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.

[Stijl Cycles]

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?

Carl, part of the reason is just to ask the question as I felt it would illicit decent responses.
But it honestly is something i am interested in understanding. I have gotten to know builders who are doing one or the other and some of those that are going through dealers wouldn't have it any other way, and some are interested in going direct. having always been a direct tailor made builder, I only know what I know. And how will I know unless I try?
My frames have been very different from one build to the next, always challenging myself and allowing the client relationship drive the design. I have built boring bikes that the client just loves and amazing bikes that the client doesn't realize what they have. I really enjoy designing and have found parts making very rewarding. I get to push my design out and see how it is received. if I did a good job, people order and I just continue to sell that design.
Would that be rewarding with bike design as a whole? I think it might.
I see it working for others...
So maybe i'll give the stock bike thing a go? worse case scenario- it's a waist of time and money?

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.

exactly, but I do think that there is going to be a shift back towards small builders, but I think customers are more interested in the bike than the process of a custom frame IE: they want it now.

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.

I agree with most of what you are saying and believe when it comes to a custom bike, no one can sell better than you. further more you are not selling a frame, you are selling your expertise.
What I am thinking is selling a well designed product, and keeping the custom as a direct sale (but Richard says NO).
With everything that I am doing, I really don't have time to pump out tons of frames. But I can knock out some custom frames. With amount of time it takes me to make the sale / design the bike / hand hold the client / re-design the bike / schedule the bike / order / make the parts / build the bike / etc. I think I could make quite a few stock frames.
The other nice thing about stock frames for me, is that I get to design and use my own parts, and even if the margin on the sale of that stock bike is weak, I still get paid for the parts.
It's kind of a win win?
But of course I want to do both.

[David Tollefson]

The owner of the shop where I used to work has thrown around an idea of having a local builder do a line of stock bikes that he'd stock and name after local "things" (whether it's a place, a culture, whatever). The idea is that the shop itself would have a "brand" that is solely theirs, and he could also contract another local shop or two to stock the bikes that could then also be their own "brand". Kind of like a local open mold (though it would be a fairly simple steel design). I see a couple issues with this as a builder (taking up time away from the custom building, hitting a price point). Probably would be best suited to TIG assembly.

[Stijl Cycles]

The other thing that I have wondered about that I don't recall being mentioned yet.
There are a decent number of long standing custom builders that only use or have traditionally used dealers as their method of sales interaction.
If that method is so fraught with holes, why do they use it?

it's always seemed crazy to me, in particular with custom tailored frames. How do they do it?
To me, making tailored frames for long distance customers over email or phone is hair raising enough. I want meet them and expend the effort to truly understand what it is that I am building for them; with custom frames, the build is maybe 10% of the total investment of time.
But stock frames... I'm just doing the build = 10% of typical frame sale time investment (sure there is time spent working the dealers, so let's call that 30% total).

[Stijl Cycles]

The owner of the shop where I used to work has thrown around an idea of having a local builder do a line of stock bikes that he'd stock and name after local "things" (whether it's a place, a culture, whatever). The idea is that the shop itself would have a "brand" that is solely theirs, and he could also contract another local shop or two to stock the bikes that could then also be their own "brand". Kind of like a local open mold (though it would be a fairly simple steel design). I see a couple issues with this as a builder (taking up time away from the custom building, hitting a price point). Probably would be best suited to TIG assembly.

That's straight up contract building, which will ultimately take you away from your business, unless you want to be in that business.
But, unless your business has you fully committed time wise, it's a decent source of income and a great way to hone your craft.
I would suggest that it is best suited to whatever process you are most comfortable with.

[e-RICHIE]

I agree with most of what you are saying and believe when it comes to a custom bike, no one can sell better than you. further more you are not selling a frame, you are selling your expertise.
What I am thinking is selling a well designed product, and keeping the custom as a direct sale (but Richard says NO).
With everything that I am doing, I really don't have time to pump out tons of frames. But I can knock out some custom frames. With amount of time it takes me to make the sale / design the bike / hand hold the client / re-design the bike / schedule the bike / order / make the parts / build the bike / etc. I think I could make quite a few stock frames.
The other nice thing about stock frames for me, is that I get to design and use my own parts, and even if the margin on the sale of that stock bike is weak, I still get paid for the parts.
It's kind of a win win?
But of course I want to do both.

