Rf=Re+(Re-i)*(DF/CPL). Profitability calculations look pretty brutal, don't they? But they are actually not as complicated as they seem. And they are essential when you start a bike rental business. Want to make sure your project will be profitable? We'll keep it simple, promise!
We are talking about the economic asset turnover ratio, known as “k”. The economic asset turnover ratio is equal to the ratio of... Just kidding! We didn't understand a thing either, but don't tell anyone.
Right, let's move on to real business explanations that are clear and easy for everyone to follow. First, a bit of context. As you know, the bike rental market and the e-bike rental market have been particularly buoyant since the Covid crisis.
- Because soft mobility is strongly encouraged by the authorities (in France, the government has just raised the eligibility thresholds for the bike purchase bonus, to help lower-income households get equipped with bikes).
- Because cycling has kept growing since the pandemic (+ 39% compared with 2019 in cities).
- Because 95% of French people consider the fight against the climate crisis a major issue and half of them believe they have the power to change things, according to a study by L'ADN.
So this emerging business is promising, but whether you are an established rental operator, a new one, a future one or an aspiring one, you need to know the right tricks to make your bike rental business profitable.
1. Know your bikes
Simple, basic, as the French rapper Orelsan would say. But we still want to spell it out. Bike rental profitability starts with a good understanding of this little two-wheeled machine, which deserves to be treated with care. In other words, take the time to understand how bikes work, how they are built and, above all, how to make them last, whatever their type (mountain bike, hybrid bike or e-bike). Needless to say, your effort for the environment does not mean much if you replace your fleet every 6 months. And your bike rental profitability will go out the window too. So here is a recap of the good habits that keep your bikes in perfect condition and improve the profitability of your bike rental business, whether you rent classic bikes or e-bikes.
- When you buy your fleet, choose quality products
- Handlebars, fork, suspension, stem, drivetrain, frame... If you are new to bikes, now is the time to get to know your future best friend in depth. Look at it, strip it down, put it back together and love it!
- Teach your customers about cycling and the right ways to look after the bikes.
- Encourage your riders, again and again, to tell you about any signs of advanced wear.
- Set up an efficient maintenance service so you never miss a small problem.
2. Get your bike rental pricing right
Whatever the business, there is no profitability without fair pricing. You absolutely need to make sure your bikes are rented at the right price. Making a bike rental business profitable obviously means keeping a close eye on your costs versus the revenue generated by renting out your bikes, whatever they are: mountain bikes, hybrid bikes, e-bikes and more.
On one side, you need to add up everything that comes out of your pocket (we know, it's scary): equipment investment, commercial rent, salaries, insurance, maintenance and repair costs.
On the other, you need to make sure that the price of each bike rental is right, bike by bike.
- What is your bike worth?
- How much did you pay for it?
- How many rentals per month do you expect?
- How does your competitor price this service?
- What are you offering? In other words, do you offer a simple bike rental, or a complete experience (guided ride, route...)?
This method takes time, but it must be done case by case to make sure your bike rental business is profitable.
3. Look after your bike fleet with good maintenance
Your bikes are your babies. And they are more fragile than you think. A buckled wheel, a worn brake pad, a broken spoke... The more you extend their life cycle, the more profitable your bike or e-bike rental business will be. So keep a close eye on the maintenance of these little gems to make them last, because it always costs less than a breakdown on a poorly maintained bike.
Rigorous maintenance helps you get the most out of your bikes' lifespan, maximise their resale value and above all keep riders safe and avoid accidents.
Here is a short, non-exhaustive list of all the maintenance tasks to make routine to keep your bike rental profitable:
- Check tyre pressure and general condition
- Check the drivetrain and the condition of the cables
- Inspect the teeth on your chainrings and sprockets, as well as the derailleur pulleys.
- Lubricate the chain and cable housings frequently
- Check the brakes and brake pads
- Carefully inspect the wheels and rims
4. Organise your day-to-day management to make your bike rental more profitable
Let's be honest: the profitability of any business, whether it is bike rental, e-bike rental or selling bidets, also depends, above all, on clear, smooth day-to-day processes.
And that is very often where things go wrong! With a fleet of 10 bikes, you still sleep well at night. With 2,000 bikes, it is a different story! You need to plan ahead for:
- Invoicing
- Contracts
- Deposits
- Handling damage and repairs
- Stock management
- Accounting
- Online bookings
- Online payments
- etc
- etc
- etc
In short, you get the idea. We don't want to labour the point, but bike rental profitability requires a minimum of organisation, if only because rental is very different from selling! One way to secure the profitability of your bike or e-bike rental business, sustainable growth (and peace of mind) is to digitise your business.
This lets you automate all those hellish admin tasks that eat up your time and cause stress, and also avoid errors and unpaid bills. Rental software lets you centralise your whole business in one place, so you immediately get:
- Real-time visibility of your bookings and stock to manage everything going out and coming back (so you never rent the same equipment twice, for example)
- An up-to-date calendar
- Automated invoices, deposits and payments
- time savings
This is the kind of solution, Lokki's in particular, that Julien Eybert-Guillon, manager of Olympic Sport, a ski rental shop in Autrans (Auvergne-Rhône-Alpes, France), used to generate more than 400 bookings as soon as he launched his bike rental business.
“No more daily stress about missing bookings or renting the same equipment twice at the same time. Thanks to Lokki, I don't make mistakes. I have a level of comfort in my day-to-day work that I didn't have before, with a simple interface. With Lokki, I can answer my customers' requests immediately, whether by phone, by email or directly in the shop.”
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