July 6, 2009

Framebuilding and economics

I’ve fielded several calls and emails lately from folks wanting to get into framebuilding as a business (ie, not just building a frame or two, but actually hanging out a shingle and selling bikes). I know I’ve opined on this topic before, but this post will be a little bit of a different twist on that same subject.

In short, people are always surprised when I interrupt their questions about welder settings or hole saws and say “forget about metalworking for a while. It’s not important right now.” But this is absolutely true – small businesses rarely fail because the proprietor (in the bike industry or any other) sucked at making bikes, or bread, or painting houses, or whatever. In fact, the starry-eyed lad or lass often is a real stud at their chosen field – which is why all their friends urged them to go into business. So why do something like 90% of all small businesses fail in their first year or two?

Here’s a clue: go read this article about a bakery that’s closing in Longmont.

Notice that the owners blame “the bad economy”, but then later they mention that they “ran the numbers” during a holiday season when sales were RISING, and determined that they weren’t making enough money to pay themselves! In fact, one would have to conclude that they probably NEVER made any money.

That’s the first thing to worry about when considering starting a framebuilding business – you need to figure out what your costs (all of them!) are going to be, and then add a few bucks to be on the safe side, and then decide how much you want to pay yourself. THEN figure out what you need to charge, how many bikes you need to sell, etc.

I guess my main point is this: math is actually useful in real life. For a lot of people, even college-educated ones, it seems that the whole idea of using even basic math (I mean, you don’t even really even need to be able to do more than add/subtract/multiply/divide in this case) is totally alien. I’m not sure what to think of this – but I guess there’s a lot of the same math illiteracy in all the current mortgage/housing disaster stories. Pretty sad.

So don’t be one of those people. Get out Excel, or a calculator, or just a pencil and paper, and use those elementary school math skills. You’ll be glad you did.