets.

– Pallet truck.

– Pallet shelving.

– Forklift (used).

– Three computer systems including CD-RW, printer, DSL connection, Microsoft Office, and QuickBooks Pro.

– Three desks and chairs.

– File cabinets.

– Three phone lines.

Please note that items considered long-term assets, to be used for more than a year, will be labeled as such and depreciated using the G.A.A.P approved straight-line depreciation method.

Wheelie Deals, a privately held Oregon corporation founded and owned by Dan Psycle, is a wholesale distributor of bicycles and bicycle components. Specializing in closeouts, last-year models, and seconds, Wheelie Deals sells products from manufacturers such as Shimano, Campagnolo, White Industries, Syncros, Mavic, Chris King, Tioga, Michelin, Easton, Rock Shox, Answer Racing, Salsa, Race Face, Sweet Parts, Grip Shift, Ritchey, and Wellgo.

In the retail bicycle market, there are two segments: independent bicycle shops and chain bicycle shops. Independent bicycle shops are usually owned by one person and have three to 10 employees, while chains, which are not as common, serve communities in large cities. The majority of sales for Wheelie Deals will be to independent bicycle shops since chains have a consistent product offering that does not deviate for specials and closeouts, prioritizing product consistency over profit margins.

Market Analysis:

4.2 Target Market Segment Strategy

Wheelie Deals will target retail bicycle shops through three means:

• Trade shows. Wheelie Deals will be visible at the two major industry trade shows. 75% of retail bicycle shops attend at least one trade show a year. The shows provide retailers an opportunity to view upcoming products, chat with a company spokesman, and place pre-season orders.
• Advertisements. Wheelie Deals will advertise in Bicycle Retailer, the industry magazine. 90% of bicycle shops in America receive a copy of Bicycle Retailer, making the advertising opportunities especially valuable.
• Website. Wheelie Deals will develop a website with a current catalog of offerings. The website will be the most up-to-date source of product information and availability. All advertising activities and trade show presence will highlight the website as an indispensable source of information.

4.3 Industry Analysis

The industry is currently served by 10-15 different wholesalers. Each wholesaler has their own niche to some degree, but generally they have a wide product offering. Some wholesalers have a sale or closeout section, but this typically makes up a small percentage of their business. The margins in the retail bicycle industry are small; 30% for bicycles, 75% for components, and 100% for clothing. Closeouts are a great way to increase store traffic and significantly help out the shop’s bottom line with higher margins.

4.3.1 Competition and Buying Patterns

The major competitors are:

• Seattle Bike Supply: a national distributor with several warehouses across the country. Seattle sells closeout products, but they make up a small portion of their business.
• Quality Bicycle Products: a relatively high-end bicycle component distributor that operates on a national scale, but only has one warehouse in Minneapolis, MN.
• Riteway: a national wholesaler with multiple warehouses. Riteway has an extensive product catalog and does offer a decent amount of closeouts, in part due to a minority holding of the GT bicycle company.

Bicycle retailers tend to favor one type of distributor for certain things. Some variables that influence decision-making include price, availability, shipping time, and available terms. Retailers often use one main wholesaler and aggregate as much as possible into an order to save on shipping costs.

Strategy and Implementation Summary

Wheelie Deals’ sales and marketing strategy will be based on occupying an unmet niche in the retail bicycle wholesale industry. Wheelie Deals will specialize as a wholesaler only for closeout items. This focus will allow Wheelie Deals to stand out relative to other wholesalers in the industry.

5.1 Competitive Edge

Wheelie Deals’ competitive edge is specializing in the closeout niche. Currently, there are no wholesalers that specialize to a large degree. Everyone carries a wide range of products. It is a clear advantage to be focused and concentrate on a specific niche. By focusing on closeouts, retail shops can contact Wheelie Deals and always find products that offer nice margins, uncharacteristic of the bicycle industry.

The trend in the industry is consolidation. By offering value-added services, such as closeout items that provide the retailer with better than average margins, Wheelie Deals is developing value that creates a steady flow of customers.

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5.2 Sales Strategy

The sales strategy will be intertwined with the product offerings. It is of small value to have great closeouts if there is little demand. By having a well thought out product selection, Wheelie Deals will significantly increase the chances of turning a prospective customer into a sale. Wheelie Deals will emphasize the popularity and quick turnover of the items they stock. They will shy away from items that may be a good deal but are a hard sell because they are likely to sit on the retailer’s shelf.

