Executive Summary
The PedalWorks Cycle Co. is a new bike shop located in Boulder, Colorado, built as a limited liability company (LLC). Boulder is one of the most bike-friendly cities in the United States, with about 10% of residents commuting by bike compared to a national average of 0.5%. So, its strong cycling culture, outdoor lifestyle, and proximity to mountain trails make it an ideal place for a special bike retailer.
Problem
Cycling is woven into the Boulder culture, but local riders still face some challenges that affect the market. Many bike shops mainly focus on premium road and mountain bikes, so people who need commuter bikes or e-bikes often can’t find the right fit.
At the same time, service is often expensive and slow, especially during the peak season when the waiting time can run for weeks. Finally, customers who want regular operation options, like an estimated tune-up or budget-friendly repair coverage, are not reliable options.
To put it simply, the riders here love their bikes, but they do not always have access to convenience, strength, and long-term support, which they are looking for.
- Commuter and e-bike options are limited. Most of the shops prioritize road and mountain bikes, which leaves a gap in everyday commuters and e-bike demand.
- Repair is expensive and slow. Long waiting times and inconsistent pricing disappoint customers.
- No service support. Riders lack membership-style plans that make the upkeep simple and predictable.
Solution
The PedalWorks Cycle Co. will offer a full-service bike shop that mixes retail sales, professional repairs, and commuter-centric services. The shop will be a specialist in roads, mountains, commuter, and e-bikes, with price points starting from $250 to $7,500.
We will also stock helmets, locks, garments, and accessories. Services include standard repair, advanced e-bike diagnostics, professional bike fitting, and a membership-based maintenance scheme that provides estimated, membership-style pricing for regular customers.
Key to success
Ultimately, the future success of PedalWorks depends on our ability to maintain a high quality of service, differentiate from established competitors, and stay connected to Boulder’s cycling community.
The following factors are critical to ensure its sustainable growth:
- Deliver exceptional quality repairs and fittings that will create strong word of mouth.
- Differentiate through e-bike focus, membership plans, and professional fittings not offered by most local competitors.
- Build community ties with CU Boulder commuter programs, local cafés, and cycling clubs, plus a Boulder Trail & Commuter Map.
- Use Boulder’s high cycling commuter rate and proximity to both urban and mountain riders.
- Retain and develop a skilled, service-focused team that provides a personalized customer experience.
Financial outlook
PedalWorks is designed for sustainable growth. The startup costs $235,000, including $120,000 in bike inventory, $25,000 in leasehold improvements, and $30,000 in working capital.
The business estimates the first year revenue of $650,000, with a gross margin of $260,000. Due to higher operating expenses during the launch phase, PedalWorks expects an initial net loss of $30,000.
However, revenue is forecasted to grow steadily at 8–10% annually, reaching $780,000 by Year 3. At the same time, margins improve, losses narrow significantly, and the company approaches break-even with only a $6,000 net loss in Year 3.
| Year | Revenue | Gross Margin | EBITDA | Net Profit |
|---|---|---|---|---|
| Year 1 | 650,000 | 260,000 | -13,000 | -30,000 |
| Year 2 | 715,000 | 286,000 | -2,000 | -18,000 |
| Year 3 | 780,000 | 312,000 | 9,000 | -6,000 |
PedalWorks’ total startup funding requirement is $235,000. This is allocated to inventory, leasehold improvements, pre-opening costs, and working capital. The business will be financed through a balanced mix of owner’s equity ($100,000, 43%) and a bank loan ($135,000, 57%), ensuring both strong owner commitment and sufficient debt capital to launch operations.
Company Overview
The PedalWorks Cycle Co. is a limited liability company (LLC), located in the city of Boulder, Colorado, a city known for the high rate of bike commuting and strong cycling culture. The shop combines professional repair, maintenance, and fitting services with retail sales of bicycles and accessories. Its attention to e-bikes, commuter solutions, and subscription-based maintenance plans presents it as a forward-thinking approach for traditional bike shops.
