Build A Better PowerSports Business

Business Within A Business

by Vance Breese

Easy Inventory Tips

Buying and selling used motorcycles is different than selling new motorcycles

I love the motorcycle business. There’s always more to learn and more ways to make it work. Each time I think it’s going as well as it can, I find some way to do a better job. There’s always growth, and as I learn more, I find that money I’d left on the table now finds a way into my pocket. I love looking at the numbers because that’s how I learn about what works and what doesn’t.

Early on, I tended to do all business the same way when I was actually running many different businesses under one roof. I was more profitable when I learned to treat these businesses differently.

More Than Selling Bikes
Selling motorcycles seems simple enough: Have some motorcycles on the floor and people will come in and buy them. Put more motorcycles on the floor and more people will buy them. If you have too many, the flooring will eat up the profits. Discounting will eat up the profits. Commissions will eat up the profits.

When you only have 15 or 20 percent gross profit, the motorcycles had better turn over, and you need to be efficient. I was in a small town, and I had real limits on how many motorcycles I could sell, so I needed more businesses making money under my roof.

It’s easy to believe that you’re making money when you’re not because of the costs that go into getting a used motorcycle ready to sell. Because of this, I prefer to sell the motorcycle parts and labor at full retail.

Financing is another business. It doesn’t take up room and there’s no inventory. Fill out some paperwork, establish working relationships with some people, and you can make some money. It took me a long time to learn to ask “Would you like financing with that motorcycle?”

Insurance is a lovely business that many shops let slip away. In California, every motor vehicle must have liability insurance. If a motorcycle is financed, it needs to have collision and theft insurance to protect the lender. Getting an insurance license is relatively easy, and I still get checks from renewals even though I sold my shop in 2002. All I had to do was to ask “Would you like insurance with that motorcycle?” I had to let people know that I could help them with their insurance needs, fill out some paperwork, and make bank deposits. No inventory, no finance charges, and no warrantee hassles. I was using my shop in a more efficient way.

Selling Service And Stocking Parts
Service is a particularly challenging business. Most shops bill around 20 minutes of each hour available. There are 2,000 working hours in a man-year. Multiply your shop rate by 2,000 for each mechanic and that’s your potential. Compare that to what really comes in and it’ll help you understand how much money you’re leaving on the table. The car business is typically at 110 percent efficiency. Motorcycle shops are often around 33 to 50 percent of that potential. There are many reasons for this. In the motorcycle world, the biggest reason is we don’t do a good job of selling service, so we don’t charge enough. I was never able to get past 85 percent efficiency, and if I didn’t work at it all the time it was easy to slip to 65 percent.

The more varieties of parts and accessories we have, and the better they’re displayed, the more you’ll sell

Service parts is a business unto itself. There is less price shopping in service parts because it’s a smaller part of the bill. We can often plan when we’ll need parts so we don’t have to stock everything. We usually have a couple of days to get gears or pistons so we don’t have to stock them. Crash jobs are wonderful because you have the time to order all the parts so you can do a lot of business without a big inventory. Cables and electrical parts are something we stock to get people back on the road, so we have to invest some of our inventory dollars in these parts. It takes experience to properly stock items. We need to charge enough to provide a margin that’ll support the expense of having these things in stock. Seals and gadgets are critical items to complete a job, and we have to learn what ones to carry and how many. Taking a motorcycle off the lift for a lack of parts can take the profit out of a job. I’ve found that it usually takes at least 20 minutes, and on a two-hour job, that’s 16 percent. I’ve never been able to take home more than 12 percent of the gross sales, so you can see that this is going backward. Stocking too many service parts can use up capital that could be used for other profitable businesses operated under the same roof.

Oil and spark plugs fall into another category entirely. We know that they’ll sell, and our job is to keep from running out. We need to watch the freight costs for oil, and it’s a price-sensitive item because people buy it regularly enough to know how much it should cost. If you’re not price competitive on oil, it gives people the impression that everything in your store is overpriced.

Accessories And Apparel
Accessories are different than service parts. The more variety we have, and the better they’re displayed, the more we will sell. Hiding them on some shelf in the back won’t work. Knowing what you have and what it will do for the customer is important.

