Setting The Course For Success

Long-term success depends on forecasting skills, and the ability to interpret and act upon results. This article in our Business Building series lays out the methodology for creating an annual performance plan to enhance store profitability and stability.

Building A Competitive Advantage

Running a bike shop requires a lot of time, attention, detail, and expertise. Knowing what to focus on can help you build a competitive advantage and, ultimately, gain you bigger rewards.

Our previous Business Building articles in Call Up have focused on the regular nuts-and-bolts maintenance needed to drive bike shop success. With this next series of articles, we’re expanding our scope and thinking big picture. We’ll not only provide you with a better understanding of what it takes to give your shop that competitive edge, we’ll be suggesting a number of valuable tools to help you get there.

We’re going to dig deep; we’re going to be thorough. This article will provide you with an overview of what’s to come, so you can look forward to future articles fleshing out each of these practices in fuller detail.

Before we begin, however, please note that even if you’re reading this after you have already done preseason buys, received product, and begun looking ahead to the upcoming season, it’s never too late to learn these principles and start implementing them.

Ready? Then let’s get started.

The Success Story Outline

It goes without saying that the stronger your business practices, the greater the opportunity for success. Over the years, we’ve recognized six business practices that successful shop owners have in common.

  1. Store Brand Clarity
  2. Assortment Choice/Planning
  3. Sales Forecast and Open to Buy Forecast
  4. Cash Flow Forecast
  5. Calendar Alignment
  6. Reporting/Assessment

#1: Store Brand Clarity—Know Your Brand

A clear identity and strong focus will distinguish you from the competition. Conversely, a lack of clear branding will make your identity vague, and an attempt to be all things to all people usually makes an impact on no one. Most importantly though, knowing your brand gives you a priceless tool that can be used for nearly every decision you make as you own and operate your store.

Take the time to determine what you want your store to be. Establish how you plan to communicate and promote it. What brand of store are you? What store are you not? The products you offer and the events you choose to participate in validate your message, announce your presence, and strengthen specific ties in an irrefutable way.

Make sure your staff understands your mission and vision. The story they share with customers and business partners should be consistent and clear. Simplicity and precision aligns people and resources.

This brand is your brand, not your vendors’ brand, not what the sales rep says it should be. You own it, you define it, and you are its keeper. Use your brand to guide you every step of the way.

#2: Assortment Choice/Planning—Supporting Cast In Your Story

Consider what brands and products best align with the essence of your store brand, while keeping in mind the market you play in. What can you personally, passionately get behind—and will these products you choose be profitable? What exists in your market already that you’ll have to compete with, or are there products and services that align with your brand that you could be the first to provide? How do either of these two scenarios have an impact on your store?

In much the same way that store brand clarity offers you guidance, your assortment choices guide your customers toward the message you want them to absorb and have confidence in. The result of vetting your brands and products so they align with your store’s “personality” communicates to your consumer who you are and engages them on a personal level.

#3: Sales Forecast/Open to Buy Forecast—Just Enough Of The Right Stuff

When it comes time to put pen to paper (or finger to mouse), the first thing to know about forecast planning is: forecasts are always wrong.

The reason we forecast, however, is to think deeply about how much of something we can realistically sell. Or, if we’ve sold these things in the past, how much of those sales are repeatable. The result of this speculation is going to drive how much you buy.

The most solid way to ground a forecast is to keep comprehensive track of past and current sales numbers throughout each year. Break the numbers down by brand, and then by day, week, month, and year. Review these results annually and be aware of patterns or inconsistencies. Do the numbers look achievable and can they remain so? Or do you need to reassess?

Once your sales forecast is complete, total it by brand and multiply each total by your previous year’s cost of goods sold percentage. These numbers are important as they yield your actual open-to-buy dollars per brand.

Be forewarned that your open-to-buy might not match a given supplier’s program. Trying to line them up so that you don’t exceed your open-to-buy budget while still getting program benefits—that’s the sweet spot. Overbuy and you’re left stuck with inventory and unable to pay your bills. Order too conservatively and you might be forfeiting valuable discount points that help to drive profitability.

This is where negotiating skills can come in handy. Whenever possible, keep the dialogue open with the vendor so that both of can get what you need.

#4: Cash Flow Forecast—“I’ll Gladly Pay You Tuesday For A Hamburger Today.”

Creating a cash flow forecast isn’t nearly as big and scary as it sounds. Simply put, it’s just a methodical way of planning your cash inflows and outflows.

The cash flow forecast is a calendar-based document that generally starts January 1 of the year you’re entering, or the month that you’re starting. When creating a forecast, start with the cash in the bank on the date that you create it, and then add the forecasted cash inflow that includes your sales, rental revenue, etc. Adding these sums shows you the cash available for the month.

