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Utah retailer Park City Bike Demos up for sale

Published September 10, 2018

PARK CITY, Utah (BRAIN) — Park City Bike Demos, a retailer offering rental and paid-demo bicycles that are available for sale, is selling the business's assets for $120,000. The money will be used to pay the company's debtors. While the sale will not include any inventory, it does include a low-cost lease on the shop's 2,800 square-foot space, the business name, website, and other assets. With an asking price of nearly $750,000, previous attempts to numerous parties to sell the business in its entirety were unsuccessful.

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Andre Shoumatoff founded Park City Bike Demos in 2015 in two former bread trucks turned demo rigs that traveled to customers and trailheads to allow riders to demo bikes from several brands before buying. Its model was designed around discounts and extended payment terms that most brands offer for rentals and demo bikes to retailers. The business later moved into a brick-and-mortar store in Park City, providing demos from about 12 different companies, including Felt, BMC, Devinci, Transition, Knolly, Stromer, Argon 18, Faraday, and others.

"The only exception we had to ask of brands is that they allowed us to sell our demos and rentals year round, instead of at the end of the season," Shoumatoff said. "In the beginning many brands were skeptical but eventually they became close partners because we put hundreds, or even thousands of riders, on their bicycles or products, in a truly welcoming environment, combined with Park City's world-class trail network in our visitor-friendly town."

According to Shoumatoff, approximately 25 percent of PCBD's $500,000 in annual revenue came from rentals, allowing the shop to see 46 percent or higher overall margins on its bicycles, well above the industry average. He estimates that year-over-year growth will continue at 27 percent or more for several years, and EBIDTA (earnings before interest, taxes and amortization) shows approximately 16 to 24 percent. Shoumatoff believes this figure is twice the national average or higher.

"People say that high-end bikes cost so much yet no one makes any money. We've proven that retailers actually can make money from the bicycle sales component of their business, and that rental-to-sales can be a key to that once several specific logistical and marketing items are taken into account," he said. "Where we faltered was on cash flow, growing too quickly, lack of a road map, and high costs of building our logistical infrastructure, software, and e-commerce systems, which we designed to power several stores."

While Shoumatoff thought he could raise necessary capital to expand, few investors seemed to be interested in brick and mortar, "although this is where 9 out of 10 bicycles are still sold, and will always be sold", he said.

But Shoumatoff said not paying attention to cash flow is ultimately what bit him in the ass.

Park City Bike Demos sells demo and rental bikes to customers out of its 2,800 square-foot retail space. photo by John Shafer

"When we had money, we spent too much of it building things and figuring things out. I also definitely lacked the core competencies of understanding cash flow and its relationship to an inventory-specific business, and when associates warned me about this, I simply wasn't listening," said Shoumatoff, who also owns a digital marketing agency. "Part of it is there isn't much info out there in the industry about this, but I do hold myself 95 percent accountable. I didn't have the education to understand what cash flow means and that's it's the most critical element."

The shop did not offer service or a deep accessories lineup which are normal profit points for many retailers. Instead, PCBD built its business around several innovative out-of-the box strategies.

"Our joke is that when we founded the business we didn't just drink the Kool-Aid, we drank all of it," Shoumatoff said. "We were on point with trends — vans/mobile, being consumer centric, etc. And we were able to create a mechanism to sell small and medium brands at high volume and high margin and extended terms, and we controlled all of our marketing. Small and medium-sized brands' challenge is lack of marketing resources and we have been good at getting people on their bikes."

More recently the shop also began offering mail order demos, charging $599 for any model for an 8-day test period, including shipping both ways. That fee can also be applied to the purchase price should the customer choose to keep the bike and Shoumatoff said the program was successful even with limited reach.

The business currently has around $500,000 in debt that Shoumatoff is working to pay down by liquidating inventory. The business buyer would not assume any of the debt as a result of the sale. Shoumatoff also said he is open to offers and is available to help new owners through a transition period. He can be reached at andre@parkcitybikedemos.co

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