Build A Better PowerSports Business

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.

(Not So) Shameless Self-Promotion

Brainstorming Session by Vance Breese and Rick Fairless

Using Events to Bring in Customers
Finding ways to bring customers into your dealership can be difficult anytime. But it’s even tougher in today’s market, when money is tight.

How can you use your limited promotional budget most effectively to increase foot traffic and sales? The answer may require you to look beyond traditional newspaper, radio, and TV advertising to creative ideas like dealer rides, bike nights, open houses, charity events, maintenance seminars, and more. Yeah, it’s work, but you could find that the return on your investment is much greater than what you’re getting now.

Create a crowd: Hosting events at your dealership can bring in more people in one night than you see all week

To help get the thought process started, we offer a new feature called Brainstorming Session, presenting personal tips on important issues from knowledgeable sources.

Industry guru Vance Breese, who’s been involved in motorcycling as a racer, dealer, and, most recently, founder of Santa Maria Software, which produces the Counterman point-of-sale system used by more than 600 motorcycle shops, traces the development of his thinking on the subject. And Rick Fairless, who left behind a highly successful career as a sales rep for a major corporation to open an Easyriders store in Dallas that has since become the Strokers Dallas empire, offers his personal take on dealer events.
Finally, we end with a list of ideas gleaned from successful companies across the country.

Promote Your Shop? It’s a Breese!
During my years as a dealer, I tried to learn from small-town preachers. After the church gathering, they shake the hand of all those in the congregation to make them feel welcome. I found it’s an approach that could work for me, too.

No one needs a motorcycle, so it has to be a fun toy. And one of the most important lessons I had to learn is that not everyone knows how much fun a motorcycle can be.

I have been addicted to motorcycles since I purchased my first one decades ago in Oregon. At the time, you could get a motorcycle license at 14 there, and I would ride through the night to see my sweetheart.

I lived in Richland, and she went to college in Medford, about 450 miles away. I would visit her almost every weekend. I moved on to road racing for 23 years, and I still race at Bonneville. With memories like those, I don’t need to be reminded to enjoy my motorcycle. You probably don’t either.

Many of my customers are not addicts, though. And I have to teach them how to enjoy their motorcycles if they are going to stay involved in the sport. I had a hard time understanding this at first. I would see them purchase a motorcycle in June and not have their 500-mile service until the next summer. Many were too busy being responsible to learn about chasing dreams, so I had to teach that also.

In my early, struggling days as the new owner of a shop that had not been profitable for 11 of the 12 years it had been in business, I used to get caught up in the minutia of the shop, and I didn’t have time to teach my customers to have fun. As the owner of the dealership, I was responsible for making sure there was a gross profit and creating a situation where something was left over to fund my lifestyle.

I have a poor work ethic, so I always try to move tasks off my desk and into someone else’s hands. Once I hired enough people and learned to delegate, I could stay focused on what I can now see is the most important task.

Creating Fun with Events
Every year, in my small farming town, we would have a car show. I would show up with some of my racing motorcycles, along with some T-shirts and leather jackets to sell.

And each time, several local people would say to me, “I didn’t know there was a bike shop in town.” I found this particularly painful, because I was spending 3 percent of the gross on advertising. I would advertise on the radio around Christmas, and I would run ads in the photo-trader magazines.

I was whining about this to a friend who had a shop that had been successful for a long time, and he told me that 80 percent of my advertising budget was wasted. He said he always got better value from public relations than from advertising.

I always try to learn, especially from those who are doing better at chasing their dreams than I am, so I asked him to tell me more. He said that events are the key to getting customers involved with their motorcycles and your shop. He said he put on charity events, rides, open houses, maintenance classes, and a ladies’ night to bring in customers.

That’s just what I need, I told him — more stuff to do and more money to spend. But he told me to get my customers involved and have them do some of the work.

I had already learned this lesson from the dealership newsletter. I paid the editor, John, low wages to make it happen, and it came out on time, every month. I had to buy him a word-processing program and pay for the printing and mailing, but the newsletter was very effective. It had a much better return on investment than any advertising I was doing. I could see that I needed to apply some of the same techniques to events.

