# Bike Shop Model A seven-year operating model and unlevered DCF for a single-location independent bicycle dealer that sells new bikes, parts, accessories and apparel, and service labour. Bikes are committed to a pre-season book order months before demand can be observed, and whatever misses ages through a three-vintage price ladder: current model year at full price, prior model year at a markdown, clearance at a deeper markdown, and the remainder written off, with every unit costed at the booked unit cost of the year it was ordered. A supplier program tier keyed to the size of that commitment sets both the wholesale unit cost and the payment dating days, so cutting orders to clear a backlog raises cost and destroys supplier financing at the same time. An installed base rolls bikes sold forward into service and replenishment revenue, and an unlevered free-cash-flow bridge discounts to enterprise value, equity value, and value per share. Built so an owner, buyer, or lender can flex the book-order buffer and watch margin, inventory, and cash move together. - Canonical: https://finamodel.com/templates/bike-shop - Excel download: https://finamodel.com/templates/bike-shop.xlsx - Category: Consumer - Model type: Operating model - Difficulty: Intermediate - Audiences: Founders & operators, Investors & analysts, Bike shop owners and operators, Specialty retail investors, Search-fund and small-cap buyers, Lenders and analysts - Tags: bike-shop, bicycle-retail, inventory, working-capital, dcf ## Overview A seven-year operating model and unlevered DCF for a single-location independent bicycle dealer, covering new bike sales, a parts, accessories and apparel attach, and a service department fed by the shop's own installed base. Bikes are committed to a pre-season book order months before demand can be observed, and the model's first signature mechanic is what happens to the units that miss: a three-vintage markdown cascade in which unsold current-model-year stock ages to prior model year at a 22% markdown, then to clearance at 45% off, then is written off entirely, with every unit costed at the booked unit cost of the year it was ordered rather than the year it was sold. Carry-over stock peaks at 526 units and the aged share of units sold climbs from 7.4% to 32.5% while bike gross margin compresses from 35.6% to 25.4%, without a single list price changing. The second mechanic is the supplier pre-season program tier: the size of the book-order commitment relative to last year's units sold sets both the wholesale unit cost and the payment dating terms, so cutting orders to clear the backlog raises unit cost by 5.5 percentage points and collapses blended dating from 150 days to 30 in the same year, swinging net working capital from a source of cash to a use and turning a positive-EBITDA year into negative free cash flow. Working capital is built from a real vintage-valued inventory balance and tier-driven payables rather than a percent-of-revenue plug. ## What's included - Demand and pricing: Year-1 bike unit demand, demand growth, average selling price, price growth - Book-order policy: a per-year over/under-book buffer against unit demand, prior-year unit sales seed - Supplier program tiers: ratio thresholds, wholesale cost as % of price, and dating days for each tier - At-once reorders: unit cost, dating days, and the fill rate on an in-season shortfall - Vintage ladder: prior-year and clearance markdowns, sell-through rates, opening stock and its booked cost - Installed base and service: Year-0 base, attrition, repair orders per bike, average ticket, parts cost - Parts and accessories: attach spend per bike sold, replenishment per bike in the base, gross margin - Cost structure: mechanic and sales headcount and wages, owner salary, rent, freight and assembly per bike received, marketing, merchant fees, software, insurance, utilities, G&A - Capital and working capital: capex % of revenue, depreciation life, receivable days, P&A inventory days - Valuation: WACC, terminal growth, net debt, shares outstanding - Operations sheet: book order, commitment ratio, program tier, vintage roll-forward, installed base, purchases and dating, working capital - Revenue sheet: vintage price ladder, bike revenue by vintage, parts and accessories, service - P&L sheet: vintage-costed bike COGS with a write-off line, the full cost stack, EBITDA to net income - FCF sheet: NOPAT, depreciation add-back, capex, change in NWC, unlevered FCF, discount factor, PV - Valuation sheet: sum of PV, terminal value, enterprise value, equity value, value per share, implied EV/EBITDA - Dashboard with commitment ratio, program tier, dating days, aged share of sales, bike gross margin, revenue mix by vintage, working capital, EV, and value per share - Supplier program tiers: ratio thresholds, wholesale cost as % of price and dating days for each tier - At-once reorders: unit cost, dating days and the fill rate on an in-season shortfall - Cost structure: mechanic and sales headcount and wages, owner salary, rent, freight and assembly per bike, marketing, merchant fees, software, insurance, utilities, G&A ## Inside the Bike Shop Financial Model: Pre-Season Orders, Vintage Markdowns and Supplier Tiers This bike shop financial model explains how pre-season ordering, vintage markdowns and supplier program tiers interact. It shows an independent bicycle dealer where committing to a book order months before demand is known ties up cash and later forces aged inventory through a three-vintage price ladder. A single procurement decision also sets both unit cost and payment terms, so correcting a glut raises costs and removes supplier financing at the same time. Rates and financial results described here reflect illustrative model settings, not industry benchmarks. ### How Pre-Season Ordering Works Bike unit demand grows at a steady rate, but the shop orders against that demand well before the selling season. The book-order buffer is the main decision lever: it sets the committed quantity above expected demand. - Unsold units then age through a three-step roll-forward: current