OUTSPOKIN’
july 2012
Despite a short season for bicycling, Mike's Bikes produces sales per square foot about four times the North American average. The owners give much of the credit to the NBDA's Profitability Project.
WAY UP NORTH In a small town on the eastern edge of Canada, a three-hour’s drive north of Halifax, is a $2.5 million bike shop. What’s the magic? Numbers. By Chris Lesser
Despite (or maybe because of) New Brunswick’s’s fierce winters, locals there are serious about being active when summer comes around, and Mike’s Bikes in Dieppe is at the center of the action. Dieppe is a town of 35,000 that’s part of Greater Moncton, which has a combined metro population of 150,000. Mike’s Bikes works hard at promoting the sport. The area is home to one of the few velodromes in Canada, and the shop works with it to sponsor events and help grow cycling in the community. In addition to partnering with the Atlantic Cycling Center, Mike’s Bikes puts on bike rodeos several times a month and sponsors its own multidisciplinary race series called The Mike’s Bike Cup, which is comprised of road, mountain, time-trial, track, BMX and ’cross races— and many of the shop’s best customers take part in all six sports.
Additionally, the shop sponsors the Pepsi Cup, a local six-week series every season that sees participation from some 175 kids. The two sparkplugs driving the engine of the business are partners Rick Snyder and Jim Goguen. Snyder has been working in area bike shops since he was a kid himself—he started at the tender age of 11, sweeping the floors. After decades of working up to the general-manager role at another local shop, Bungay’s Bicycles, Snyder, with Goguen, who also worked at Bungay’s, was poised to purchase the business.
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Then he got a call from the then-owner of Mike’s Bikes, inquiring if they’d be interested in buying his shop. Snyder was already in the process of buying Bungay’s Bicycles and politely declined. “Ten minutes later he called me back and asked if he could at least buy me lunch to talk it over. Luckily, I never pass up a free lunch, and before the meal was over I knew we were going to buy the store from him.” Fast-forward several years and Snyder and Goguen have grown Mike’s Bikes from a business doing under $400,000 in annual sales into a $2.5 million powerhouse. The partners did end up buying Bungay’s a few years back also, but only to absorb its inventory. Currently the shop is bursting at the seams of its single, 3,500-square foot location, and the 16,000-square-foot custom retail location that will soon be the new home Mike’s Bikes can’t come soon enough. Business By The Numbers Snyder stresses that the growth curve at Mike’s Bikes came with a complementary—and sometimes steep—learning curve. The primary thing he’s learned in recent years is how to track and therefore adjust his store’s performance by interpreting key metrics. “I worked for 25 years at a cash register with just two buttons: parts and labor,” says Snyder. “Something I’ve certainly learned working with the NBDA’s Profitability Project—the P2 group—is that the numbers really do tell the story of my bottom line; they’re everything. Knowing how to read and interpret the numbers has really revolutionized my business.” Snyder says the P2 program has been instrumental in shaping many aspects of his day-to-day operations, from inventory control to setting sales goals. “When we were working on the floor plan for the new shop, I could send an e-mail to the group and get immediate feedback. Knowing your e-mails are going directly to Chris Kegel (owner of Wheel and Sprocket, Wisconsin) and Mike Hamannwright (Revolution Cycles, D.C.)—I can’t put a price on that.” Actually, the NBDA can, and does, but Snyder says it’s worth the investment, adding that he can’t imagine running his business without the peer-group support he’s gotten from P2.
“Knowing how to read and interpret the numbers has really revolutionized my business.” One important way Snyder has streamlined his business is through using open-to-buy software. “I used to say, ‘We’re out of that bike, let’s order another.’ But this program lets you look at the whole category, and see if you’re over-stocked, under-stocked, or good. Like many stores we were way overstocked, so this helped. I can see we’re out of this particular kid’s bike, but instead of re-ordering I can also see that we’ve got others in the same category that will work.” Using Trek’s Ascend point-of-sale software, Snyder manages day-today inventory by setting min/max levels, and has focused on what’s sell-
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There's no free lunch? Partners Rick Snyder (left) and Jim Goguen owe their multi-million-dollar business to one.