Additionally, Wheelie Deals will have constantly changing inventory, which will encourage shops to frequently inquire with them. Lastly, Wheelie Deals will have an email update service that will be sent to interested shops, featuring current specials.

5.2.1 Sales Forecast

The first month will be used to secure warehouse space, set it up to accept inventory, and hire personnel. During the first six weeks, relationships will be established with many different manufacturers of parts. These relationships will be based on Wheelie Deals’ willingness to take all of their closeouts. Typically, the manufacturer will call several distributors and eventually find someone to take some, or all, of their product. Wheelie Deals’ increased willingness to take closeouts will create an incentive for the manufacturer to contact them first.

Month three will mark the first decent month of sales. It is forecasted that sales will steadily increase after this month.

Sales Forecast

5.3 Milestones

Wheelie Deals will have several milestones early on:

• Business plan completion: an indispensable tool for ongoing performance and improvement.
• Warehouse setup.
• Establishment of vendor relationships.
• Profitability.

Management Summary

Dan Psycle received a Bachelor of Arts in philosophy from Washington & Jefferson College. After college he worked in a bicycle shop as a mechanic but quickly moved to sales and finally manager, all in a span of a year. Dan stayed at the shop for two more years, learning all of the nuances of the bicycle industry. By this time, Dan felt he had a comfortable grasp of the industry and decided to pursue an MBA from the University of Oregon. Dan spent a week with a wholesale distribution company for plumbing supplies to gain insight into the distribution industry and apply it to the bicycling industry.

6.1 Personnel Plan

Dan will be a full-time employee. He will also hire one administrative person to handle billing, payroll, and more. Two other full-time employees will take phone orders and assist a fourth employee with order fulfillment.

Financial Plan

The following sections outline important financial information.

Note that there is a bit of discrepancy between Wheelie Deals’ numbers and the industry average in the Ratio table. This is due to different accounting procedures for expenses.

7.1 Important Assumptions

7.2 Break-even Analysis

The Break-even Analysis indicates the monthly revenue needed to reach the break-even point.

Break-even Analysis

Monthly Revenue Break-even: $30,819

Assumptions:

– Average Percent Variable Cost: 50%

– Estimated Monthly Fixed Cost: $15,410

Projected Profit and Loss Table:

The table below shows the projected profit and loss.

Pro Forma Profit and Loss:

7.4 Projected Cash Flow

The following chart and table indicate the projected cash flow.

Pro Forma Cash Flow

Year 1 Year 2 Year 3

Cash Received

Cash from Operations

Cash Sales $308,944 $553,506 $602,999

Subtotal Cash from Operations $308,944 $553,506 $602,999

Additional Cash Received

Sales Tax, VAT, HST/GST Received $0 $0 $0

New Current Borrowing $0 $0 $0

New Other Liabilities (interest-free) $0 $0 $0

New Long-term Liabilities $0 $0 $0

Sales of Other Current Assets $0 $0 $0

Sales of Long-term Assets $0 $0 $0

New Investment Received $0 $0 $0

Subtotal Cash Received $308,944 $553,506 $602,999

Expenditures

Year 1 Year 2 Year 3

Expenditures from Operations

Cash Spending $106,400 $116,800 $127,176

Bill Payments $214,461 $380,032 $407,377

Subtotal Spent on Operations $320,861 $496,832 $534,553

Additional Cash Spent

Sales Tax, VAT, HST/GST Paid Out $0 $0 $0

Principal Repayment of Current Borrowing $0 $0 $0

Other Liabilities Principal Repayment $0 $0 $0

Long-term Liabilities Principal Repayment $0 $0 $0

Purchase Other Current Assets $0 $0 $0

Purchase Long-term Assets $0 $0 $0

Dividends $0 $0 $0

Subtotal Cash Spent $320,861 $496,832 $534,553

Net Cash Flow ($11,917) $56,674 $68,446

Cash Balance $17,033 $73,707 $142,153

7.5 Projected Balance Sheet

The following table indicates the projected balance sheet.

