This story originally appeared in the Dealernews August 2010 issue.
$10,000. 300 bikes.
These two numbers figure prominently in the history of Top 100 dealership Road, Track and Trail. First the latter: Before opening up his nonfranchised store in Big Bend, Wis., owner Nick Rank knew that if he could have 300 pre-owned bikes on the sales floor, he’d easily out-inventory his closest competition. The $10,000? This is the amount, cash in hand, he used to start his business.
Now consider $13 million and 600 bikes. Eleven years after opening his store these are the numbers that Rank is looking at. The first number? That’s Road, Track and Trail’s annual revenue. The second? Well, if 300 pre-owned bikes are going to put you at the top of the heap in your market, it’s probably a good idea to double that number to help you stay there.
As with most entrepreneurs, Rank’s success didn’t just fall out of the sky. There were the requisite long hours and popcorn dinners and one-man-banding it until employees could be hired. But in building a business around used bike sales there was something more, something not as easy as placing an order when the new models come out. What Rank has done — and this might be good advice for many dealers — is to learn his market. Backward and forward. Inside and out. Upside and down.
The knowledge that he’s built up over the past decade not only has enabled him to bring on a staff of 28 employees and move into a 19,000 sq. ft. location, but has also given him enough insight to stock an inventory wide and deep — we’re talking multiple brands from multiple decades — and stock the bikes that people want, at the prices they’re willing to pay.
“It’s all in the buying and the pricing, and in the gut,” Rank, 36, says. “You have to know what they’re selling for. You have to know what your competitors are doing. You have to know everything about what everybody is doing. You have to know what you can do to make your money and what you’re buying. It’s not some textbook thing that says what the MSRP is going to be. You have to know it, live it, eat it and breathe it.”
This ain’t no museum
By its nature, the pre-owned bike business is transient — what’s being crashed? what’s being repossessed? what’s coming in on trade? what are private parties selling? what slow-movers do some dealers want to dump? — so nailing down an inventory is like herding cats. It’s also risky. “Sometimes you don’t know what you’re buying and maybe get stuck with a P.O.S.,” he says.
It’s not as if the parts guy can get on the phone with Kawasaki and order something for an ‘87 Eliminator 1000. Add to this the fickle nature of the buying public, and you have a business model that requires work, speed and flexibility. Rank notes that he can reconfigure and reprice his entire inventory in about two days if needed.
Having a pre-owned bike business is also akin to running a museum where the selection runs from a 1979 Honda CB750K to a 1980 custom Shovelhead Harley to a 2008 Ducati Hypermotard. It’s this selection that draws in customers from far and wide. A Yelp.com reviewer from Chicago had this to say about the store’s location: “Don’t cry about this, Chicagoans. If you love your used motorcycles, you’ll drive the 1.5 hours to Milwaukee, hang out for a bit and then do the 20 minutes to Big Bend.”
In addition to his selection being a major draw, Rank says that the speedy service he provides in purchasing a motorcycle helps, too. Because of the broad inventory, he makes sure his sales staff is particularly adept at figuring out which bike suits a particular customer who might be overwhelmed by the offerings. “That’s the only downfall when you have this many bikes. You actually do confuse a handful of people,” Rank says. “You get people who come in here and they’re looking for a V Star, and they leave on a Boulevard. It happens.”
The selection also enables him to meet any customer’s price point or desire, whether it’s the guy on a budget, a gal looking to trade up, somebody else who wants something newer or just a customer who’s looking to trade in a bike he bought from the store for something else.
What, no ordering form?
Back in his first year of business, Rank ran an all-consignment shop — he just didn’t have the cash to put anything into inventory. Then, as things got better, he’d head out in his 1992 Chevy S-10 pickup truck and buy bikes from private parties.
Now, he works mainly with wholesalers who do the street shopping for him. He’s also started doing some dealer trades with dealers who can’t afford to have slow-moving inventory hanging around. Finally, he’s been using the National Powersport Auctions simulcast auctions for the past three years to acquire bikes.
It’s during this buying process that Rank calls upon his knowledge of the local market, especially as margins have started to come down a bit over the past two years. “You have to buy correctly for your region,” he advises. “Some bikes that are going for low [prices] here are gold somewhere else. It’s not about MSRP or NADA; it’s testing and knowing your market and what sells.” On any morning a trailer of 25 bikes has been delivered before the staff even arrives. As the doors open, within minutes each technician has a bike on his lift, going through a 30-point checklist as a safety guide.
