IFSM 300 - Final Exam: Virginia Bikes. Case Study.
Virginia Bikes
Case Study
In 1985 Bill Thomas took $6,000 of his savings, borrowed another $4,000
... [Show More] from his best friend, and
opened a bike rental business in Vienna, VA. The rental shop is adjacent to the Washington & Old
Dominion Trail (W&OD) that goes from Purcellville to Old Town Alexandria (45 miles), connects to
the Mt Vernon Trail (18 miles) and ends at George Washington’s Mt Vernon Estate. Bill, bought 10
bikes for his first store. The location has parking, and is near the historic Vienna Inn and a number of
food and drink establishments. He has since opened stores in Old Town Alexandria and Reston, VA,
where he sells, rents and repairs bicycles.
The Vienna store is now Bill’s anchor store, and at 5,000 square feet, it is three to five times larger
than his other stores. Bill estimates he sells around 3,000 new bikes a year. Because of the high
use of the W&OD trail, especially on weekends, he also provides tune up and maintenance services
at all of his stores for the many riders from up and down the trail.
In 2012, Bill leased a store in the heart of D.C., near the Smithsonian Museums and other tourist
attractions. He uses this store to rent bikes to tourists and residents of the city, and does some
repairs to his rental bicycle inventory in the back of the shop.
Although he has always made money, or he would not be in business, Bill has seen a decline in
bikes sales of about 20 percent since 2008. He attributes this to the downturn in the economy and
the growth in Internet sales. However, his rental, tune up and repair business has increased
dramatically. Over the past few years, he realized that he must be more aware of expenses and
decrease them wherever practical in order to preserve profits.
Bill thinks that the one of the most important factors is the weather, but has no data to support that
thinking. On rainy days, there are few customers in the stores, while on sunny weekends all of his
locations are extremely busy. From spring through fall, Bill keeps all his stores open seven days a
week, while in the winter months he opens his stores on the weekend when the weather is good for
riding. Through observation, Bill figures his highest sales occur in May, and that June and
September are his best months for rentals. He also sells many bikes during the holiday season in
December, but in January and February, he often wonders if he should close shop and go to Florida
for a couple of months.
Virginia Bikes grosses between $5 and $8 million annually and earns Bill a comfortable six-figure
income. Each year, he leaves a considerable amount of cash in the business so that he does not
have to borrow money to keep his business going. He sells a wide variety of bikes (from tricycles for
toddlers to sophisticated racing bikes) and accessories such as helmets, speedometers, bike racks,
repair kits, and clothing. Bicycle sales have decreased to account for 25 percent of revenues.
Accessories such as helmets, bike racks, gloves, and locks amount to another 5 percent. Rentals
make up about 35 percent, and repairs make up the remaining 35 percent.
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