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.
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 | |||||||
Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |||
Potential Customers | Growth | CAGR | |||||
Independent bicycle shops | 9% | 12,458 | 13,579 | 14,801 | 16,133 | 17,585 | 9.00% |
Chain bicycle shops | 8% | 8,045 | 8,689 | 9,384 | 10,135 | 10,946 | 8.00% |
Other | 0% | 0 | 0 | 0 | 0 | 0 | 0.00% |
Total | 8.61% | 20,503 | 22,268 | 24,185 | 26,268 | 28,531 | 8.61% |
Contents
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 | |||
Year 1 | Year 2 | Year 3 | |
$187,239 | $335,458 | $365,454 | |
$121,705 | $218,048 | $237,545 | |
$308,944 | $553,506 | $602,999 |
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.
Milestones | |||||
Start Date | End Date | Budget | Manager | Department | |
1/1/2001 | 2/1/2001 | $0 | ABC | Marketing | |
1/1/2001 | 2/1/2001 | $0 | ABC | Department | |
1/1/2001 | 2/15/2001 | $0 | ABC | Department | |
1/1/2001 | 9/1/2001 | $0 | ABC | Department |
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.
Personnel Plan | |||
Year 1 | Year 2 | Year 3 | |
$36,000 | $40,000 | $45,000 | |
$17,600 | $19,200 | $20,544 | |
$17,600 | $19,200 | $20,544 | |
$17,600 | $19,200 | $20,544 | |
$17,600 | $19,200 | $20,544 | |
5 | 5 | 5 | |
$106,400 | $116,800 | $127,176 |
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
General Assumptions | |||
Year 1 | Year 2 | Year 3 | |
1 | 2 | 3 | |
10.00% | 10.00% | 10.00% | |
10.00% | 10.00% | 10.00% | |
30.00% | 30.00% | 30.00% | |
0 | 0 | 0 |
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:
Pro Forma Profit and Loss | |||
Year 1 | Year 2 | Year 3 | |
Sales | $308,944 | $553,506 | $602,999 |
Direct Cost of Sales | $154,472 | $276,753 | $301,500 |
Other Production Expenses | $0 | $0 | $0 |
Total Cost of Sales | $154,472 | $276,753 | $301,500 |
Gross Margin | $154,472 | $276,753 | $301,500 |
Gross Margin % | 50.00% | 50.00% | 50.00% |
Expenses | |||
Payroll | $106,400 | $116,800 | $127,176 |
Sales and Marketing and Other Expenses | $2,400 | $2,400 | $2,400 |
Depreciation | $4,956 | $4,956 | $4,956 |
Utilities | $3,600 | $3,600 | $3,600 |
Insurance | $3,600 | $3,600 | $3,600 |
Rent | $48,000 | $48,000 | $48,000 |
Payroll Taxes | $15,960 | $17,520 | $19,076 |
Other | $0 | $0 | $0 |
Total Operating Expenses | $184,916 | $196,876 | $208,808 |
Profit Before Interest and Taxes | ($30,444) | $79,877 | $92,691 |
EBITDA | ($25,488) | $84,833 | $97,647 |
Interest Expense | $0 | $0 | $0 |
Taxes Incurred | $0 | $23,963 | $27,807 |
Net Profit | ($30,444) | $55,914 | $64,884 |
Net Profit/Sales | -9.85% | 10.10% | 10.76% |
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
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