The next step is to total all cash outflows like wages, rent, loan payments, and any other money that the business will have to pay out during month. Subtract the total cash outflows from the total available cash to get your cash flow balance at month end.

From this point on, repeat the exercise each month throughout the year. This helps you understand what your business' cash needs are and allows you to compare actual data against forecasted data so that you can assess accuracy and look for discrepancies.

For example, say the store is not hitting your sales goals (which is your largest source of cash inflow.) With the data you’ve logged, you’ll not only notice it, you’ll diagnose it, and react more quickly. On the other hand, if your store is blowing the forecast apart, you’ll be able to speculate why and use that knowledge to continue generating such strong results.

Cash flow forecasts are all about you knowing your business better. Projecting negative or positive cash balances each successive month allows you to make informed decisions. A negative cash balance might have you planning to tap your credit line, while a positive one might have you paying off a credit line or making investments for a future need.

Meeting and managing your cash flow needs is crucial to business sustainability. Especially in the heat of the season with so much money coming in, it’s not uncommon to hear some shop owners say they’re far too busy to update their cash flow forecast. Yet, time and time again we’ve seen shops fail because their actual financial performance was not understood and cared for. The bubble in the late nineties is a good example of this dangerous mindset.

#5: Calendar Alignment—Synchronize Your Watches

Seasonality, promotions/events, cash flow—they’re all in motion, all the time. Your challenge is to tie them together for easy, daily use.

Align your various business calendars to look for holes, gaps, and spots that put extraordinary stress on the business. It’s important to refer to the calendar of the business' seasonality and not the calendar that lives in your head!

Make an actual commitment to paper for this exercise. To see each month's total revenue, take the cash inflows from the cash flow that you created. If the business is doing things that have or could change its seasonality, those changes should be noted. For example, selling more winter gear, bikepacking gear, winter training classes, etc. are all things that might change your financial results. While these changes should be reflected in the cash flow forecast that comes from the actual sales forecast, new initiatives like these are often overlooked or underestimated.

Once the seasonal calendar is done, compare the cash flow calendar that you created in the previous section. You’ll be able to confirm that seasonality and your projected cash flow line up.

The next step is to cut in the promotion/events calendar. The promotions/event calendar provides a view into what resources like staff requirements, shop van, signs, product, etc. that will be needed to execute promotional plans and events successfully. After all, being the bike shop that does tech support at one event, sags at a second, and provides bike inspections at a third sounds great…except when they are all on the weekend of the store's spring kick off!

The other benefit of dialing the promotion/events calendar is that it points out when your largest cash outflows are. If you can be sure that there will be enough cash left over to cover the month's payables, you can take advantage of additional promotional opportunities.

Calendar synchronization lays out how much is due when, making clear what other resources will be needed or will become available to bring your store’s great plan to fruition. Overlaying the various commitments in staff, cash, vehicles, inventory, etc. can help point out when various calendars are not aligned, or rather, when there are gaps that could put undue stress on the store. This makes it easier for you to find those gaps, fix them, and move on. This might mean saying no to staff requests or cancelling an event that sounded great in November but is no longer possible when May rolls around.

#6: Reporting/Assessment—To Know Where You’re Going, Know Where You’ve Been

Measurement and assessment determine success. They are two independent and critically important activities, and they need to be done without fail.

When it comes to measurement, ask yourself: Did the store hit revenue and expense forecasts derived in the cash flow schedule? Remember, the forecast is your goal. It should be known by store leadership as well as staff, otherwise everyone is lifting weights without knowing how much is on each barbell.

The actual results of the forecast allow you to measure how your store has performed. Measurement is a review of time past. You change future results by changing the actions that create the results. For example, if you tried closing on Sundays to give your staff a break but your revenue numbers fell dramatically and, therefore, did not hit the forecast, then you need to figure out a way to hit those numbers while meeting still your staff's needs.

Measurement allows you to compare and contrast which, in turn, paves the way for assessment. If you are hitting your goals’ mark, don’t just keep it up; figure out what’s working so that you can continue to exceed your goals! If you’re not making the goal, then figure out why so you make a change.  

Once you generate results that make the grade, enter into a simple wash cycle—lather, rinse, repeat. As long as you are hitting your numbers and satisfied with your results, keep the forecasting and assessment cycle going.

All Systems Go!

This article has covered a lot of ground. But by breaking down big plans and goals into smaller components, business practices can more easily understood and executed. Putting these sub plans together, and understanding them, helps you establish practices that will give you better results in sales, management, customer engagement, employee morale, and more.

The year is young. It’s not too late to put a plan together. Get control and visibility into your business while, perhaps even more importantly, you create a greater vision of the future.


  1. Store Brand Clarity
  2. Assortment Choice/Planning
  3. Sales Forecast and Open to Buy Forecast
  4. Cash Flow Forecast
  5. Calendar Alignment
  6. Reporting/Assessment

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