Problems for my bike idea… solutions anyone?

Jay has now provided a great answer to his first question “what to do with the bikes in the winter”. (first article here) Interesting….. he pretty much proves (mathematically;) how this idea won’t work because of our Canadian winters. I’m not quite ready to give up the idea yet because I think there’s still merit in having 24/7 rent-a-bikes in the nation’s capital. Maybe one solution is to use the Germany system “call-a-bike” that Simon commented on. It wouldn’t require the same infrastructure needs as the Velo’v. If any of you have some ideas on how to make it work, please share.

Jay’s comment:

So suppose you rent bicycle storage to store bikes from October through March. Let’s suppose that you get a nice storage space with, say, a PODS 16 foot container (16′x8′x8′). It will cost you about $400 for moving the container back & forth plus $240 per month for a total of about $1900 for 6 months. I’m going to guess that each bike occupies about 4′x2′x4′ (assuming that quick release front wheels can be removed and attached to the frame), which means that you can store about 2 bicycles per foot of container length, on average, for a total of 32 bicycles. Let’s also suppose that you have a good looking female math geek negotiate with those hairy PODS guys for a 30% volume discount. So…($1900/32 bikes)*(100%cost – 30%discount)/100) gives you about $42/year/bicycle per bicycle just for storage during the off months.

I’m going to assume that the bicycles can be bought for about $120 per bike in volume, and including management, can be operated for about $40 per year and last for 10 years. Even without using present-value funky math, that comes to about $52/year/bicycle for ownership.

Next, you have to rent out some prime real estate to store your bicycles, and pay an attendant. Attendant costs $15/hour (load labour rate) for 14 hours per day, for a total of $210/day. Let’s assume that the city gives you some prime real-estate at a sweetheart deal of $1/square foot per month. For 64 bicycles per location, and 6 square feet per bicycle (assuming storage in a double-ended queue), and 33% extra for bicycles that come from other locations, management, access, security, and wasted space), that comes to (64*6*1.33)=512 square feet, or $512 per month for 6 months, for a total fo $3072 per year for 64 bicycles, or $48 per bicycle per year.

So far, we have an ownership cost of about $142/year/bike to buy them, store them, park them, maintain them, and collect money. If we add on a very modest management, insurance, and marketing costs, it is about $150/year/bicycle.

You are going to collect this money from the users of the service. The problem is that most avid cyclists will find it more convenient to buy a $120 bike and store it at home, and to take to it to a service shop for $40 per year, because using the same math, the bike costs $52 per year. Even if the bike is stolen every 3 years, they still come out ahead.

The cost model works better in cities with 12-month bicycling because you have more months to rent, (12 versus 5), you don’t have to store them in the off season, and 12 month cycling means that you don’t have to incur the direct or transitive fixed costs of alternate private (buy a car, license, insurance) or public transportation (purchase, license, insurance passed on through cost of bus passes).

Do you have a revenue model that can turn a profit with this cost model? Or, am I out to lunch, and you have a more realistic cost model and a profitable revenue model?

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2 thoughts on “Problems for my bike idea… solutions anyone?

  1. One of my biggest peeves in the world of marketing is those huge “billboard buses” that drive around aimlessly. They pollute and clog the streets for no good purpose. I’ve even taken the time to write to advertisers to complain.

    But the idea of mobile billboards might solve your bike problem. The rickshaws already sport advertising. Why not bikes. It would be easy to convince advertisers to buy into such environmentally-conscious advertising. The trick would be designing the bike modification that could display advertising. I’m sure some brilliant Carleton Industrial design student could handle that…

    As an added bonus to the business case… Who’s going to steal a bike that screams “Preperation H is groovy. Buy Preparation H”

  2. Jay Godse says:

    Interesting proposition. Most billboard style ads cost about $1500 per month. Take off about $300 for changes and management, that leaves about $1200 per month. Now billboards are big and can be seen by a lot of people. Bicycles are perhaps 1/20th the size of billboards, and they are at ground level. I would guess that makes about $60/month for a bike ad. You could double the rate if you only put ads on the bike that was ridden close to the business.

    However given the high cost of changing up the ads, you would have to get people to book the ad for the full 5 months.

    The interesting thing about these numbers is that you could use a seasonal contract from an advertiser to pay for the bike. For example, you book 5 months @60/month, and that leaves you with $600. That is enough to pay for a bike and ownership costs for 8 years. The only thing left is the attendant’s fees, which could be had for $3/day. That is not enough to justify switching primary transportation modes for a lot of people.

    Interesting…

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