Salesmanship is also important. We can sell a lot by using the catalog. People love to have something that none of their friends have, so it would be difficult to stock everything that they might want. There’s no substitute for instant gratification, so it’s important to have a selection of accessories properly displayed.

Variety sells, so it’s better to have five different items than five of the same thing. At the same time, we don’t want to overlook the effect on the industry when someone important in the motorcycle community buys an accessory, and we need to be ready to respond to the demand that creates.

Having all clothing sizes at a few different price levels is important

Clothing is at least two businesses. We have the traditional biker jacket, and having all the sizes at a few different price levels is important. Having what the customer needs when he needs it is important. The customer should try on the next bigger and the next smaller size because apparel can be expensive, and he will probably have it for a long time. A little advice goes a long way, so we need to explain both quality and function. There’s a difference between a fashion jacket and a riding jacket.

T-shirts are about variety and size. Most of our customers aren’t small, so we need to have the sizes that sell. Customers like to leaf through the T-shirt racks to find their special treasure. Ordering T-shirts is a crystal-ball experience, and it’s easy to make a mistake. I did find out that cheap clothing hurt the shop’s reputation. Don’t be afraid to discount the ones that aren’t selling so you can invest in ones that do. When we got a new shipment of T-shirts, I’d mention it in our newsletter, and I was always amazed at how many people responded. Some clothing is more seasonal. Even in California, we didn’t sell a lot of tank tops in the winter. On the other hand, sweatshirts sell all year round. This is another place where experience pays off.

Although we didn’t concentrate much on selling jewelry, I learned that sometimes a man could get permission to buy something he wanted by buying jewelry for his lady. It also gave women visiting the shop something to look at and talk about so they wouldn’t be in such a rush to leave.

I love the complexity and variety of being in the motorcycle business, but it sometimes wears me out. Each business inside the business needs work and attention to make it profitable. Each day is an opportunity to make each part work a little better.

Motorcycle, Quad, ATV, Scooter Business Basics

by Vance Breese

At its core, the retail sales business isn’t that complicated.
Whenever something seems really complicated, I’ve usually found that it’s because I’m not seeing the truth. Understanding this helps me to be honest with myself and keep it simple. When I want to deceive myself, I make something even more complicated and imagine it as a unique situation.
Business, in spite of what I sometimes tell myself, is not that complicated or unique. Others have made it work, and we can learn from them if we are honest with ourselves.

The retail business consists of selling something for more than we paid for it, paying the overhead, and keeping a percentage for ourselves. To do this, we need to have something that people want to buy, let people know we have it for sale, and make the sale happen.

That means there are three ways we can increase our net income: by increasing sales, increasing margin, or decreasing overhead.

The Sales Factor
We can increase sales with better salespeople, better inventory control, or more effective advertising. Having a great location also helps, and having something that people want to buy is useful.

The conundrum here is to increase sales while controlling our expenses and living inside of our available capital. We know that if we could stock every part from every manufacturer, and we could find a way to tell every potential customer of this bounty, our sales would go up. We also know that we would need a large building and many people to manage the sales. We don’t have the capital to do this, so we have to strike a compromise. We need to determine the correct amount of inventory, the proper building size, and the correct number of employees for our market.

Maximizing Margin
We have control over our gross margin. If we charged too much, our sales would go down. If our margin were less than what it costs us to sell a product, no amount of sales would help our net profits.

To put this in perspective, most small retail businesses net around 4 percent of the gross. This means that if we gave all our customers a 5 percent discount, we would continue to go backward, no matter how much our sales increased.

It also means that if we cut our margins in half, we would have to sell four times as much stuff to make the same profit. Why? Because we would have to invest more in inventory, facilities, and people to make the sales.

Cutting margins also means we would always be competing against the people who discount. Our customers would be drawn to us mainly because of our low prices. There wouldn’t be much customer loyalty, because we wouldn’t have the profits to invest in customer service.

I would rather charge more, have fewer sales, and take care of my loyal customers.

Look Out for Overhead
Lowering our overhead is easy, but how does it impact sales and our ability to maintain our margins? If we move to a too-small, out-of-the-way location, or fire our employees, our sales will go down, and this will have a negative effect on our net profits.

If you could stock every product from every manufacturer, your sales would go up, but would your profits?

We have a product that few people need, so we must invest in teaching our customers how to enjoy their motorcycles, and that costs money. But if they don’t have a positive experience when they interact with us, we won’t be in the motorcycle business for long.