Batch build the best frames you can design and fab. They're made by you, and have your DNA. Just don't sell them for less because they're made and ready to ship. Or stated another way, don't let them out at wholesale. I gave up on custom in 1978 and only make frames based on my ideal within each size range. Sure, since I pull orders I can make a tube length 2mm longer, or a seat tube lean 1cm forward. It takes no extra time because the design is etched in my head. I consider what I do here as making production frames that are made to order, simply because I couldn't fathom having staff or working any harder than I do. And PS sell only bicycles. That should be a given, or at least a goal. This is a business thread, right?

[Tristan]

If you want to do batch bikes with few options check out Wraith - they (he?) seem to be doing a great job in this area.

There is some discussion on this forum with him as well.

Wraith Fabrication | Handmade in USA steel bicycles

[11.4]

In the other concurrent business thread, I commented that there are different business models for a Richard Sachs, a Sacha White, an Indy Fab, and an All City. Each is equally successful in its own right and each has peers that have failed. Your challenge is to decide which you want to be.

Richard: One builder, 100% custom, rarified marketing, long evolution.
Sacha (just talking Sacha, not SV): Selling a brand new Tesla brand right out of the box with lots of distinctive features and acute attention to detail. Fast evolution, bigger shop (not at first, but now), possibly more production.
IF: Like Moots and a few others, work through stores, distinctive branding, high quality, not the unique provenance of Richard but a pretty bike that rides as well.
All City: Interesting model (now part of QBP for anyone who didn't catch that), offering a roughly $500 frame through dealers with good production values, good paint, good geometry. What an All City doesn't pursue is light weight, or custom work, or super-fine detail, but they do sell a lot of bikes (made in Asia) and make some good money at it without embarrassing themselves as to product quality.

Somewhere in between these basic business models are the Dolans, Serenitys, Estlunds, and so on. All good business models. All different. All the models I name are ones I admire and would recommend without hesitation, would buy without hesitation.

Basic rule: You have to decide what you want to be and then be that, nothing else. One model is all any human, and especially any frame builder, has the wattage to deliver on 100%. Do two business models, neither one gets 100% and both can fail. It's a fight and you have to win. You can win with a second-rate business plan or second rate frame, but you don't win with less than 100% effort. The single most important attribute of business success in a start-up is the ability to focus 100% of your energy and life on it and not let it fail.

The second most important attribute of business success is to be watching your customer even as your torch is on a tube. Every moment of thought is about making it a better experience for your customer. Richard once was building a frame for me and I had this old very early Colnago Super with double-tapered seat stays and small scalloped plugs at the top. I loved them and Richard found the materials and figured out how to offer them to me. I remember a bike for Grant with a RS logo cut into the seat tube right at the top tube junction -- impossibly cool detail that no one would see except the owner. It's things like that. Or Nick's knowing how much I liked one frame from him that when I ordered a duplicate, he still ignored me and chose to make it better. Your job isn't to make frames; it's to thrill a customer (with a frame).

And the third most important attribute of business success is ... not telling all your secrets. You'll have to make do with two. But if you can make those two, you'll succeed.

[e-RICHIE]

And the third most important attribute of business success is ... not telling all your secrets.

Thanks for saying what I won't go on record as saying atmo. Most will never get this ^ even if it's drilled into them. The one that does (you see what I did there, huh...) will.

[progetto]

Don't think you could make money at those prices. I would rather make 12 high margin bikes a year than 50 low margin, but that's me. I'm lazy.

If you want to do batch bikes with few options check out Wraith - they (he?) seem to be doing a great job in this area.

There is some discussion on this forum with him as well.

Wraith Fabrication | Handmade in USA steel bicycles

[11.4]

Thanks for saying what I won't go on record as saying atmo. Most will never get this ^ even if it's drilled into them. The one that does (you see what I did there, huh...) will.

You've said that a hundred times on this forum. For those who would listen.

But it's only the " third most important attribute of business success" because 99% of people don't make it past the first two. And the ones who do are the ones who know #3.