I started with evening shop rides. I would write the destination and the time on a chalkboard in the shop, add it to the message on our invoices, and put it on our answering machine with the shop hours and directions.

In the beginning, I found that I had a tendency to want to go too far, too fast, so I had to learn to look at motorcycling through my customers’ eyes. But once I learned that, these Thursday-night rides worked great.

John would write about them in the newsletter, using people’s names and making it sound like it was even more fun than it was. After about six months, John put a notice in the newsletter that we would meet at the shop and ride to a toy run together. A remarkable number of customers showed up, and within in a few years, people just assumed I was involved in running the event. The people who were running it didn’t mind. They loved the extra attendance. And I got a great return on my investment without much effort.

Adding a Charity Ride
After that success, I went looking for other ideas. A shop birthday ride seemed good, but the timing was bad. I had closed the deal to buy the shop on April 1, and that didn’t seem like a good date. But no one seemed to know when the shop had originally opened, so we just made up a date that became the shop’s birthday.? We decided to make this a charity event. John was a retired fireman, so we picked a kids’ burn camp as the beneficiary. Most of my customers who were firemen were happy to get involved, and some of my shop-ride regulars agreed to do a barbecue. All I had to do to reserve a large picnic area at the public park was to ask. Most of the radio stations I advertised on got involved with public-service announcements, and many local merchants donated prizes for our primary fund-raiser, a 50/50 raffle.

The whole thing ended up costing me around $600, and about three times my customer base showed up. Everyone enjoyed a great barbecue and a nice ride. We donated a little more money to the burn camp each year, and we got a write-up about it in the local paper, as though it was a news item. Plus, all those involved felt like they had done a good deed. I love this business.

Expanding the Concept
Based on those successes, we added other events. Among the most effective were the night classes to teach people how to service their motorcycles. They helped people understand how much they were getting for their money.

Most of our customers thought they were just paying for an oil change. They didn’t realize how much stuff got serviced or adjusted, and how carefully we would check over their motorcycles. These events also allowed people to pretend that they knew more than they did. I think that everyone likes that.

I never did a ladies’ night, but my friend, in a much bigger city, had great success with them. He would have a fashion show with both male and female models. He served alcohol, then drove all the women home in limousines he had hired. It was a ladies-only evening, and I heard that he hired a male stripper. It was the talk of the town.

All of these things had a return on investment that was easy to justify on a strictly monetary basis. But they were even more effective because, from the beginning, I got so much help from the customers. It made them feel more like this was their shop when they were able to help with an event.
— Vance Breese

Bikers love to be around other bikers. If you can get the party started, they know what to do from there

The Strokers Guide to Event Success
Hey, y’all. I would like to address this meeting of the Harper Valley PTA … wait a minute, wrong speech. This is about putting on an event at your motorsickle shop. OK, let’s get into it.

The idea behind putting on an event is to make money for the business, and you do that by bringing people into the store. However, people have to have a reason to come visit your business and spend money. Whether it’s an open house, anniversary party, or Marilyn Monroe’s birthday (June 1), having an event will give them that reason to visit and hang out all day.

At my shop, we put on an event every couple of months. Here are some of the things we do to attract people.

For starters, I always advertise the event on the radio. That kinda makes it more legitimate and helps spread the word to more people. We have our Spring Fling party every year around the end of March or the beginning of April, so people always know when it’s going to be. That makes it easier for them to plan to attend every year. We also make it a three-day weekend, so more people will travel to see us.

The way to make a three-day event work is to make sure there are reasons for people to come back each day. We do this with contests. On Friday night, I’ll do a tattoo contest. I own a tattoo shop (Strokers Ink), which makes this easier. But you can work with your local shop for judges and prizes. Saturday, we do a wet T-shirt contest that’s always popular. And on Sunday, we have a bikini contest. We use the crowd for the judges, and they really get into it.