ing and whittling down what’s not to reduce the breadth of the store’s inventory. “We’ve certainly gone down hundreds of SKUs,” says Snyder. “And really, if I have four products on the wall and only one is selling, why would I have these three other hooks taking up space?” Soft goods have been a key growth area for Mike’s Bikes, and an important one to help buoy business during New Brunswick’s long winters—especially with high-end, high-margin lines like Arc’teryx taking up floor space. “I’ve been terribly guiltily in the past of buying clear-outs and going for long margins,” says Snyder, “but I’ve got a great employee now named Johannah Bubar who watches all those categories, and she’s gotten me off the clear-outs.” Thanks to Buber, the policy now is to increase turns. “I cringe sometimes when I see $200 shoes on sale for 30 bucks, but she says, ‘Rick, they’ve been here for five years and have an inch of dust on them. Better to get something from them than nothing.’ And she’s right,” says Snyder. “Before, we’d have only XS or XXL, because we bought on clear-out. Now, instead of 50-percent-off sales racks out front all the time, we’ve
OUTSPOKIN’
july 2012
perceived micromanagement, Snyder says employees have by and large reacted positively to the program, which Snyder uses to regulate bonuses and spiffs. “Sales per hour, units per transaction, who’s selling more or less, add-on units and dollars per bike— we can track it all. Each line has a score and each is rated, so we can look and see the bottom line. Reports are scored 1 to 100, and can go up to 150 if the employee is above target. “For example, last month anyone who got to 110 got a $250 gift card. That’s a same-as-cash gift card, not in-store credit. If you work in bike shop you tend to have plenty of bike stuff. I like to give employees something they can really use. I know one guy used his $250 last month to get a new barbeque grill, and now he’ll remember every time he uses that thing Coming soon: a 16,000 square-foot super store. Trek helped design it, but the sign will say "Mike's Bikes." how he got it—from doing a great job at Mike’s Bikes. “It’s a little less structured in the service center, but everyone wants an opportunity to earn a spiff. Somelowered our SKUs, which in the long run is way more profitable. Plus, times we’ll do daily or weekly labor totals. I might say, ‘If you bust out we have fresher, better products in stock for our customers.” $600 in labor today, everyone gets $50 bucks.’ “We hold onto people year after year, and still have some from seven Scoring Sales Performance years ago when we bought the business. We also have some good uniBeyond inventory control, employee management has become a versity graduates as full-time managers, and a lot of our success comes cornerstone of the store’s growth—and again, the key boils down to from our staff, so I try to keep them involved in the day-to-day decisions. numbers, which in this case come in the form of constantly tabulated “A lot are able to see the numbers, so they know what we’re workEmployee Progress Performance Reports. ing toward, and we spiff a lot. We give out all sorts of spiffs, and pay “Every employee gets a report twice a week, and I try to spend five relatively well, at least in our end of the country here. minutes in the office every week with each staff member so we can go over things like units per transaction and dollar-sales per transaction, and just see which way their numbers are trending.” The EPPR system is fully integrated with Snyder’s Ascend POS system, and spits out real-time, trackable data. Rather than bristling at
“Every employee gets a report twice a week, and I try to spend five minutes in the office every week with each staff member.”
“For spiffs, we’ll often go though our aged inventory. I can discount an old product $50, or put a $20 spiff on it and only discount it $30. That way, employees are incentivized to make the sale, and we don’t have to discount as deeply.” One important line-item on employees’ Progress Reports is the percentage of customer e-mails that are captured at the checkout line. Besides producing local events and grassroots sponsorship, Snyder says e-mail marketing has become an important part of his business.
The service department is clean with clear menus. The owners believe in incentives for all employees, including service techs.
No More Yellow Pages “We still do some radio, but all of our traditional advertising expenditures have taken a nosedive. We went from $20,000 in Yellow Page advertising down to zero,” says Snyder. “Unless it’s a fabulous deal, we’re not interested in print. The funny part is we’ve cut our Yellow
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SPECS Mike’s Bike Shop Dieppe, New Brunswick, Canada Locations: One Square feet: 3,500 (soon to be 16,000) Years in Business: 7 under current ownership, 30 years total Employees: 15 full-time in peak season; 6 in off-season Major brands: Giant and Trek (together 80% of sales), BMC, Cervello, Electra, Intense, Opus Annual gross revenue: $2.5M Web: www.mikesbikeshop.ca
High volume in a small space requires sophisticated inventory control. Mike's has reduced SKUs and increased turns.
ices. So many of our vendors have come to bat and said ‘We want to help you, we want to have a part of the store.’ We’ll have a Trek section, a Giant Section, an Electra section,” says Snyder. The new design will allow for dedicated areas throughout the store to showcase the most exciting products from a given brand. Call it “Concept Lite,” but while Snyder says he’s not afraid to share the limelight with his most important brands, he knows to make sure his own brand is never forgotten. “Make Mike’s the brand—that’s something I’ve really taken to heart from the P2 group, to make sure it’s my brand I’m building,” says Snyder. “Everything in the store, if it says Trek it also says Mike’s Bike Shop somewhere. If it says Giant, it also says Mike’s Bike Shop.”
Pages ads and our sales are up, and because we’re not running sales our margins are up five percent,” Snyder says. “That’s another thing I’ve come away with from the P2—unless we’re clearing out five-year-old shoes, we’re not going to run a blanket sale just so we can run an ad in the newspaper to promote it. Instead we’re going to have the same prices all the time, and back them up with great service, all the time.” Bursting At The Seams The new store will not only give the shop more breathing room, but will let it run more efficiently, too. “We currently have an off-site warehouse, but there are inefficiencies in running back and forth. Just like our clothing racks, every time you have to touch or move a product, your profit goes down,” says Snyder. “We have a fenced-in compound where every day we take out all the repair bikes to make room to work, and then put them back at night. We lose three man-hours a day doing that. We also have a big tented area outside where we display new bikes, and that represents another couple of man-hours of just moving bikes. Every day,” says Snyder. “We did a lot of work with an architect, and with Trek Retail Serv-
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Sales of accessories have driven growth. It may be too cold to ride, but you can still buy a "toy."