PedalWorks operates from 2,000 square feet of retail and service space in Downtown Boulder. The layout is planned to carefully sell, service, and balance the needs of special customers:
- Showroom (60%): Display of road bikes, mountain bikes, e-bikes, and accessories.
- Repair and Services Sector (25%): Equipped with advanced tools, wheel troupes, and e-bike diagnostics.
- Bike Fitting Studios (15%): Professional Fitting Services to improve comfort and performance.
Mission
The PedalWorks Cycle Co. aims to become Boulder’s most commuter-friendly and service-centered bike shop. The company will make cycling more accessible, reliable, and enjoyable for riders and enthusiasts, including curated product lines, specialist maintenance, and innovative membership services.
Ownership and management
PedalWorks is owned by Daniel R. Whitman. He is an experienced cycling professional, with eight years in sales of retail bikes and three years as a certified mechanic. Daniel first managed a Trek Cycle Store location, which gave him direct experience in both sales growth and operational oversight. He is supported by a general manager with outdoor retail experience and a lead mechanic certified by the Barnett Bicycle Institute.
History/Background
While PedalWorks is a new venture, its foundation lies in the founder’s long-standing involvement in cycling. Daniel’s professional background provides reliability with both suppliers and customers. His proven ability to manage store operations, create a supplier relationship, and provide high-quality service reduces the risk of a first-time business launch.
Startup Summary
| Start-up Expenses | Amount |
|---|---|
| Marketing & Branding | $12,000 |
| Insurance & Licensing | $8,000 |
| Total Start-up Expenses (Loss at Start-up) | $20,000 |
| Start-up Assets | Amount |
|---|---|
| Cash / Working Capital Reserve | $30,000 |
| Inventory – Bicycles | $120,000 |
| Inventory – Accessories & Parts | $25,000 |
| Leasehold Improvements | $25,000 |
| Tools & Equipment | $15,000 |
| Total Assets | $215,000 |
| Funding Sources | Amount |
|---|---|
| Owner’s Equity Investment | $100,000 |
| Bank Loan (5 years, ~7% APR) | $135,000 |
| Total Funding | $235,000 |
Objective
Within the first two years, it wants to capture at least 5% of Boulder’s bike retail and repair market. Further, it aims to:
- Enroll 200+ members in the maintenance membership program by the end of year 1.
- Sell 300+ commuter and e-bikes annually by Year 3, positioning PedalWorks as Boulder’s commuter hub.
- Reach $1 million in annual revenue by Year 3 with gross margins near 40%.
- Build brand recognition through quarterly community events (rides, clinics, workshops).
- Secure 5–6 institutional partnerships (CU Boulder commuter program, cafés, gyms, employers) by Year 2.
Industry Overview
According to Grand View Research, the U.S. bicycle market is expected to reach $20.68 billion by 2030, growing at an 8.7% CAGR between 2025 and 2030. There is a large driver of this growth, which is experienced by 25% year-on-year sales growth. This trend is particularly relevant in Boulder, where eco-conscious consumers are actively looking for alternatives to car commuting.
Alongside overall growth, the U.S. bicycle market is divided across several key categories. As shown in the chart below, mountain and all-terrain bikes make up the largest share at about 35%, followed by road bikes (around 30%) and hybrid bikes (about 20%). E-bikes currently account for roughly 10% of the market, while the remaining 4–5% includes cargo and other specialty models.
This breakdown shows that while traditional bike categories still represent the majority of sales, e-bikes are steadily gaining ground as more riders consider electric options for commuting and recreation.
Demographics and Target Segment
Our customer base comes in two main groups.
1) Primary Segment
Adults, mostly professional and external enthusiasts, aged 25–45, with a domestic income between $60,000 and $120,000. This group gives importance to quality, stability, and convenience. Many are prepared for communities and e-bikes as an alternative to the use of cars.
