Ted’s expenses include the cost of goods such as new bikes and accessories, rent and payroll. He negotiates leases for all his locations except the Alexandria store, which he owns outright. Ted has 15 full-time employees and usually hires another 15 part-time employees during the busy months and weekends.
Until two years ago, he was spending about $30,000 a year on advertising in local papers. Now he uses a simple website and has links on many of the local biking trail sites to provide information about his various locations, and his advertising budget is close to zero.
In the late 1990s, Ted over-expanded to six stores, including a store in Purcellville, VA, and one in Bethesda, MD. The expansion necessitated a warehouse in Springfield, VA, the hiring of a general manager and considerable overhead expenses. In a subsequent cost-reduction effort, Ted closed the Bethesda store, gave up the warehouse and moved his inventory to the Vienna store, and let the general manager go. Now, he handles all the general management tasks himself, which affects the time that he has available to plan and develop strategies.
Ted further reduces his expenses by working in the Vienna store two days a week. Since he has only one staff person in some of his stores, he has to make special arrangements if that person does not come to work, or takes a day (or week) off.
He is trying to expand the bicycle repair work, especially on the weekends, so he will be able to increase revenue from this profitable aspect of his business. He needs to have repair capability at each store to maintain the rentals, prepare the new bikes for sale, and perform the periodic maintenance for the bikes that he has sold, as well as provide the breakdown repairs and adjustments for the riders on the Trail.
In an effort to increase profits, Ted tries to get good deals from his suppliers so he can realize a good margin on bike and accessory sales and repairs. He looks for situations where suppliers have more bikes in a line than they need and buys those bikes at a discount for rentals and low-end sales, while maintaining a rapport with high end suppliers so that he can offer his customers the best at reasonable prices. By doing so, he can sell bikes at a lower retail price with on-the-spot delivery while still realizing a nice profit.
Ted has no bank debt, and has long since repaid the $4,000 he borrowed from his friend to start the business. He feels that, because he has a diverse business strategy that addresses the many different aspects of the local bike business, he will do well in the many different economic climates as long as he is able to manage his varied business. He also feels that he is insulated from “substitutes” from the Electronic world, due to the rental and repair aspects of his business.