A couple of years ago Rank implemented a “must be ridden” policy for all bikes before a customer takes possession. All bikes are tested before they’re purchased, while they’re on the floor and in front of the customer before he or she rides away — snow, rain or shine.
“We make them safe. I’ve got to sleep at night,” Rank says. “We have to use our judgment … Are we going to completely refurbish the thing to look like new? Absolutely not. There’s no money in doing that. If we buy something with a scratch on it, well, it’s known that if you come into this store you’re going to see some stuff that’s rough, some stuff that’s cool. It’s a big selection.”
While at one point the shop used to remove and sell any accessories, it doesn’t anymore. Given the current state of the economy, Rank considers the aftermarket chrome parts and saddlebags and exhaust systems that come in on used bikes as an added value for his customers.
Given that the store makes most of its revenue on unit sales, Road Track and Trail doesn’t do a whole lot of service work. Yes, there are nine full-time technicians and anywhere between 25 to 30 bikes in service at a time, but it’s not a major profit center.
With a huge selection spanning just about every year and every OEM out there, it’s also difficult to run a typical P&A department. The store stocks mostly the basics — jackets, gloves, saddlebags — and has a huge wall of helmets, what Rank calls his breadwinner.
“We pretty much take orders because we’re not a Honda place that can stock only Honda aftermarket stuff. It doesn’t work like that,” Rank says. “We just sold a Akrapovic exhaust for a 2010 Z1000, and the next guy who walks in wants a backrest for something in the ‘90s.”
Financing and used sales
Much like with the rest of the dealer community, Rank felt it when consumer lending went away. In fact, the pullback whittled down the number of lenders he had to work with, especially after his regular, major lenders got out of the game. Rank then discovered that even some banks and credits unions only work with franchised dealers. It forced him to put on a suit and start knocking on doors to find more local lenders, which he did. Although he has fewer lenders than before, the lenders he now has allow him to work with customers with credit scores ranging from 800 all the way down to 400. Flooring? Rank doesn’t even bother. It’s a philosophy that goes back to that first $10,000 that he sunk into the business and grew from there. Why spend money you don’t have on bikes for which you’re not going to be holding the paper?
“Who wants to pay thousands in ‘juice’ every month when you don’t have to?” he asks. “At the end of the year, that number is thousands in wasted money. Also, we need the titles now, not next week when the bank sends me a floorplanned title for a specific bike. What a waste of time. Inconvenient for the customer and the store personnel. … The gotta-have-it-now customer has already left the store.”
Rank believes that this slow, steady and responsible approach to growth has given him a leg up on his competition. “I would have made mistakes if had I jumped into it. I think a lot of guys jump into a new franchise and get buried way in over their heads with money that’s not theirs, and now they’ve got all of these other headaches to deal with.
“Yeah, I’ve got an advantage,” he continues. “I let it grow and I knew the value of money because I started with very little. Some of these guys that jumped into this, they didn’t know what they were doing to themselves. I had nothing to lose but a little money. My story’s pretty rare. I like to preach it because it’s near and dear to my heart.”
The importance of tracking sales
If you haven’t noticed, Nick Rank is a hands-on owner. Sure, the nature of used-bike sales requires him to be immersed in his business, but he’s just that kind of guy. He’s the one who tracks advertising and how many units sold any given week, and he’s the one who does the deposit each day, six days a week (unless he’s on vacation).
“Since I’m still doing the teardowns and deposits, I have my hand on the pulse of what’s going on, all the way down to what it sold for and we paid for it,” he says. “At the end of the month, we have a chart that shows how many motorcycles/ATVs/sleds we sold. We also have a pie graph that shows me where the customers came from with our advertising efforts. This is all useful [to] curve your advertising to what is working the best and you can adjust your prices in real time, not a month later, when it is too late sometimes.”
He does most of his advertising via the Internet but didn’t want to elaborate on his advertising/marketing messages. Suffice it to say that Rank, who majored in marketing in college, recognized a long time ago that the Internet is key. Way back in the dark ages of the Web — the year 2000 — he had a college friend build a website for his store.
“I think most guys have figured that out, and if they haven’t, they better figure it out quick,” he says. “We’ve dumped the money into it, and it paid off every time.”
So at a time in the industry where new units aren’t selling and dealers may be sitting on multiple years of noncurrent inventory, even in the winter when there is a foot of snow and the competition is closed, Rank says that he sells at least a bike a day. He adds that by concentrating solely on the pre-owned market, taking a slow-growth approach and keeping his financial nose clean, he’s put himself in a good position.
“In a better economy we would do better, but in a bad economy we’re doing pretty well,” he says.