2) Secondary Segment
College students (especially CU Boulders), families with urban travelers, and young children. Students and passengers are value-sensitive, but want reliability, while family is inspired by safety, practicality, and affordability.
Together, these groups create a strong foundation to retain customers in different price points and service needs.
Industry Trends
Major trends that shape the opportunity include:
- To adopt an e-bike for commuting and entertainment.
- Consumers look to reduce the use of the car due to an increasing interest in environmentally friendly transport.
- Increasing demand for value-added services such as bike fitting, maintenance plans, and customization.
Competitive Analysis
The bike retail and service industry is competitive in Boulder, but growing. With one of the highest commuter cycling rates in the US, the local market supports several installed shops, many of which have a loyal customer base and community relations.
At the same time, the demand for e-bike adoption and membership-style service increases, which is inaugurating for new entrants with new approaches.
Local Competitors
Boulder already has several installed bike shops, but each leaves space for PedalWorks.
University Cycle (Boulder, CO): The city’s most famous shop, with a wide inventory and strong community appearance. They have brand loyalty, but their size makes them less individual, and they do not emphasize commuter-centric solutions such as e-bikes.
Full Cycle Bike (Boulder, CO): Positioned around high-end bikes and rentals. Great for serious bicycles, but expensive for everyday use for a student.
Trek Cycle Store (Boulder, CO): Supported by a global brand and offered an extensive selection of Trek bikes. The negative side is a narrow product mixture bound to a brand, which limits the customer’s choice.
Beyond traditional shops, customers in Boulder also have alternative options:
Online retailers like Canyon, Rad Power Bikes, and Specialized focus on direct-to-consumer sales. They typically offer lower prices, but lack local service support.
Malls and retail chains such as REI or Dick’s Sporting Goods draw in casual cyclists and families with their convenience. But the range of repair services is limited.
Used bike shops are popular among students and riders looking to save money, but the quality of bikes and warranty coverage can vary significantly.
Garage mechanics and mobile vans offer affordable, basic repairs that attract customers who value cost over experience.
Competitive Advantage
PedalWorks Cycle Co. will focus on urban passengers, e-bike riders, and mid-range buyers to make a place in Boulder’s cyclist market, often reduced from high-end or brand-specific shops.
It will be differentiated by:
- Serve the fastest-growing customer segment in Boulder with specialization in e-bike and commuter-centric solutions.
- Offering membership maintenance schemes that create recurring revenue and loyal repeat customers.
- Running a unique, in-house bike fitting studio, not introduced by most local shops.
- Balanced product mix, including mid-tier to premium bikes plus affordable gear & seasonal service packages.
- CU Boulder partnerships, café tie-ins, and free Boulder trail maps that build strong local ties.
With these advantages, PedalWorks is well-positioned to occupy market share from high-end competitors and generalist shops, aligning closely with Boulder’s commuter and sustainability-focused culture.
Products and services
The PedalWorks Cycle Co. will offer a well-rounded mixture of retail sales, accessories, repair services, and special offerings that serve both casual riders and serious cyclists. Our focus is on customer-friendly solutions and high-quality service options that set us separate from traditional bike shops.
Main offerings
1) Bike sales
We will offer a range of bikes designed to meet the needs of Boulder’s diverse cycling community:
Road bike ($1,200-$6,000): For serious riders, racers, and enthusiasts who take advantage of the broad road cycling routes of Boulder.
Mountain bikes ($1,500-$7,500): Designed for riders reaching nearby trails in Flatirone and the Rockies.
Commuter and e-bike ($1,000-$4,500): An increased section, ideal for professionals, ideal for students, and environmentally conscious residents discovered options for driving.
Kid’s bike ($250-$800): Providing inexpensive, sustainable options for families, enhancing the next generation of cyclists.
Our selection will focus on mid-tier to premium brands. This will balance affordability with quality to ensure customer satisfaction.