Pro Forma Balance Sheet

Year 1 Year 2 Year 3

Assets

Current Assets

Cash $17,033 $73,707 $142,153

Inventory $18,253 $32,703 $35,627

Other Current Assets $0 $0 $0

Total Current Assets $35,287 $106,410 $177,781

Long-term Assets

Long-term Assets $24,750 $24,750 $24,750

Accumulated Depreciation $4,956 $9,912 $14,868

Total Long-term Assets $19,794 $14,838 $9,882

Total Assets $55,081 $121,248 $187,663

Liabilities and Capital

Year 1 Year 2 Year 3

Current Liabilities

Accounts Payable $21,824 $32,078 $33,609

Current Borrowing $0 $0 $0

Other Current Liabilities $0 $0 $0

Subtotal Current Liabilities $21,824 $32,078 $33,609

Long-term Liabilities $0 $0 $0

Total Liabilities $21,824 $32,078 $33,609

Paid-in Capital $65,000 $65,000 $65,000

Retained Earnings ($1,300) ($31,744) $24,170

Earnings ($30,444) $55,914 $64,884

Total Capital $33,256 $89,170 $154,054

Total Liabilities and Capital $55,081 $121,248 $187,663

Net Worth $33,256 $89,170 $154,054

7.6 Business Ratios

The following table outlines important ratios from the Sporting and Recreational Goods and Supplies Merchant Wholesale industry. The Industry Profile column details specific ratios based on the industry’s NAICS code, 423910.

Ratio Analysis

Year 1 Year 2 Year 3 Industry Profile

Sales Growth 0.00% 79.16% 8.94% 11.50%

Percent of Total Assets

Inventory 33.14% 26.97% 18.98% 28.00%

Other Current Assets 0.00% 0.00% 0.00% 29.00%

Total Current Assets 64.06% 87.76% 94.73% 88.70%

Long-term Assets 35.94% 12.24% 5.27% 11.30%

Total Assets 100.00% 100.00% 100.00% 100.00%

Current Liabilities

Accounts Payable 39.62% 26.46% 17.91% 38.00%

Long-term Liabilities 0.00% 0.00% 0.00% 9.00%

Total Liabilities 39.62% 26.46% 17.91% 47.00%

Net Worth 60.38% 73.54% 82.09% 53.00%

Percent of Sales

Sales 100.00% 100.00% 100.00% 100.00%

Gross Margin 50.00% 50.00% 50.00% 23.00%

Selling, General & Administrative Expenses 59.85% 39.90% 39.24% 14.80%

Advertising Expenses 0.39% 0.22% 0.20% 0.70%

Profit Before Interest and Taxes -9.85% 14.43% 15.37% 2.00%

Main Ratios

Current 1.62 3.32 5.29 2.19

Quick 0.78 2.30 4.23 1.22

Total Debt to Total Assets 39.62% 26.46% 17.91% 47.00%

Pre-tax Return on Net Worth -91.54% 89.58% 60.17% 5.30%

Pre-tax Return on Assets -55.27% 65.88% 49.39% 10.10%

Additional Ratios

Net Profit Margin -9.85% 10.10% 10.76% n.a

Return on Equity -91.54% 62.70% 42.12% n.a

Activity Ratios

Inventory Turnover 10.08 10.86 8.82 n.a

Accounts Payable Turnover 10.83 12.17 12.17 n.a

Payment Days 27 25 29 n.a

Total Asset Turnover 5.61 4.57 3.21 n.a

Debt Ratios

Debt to Net Worth 0.66 0.36 0.22 n.a

Current Liab. to Liab. 1.00 1.00 1.00 n.a

Liquidity Ratios

Net Working Capital $13,462 $74,332 $144,172 n.a

Interest Coverage 0.00 0.00 0.00 n.a

Additional Ratios

Assets to Sales 0.18 0.22 0.31 n.a

Current Debt/Total Assets 40% 26% 18% n.a

Acid Test 0.78 2.30 4.23 n.a

Sales/Net Worth 9.29 6.21 3.91 n.a

Dividend Payout 0.00 0.00 0.00 n.a

Appendix

Sales Forecast

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

Sales

Independent bicycle shops $0 $3,455 $8,544 $12,457 $15,478 $17,454 $18,854 $25,855 $22,787 $21,987 $20,254 $20,114

Chain bicycle shops $0 $2,246 $5,554 $8,097 $10,061 $11,345 $12,255 $16,806 $14,812 $14,292 $13,165 $13,074

Total Sales $0 $5,701 $14,098 $20,554 $25,539 $28,799 $31,109 $42,661 $37,599 $36,279 $33,419 $33,188

