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

[Andrew R Stewart]

Not sure who can build a frame for $200 cost of materials and labor, even the paint job will cost a fair chunk of that. Also not sure who wants to become what is basically a cookie cutter factory. Andy.

[LifeCycle]

Not sure who can build a frame for $200 cost of materials and labor, even the paint job will cost a fair chunk of that. Also not sure who wants to become what is basically a cookie cutter factory. Andy.

If your time is valued at $60 an hour, then no. And "cookie cutter factory" is one way to look at it just like "poor, narcissistic artist" might be another way to look at a frame building start up. It might not be ideal and it might not wind up with a blue ribbon at NAHBS, but it is more secure and it's not for everyone but if someone wants to build frames to some degree and likes bikes and wants to be their own boss and doesn't want to try and survive by slicing off a sliver of a niche market already filled with reputable builders, it doesn't seem like a bad way to accomplish those things.

[dgaddis]

What little I've seen of tubing prices, there's no way you could sell a frame for $200 and make a reasonable living. Even at $15/hr, you're not getting it done.

[Will Neide]

Yea, wrong end of the spectrum in regards to sales and pricing.

@Stijl....

My own thoughts on where I was (am?) planning on placing any "stock" frames. I have tossed the idea around a lot and have lots of pieces moving in that direction, but the plan is not to stock large quantities of frames over large size ranges. My intent is to do batches in maybe 5 and stock them in trusted local shops (or single shop) whom I trust and I know others trust for their high end needs. It would still be "Wilco" frames. Potentially with a "Model Name" but ultimately Wilco's. All high quality frames and finishes. The idea was/is to provide not only frames, but a "Chassis" (frame/fork/post/headsets) for the shop to build off of. Pricing has been an issue. It has to be worthwhile to me and the shop. Also, it can't be super cookie cutter that it devalues my brand. The project would be low key enough so as to not saturate the local scene and still high enough in quality to yield interest while sitting next to $10k Cervelos/Moots/etc. Still local enough that I can answer questions if needed, or pop into the shop if needed.

I have my own list of pros and cons and it's still sitting on the balance as I list more things to it. I put a lot of thought into it but am not married to the idea. The one thing Richard said about not selling for less has been one of my hang-ups. If I can sell them for the same price the shop can, why would I pass on the profit? What advantage would that have for me? If I can sell my own batch of 5 fully equipped, then why not do it? Rody (Groovy) onced mentioned something about maximizing his profits with his holistic approach to design and outfitting his bikes. That's stuck with me. How would putting stock bikes in the shop maximize my profits both short and long term?

I have lots and lots of building to get through, refine, learn before I'm ready to reasonably consider that option, but I don't think planning for the future has any harm.

[MarkC]

There might be a model that works. Our LBS for example is looking to carry a brand or two in addition to the big name box they sell. It is an upscale market and they have customers who want bike number 3, 4, 5 ... And it needs to be different. These customers don't have time, patience, inclination to wait in an effbuilders queue but might go for something nice off the peg. Ultegra build kit, room for 27s....

Think you need to establish the market and number of units to sell this way or you could end up just undercutting yourself.

If it's a model to pursue then run the numbers and form the relationship. Pop out a few 54s and 56s. If they don't sell in a season blow em out in the classifieds and don't lose much if anything other than time. If they do sell you will know if there is a demand and a price point you like. If not, experiment ends.

[steve garro]

and don't lose much if anything other than time.

What else do you have?

If you have that much spare time in a business, then perhaps the entire business model is unsound.

- Garro.

[Eric Estlund]

Time is the asset. Be it the $400 urban bike or the $4000 spec frameset, those are hours you only get to spend once as a business (especially a single operator business).

[Eric Estlund]

This idea, to me, would satisfy a frame builder's desire to build frames without tossing the full need to profit on their abilities as a frame builder

With respect- the nature of the business is to make profit based on ones labor and efforts. Too many folks are giving away work, many to the extent that they ultimately go out of business. I have no problems with folks wanting to build the occasional bike as a hobby (to satisfy their need to build bikes), but I do have professional concerns about people treating their (my) profession like a recreational activity.

I'd recommend folks run the real numbers on their product, from frame materials to power bills to toilet paper. Include the material you will inevitably bin as part of QC, and the time it takes to to that and then rebuild it. Find a sustainable rate ($15 hr is not it). Charge what it takes. My bikes are not inexpensive, but I firmly believe they are a good value for a unique product in the market. They sell for what they need to to keep my lights on and to allow me to live a comfortable, sustainable life (one that is fairly modest, I might add)- the same thing I wish for all of my clients. I don't want to be the starving artist that has to shut down when the money runs out. It's far better customer service to be fair in my pricing and to be around in 10 years when my clients want a new stem.