2) Accessories and gears
Cycling is more than just the bike. To maximize sales per customer and support rider safety and performance, Pedalwork will stock:
- Helmets, locks, and lights (average sales $30-$200)
- Cycling Apparel (Jersey, shorts, gloves, and shoes)
- Bike rack and storage solution
- Winter riding kits (fenders, lights, thermal gloves, studded tires)
- Commuter bundles, including locks, lights, helmets, and maintenance vouchers for students.
These products increase the features for both customers and promote overall margins.
3) Repair and maintenance services
Repair and service are essential drivers of recurring revenue and customer loyalty. Services will include:
- Basic tune-up ($85): Adjustment, brake check, and safety inspection.
- Full overhaul ($250): Full bike dishes, cleaning, and reconstruction.
- E-bike diagnostics ($100/hr): Special expertise to support the rapidly growing e-bike market.
By offering transparent pricing and rapid change, we aim to become a go-to repair destination in the city of Boulder.
4) Special services
To separate PedalWorks from the competitors, we will offer:
- Bike Fitting ($150/Session): A professional studio with advanced fitting tools to maximize rider comfort and performance.
- Custom Wheel Building ($200- $400 per wheel): A premium service is not widely offered locally.
- Seasonal Services Package ($200- $500 annually): Preventive care memberships that customers keep returning year after year.
5) Membership-based maintenance plans
Customers will be able to purchase a monthly or annual membership plan, including tune-up, minor repair, and priority service scheduling. The model produces forecasted recurring revenue, promoting strong long-term relationships with riders.
Key Differentiators
While Boulder is home to many well-installed bike shops, PedalWorks will stand out as a bicycle company:
- Pay attention to e-bike and commuter-friendly solutions, align with national urban dynamics, and the strong commuter cycling culture of Boulder.
- In-house professional bike fitting studio, a unique feature among local contestants.
- Membership-based maintenance programs create a dependable service relationship rather than one-off transactions.
Marketing Strategy
The PedalWorks Cycle Co. will create its reputation in Boulder through a mixture of community participation, digital outreach, and customer loyalty initiatives. Since Boulder is already a strong cycling hub, the shop will be focused on positioning itself as a go-to place for e-bike, commuter solutions, and reliable service.
Local marketing
Our physical appearance will be supported by ground-level community efforts. We want Boulder residents to be associated with PedalWorks with accessibility, friendliness, and expertise.
- Sponsor CU Boulder commuter programs (clinics, semester tune-up passes, campus pop-ups).
- Partner with local cafés for “Bike Perks” (discounts with coffee receipts, mini-tune-ups).
- Publish a Boulder Trail & Commuter Map (print + digital) with bike routes, chargers, and tips.
- Join farmers’ markets, group rides, and cycling events to stay visible in the community.
These efforts ensure that from the first day, PedalWorks is seen as more than a store. It’s a part of Boulder’s cycling scene.
Digital marketing
A strong online presence is important to reach both busy professionals and students who rely on quick discoveries and online booking.
- SEO-friendly website with bike service booking, event calendar, and online sales for accessories.
- Social media content (Instagram, TikTok, Facebook) includes new arrivals, customer stories, and cycling tips.
- Google Ads to target high-intent local searches. As well as focus on local search terms: “bike shop Boulder”, “e-bike repair Boulder”, etc.
Promotion and customer loyalty
We will use creative promotion to bring customers back and encourage word-of-mouth referrals. A loyalty program will reward regular service customers with a free tune-up after every five visits.
Our promotions will also follow seasonal campaigns: “Spring Ride Prep” will offer discounted tune-ups and accessories, “Back to School” will target students and staff with commuter packages, and “Holiday Discounts” will keep winter sales moving with gift cards and gear bundles.
Additionally, the maintenance membership plan will let customers get additional benefits, like priority service scheduling and discounts on accessories.