It’s important to see where the money goes. As uninteresting as the books are to most, they contain many important messages about how to get the business to be the correct size for our customer base.

Inventory is always a gamble; we are betting that we will have the part or accessory when the customer is ready to by it.

The Business Fundamentals
These business fundamentals add up to define our job description:

• We must increase our gross sales because that is what drives the rest of the business.
• We must teach our employees to help our customers enjoy their motorcycles. We need to be sure customers have a positive experience every time they interact with our establishment.
• We must process sales in an efficient way, so we don’t have to charge too much for our overhead.
• We must manage our capital outlays so we don’t outgrow our available resources.
• We must make sure that a percentage of the gross sales ends up in our pocket.
• Business is ever changing, so we must continue to learn and change with the times.

We have to work hard each day to make our business the best it can be based on these fundamentals.

In my experience, if something seems too complicated, it is probably a distortion of reality.

If we do all this well, our reward is that we get to participate in the American dream of doing what we love for a living.

Learn From Other Businesses

by Vance Breese

Looking Outside The Motorcycle Industry??
Fortunately most customers aren’t like me. I’m cheap, I know what I want, and what I want is weird. The shops I liked the best were the ones who had all the parts that nobody wanted except me. I didn’t need knowledgeable sales people, and I didn’t care if the place was clean or well-organized. I liked the shops that would let me look through the parts books and wander around in their parts departments. I was always looking for the racer discount.

Supermarkets know how to face the shelves so that it looks like they have more inventory, and why the milk is always at the back of the store

Suddenly, without proper training or a true evaluation of what I was letting myself in for, I found myself the owner of a Harley-Davidson agency in a small town where I didn’t understand the culture of the locals. I knew that to make a living I needed to increase sales by at least 20 percent. Harley-Davidson spent a couple of days trying to teach me how to run a store, but this was 1987, and its approach seemed aimed at spending all of my money on parts. I didn’t have the money to make that work.

I didn’t have time to go to school to learn to be a motorcycle dealer because I needed to know what to do now.

Whom To Ask?
The first people I asked were my customers. They did a lot of different things for a living, and they had to be good or they couldn’t afford such expensive toys. They also understood the local culture in a way that I still don’t.

The first person to help me was the manager of a grocery store. You think we have short margins? You should see what they’re working with. They have elevated self-serve to an amazing level. The grocer taught me how to face the shelves so that it looks like you have more inventory, and he explained why the milk is always at the back of the store.

Then there was the auto-parts store owner across the street. He had to service so many different types of automobiles that his inventory had to work. His parts people had to know their stuff and push a lot of parts across the counter. My own experience with foreign auto parts helped me understand what he was trying to tell me about inventory control.

In my opinion, women know more about shopping than men. It’s an avocation for them, and they know what they like and don’t like. They helped me with the apparel ordering and the merchandising of the store. At first I was afraid to ask because I thought I would be imposing. I discovered that many women have a desire to create the ultimate shopping experience. Each woman is a wealth of knowledge and seems to know how it should be done. They took me to Nordstrom’s where I learned the meaning of true customer service.

Auto parts have to service so many different types of automobiles that their inventory has to work. The parts people have to know their stuff and push a lot of parts across the counter (Photo courtesy of Reinertsen Motors Inc.)

Service is something that continued to puzzle me throughout my retail motorcycle experience. Why do we have mechanics trying to sell service? How much do I charge an hour for my shop rate? What do I charge for? How much help do I have in the service department? I found the answers and more at the local automobile dealers. They seemed willing to share what they had learned. A word of caution here: I feel that doing things the automobile dealer way won’t work in many areas of our business. We have to build a relationship with the customer and teach him how to enjoy his toy. Nobody needs a motorcycle, so it’s our job to keep him interested. This is a concept that is lost on most automobile dealers. On the other hand, the people at some of the enthusiast automobile dealerships can teach us a lot about customer follow-up.
Then there are the other motorcycle shops. This is a tough business and to stay in it they have to be good at something. When I would go on cross-country trips, I’d stop in at every motorcycle shop I could find and try to learn from each one. When I returned, I’d try to evaluate my shop in the same way.