Direct Cost of Sales

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

Independent bicycle shops $0 $1,728 $4,272 $6,229 $7,739 $8,727 $9,427 $12,928 $11,394 $10,994 $10,127 $10,057

Chain bicycle shops $0 $1,123 $2,777 $4,049 $5,030 $5,673 $6,128 $8,403 $7,406 $7,146 $6,583 $6,537

Subtotal Direct Cost of Sales $0 $2,850 $7,049 $10,277 $12,769 $14,400 $15,555 $21,330 $18,799 $18,139 $16,710 $16,594

Personnel Plan

Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8 Month 9 Month 10 Month 11 Month 12

Dan $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000 $3,000

Full time administrative $0 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600

Full time sales $0 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600

Full time sales $0 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600

Full time order fulfillment $0 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600 $1,600

Total People 1 5 5 5 5 5 5 5 5 5 5 5 5

Total Payroll $3,000 $9,400 $9,400 $9,400 $9,400 $9,400 $9,400 $9,400 $9,400 $9,400 $9,400 $9,400 $9,400

General Assumptions:

Plan Month 1 2 3 4 5 6 7 8 9 10 11 12

Current Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%

Long-term Interest Rate 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00% 10.00%

Tax Rate 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00%

Other 0 0 0 0 0 0 0 0 0 0 0 0 0

Pro Forma Profit and Loss:

Sales $0 $5,701 $14,098 $20,554 $25,539 $28,799 $31,109 $42,661 $37,599 $36,279 $33,419 $33,188

Direct Cost of Sales $0 $2,850 $7,049 $10,277 $12,769 $14,400 $15,555 $21,330 $18,799 $18,139 $16,710 $16,594

Other Production Expenses $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Cost of Sales $0 $2,850 $7,049 $10,277 $12,769 $14,400 $15,555 $21,330 $18,799 $18,139 $16,710 $16,594

Gross Margin $0 $2,850 $7,049 $10,277 $12,769 $14,400 $15,555 $21,330 $18,799 $18,139 $16,710 $16,594

Gross Margin % 0.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00% 50.00%

Expenses

Payroll $3,000 $9,400 $9,400 $9,400 $9,400 $9,400 $9,400 $9,400 $9,400 $9,400 $9,400 $9,400 $9,400

Sales and Marketing and Other Expenses $100 $700 $100 $100 $100 $100 $100 $100 $100 $100 $700 $100 $100

Depreciation $413 $413 $413 $413 $413 $413 $413 $413 $413 $413 $413 $413 $413

Utilities $300 $300 $300 $300 $300 $300 $300 $300 $300 $300 $300 $300 $300

Insurance $300 $300 $300 $300 $300 $300 $300 $300 $300 $300 $300 $300 $300

Rent $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000 $4,000

Payroll Taxes 15% $450 $1,410 $1,410 $1,410 $1,410 $1,410 $1,410 $1,410 $1,410 $1,410 $1,410 $1,410

Other $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

Total Operating Expenses $8,563 $16,523 $15,923 $15,923 $15,923 $15,923 $15,923 $15,923 $15,923 $15,923 $16,523 $15,923 $15,923

Profit Before Interest and Taxes ($8,563) ($13,673) ($8,874) ($5,646) ($3,154) ($1,523) ($368) $5,407 $2,876 $1,616 $787 $671

EBITDA ($8,150) ($13,260) ($8,461) ($5,233) ($2,741) ($1,110) $45 $5,820 $3,289 $2,029 $1,200 $1,084

Pro Forma Cash Flow:

Cash Received

Cash from Operations $0 $5,701 $14,098 $20,554 $25,539 $28,799 $31,109 $42,661 $37,599 $36,279 $33,419 $33,188

Subtotal Cash from Operations $0 $5,701 $14,098 $20,554 $25,539 $28,799 $31,109 $42,661 $37,599 $36,279 $33,419 $33,188

Additional Cash Received

Sales Tax, VAT, HST/GST Received 0.00% $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

New Current Borrowing $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

New Other Liabilities (interest-free) $0 $0 $0 $0 $0 $0 $0 $0

Pro Forma Balance Sheet

Business Plan Outline

• Executive Summary
• Company Summary
• Products
• Market Analysis Summary
• Strategy and Implementation Summary
• Management Summary
• Financial Plan
• Appendix

Andrew Brooks

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I’m Andrew Brooks, a seasoned finance consultant from the USA and the mind behind phonenumber247.com.

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