Brand positioning
PedalWorks will place itself as a mid-tier, service-first bike shop. Unlike the big competitors pushing high-end models, PedalWorks will emphasize cheap e-bikes, commuter gear, and reliable service schemes that fit everyday life in Boulder.
Seasonality Insights
PedalWorks’ business activity will naturally rise and fall with Boulder’s cycling season. Understanding these seasonal patterns allows the shop to plan promotions, staffing, and marketing efforts.
During peak season (Mar–Sep), bike sales and service demand are highest; promotions focus on tune-ups and commuter readiness. Whereas in slow months (Oct–Feb), our marketing shifts toward repairs, membership renewals, and online accessory sales to keep revenue steady.
Operations Plan
The PedalWorks Cycle Co. will be open six days a week, Monday to Saturday, from 10:00 am to 7:00 pm. The busiest months will be March through September, when the cycling activity in Boulder will be at its highest level. During this time, the focus will be on bike sales, tune-ups, and seasonal service packages. In the slower months (October to February), the shop will shift more attention to repairs, membership maintenance plans, and online sales of accessories.
The shop will run on a clear daily routine. Mornings will focus on repair drop-offs and service work, while afternoons will see more customer traffic for sales and fitting. At the end of the day, the employees will update the inventory system, review the sales, and prepare for the next day.
The inventory will be managed with a POS system that tracks the stock and alerts staff when stock is running low. The bike will be ordered seasonally, while goods such as helmets, locks, and tires will be restored more often. The company will work with reliable suppliers to balance road bikes, mountain bikes, commuter bikes, and e-bikes. Special tools, including e-bike diagnostic equipment and wheel truing stands, will allow mechanics to handle both normal and advanced repair needs.
Technology will help keep operations efficient. Customers will be able to repair or fit online appointments, while a CRM system will track the loyalty prize and membership plans. A company will support van delivery, mobile repair, and small contracts with local businesses or organizations that use bikes for commuting.
Staffing plan
To run the day-to-day operation smoothly, the PedalWorks Cycle Co. will trust a small but skilled team. Each staff member will have clearly defined roles for sales, repair, customer service, and community engagement.
| Role | Number of Staff | Pay | Main Duties |
|---|---|---|---|
| General Manager | 1 | $55,000/year | Runs daily operations, works with suppliers, and manages staff |
| Bike Mechanics | 2 | $22/hour | Handle repairs, diagnostics, and custom builds |
| Sales Associate | 1 | $18/hour + commission | Helps customers with sales, manages POS |
| Marketing & Events Coordinator | 1 (part-time) | $20/hour | Handles social media, promotions, and community events |
During the busy Season (March–September), we’ll bring on 1–2 extra part-time mechanics to keep up with higher demand for tune-ups and service packages. Sales staff will also be trained to help with fittings and accessory sales during busy weekends.
While in the slower season (October–February), the focus will shift to maintenance plan members, online accessory sales, and marketing work. Seasonal staff hours will be scaled back so payroll stays efficient.
This way, we stay lean in the off-season but fully staffed when customer demand is at its highest.
Management Team
The PedalWorks Cycle Co. is headed by a small but highly competent team, with deep experience in retail, cycling, and customer service. Each member brings a mixture of technical expertise and local knowledge that will help the shop to be a reliable part of Boulder’s cycling community.
Daniel R. Whitman – Founder and Owner
Daniel is an enthusiastic cyclist, with eight years of experience in bike retail sales and three years as a certified bike mechanic. He first managed a Trek Bicycle Store location, where he gained firsthand experience in supplier relations, staff training, and customer service at scale. At PedalWorks, Daniel will oversee the strategy, supplier participation, finances, and long-term development. He will also play a role in ensuring the quality of service and customer satisfaction.
Steven Clark – General Manager
Steven Clark comes from a strong retail background, having relevant experience in several outdoor gear and sporting goods stores. With proven leadership and organizational skills, he will be responsible for daily operations, maintenance of employees, and running the shop smoothly during both the peak and off-season. Steven will also lead the inventory control and customer experience.