Sometimes I would learn what not to do. For instance, I learned to keep angry service customers from the new bike customers by watching what happened at a shop in Nevada during a big rally. A new bike sale was well on its way to closing and several angry service customers were talking loudly in the showroom about all the trouble they were having with an aftermarket chopper — but they were calling it a Harley. The potential customer got into his BMW and drove off into the sunset. Then two other people in the showroom asked about the reliability of the new Harleys. It was an awkward moment that could have been avoided by having the service customers in the service department instead of the showroom.

Anytime there’s a rally, there are problems with batteries and charging systems because there are people there who only ride their motorcycles at rallies and don’t ride them often enough to keep the ?battery charged.

Marketing, Promotions, And Advertising
Everywhere I look there are signs. Which signs work, and which ones do I forget and why? This was all a new world for me, and another new learning experience.

?Advertising brought up the same questions. I could never tell if advertising worked. I could see that the people who advertised had more business. In my heart, I felt that they advertised because they could afford it, and it didn’t really help. In my head I knew I needed to advertise. I always wanted to quantify how it worked. This is silly. I know that if I didn’t advertise that the business wouldn’t work as well. A local radio station had classes on advertising. They were aimed at selling radio time. There was still a lot to be learned there.

The local dirt track gave me a lot of ideas about how to promote events. The track management has an active e-mail list that they must keep pared down to work. This is computer stuff, but it has made me a lot of money. They understood what it cost to fill a seat.

And then there are the trade publications. I learned a lot from this source, and I still try to read them all. Knowledge is power and no knowledge ?is wasted.
We are all challenged by the same things, and I learned that solutions that work for others are likely to work for me.

I don’t have the money to have every part anyone could want, and I don’t have money to throw away on advertising that doesn’t work. I don’t have a desire to build a monument store. I just want to be in the motorcycle business and have fun. Learning from others is one way I have found to do that.

Getting Back to Fundamentals

By Vance Breese

If Your Customers Aren’t Having Fun, They Won’t Spend Money

A friend called me the other day and told me how badly his shop was doing. He cried about how business had fallen off. Even though he was a friend, I felt better once the conversation was over.

When I went to visit him a couple of days later, his customers all knew of his troubles. It occurred to me that instead of dropping by because they knew they would feel better after spending time in the motorcycle dealership, they, too, were visiting because they felt an obligation.

It seems fundamental to me that the point of a motorcycle store is to make the customer feel better. My friend had lost sight of this because he was not having fun.

I’m not sure he heard me when I told him it was his responsibility to have fun and his job to make sure that his customers had fun.

Taking the Plunge
The condition of his shop reminded me of my early days in this wonderful industry. I had been around the industry for 40 years, but I had been clever enough never to depend on it for my income. Then I took the plunge.

Is there a motorcycle shop around here? Sometimes you have to face challenges that are beyond your control.

April Fools’ Day of 1987 was the day I made my commitment to the motorcycle industry. As I sat behind my desk in the shop I had just purchased, the dark reality of the situation closed in around me.

The person who had owned the store before me looked like a Harley dealer and was at the shop every morning at 8:30. He usually didn’t go home until after?7 p.m. His wife also worked there full time.

He had come to this small town with a lot more money than I had, and nine years later, he was leaving town with next to nothing. I did not want a rerun.
I knew a lot about motorcycles, but little about running a motorcycle store. It occurred to me that I had made an error.

From the outside, the shop looked like what it was: a dream gone bad. The paint wasn’t good, the place still had an AMF Harley-Davidson sign in front that you couldn’t see from the street because it had a tree in front of it. And since the shop was located on a state highway, city officials told me they couldn’t get rid of the tree or change the regulations that kept people from parking in front of the store.

First Impressions
The previous owner had been lulled into a sense of inaction by the success of his friends in the late ’60s, a good time to have a Harley-Davidson shop. But I had bet everything on this place, so I had to take action to turn the business around.

I rolled a motorcycle out front so that you could tell it was a bike shop. This was a farming community, so we had to wash the dirt off it often, but it worked better than any sign I have ever had.

I hired a painter to paint the building, and he used the money to make a down payment on a motorcycle. I hired a homeless guy to police the grounds. Together, we painted the inside and realized how dark the place was, so I bought used fixtures from several stores in town that were going out of business, and installed them. Each morning when I walked in, I would stop at the front door and imagine what a customer’s first impression would be. Then I would try to imagine how to improve it. You only get one chance to make a first impression.