model year becomes next year's prior model year, which becomes clearance, and any clearance stock still unsold is written off. Aged stock clears at fixed sell-through rates, while current-model-year units fill the rest. - If the book order falls short, at-once reorders cover part of the shortage, but at the worst unit cost, and any unfilled demand is lost. ### The Vintage Markdown and Cost Cascade Each model-year vintage carries its own price and cost. Current model year sells at the full average selling price, prior model year at a 22% markdown, and clearance at a 45% markdown. - Importantly, every unit is costed at the booked unit cost of the year it was ordered, not the year it was sold. So a clearance unit sold in a later year carries a much older, higher program tier cost. - That mismatch can push clearance gross margin negative. Over the horizon, the carry-over backlog peaks, aged units reach their highest share of sales, and write-offs rise. Bike gross margin compresses without any list price change, because the swing comes entirely from vintage mix and vintage cost. ### Supplier Program Tiers and the Cash Trap The commitment ratio, calculated as book order units divided by prior-year units sold, maps to one of three supplier program tiers. Tier 1 offers the best wholesale unit cost and 150-day payment dating when the ratio is at least 100%. - Tier 2 gives slightly worse cost and 90-day dating at a 75% threshold. Tier 3, below that, has the worst cost and only 30-day dating. - At-once reorders sit outside all tiers at the worst cost and 30-day terms. This means a single procurement choice directly sets both a profit-and-loss rate and a balance-sheet term. If the shop tries to correct an inventory glut by cutting orders, it can fall into a worse tier, which raises unit cost and sharply reduces the accounts payable funding that supported inventory. The result is a working-capital swing that can turn positive EBITDA into negative unlevered free cash flow. ### Outputs and How to Use the Model The model builds revenue from three bike lines priced off one ASP, plus parts, accessories and apparel that depend on units sold and an installed base rolling forward with attrition. Service revenue comes from that installed base through repair orders and average ticket. - The P&L flows from vintage-costed bike COGS and write-offs through operating expenses to EBITDA, EBIT, tax and net income. An unlevered free-cash-flow bridge nets NOPAT, depreciation, capex and working-capital changes, then discounts to enterprise value, equity value and value per share. - This model is useful for an owner, buyer or lender who wants to flex the book-order buffer and see how margin, inventory and cash move together, rather than viewing each statement in isolation. ## Inventory that ages, not a percent-of-revenue plug Unsold bikes move through a real three-vintage roll-forward and carry the booked unit cost of the year they were ordered, so a clearance unit sold in Year 5 is costed at the Year-3 program tier and sells at a genuinely negative gross margin. Write-offs are their own expense line, and the closing inventory balance is the vintage schedule valued at cost rather than a days-of-COGS approximation. ## One decision, three consequences The book-order buffer sets the committed quantity, that quantity sets the supplier program tier, and the tier sets both the wholesale unit cost and the payment dating days. Cutting orders to clear a markdown backlog therefore raises unit cost and destroys supplier financing in the same year, while leaving some demand unserved. Every input is a named-range cell, so one edit moves all three at once. ## An unlevered DCF, because the cash swing is the story This business can post positive EBITDA and materially negative free cash flow in the same year purely from a change in inventory and payment terms, so the model bridges to unlevered free cash flow and discounts it at a WACC with a Gordon-growth terminal value. Enterprise value bridges through net debt to equity value and a per-share figure, and the implied EV/EBITDA falls out as a sanity check. ## Workbook structure ### Cover Workbook overview, sheet legend, units, and tab-colour key. - Title and scope framing - Sheet-by-sheet purpose summary - Units and tab-colour legend ### Assumptions Every driver in one sheet: demand, book-order policy, supplier tiers, vintage ladder, costs, valuation. - Year-1 bike unit demand, demand growth, average selling price and price growth - A per-year book-order buffer and the prior-year unit sales seed - Tier ratio thresholds, wholesale cost as % of price, dating days, and the at-once terms - Prior-year and clearance markdowns, sell-through rates, opening stock and its booked cost - Installed base, attrition, repair orders per bike, service ticket, parts and accessories drivers - Headcount and wages, rent, freight and assembly, marketing, merchant fees, software, insurance, utilities, G&A - Capex, depreciation life, receivable days, P&A inventory days, WACC, terminal growth, net debt, shares ### Operations Book order, program tier, vintage roll-forward, installed base, and working capital. - Book order equals unit demand times one plus the book-order buffer - Commitment ratio equals book-order units over last year units sold - A nested IF maps the ratio to a program tier, a booked cost % of price, and dating days - Unsold current-year stock ages to prior year, unsold prior-year stock to clearance, the rest is written off - Aged stock clears at fixed sell-through rates and current-year units fill the residual demand - A shortfall is part-filled by at-once reorders, with the unfilled remainder lost - The installed base rolls forward at bikes sold less attrition and drives repair orders - Bike inventory is the vintage schedule at each vintage own booked cost; payables carry the blended dating days ### Revenue Vintage price ladder, bike, parts and accessories, and service revenue. - One average selling price, three realised prices: full, prior-year markdown, clearance - Bike revenue splits across current-year and at-once, prior-year