Carlos Ramirez – Lead Mechanic
Carlos Ramirez, the lead mechanic of PedalWorks, is certified by the Barnett Bicycle Institute and brings years of experience in handling advanced repair, custom wheel building, and e-bike diagnostics. He will ensure that all service works meet the highest standards and also train junior employees in technical fields.
Megan Turner – Sales Associate
The Sales Associate, Megan Turner, will focus on helping customers find the right bike or gear for their needs. With a commission-based structure, he is responsible for creating strong customer relations and running accessory and bike sales.
Jordan Lee – Marketing and Event Coordinator (part-time)
Jordan Lee will handle community outreach, digital marketing, and in-store promotions. From managing social media channels to coordinating events such as the Grand Opening Ride, Jordan will be responsible for PedalWorks’ brand awareness and local presence.
Advisors/Consultant
In addition to the core team, PedalWorks will rely on two advisors: a local small business consultant (Sarah Mitchell) to guide early growth and an experienced accountant (Patricia Hughes) to provide financial oversight and compliance support.
Together, this team covers all major areas of business, including operations, service, sales, marketing, and finance, ensuring PedalWorks Cycle Co. is established for steady growth and long-term success.
Financial Plan
The financial plan of the PedalWorks Cycle Co. is based on conservative revenue assumptions, industry-standard margins, and realistic expenditure estimates. The startup cost is estimated $235,000, which requires funds through a mixture of owner equity and a small business loan.
Key Assumptions
Average bike sale: $1,800
Gross margin: 35–40% on bikes, 50% on services/accessories
Revenue growth: 8% annually
Revenue Forecast
| Revenue Stream | Year 1 | Year 2 | Year 3 |
|---|---|---|---|
| Bike Sales (60%) | $390,000 | $420,000 | $455,000 |
| Services & Repairs (25%) | $162,500 | $176,000 | $190,000 |
| Accessories & Gear (10%) | $65,000 | $70,000 | $76,000 |
| Membership Subscriptions (5%) | $32,500 | $36,000 | $37,000 |
| Total Revenue | $650,000 | $702,000 | $758,000 |
Expense Forecast
| Expense Category | Year 1 | Year 2 | Year 3 |
|---|---|---|---|
| Payroll & Benefits | $180,000 | $188,000 | $196,000 |
| Rent | $56,000 | $58,000 | $60,000 |
| Marketing & Promotion | $25,000 | $26,000 | $27,000 |
| Insurance & Utilities | $15,000 | $16,000 | $17,000 |
| Misc. & Supplies | $20,000 | $21,000 | $22,000 |
| Total Expenses | $296,000 | $309,000 | $322,000 |
Monthly P&L Breakdown (For Year 1)
| Month | Revenue | COGS | Gross Margin | Operating Expenses | Net Profit |
|---|---|---|---|---|---|
| Jan | $40,000 | $24,000 | $16,000 | $22,000 | – $6,000 |
| Feb | $42,000 | $25,200 | $16,800 | $22,000 | – $5,200 |
| Mar | $55,000 | $33,000 | $22,000 | $23,000 | – $1,000 |
| Apr | $60,000 | $36,000 | $24,000 | $23,000 | + $1,000 |
| May | $65,000 | $39,000 | $26,000 | $23,000 | + $3,000 |
| Jun | $70,000 | $42,000 | $28,000 | $23,000 | + $5,000 |
| Jul | $72,000 | $43,200 | $28,800 | $23,000 | + $5,800 |