I started asking my customers what they would like to see in their shop, and they not only gave me good suggestions, but helped me turn their ideas into reality. I quickly discovered that there was a lot of talent in my customer base, and I was careful to mention the names of all my volunteers in our monthly newsletter.?We started having weekly rides at night and a monthly shop ride. I found that customers who had better social skills than me were willing to help. It seemed they all wanted to be in the motorcycle business, but they were too accustomed to money to do it.

Business Expansion Plans
Business grew and the shop expanded. The customers felt a part of it.
I found that growth costs money, so I made friends with one of my customers who was a banker. He loaned me the money to buy a computer to manage the ever-changing inventory and keep track of my customers’ needs. I had a customer who was a bookkeeper, and he helped me understand business on a much higher level and provide reports that the banker needed to justify loans.
I hired a second mechanic, and every winter we taught a course on working on motorcycles. Once people found out all the work that was involved in a service, they were happy to pay our new, higher labor prices. But more than raising the hourly rate, we worked at making sure we were actually charging people for the time we spent on their motorcycles. There are approximately 2,000 working hours in a year, and it turned out that we were only charging for about 600 for each mechanic.? During the summer, I would hire a lot kid to wipe the fingerprints off the motorcycles and make sure that when a customer picked up his bike it always looked better than when he dropped it off.

Even mistakes can help attract customers, if you handle them right
We started taking bikes to car shows in the summer and placing them in malls at Christmas. Yes, the motorcycles got a little scratched up, but it was worth it.? We sponsored a bowling team and a girls’ softball team. We gave a free T-shirt to each graduate of the motorcycle safety course. We had donuts on the weekend and always had free coffee.

Personal Connections
We made it a matter of company policy that each customer was to be greeted as soon as he came in the front door, before turning left or right. And instead of saying, “Can I help you?” our employees asked, “What brings you in today?”
We tried to answer the phone before the third ring so that we made a good first impression. And we made sure that the fun we were having came through on the phone.

We created a bulletin board where we would post pictures of our customers. We offered a free 21-point safety check to identify the things the customer needed to buy to be safe.

If one of our customers was considering buying a used motorcycle, we would perform a thorough inspection and provide him with a detailed quote on what it would cost to bring the motorcycle up to snuff.

We changed the look of the store every few months so that it made a new first impression of our customers. We set aside one area for new products, with information on all kinds of seasonally appropriate accessories. And we set up a bargain table to get rid of our mistakes. It is amazing what people will buy if it is really cheap.

All of these ideas didn’t happen at once. Some, I came up with on my own, and many others I got from customers or from looking at successful stores. All of them contributed to creating a different outcome from the one experienced by the shop owner who preceded me. And together, these ideas meant I was able to make a living out of a store where he’d been losing money.

I’m sure you can think of a lot more ideas. But good ideas aren’t worth much if you don’t make them happen.

Remember, your shop can always be better.

Don’t Worry, Be Happy

Customers Just Want to Have Fun

I feel that in the motorcycle business we sell happiness. So what happens when we run out of happiness?

Is this the kind of greeting your customers get when they walk into your shop?

I eventually bought the shop I did because when I first walked through the door I knew it was in trouble: There was no joy.  I could see a mechanic reading a magazine, and a fellow holding down the counter with his coffee mug. There was no greeting. No one asked, “What brings you in today?”

I have tried to remember that experience as I have traversed the rocky retailer road.

In my experience, if a customer is happier when he leaves your store than when he came in, he will also leave money with you from time to time. Happiness is best when it is a shared thing, and people just don’t seem to want to visit—or spend their money—when I am not happy.

Sell Pleasure, not Technology

I suspect that people don’t really want to know how things are going when they ask. I feel that they are only opening the door to talk about enjoyable things. I learned a lot about this by watching John, one of my employees.

John is a retired fireman who loves to ride his motor-cycle. He doesn’t know all that much about bikes, other than that he loves them. I hired John because he was a pleasure to be around, and he loves people. I do not always share this quality.

I remember one day when a customer asked how Harley’s Softail suspension worked. He was not a Softail enthusiast, so I was prepared to explain about the hidden shocks and the hardtail look, when John began to tell a story about riding over the Sierras with seven other riders on Harleys.