For us, alcohol is another key factor in a successful event. If people can drink a beer while they’re here, they stick around longer and come back the next day. Again, it helps that we have a bar next door (Strokers IceHouse). You may need to get an event permit to serve beer. Just make sure you also get event insurance to cover yourself.

Adding Entertainment
For entertainment, we bring in several bands to play continuously through the weekend. Having live music is important to create that party atmosphere, and you can usually find local bands to play for free or cheap just to get their name out there. We also make sure that we have plenty of gals around for atmosphere.?If you’re trying to create a family-friendly event, think about activities for kids. If people feel like the whole family is welcome, they’ll be likely to spend the day.?We’ve brought in motorcycle daredevils to perform, including a trials rider who climbs over everything on his bike, and sportbike guys doing wheelies and donuts. Last year, we had “Jumping” Jeff Schneider, who jumped over 13 trucks on his Harley. This kinda stuff brings people in and keeps them. If there is a big-name bike builder in your neck of the woods, then invite him out to show off his work.

Inviting Groups
It’s also a good idea to invite some local bike clubs and vintage-bike clubs, or the local antique/hot-rod car club. These guys all love to show off their stuff, and it won’t cost you a dime. Just give them special parking to show off their machines, and these guys will eat it up and talk it up. They will tell their buddies that they’ll be there and that their friends should come hang out as well.
I’d also invite the HOG club and Ladies of Harley groups in your area. Inviting all these people is the easiest way to publicize the event and get lots of people to your shop without spending a lot of money. Bikers love to be around other bikers. If you can get the party started, then they know what to do from there.

Like I said, though, the point is to make money! So once you get these people to your shop, be sure to have plenty of stuff to sell. Load up on T-shirts, sunglasses, bandannas, caps, gloves, belt buckles, and all those quick-impulse items. Decorate your store with banners, pictures, or anything else that will encourage your customers to walk around and not just stand in one spot. I even have the ceiling airbrushed. The more stuff you have to look at, the longer people hang around, and the more money they spend.
While you’re thinking ahead, be sure you set aside plenty of room for parking all the bikes that will show up, and talk to your city’s special events department about any permits you need to hold an event, put up tents, host live music, or serve alcohol. I also work with the Dallas Police Department to provide security — not that you’re likely to need it, but better safe than sorry.

Once you get your event going, it will take on a life of its own and people will come back every year. Hey, I didn’t start my business the size it is now. It grew steadily, and having planned events helped a lot.
— Rick Fairless

And a Few More Additional Ideas for Shop Promotions
What else can you do with promotions to bring customers into your shop? Here are several more ideas borrowed from successful dealerships across the country: 

1. Bring in the reps — Huge dealerships can get the manufacturers to show up at their open houses. You probably can’t match that, but do you have some close contacts with a distributor, an aftermarket company or custom builder in your area? See if they’d be willing to display their products at your event, and offer expert advice or tech tips to your customers.

2. How low can you go? — See if you can get volume pricing on special products from your distributors (particularly those that might be on hand) to pass along to your customers.

3. Everything must go — Put your own clearance pricing on last year’s merchandise that’s cluttering up your display shelves. Move it out to make room for new gear this year.

4. Get it on — Offer special “buy-it-now, install-it-free” deals on select items to spur sales and introduce customers to your service department.

5. Make it yours — Work with local airbrush artists or painters to offer discounts on customizing newly purchased items.

6. Show it off (part one) — Hold bike shows in various categories: customs, everyday riders, vintage bikes, etc. Offer the free use of cleaning products to promote sales. Let your visitors choose the winner by placing quarters in buckets in front of each machine, with the proceeds going to charity. You get a great addition to your event, more customer involvement, and thanks from a charitable organization, all for the price of a few trophies.

7. Show it off (part two) — Does your shop sponsor a race team? Make the bike and rider attractions at your event. People love to look over exotic?racing machines, particularly stretched-out drag racers, and talk to the?athletes who ride them.

8. Choose a partner — Many local radio stations are eager to do remote broadcasts from locations that allow them to come into direct contact with listeners. And that’s exactly what you have to offer. In exchange, you’ll get plenty of pre-event promotion on the station.