The Art of Business: an open but serious thread about the framebuilding business

[Stijl Cycles]

My intention of starting this thread is to provide a platform for discourse on the subject of business, specifically the framebuilding business.
A place for people to pose business questions and discuss business ideas with those who have done this long enough to know better.
I feel this topic is under served while being one of the most important aspects of our daily activities.

In 2010 I had the pleasure of attending one of Carl Strong's "The Business of Frame Building" seminars at NAHBS, which was hands down the most vital and impactful seminar I have ever attended.

This is what I hope for this thread, to bring to light the issues and questions that many of us face on a day to day basis. In the end, beyond all the craft and technique we are in this business to provide for ourselves and others or we are interested in getting started in the business. Sure, it's not all that black and white, but I think you get the point.

I am not suggesting that I am a business wizard or have all the answers. I started my first business when I was 25 and I have owned and run retail, wholesale, and service based businesses at one time or another. This only means that I have banged my head against many of these things enough times now, that I have scar tissue and the know how to solve most of them.

So, I guess I will start this off with a question:

I'm interested in knowing more about dealer network sales vs. direct to market sales. I chose direct to market as a custom builder, but am recently interested in developing stock models and toying with the idea of changing the sales approach on those models. I have tested the waters and found interest, but realized that I do not know the first thing about how this type of business is set up. What's a typical margin? What's a good deal, what's a bad deal? Are MOQ's even applicable? What should I be angling for in the negotiation? Do dealers require exclusivity? If so, what's typical or reasonable to expect? Is selling bikes on consignment a good idea or a bad idea?

[e-RICHIE]

I started out as a dealer-only supplier (so I could build frames and race, rather than channel my inner Bijan...) and that ended after maybe 10 years. I learned many things, perhaps the most important among them being this: you can be wholesale or you can be retail, but you can't be both atmo. Unless what you make is batch built, repeatable, (hopefully) pre-ordered in numbers, and have a contact, then every unit or most of them will be unique. You can't and don't discount unique, especially in the internet era. We're accessible, much more so than in the 1970s when I was a to-the-trade-only maker. To that end, every second you spend doing the dealer's work (answering email that should be questions from clients to them, NOT to you is just one example I'll use now) is wasted forever. If you're job shop doing production work, wholesale is fine. For one man shops, small suppliers, and independent minded cats, don't give away a single cent to a dealer.

Here's an old ad from when I had about 40 dealers nationwide. We decided to produce these inserts in VeloNews for my more active resellers. That era ended - thank goodness.

[Stijl Cycles]

So... the idea of doing wholesale on stock frames but keeping custom as retail is bankrupt?
No cake and eat it too?

[e-RICHIE]

So... the idea of doing wholesale on stock frames but keeping custom as retail is bankrupt?
No cake and eat it too?

Nope. Never. No way atmo.
And since is the internet, I'm sure someone will disagree with me
Morph into a 40 person production line with pre-this and pre-that and pre-these (from your supply channel, too) and maybe we'll talk.

[Will Neide]

So... the idea of doing wholesale on stock frames but keeping custom as retail is bankrupt?
No cake and eat it too?

Maybe do a spin-off line/brand? I would think you'd need manpower for that though, and a very strong parent brand. At that point, I think it's a whole new ball game.

[Carl S]

Hey Hinmaton, what goals compel you to consider building stock and selling via retailers that aren't being met by building custom and selling direct?

[ldamelio]

Maybe do a spin-off line/brand? I would think you'd need manpower for that though, and a very strong parent brand. At that point, I think it's a whole new ball game.

Hasn't this been done to an extent? Breadwinner (Ira Ryan and Tony Periera) and Sacha White with Speedvagen as a "mass-produced" Vanilla? Speaking from the perspective of the target consumer, not sure there's a huge potential market for this even though the niche exists. Such a market would be watered down in most retail shops in an era where metal bikes are not the latest and greatest in the eyes of the general riding public.

[Will Neide]

Hasn't this been done to an extent? Breadwinner (Ira Ryan and Tony Periera) and Sacha White with Speedvagen as a "mass-produced" Vanilla? Speaking from the perspective of the target consumer, not sure there's a huge potential market for this even though the niche exists. Such a market would be watered down in most retail shops in an era where metal bikes are not the latest and greatest in the eyes of the general riding public.

Those two examples were what I was thinking.

[e-RICHIE]

Here's another thought before I go into the pain cave atmo. Keep in mind I'm a road-centric cat so this may not apply. Find a way to make a good deal of your one-offs (or customs) en masse (that's French for a shitload at a time). Either do a run of main triangles for a 57cm and add the stays later. Or miter every seat tube and down tube for the next 50 units. Or braze up all the chainstay assemblies for the year in a week. Etcetera. I think the one-man, one order, one-frame-at-a-time thing is overrated and a bit of a fantasy. There are many ways to use batch building techniques so that every time you begin an order, the first 20% of the labor is already done. That's how you make custom frames and sustain a business. An other way to phrase this is to say, Hinmaton - investment cast yourself. There's only so much romance in the small and articulated operations. The message here is to use the efficiencies for your signature work rather than a watered down, price-point model.

[Tristan]

There aren't going to be many shops who want to stock your bikes/frames. Sorry but it's true. Most / many shops don't own their bike inventory - it's all part of the contact they have with Trekspecigiant. The bikes arrive in a box, take 20 mins of low-skill labour to have assembled, and then they sit on the floor. Then a customer comes in who has been reading Road Bike Action's Bike Buyers Guide and is comparing the rear derailleur on this $1000 bike with the one on the competitions $1050 bike to see which bike will shift better (because we all know that the rear derailleur, and rear derailleur alone, determines how good a bike is)

So then a low-skill worker spends a bit of time talking to the customer and sells him a bike. Yay! Bills get paid, the workers get paid, and a small amount of profit is generated.

Selling bespoke or semi-bespoke frames is a totally different kettle of fish. There are only a handful of shops worldwide which can do this effectively - it requires capital, skilled workers, and a totally different focus to selling Trekspecigiants. When times are tough the shop owner / manager is going to sell the Trekspecigiant which makes more margin for less work to the customer. Consuming 20 hours of a salesperson's time pricing and then re-pricing various options (hey, it's a custom bike) and then requiring 5 hours of skilled workshop time to assemble the bike from 22 individual small boxes won't sound attractive to most shops.

But the worst bit about a shop selling your bikes/frames is that you're not. Talking to you, getting your advise, translating my needs as a customer into the frame you're going to make...that's what a custom frame is all about. Don't murder that by sticking a shop between you and the customer.

[11.4]

Hasn't this been done to an extent? Breadwinner (Ira Ryan and Tony Periera) and Sacha White with Speedvagen as a "mass-produced" Vanilla? Speaking from the perspective of the target consumer, not sure there's a huge potential market for this even though the niche exists. Such a market would be watered down in most retail shops in an era where metal bikes are not the latest and greatest in the eyes of the general riding public.

On this particular point, I don't think Sacha started SV to make more money. He had huge demand, he knew that there were people who might not design like he did but who could build like he did, and he saw himself more as a design house than a frame builder. Big important difference.

Plus, he had a ridiculous waiting list and too many people had his cell number. He had to do something.