[Stijl Cycles]

Who else can we pin a tail on here?

It should not be much surprise that bicycle business owners are neither more helpful to new entrants nor more forthright with their rationales when those seeking knowledge and the benefit of experience are presumptuous and/or primarily critical.
Some passionate sounding people in these threads, when they do appear from time to time, have their own ideas which time and experience will eventually prove ill-conceived and unproven.

Maybe you misunderstood?
I think what Sacha is doing is living proof that a well executed and thought out plan can be very successful. X2.
He is a valued customer of mine and I wish him all the success in the world.

[Stijl Cycles]

Yea, wrong end of the spectrum in regards to sales and pricing.

@Stijl....

My own thoughts on where I was (am?) planning on placing any "stock" frames. I have tossed the idea around a lot and have lots of pieces moving in that direction, but the plan is not to stock large quantities of frames over large size ranges. My intent is to do batches in maybe 5 and stock them in trusted local shops (or single shop) whom I trust and I know others trust for their high end needs. It would still be "Wilco" frames. Potentially with a "Model Name" but ultimately Wilco's. All high quality frames and finishes. The idea was/is to provide not only frames, but a "Chassis" (frame/fork/post/headsets) for the shop to build off of. Pricing has been an issue. It has to be worthwhile to me and the shop. Also, it can't be super cookie cutter that it devalues my brand. The project would be low key enough so as to not saturate the local scene and still high enough in quality to yield interest while sitting next to $10k Cervelos/Moots/etc. Still local enough that I can answer questions if needed, or pop into the shop if needed.

I have my own list of pros and cons and it's still sitting on the balance as I list more things to it. I put a lot of thought into it but am not married to the idea. The one thing Richard said about not selling for less has been one of my hang-ups. If I can sell them for the same price the shop can, why would I pass on the profit? What advantage would that have for me? If I can sell my own batch of 5 fully equipped, then why not do it? Rody (Groovy) onced mentioned something about maximizing his profits with his holistic approach to design and outfitting his bikes. That's stuck with me. How would putting stock bikes in the shop maximize my profits both short and long term?

I have lots and lots of building to get through, refine, learn before I'm ready to reasonably consider that option, but I don't think planning for the future has any harm.

Kinda right there with you. Just sussing it out.
The thought that goes through my mind is this:
Maximize Profits = either increase set price vs expenditure or decrease expenditure vs set price.

Just like Eric and everyone else is saying- your time is valuable! Never loose sight of this. Right?!
My time is worth X, whether I am welding, brazing, designing, mitering, on the phone, answering emails, or selling.

So- what is the cost of sale for you?
I have established that the cost of sales for me is close to 70% of my time investment per custom tailored frame.
I love that part, but if I also had some sales for frames on the shelf that I had no involvement in the sale?
Would I accept a lower margin? Is it really a lower margin?
Would you loose some of the custom clients?
I don't know yet.
My guess is that it is pretty close on the average.
I also think that the clients that want a stock bike over a custom are a different customer and you have effectively increased your market.

I still think that doing both is the way to go.

[11.4]

Maybe this is just a display of ignorance, but I always thought it would be interesting to sell production single speed or fixed gear bikes with ability to customize them with paint and component colors right alongside big brand bikes. So carry a full line of whatever brand bikes but instead of carrying the city/commuter/recreational bikes of that brand, a framebuilder would just make their own. I know this promotes unecessary competition, but if specigiandale is selling their fixie to a dealer for $350, and you can make it for $200, why not sell yours for the same price and increase the margin? This idea, to me, would satisfy a frame builder's desire to build frames without tossing the full need to profit on their abilities as a frame builder and could instead piggy back of the marketing and business of the other brand or the reputation as a shop in general. Maybe this isn't as pure and it's not as artistic or something but everyone talks about the importance of a successful framebuilding business being mostly business, how would this not work even though it would be sharing with another brand? Is it just not worth it to build a frame for a few hundred dollars of profit? It seems worth it to ensure your chances of success, but of course I am saying that from the outside.

Others have addressed the question of cost of time. I'd also add the issue of how to compete against the Specializeds and so on of the world. In this model, the dealer is presumably getting some floor planning from Specialized or whoever, plus advert allowances, plus various other promotions over the year. That's how Trek, Specialized, etc. have penetrated the bike shop market so completely and keep their position in those stores. Frankly, once a major brand is in a store, the store is addicted to the economics. A store might switch to another major brand, or add another, but there are still costs to doing so and the major brands want to keep their bikes in any significant store and pay to do so.

To even begin to compete with a Specialized, you'd have to have superb marketing (even if it's a budget program), superb paint and graphics, a very low fully loaded manufacturing cost, and a rapid response time. You'd probably have to provide frames on sufficiently liberal terms that the shop can hope to sell them before they have to pay you. And you can't sell all over town -- just one or at most two shops in town, or they won't like the competition. And if you're thinking about a specialty bike like a fixie, remember that such a bike is only a very small fraction of the bikes an established shop will sell.