| Aug | $68,000 | $40,800 | $27,200 | $23,000 | + $4,200 |
| Sep | $62,000 | $37,200 | $24,800 | $23,000 | + $1,800 |
| Oct | $50,000 | $30,000 | $20,000 | $22,000 | – $2,000 |
| Nov | $38,000 | $22,800 | $15,200 | $22,000 | – $6,800 |
| Dec | $28,000 | $16,800 | $11,200 | $22,000 | – $10,800 |
| Total | $650,000 | $390,000 | $260,000 | $273,000 | – $30,000 |
Projected Profit & Loss (3-Year Annual)
| Income Statement | Year 1 | Year 2 | Year 3 |
|---|---|---|---|
| Revenue | $650,000 | $715,000 | $780,000 |
| Cost of Goods Sold | $390,000 | $429,000 | $468,000 |
| Gross Margin | $260,000 | $286,000 | $312,000 |
| Payroll & Benefits | $160,000 | $170,000 | $180,000 |
| Rent & Utilities | $65,000 | $66,500 | $68,000 |
| Marketing & Promotion | $25,000 | $27,000 | $29,000 |
| Insurance & Licenses | $8,000 | $8,500 | $9,000 |
| Misc. & Admin | $15,000 | $16,000 | $17,000 |
| Total Operating Expenses | $273,000 | $288,000 | $303,000 |
| EBITDA | – $13,000 | – $2,000 | $9,000 |
| Depreciation | $5,000 | $5,000 | $5,000 |
| Interest Expense | $12,000 | $11,000 | $10,000 |
| Net Profit (Loss) | – $30,000 | – $18,000 | – $6,000 |
Projected Balance Sheet (3 Years)
| Balance Sheet | Year 1 | Year 2 | Year 3 |
|---|---|---|---|
| Assets | |||
| Cash | $35,000 | $40,000 | $55,000 |
| Accounts Receivable | $15,000 | $18,000 | $20,000 |
| Inventory | $100,000 | $105,000 | $110,000 |
| Equipment (net) | $40,000 | $35,000 | $30,000 |
| Total Assets | $190,000 | $198,000 | $215,000 |
| Liabilities | |||
| Accounts Payable | $20,000 | $22,000 | $23,000 |
| Loan Balance | $120,000 | $105,000 | $90,000 |
| Total Liabilities | $140,000 | $127,000 | $113,000 |
| Owner’s Equity | $50,000 | $71,000 | $102,000 |
| Liabilities + Equity | $190,000 | $198,000 | $215,000 |
Projected Cash Flow (3 Years)
| Cash Flow | Year 1 | Year 2 | Year 3 |
|---|---|---|---|
| Cash Inflows | |||
| – Sales Receipts | $635,000 | $700,000 | $765,000 |
| – Loan Proceeds | $135,000 | — | — |
| – Owner’s Investment | $100,000 | — | — |
| Total Inflows | $870,000 | $700,000 | $765,000 |
| Cash Outflows | |||
| – COGS | $390,000 | $429,000 | $468,000 |
| – Operating Expenses | $250,000 | $265,000 | $280,000 |
| – Loan Payments | $95,000 | $90,000 | $85,000 |
| Total Outflows | $735,000 | $784,000 | $833,000 |
| Net Cash Flow | $135,000 | – $84,000 | – $68,000 |
| Ending Cash Balance | $35,000 | $40,000 | $55,000 |
Break-Even Analysis
From the Income Statement & Monthly Breakdown:
- Revenue (Year 1): $650,000
- COGS (variable costs): $390,000
- Gross Margin: $260,000
- Operating Expenses (fixed costs): ~$273,000
Contribution Margin Ratio (CMR) = (Revenue − COGS) / Revenue
= 260,000/650,000 = 0.40(40%)
Break-Even Sales (in $)
= Fixed Costs/CMR
= 273,000/0.40 = 682,500
So, PedalWorks needs $682,500 in sales to break even in Year 1.
If we assume an average bike price ≈ $1,000 (as Bike Sales = $390,000 / ~390 bikes est.),
Break-even Units = 682,500/1,000 ≈ 683bikes
In Year 1, revenue = $650,000. This is below break-even ($682,500), so Net Loss (-$30,000).
In Year 2, revenue = $715,000 → above break-even → considerably closer to profitability.