He talked about the curves and the fresh air and the vistas. He spoke at length about camping and friendship. After a lot of talking and gesticulation, he concluded by saying, “Three of them were Softails, and the suspension worked fine!”

It reminded me that we are selling pleasure and not technology.

John was also the guy who would run ice cream rides at night, even when it wasn’t really ice cream weather. People would show up because they wanted to share happiness.

In addition, he edited our newsletter to let people know when they could join him in the merriment of these rides. People like to read about themselves being happy and having fun.

Life is Good

I have a bit of a head start in this area because I am basically a happy person. Sometimes, though, unhappy experiences happen even to me (a divorce comes to mind). That is when I really have to work at being happy.

During one of my dark times, I was walking to work one day and I started thinking about all the things I had to be grateful for. By the time I had walked the half hour to the shop, I was singing, and I was ready to take on the customer experience that awaited me. I have made this a morning ritual, and it works to this day.

I live the American dream. I have my own business. People work for me. I am making a living, and most of what I do is pleasant. I have access to motor-cycles, and I am recognized on the street. My life is good.

Working in the motorcycle business is not like working in a hardware store, where the customers are often tackling some home repair project that is an annoyance.

When someone walks into a motorcycle shop, he is pursuing something he loves. Even if a biker’s personal relationships may be troubled, he still loves his motorcycle. If I remember to allow it, that joy and enthusiasm are contagious.

Getting through Troubled Times

Your sign says it, but do your customers feel welcome?

Sometimes our relationships with our motorcycle stores can get a little troubled. Sometimes they don’t provide as much time or money as we feel we need. It takes work to avoid this negative spiral.

I cannot imagine how my days would be if I were in some other industry. Sure, I have given up a lot to stay in the motorcycle business. But I love being around people who love their motorcycles, and I love helping them make that relationship better.

This is why the Internet will never replace the motorcycle dealer. I’m cheap, so I can understand the allure of the Internet. But I also know what is missing: there doesn’t appear to be a lot of happiness on the Internet.

I sometimes have trouble remembering to charge enough to put me in a good mood. If I don’t charge enough, I won’t be able to provide my customer with what he wants, and even I find it hard to be happy when I am broke. Money is not that important until it runs out.

Lessons from Cincinnati

There were two main camps at this year’s V-Twin Expo in Cincinnati. There were those who knew that the economy was in trouble, so they were cutting back on their orders. In the weeks since, they probably have been proven right, because their sales are down.

I am glad the other camp was at the show also. For them, business is growing, because they are selling fun.

They know they are providing their customers with a reason to ride. Their business is growing as the people who forgot that motorcycles are about fun go out of business. Their stores are fun places to visit. They love being in the motorcycle business. They remember to be happy. I find pleasure in this attitude.

Let Your Customers Make You Happy

I watch that show on TV with the abusive father who has a motorcycle shop. I feel that if I treated the people who work for me the way he treats his employees, they would have a hard time being in a good mood. I know I don’t like it when someone makes unreasonable demands on me and then yells at me when I am not able to fulfill those demands. It is interesting to me that people who aren’t even into motorcycles love that show.

Sometimes, people who work for me forget how much fun working is, and I have to remind them they are having fun. I have found this to be difficult, but always worth the effort.

And on those days when I don’t have any fun to share, I will ask a customer to tell a story about his most recent adventure on his motorcycle. If I ask the right person, I find these stories remind me why I am in this business. I don’t have to be the source for all good humor.

Every morning when I open up, I take a moment to soak in the reality of the experience. Most people would love to be in my shoes. And I am grateful for the people who will help to make the day full of joy.

Selling Used Bikes – New Money From Old Bikes

by Vance Breese

When I had a motorcycle shop, I was in a small town that had not had a successful Harley-Davidson dealer for at least 10 years. I tried to make all the parts of it work as though they were separate businesses. Each part of the business needed to carry its own financial weight. There were many parts of being in the motorcycle business that I didn’t understand in spite of being connected with the industry for more than 20 years. I spent more than a little time trying to understand where the costs were and what parts supported other parts. One particularly confusing area was how to make money with used motorcycles. I called all the usual suspects to help, but when it came down to it, it was my money, my customers, and my shop.

