How to start your business with the appropriate bike-sharing business plan?

How to start your business with the appropriate bike-sharing business plan?

“It is a rapidly growing global phenomenon: bikes of different breeds zipping through cities, being picked up and deposited at will. They belong to companies, not members of the public. The future of cycling could be sharing, not owning one,” wrote The Bike Europe, source of industry news, data, and analysis for the e-bike and bicycle industry’s decision-makers, at the start of this year. And the pandemic hasn't changed the situation significantly. 

According to a recent eight nation survey Oliver Wyman conducted with approximately 6,000 respondents, 44% of riders said they would be willing to increase their dependence on the service (shared vehicles and ride-hailing) in the future. 34% said they planned to use it as much as before the pandemic. 

Accordingly, there is a pretty big interest in starting a business based on a bike-sharing service. Every business should start with a detailed business plan. Here, we are going to explain how to create a business plan that it would be appropriate to implement in your business.

Mind the differences

If you are a newcomer or even if you have ride-sharing business experience, the first thing to remember before preparing a business plan - every vehicle sharing model is specific and has its own differences to keep in mind. 

In regard to bikes, it is important to remember that users are usually willing to take the bike from one docking station and return it to another. Sometimes, it is located on the other side of the city. So the service provider should calculate capacity, as well as vehicle availability in the most popular parts of the city during rush hours. That might be crucial. 

Know your customer

Before taking further steps and making any decision you must know your audience. So it is the right time to do market research. The first thing to do is to define the characteristics of your customer by identifying:

  1. Age - what is the age range of your customer more likely to use your services? What group of customer generations do they belong to? For example, people born in the mid-to-late 1990s and the early 2000s are referred to as Generation Z. There are some characteristics that identify their behavioral patterns, so you already know what they might and might not like. 
  2. Gender - do you plan to communicate with men, women, or both sexes? There are differences.
  3. Marital status and family - it might influence how the person is moving through the city. For example, if she or he must take into account the plans of their partner while scheduling their everyday activities.
  4. Location - what are the most likely points which your potential customer is moving between in the city?
  5. Income - how likely they are willing to use bike-sharing? And how much they would be willing to pay for the service?
  6. Language - what language are you going to use to communicate with your audience? And what languages you should make available on your app.

Usually, several groups can be identified according to these characteristics. The next step is to find people that are representing each group, talk to them and test your hypothesis and assumptions towards them. 

You can also calculate quite precisely the size of your target market. You can find it out by calculating the TAM, SAM, and SOM. TAM is the total available market for the service, for example, the total amount of users. SAM is a serviceable available market in the area you have chosen to operate. SOM is a serviceable obtainable market - a portion of the available market that you are willing to serve.

Choose what suits you best

After you have defined your target market and potential audience, you may start to consider what works best for your customer. There are three options to choose your bike-sharing business from and to put into your bike-sharing business plan:

  1. dockless bike-sharing - bicycles are freely available to potential users and they are not located at docking stations. Vehicles can be unlocked using a mobile app and afterward returned to a particular bike rack or even left along the sidewalk. This model is more suitable for tourists and other short-term use cases. Usually, dockless sharing services offer single rides for a small fee, for example, $1 or monthly fees for continuous use. The biggest risk of this model is high operational costs, as well as a bigger risk for vandalism or damage to the bikes;
  2. station-based bike-sharing - bikes are into docking stations and users can unlock them to have a ride. In addition, users must return the bike to the same or another docking station. Providers of this model usually offer payment of a flat membership fee plus the fee for the amount of time spent on the road. This is a good choice for the business due to low operational costs for maintenance or relocation. However, dockless bikes are becoming more accessible so there is a risk that a potential user will choose the service with no strings attached rather than one where he has to follow certain rules in terms of the place to leave his bike; 
  3. corporate bike sharing - in this case, the service provider takes care of the maintenance and relocation of bikes, if needed, but bikes are owned by the corporation. Most likely, the owner will make bikes available to its employees or use them as a magnet for their business, for example, if the company additionally owns a hotel or entertainment park. This model is the best for any operator. The only and quite significant risk is that the corporate partner can decide to leave this business at any time.

To sum it all up, the dockless bike-sharing model is more convenient for users but involves higher risks for service providers. Station-based bike-sharing is less risky for the service provider, but not as convenient for the end-user. So while making the bike-sharing business plan, the choice should be made depending on the other market players and the risks you are willing to take. And if you have a corporate partner, who is willing to buy bikes and you have to operate the fleet - do it, but remember that you can be left alone at some point.

Calculate all costs

The most important part of the business plan is to find a balance between revenue and costs. If you haven't had a ride-sharing business previously, you would be wise to understand and consider all costs that you will have to cover with your revenue stream. Here are the most important positions you have to think of:

  1. vehicle purchase costs - it is recommended that you start with a small fleet and test your business model. However, you will need a first investment to purchase your fleet. And keep in mind that after some time vehicles should be changed, so consider including depreciation costs in your bike-sharing business plan;
  2. IT costs - vehicles are just part of the business. The other part is software and apps that allow people to rent a vehicle and you run your bike-sharing business. You can develop the software from scratch. However, there are already appropriate ready-made solutions in the market that have all the functions you might need. For example, ATOM has been operating on the global market since 2018 and has all the expertise you might need;  
  3. marketing costs - what is the budget you are ready to invest so that people are informed about your service? Consider all options, for example, social media, local media, your own media (web site, newsletter). Think of the bonuses that you can offer to the client, for example, free rides. However, keep in mind that every bonus reduces your profit margin. Average statistics for fast-growing companies indicate that they invest 10-20% of turnover on marketing;
  4. maintenance costs - proper service should be provided to expand the vehicle’s lifecycle as well as to provide clients with the perfect service. So you will need a team of people that can check vehicles every day all over the city;
  5. costs for the customer support - your customers will look for options on how to contact you if they have questions while starting to use or using the service. You have to have somebody or even a small team ready to answer them.
  6. other costs - you have to hire an accountant. You may require legal support. You will have to cover fees to be able to use the payment system. 

You should consider making a total investment of EUR 15,000-30,000 to launch a small test bike-sharing fleet (30-50 bikes). For a proper full-scale and successful launch with several hundreds of bikes, you will need a total investment of EUR 70,000-100,000. 

What is your bike-sharing business model?

Your business model is the way you will get revenues from your service. A lot of different business models exist in the bike-sharing market. When you think of yours, take a look at what your competitors are doing and think of ways how you can be more attractive to customers. In addition, you have to consider location and take seasonality into account. And one more thing - act fast! This can be crucial for your future success. ATOM allows you to launch your bike-sharing business within a few weeks. Learn more about ATOM's solution for shared mobility.

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