In Year 3, revenue = $780,000 → well above break-even → attains profitability.
Break-Even Point = $682,500 in sales (~683 bikes at $1,000 each)
Currently, Year 1 sales fall short, but Year 2 and 3 surpass it.
Business Ratios
| Ratio | Year 1 | Year 2 | Year 3 |
|---|---|---|---|
| Profitability | |||
| Gross Margin % | 40.0% | 40.0% | 40.0% |
| Net Profit Margin % | -4.6% | -2.5% | -0.8% |
| EBITDA Margin % | -2.0% | -0.3% | 1.2% |
| Return on Assets (ROA) | -15.8% | -9.1% | -2.8% |
| Return on Equity (ROE) | -60.0% | -25.4% | -5.9% |
| Liquidity | |||
| Current Ratio | 7.50 | 7.41 | 8.04 |
| Quick Ratio | 2.50 | 2.64 | 3.26 |
| Leverage / Solvency | |||
| Debt to Equity | 2.80 | 1.79 | 1.11 |
| Efficiency | |||
| Inventory Turnover | 3.9x | 4.1x | 4.3x |
| Asset Turnover | 3.4x | 3.6x | 3.9x |
| Accounts Receivable Turnover | 43.3x | 39.7x | 39.0x |
| Days Sales Outstanding (DSO) | 8.4 days | 9.2 days | 9.4 days |
Funding Needs
The PedalWorks Cycle Co. requires $235,000 in total startup funding to cover leasehold improvements, initial bike inventory, accessories, service equipment, marketing, and working capital. This will ensure that the shop is fully stocked, the service sector is well-equipped, and the business has enough reserves to operate smoothly during its first year.
The funding plan has been structured as follows:
- Owner Equity ($100,000): Founder Daniel Whitman will contribute $100,000 to show personal commitment and reduce the outside debt.
- Bank loan ($135,000): The remaining amount will come from a small business loan, structured as a term loan (7-10 years) and is protected by business property and owner equity.
Use of Funds
Capital will be allocated in the following way:
| Category | Amount | Notes |
|---|---|---|
| Leasehold Improvements | $25,000 | Store buildout, signage, fixtures, bike racks, service bay setup |
| Early Inventory | $120,000 | 60–80 bikes: road, mountain, commuter, e-bikes, and kids’ bikes |
| Accessories & Parts | $25,000 | Helmets, apparel, locks, lights, racks, and repair/service parts |
| Tools & Equipment | $15,000 | Truing stands, e-bike diagnostic tools, repair benches, lifts |
| Marketing & Branding | $12,000 | Website, logo design, digital ads, grand opening campaign |
| Insurance & Licensing | $8,000 | Business registration, liability and property insurance |
| Working Capital & Reserves | $30,000 | Payroll, rent, and operational buffer in the first months |
| Total Uses | $235,000 |
Loan Repayment Plan
PedalWorks will finance part of its startup through a $135,000 small business loan, budgeted at a 7% annual interest rate with a 5-year term. The repayment schedule is structured to ensure that monthly obligations are manageable alongside projected operating cash flow.
Loan Assumptions:
- Loan Amount: $135,000
- Term: 5 years (60 months)
- Interest Rate: 7% APR
- Monthly Payment: ≈ $2,673
- Total Payments Over Term: ≈ $160,380
- Total Interest Paid: ≈ $25,380
Annual Repayment Schedule
| Year | Opening Balance | Principal Paid | Interest Paid | Closing Balance |
|---|---|---|---|---|
| 1 | $135,000 | $19,700 | $12,400 | $115,300 |
| 2 | $115,300 | $21,100 | $11,000 | $94,200 |
| 3 | $94,200 | $22,600 | $9,500 | $71,600 |
| 4 | $71,600 | $24,200 | $7,900 | $47,400 |
| 5 | $47,400 | $25,900 | $6,200 | $21,500 → $0 (final payoff) |
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