I believe that the most fundamental part of a motorcycle business is to have customers ride their motorcycles. If they don’t have motorcycles, they can’t ride them, accessorize them, and get them serviced. I bought my agency April Fools’ Day, 1987, and at the beginning, I could get all the new motorcycles I could sell. At that time, though, the median annual household income was $25,000, so not everyone could afford a new motorcycle.

Know Your Sales Costs

All my capital was being applied toward the store’s growth, so I had a real challenge to find a way to carry a selection of used motorcycles. My first idea was to consign motorcycles for customers. This was not going to expand my customer base, and in my town saving money is a major sport, so people balked at the 10 percent I charged to sell their motorcycles. At the time Harleys were getting stolen at an amazing rate, and I would not hesitate to remind them that advertising to potential customers was also advertising to potential thieves. I insured the motor-cycles, had a sophisticated alarm system, and I could accompany the buyer on a test ride.

It didn’t take me long to realize that it cost me around 14 percent to process a motorcycle sale. I would insure them, advertise them, shine them up, and put them on the showroom floor. I’d charge the customer for the tire or clutch that the bike needed. Most times, I stood behind the customer if he had a problem that we probably should have known about. I found that often times my x-ray vision failed me. With all these issues, I’d found a way to lose 4 percent on every bike I sold.

My justification was that the old customer would appreciate what I was doing, and the new customer was more likely to ride and accessorize his new toy. This was really not a reasonable fantasy. The seller would feel that I should have gotten more money, and that any repairs should come out of my 10 percent. And the new owner often introduced me to an unimaginable level of cheap.

I felt lost and confused. As I so often do, I turned to the automotive business for guidance. I was on Main Street, six blocks from Broadway. Like most small towns, there are lots of small used-car lots and a few new car dealerships. They’re mostly on either Main Street or Broadway. I walked to all of the used car dealers I could find and listened to the people that would help. I’ve found that most good business people are happy to explain the things they know, if they know that I won’t compete with them and that I’ll truly listen. I learned, among other things, about the back end of the used bike business.

The Finance And Insurance Business

In-house financing is a wonderful thing, so I found several people who would finance used motorcycles, including a local bank. Don’t be afraid to ask, and remember that each “No” gets you closer to a “Yes.” I discovered that I could usually get around two percent of the financed amount, and the financier would send me the money as soon as I had the paper work properly filled out. This created another opportunity: insurance. A prospective buyer can’t finance his motorcycle without insurance. Managing everything under my own roof made it easier for the customer and more profitable for me.

I went to a two-day insurance school and got my license. It was wonderful because I didn’t need to buy inventory, I always had the correct policy in stock, and I could “install” it the same day. Usually if I called the customer a couple of months before his policy expired, he’d renew and I’d receive another check.

As my business became more established, I worked out a deal with my bank to floor my used motorcycles. Now I could buy them out of town, make a little money fixing them up, and make money on finance and insurance. The money cost me about 1 percent per month so I needed to get around 20 percent gross margin on each motorcycle to make it work. Now I was truly expanding my customer base.

More Moneymaking Tips

It was also a way to keep my mechanics busy during our slow season. I always sold my parts to the used bike department at full list and paid the full shop rate so that I wouldn’t fool myself into thinking that I was making more money than I really was. I discovered that if I accessorized a bike and gave it a custom paint job, it would sell more quickly and I would have to pay the bank less flooring.

My customers would get excited and buy the accessories for their own motorcycles.

I did quite well with classic motorcycles, and I also found that I could make money by leaving a ratty motorcycle ratty and offering a 10 percent discount on any parts the new owner purchased within 90 days. However, we had to be careful that he didn’t buy parts for all his friends’ motorcycles.

Buying used motorcycles that I could make 20 percent gross margin on became a challenge. I would go out of state to where there was bad winter weather, and buy motorcycles in January and February. I had to pay for the buying trips, which cost 30 cents per mile and $200 dollars per day plus expenses, which I added to the end price of the motorcycle.

Being a little creative with advertising helped a lot. I would make sure that the bikes were well-displayed when we started our shop rides. Whenever I could, I’d take a picture of the bike with the shop sign in the background and use it in the ad.

