Since we are mildly obsessed with all things bicycle related, from bike price guides, stolen bike economics and catching bike thieves, we thought we'd start there. How do you go about starting a bike shop? Lucky for us, we knew some folks we could ask.

HUCKLEBERRY BICYCLES

Around the same time we started Priceonomics, some of our friends launched a new bike shop in San Francisco in the Fall of 2011. There isn't exactly a shortage of bike shops in San Francisco, so it certainly wasn't clear this was a slam dunk good idea. Even more interesting, they decided to open their shop in one of the "worst areas" in America - San Francisco's Mid-Market District. Amidst the drug addicts and strip clubs, could you sell speedy commuter bikes and stylish cycling pants?

Huckleberry Bicycles was started by three friends, Brian Smith, Jonas Jackel and Zack Stender. Brian was a corporate lawyer. Like all corporate lawyers, Brian was miserable (seriously, are any happy?) and wanted start his own company. He had been friends with Jonas since their college days at Grinnell. Jonas was an experienced bike shop guy and he recruited another bike professional, his friend Zach to be the third founder.

The founders scrounging for wood they could use in their store.

We sat down with Brian Smith for a beer to talk about the start-up costs and economics of starting a bike shop. Here is their entrepreneurial story.

THE START-UP COSTS



On day zero when Huckleberry was still a concept, they calculated they needed $300-$350K to get started if they managed their costs aggressively and did a lot of the work themselves. That amount would allow them to find and renovate a retail spot, give them a budget for initial inventory, hire a first employee, and provide a buffer to last at least a year.

Because two of the founders were former bike shop employees, they had a fairly accurate idea about what the costs would be. They projected they'd need a 2,000 square foot store and the rent would be $6-8K per month (they only targeted less expensive neighborhoods). Renovating the store would cost about $100K (they would do most of the work themselves). The initial inventory to get started would be about $75K, and $25-50K would cover miscellaneous expenses. They left themselves $100K as a buffer so they could confidently hire a fulltime employee to run their service center. As it turned out, their actual expenses were in line with their initial projections (nice work!).

The founders would put in a small amount of initial capital but the vast majority would be financed. They considered bringing in additional equity investors, but ultimately decided they were looking for such a little amount of capital that it didn't make sense to give away more of the company.

2010 was a tricky time for a new small business to raise money from a bank. The company was an unknown quantity with no financial history or assets for a bank to review. At the same time, the founders were willing to personally guarantee the loans and had good credit and personal assets. A loan would be critical because no landlord would give them a lease without the loan in place first. At the same time, without a lease the bike shop was just an esoteric concept that would be difficult to fund.