markdown, and clearance - Parts and accessories combine an attach spend per bike sold with a replenishment spend per bike in the base - Service revenue equals repair orders times an escalating average ticket - Total revenue ### P&L Revenue to net income with vintage-costed bike cost of goods. - Each vintage costed at the booked unit cost of the year it was ordered - Inventory write-off as its own line inside bike cost of goods - Parts and service cost of goods, total cost of revenue, gross profit and both margins - Mechanic and sales labour, owner salary, rent, freight and assembly, marketing, merchant fees, software, insurance, utilities, G&A - EBITDA, depreciation, EBIT, tax on positive EBIT, net income, margins, identity check ### FCF Unlevered free cash flow bridge. - EBIT and unlevered tax from the P&L - NOPAT equals EBIT less unlevered tax - Add back depreciation - Less capital expenditure - Change in net working capital against a Year-0 seed - Unlevered free cash flow - Discount factor and PV of UFCF ### Valuation Discounted cash flow. - Sum of PV of explicit UFCF - Gordon-growth terminal value and its PV - Enterprise value - Less net debt to equity value - Shares outstanding and value per share - Implied EV/EBITDA ### Dashboard Headline metrics and the two procurement mechanics. - Commitment ratio, program tier, and blended dating days - Carry-over stock, bikes written off, and aged share of sales - Bike gross margin against the aged mix driving it - Bike revenue by model-year vintage - Net working capital, revenue, EBITDA, and EBITDA margin - Enterprise value and value per share ## Features - **Inventory that ages, not a percent-of-revenue plug:** Unsold bikes move through a real three-vintage roll-forward and carry the booked unit cost of the year they were ordered, so a clearance unit sold in Year 5 is costed at the Year-3 program tier and sells at a genuinely negative gross margin. Write-offs are their own expense line, and the closing inventory balance is the vintage schedule valued at cost. - **One decision, three consequences:** The book-order buffer sets the committed quantity, and that quantity sets the supplier tier, which sets the wholesale unit cost and the payment dating days. Cutting orders to clear a markdown backlog therefore raises unit cost and destroys supplier financing in the same year, while leaving demand unserved. The model makes all three effects visible at once. - **Working capital as the real constraint:** Payables carry a tier-weighted blended dating figure that runs from 150 days down to 30 and back, so net working capital swings from a large source of cash to a use of cash and back again. The correction year posts positive EBITDA and negative unlevered free cash flow, which is the point the P&L alone will not show you. ## Use cases - **Size a pre-season book order:** Flex the book-order buffer year by year and watch the commitment ratio, the program tier, the wholesale unit cost, the dating days, the markdown backlog and the cash position move together. It is the fastest way to see why both over-booking and panic destocking are expensive, and where the balance sits. - **Diligence a specialty retailer's inventory:** Carry-over units, aged share of sales, write-offs and bike gross margin are all explicit rows, so a buyer or lender can separate a margin problem caused by vintage mix from one caused by pricing or purchasing terms, and see how long a backlog takes to clear. - **Test the service and accessories attach:** The installed base rolls forward off bikes actually sold, so lost sales in one year suppress service and replenishment revenue in every later year. Flex attach spend, repair orders per bike and the average ticket to see how much of the shop's profit really comes off the workshop bench. ## Frequently asked questions ### What is a bike shop financial model? A bike shop financial model captures the seven-year operating economics and intrinsic value of an independent bicycle dealer selling new bikes, parts, accessories and apparel, and service labour. It commits a pre-season book order against uncertain demand, ages unsold stock through a three-vintage markdown ladder, keys the wholesale cost and payment terms to the size of that commitment, drives service revenue off an installed base of bikes previously sold, and discounts an unlevered free-cash-flow stream to enterprise value, equity value, and value per share. ### Why does the model book orders against total demand? Because that is the behavioural error that creates a glut, and the model discloses it rather than smoothing it away. A dealer forecasting next season typically sizes the order against expected demand and forgets the stock already sitting on the floor, so carry-over compounds. Setting the buffer against demand net of carry-over is a one-cell change if you want to test the disciplined alternative. ### What is dating, and why does it matter so much? Dating is extended payment terms a bicycle brand grants on a pre-season order, under which payment is not expected until well after the season opens. At 150 days the supplier is financing essentially the whole floor, so working capital is a source of cash. Fall out of the program to 30-day terms and that financing disappears in a single year, which is a far larger cash event than the wholesale cost penalty that comes with it. ### Why an unlevered DCF instead of an EBITDA multiple? Because the working-capital swing is the story. This business can post positive EBITDA and materially negative free cash flow in the same year purely from a change in inventory and payment terms, so an EBITDA multiple would value the correction year at roughly the wrong number. The model bridges to unlevered free cash flow, discounts it at a WACC with a Gordon-growth terminal value, and reports the implied EV/EBITDA as a sanity check rather than as the input. ## Related templates - [Hardware Store Model](https://finamodel.com/templates/hardware-store) - [Retail Store Model](https://finamodel.com/templates/retail-store) - [Auto Repair Chain Model](https://finamodel.com/templates/auto-repair)