If you want to go to shops that don't carry the Treks, Specializeds, etc., you'll have to ask where you fit in their product line and their economics. Frankly, it tends to be the shops carrying the big lines (or at least Focus, Giant, etc.) that will take the risk on carrying Moots or Parlee or (once upon a time) Serotta. Independents can't usually afford to do so.

So, bottom line, you really need to understand the economics of a bike shop before you even think of competing with the major brands or with selling through a local bike shop. Remember, you are up against well-distributed low-priced brands like All City, imported from Asia, as well. Your hourly rate just dropped to $7 if you want to play that game. As Richard said at the beginning of this thread, a custom builder should sell direct. You aren't going to be a craftsman any longer in most instances if you sell to a bike shop; you're going to be pure business, because you can't afford any longer to be the craftsman you may want to be.

[EnginCycles]

Frankly, it tends to be the shops carrying the big lines (or at least Focus, Giant, etc.)

Not sure if you are active in the industry but Giant is very, VERY much a big line. Hardly should be next to Focus.

[e-RICHIE]

Maybe <cut>

We need a first and last name with every post down here in the FrameForum.
Thanks.

[Dazza]

there is some good stuff
but
some ideas, fantasy business models that have many times been proven not work over the years.
This make bespoke bikes stuff is not merchandise that arrived in a shipping container that one can reduce the margins to blow out when it does not move.
LBS are also very fickle. One week you are the flavour, next week you will not be.
Even the few builders around the world who whole sale to shops/distributors struggle to keep going and remain motivated, the up front looks rosey but behind the scenes...................

Over the years I read many suggested business models that the poster has never actually proven
it is just
Thought Ware
not sound advice
Sigh!

How about a list of builders who have been full time for 10-15 years
and have a wife and children, raised a family?
Own the home...........

[progetto]

Why would you want to devalue your own product? Discounting is not a good business model to sustainable profit in my opinion. Whether you sell it or someone else does, you still have to cover the bottom line for the life of the product.

So- what is the cost of sale for you?
I have established that the cost of sales for me is close to 70% of my time investment per custom tailored frame.
I love that part, but if I also had some sales for frames on the shelf that I had no involvement in the sale?
Would I accept a lower margin? Is it really a lower margin?
I also think that the clients that want a stock bike over a custom are a different customer and you have effectively increased your market..

[11.4]

Not sure if you are active in the industry but Giant is very, VERY much a big line. Hardly should be next to Focus.

Sorry, I was really just differentiating Trek and Specialized and some of how they deal with shops. I certainly wasn't comparing Focus to Giant.

[Stijl Cycles]

Why would you want to devalue your own product? Discounting is not a good business model to sustainable profit in my opinion. Whether you sell it or someone else does, you still have to cover the bottom line for the life of the product.

As a bicycle shop owner, I would hope that you don't see your part in this transaction as devaluing or not adding value.
the difference between wholesale and retail in not just a discount.
It's all about cost of sale.
A retail shop isn't just being handed a 50% check that they are sticking in their pocket, they are having to work for their money too.
but you know this...

anyway-
covering the life of the product is a hidden sales cost. You stand behind your product because it is the right thing to do, not because you can charge for it.
In the end the payback is happy clients that keep coming back or talk about how wonderful your customer care is.

like it's been said over and over, your time is valuable- every bit of it.
You need to be making a mark up on materials and subs as well, even if it's just to cover replacing that tube you mitered wrong.
Honestly, if all your profit is coming from the cost of sale side....

[e-RICHIE]

This is a typical internet thread that has gone circular atmo. To make it stick, and answer the OP's questions, we need more ingredients. Hinmaton mentioned pushing food around on the plate. These are questions that would help the meal digest:

1. How long have you been doing this as a full time task?
2. How many frame have you made or sold since opening?
3. Are you working alone, or is there a trained staff in place?
4. Are you selling every "custom" frame you now are making?
5. Would production frame caper be your labor, thereby robbing your time from the "customs", or would this be the work of your staffers?

For the record, I am for the production and standardizing some frame aspects angle, but against the wholesale one.

[LifeCycle]

What little I've seen of tubing prices, there's no way you could sell a frame for $200 and make a reasonable living. Even at $15/hr, you're not getting it done.

There's no way you could sell it for $200. I'm saying sell it for $500-$700 which is what someone of these big companies are selling theirs for except they're dealers are making 33% on the sale.

Ben Jones

[e-RICHIE]

There's <cut>

Please add your first and last names to the FF posts.
Thanks.

http://www.velocipedesalon.com/forum...rum-36866.html