One day, I discovered prepaid service. It seems that everyone thinks that he’s going to ride 10,000-15,000 miles per year even though my customer average was around 5,700. I found over time that only about half of my prepaid service got used, so I could give people a 20 percent discount at the time of purchase and still come out ahead.

I learned early on not to discount the bikes themselves because there was so little profit in them. If someone really wanted a deal, I’d throw in $100 worth of accessories or an even bigger discount for a prepaid service package. I found that if the buyer’s wife objected to the purchase, finding a way to include clothing for her would help grease the wheels.

When I sold the store, used motorcycles accounted for about 10 percent of my gross profit and often outperformed the service department in net profit. I found used motorcycle sales to be interesting and profitable. I didn’t get my margin on every deal, but overall, learning about used motorcycles and taking the plunge paid for a lot of my toys.

Learning From a Young Shop Owner

by Vance Breese

I had an interesting discussion with a young, successful motorcycle shop owner the other day. I asked him what made his shop make money. He said the main thing was helping his customers get the most out of their motorcycle purchases. They must be taught how to enjoy their motorcycles. They need to be involved in the motorcycle sport.

He said he tries to have at least one event a month. He keeps a close connection with motorcycle rider training. He makes sure that his customers’ bikes are down for the minimum amount of time for service, and he makes sure that his customers know the value they receive from every purchase.
I asked him about profit, and he was quick to respond that maintaining a margin on everything he sells is important. He also said it’s critical to avoid tying up money in inventory that is not working. He is careful to make all the parts of his shop work. He likes bike sales, because a large amount of money comes in without too much effort. He finds finance and insurance to be worthwhile moneymakers, and extended warranties provide a profit center without a lot of work.

Service is a moneymaker if he can keep his mechanics working and keep their efficiency up. Accessories and clothing are profit centers, but inventory control is critical, as is keeping up with trends. He has found that when his parts man is left unsupervised, he will sometimes buy the things he wants instead of what the customers want.

I asked him about advertising, and he was not exactly sure how it worked. He knew if he didn’t advertise, his competitors that did would surpass him. He figured events and promotions into his advertising budget.

I asked him about employees and he said, “You can’t live with them, and you can’t live without them.” He finds turnover and training to be major expenses, and he knows some of the thefts he sustains come from his employees. But he said his employees are what give his shop its personality. He felt that the shop’s personality is a big part of his success.

Over in the corner, I saw a forlorn Sportster, so I asked him how his business was different from a Harley shop.

He said that Harley customers have more money and already know how to enjoy the motorcycle experience. The Harley customer is free with his money and not always looking for the cheapest price. The Harley customer already knows how to ride and has no need for training.

He felt Harley events just happen by themselves and there is little need to advertise them. He believed Harley customers will wait six weeks to get their bikes serviced. And when they get charged $225 for an oil change, they’re happy to pay it. He told me Harley mechanics are more mature and less full of themselves, and that Harley customers are apparently willing to put up with bad service and bad treatment.

He said it’s easy to make money working on Harleys.

Metric Motorcycle Dealer

He believed Harley shops don’t have to look for all the little ways to make a profit because they’re working with better margins and more cash flow. It appeared to him that Harley shops sell everything they can get. Inventory control is not a problem, because there are so few models and nothing ever changes. He felt Harley customers are hungry for accessories, and there is no selling involved. They wear the same clothes they did 20 years ago, so there’s no need to stay on top of trends.

Harley Motorcycle Dealership

His observation was that Harley shops don’t need to advertise, because everyone already knows about them. He believed Harley shop employees are older and more stable, meaning there is less drama and no theft.

I did my best to keep a straight face. This young man was successful, and I felt his perspective had value. I felt he was accurate in what it took to make his own business work. He was just a little off with his fantasy of what the Harley business was like. He may have been pulling my leg.

It seems to me that we all have a lot to learn about the motorcycle business. Most of us are enthusiasts first and businessmen second. All business is driven by sales. All customers are cheap and difficult. All shops are cash-poor. All employees have different agendas from their bosses. It’s always about margins and cash flow.

I learned a lot from this young man. He reminded me of all the things I need to do to stay profitable.

Motorcycles are still about passion, and the motorcycle business is still about business. No matter what we sell, we can learn from each other, and we can be good for each other. Our customers have the same desires and needs, and our businesses require the same essentials for success.