On first glance, Undiscovered Country Bike Tours looks like a high-end retail bicycle shop. Gleaming machines that cycling aficionados would recognize as state-of-the-art gear stands out front, with more lining the wall inside. The most visible difference from ordinary shops may be the shiny round café tables with chairs in the middle of the sales floor. They looking more like something you’d see at a trendy coffee shop. But the real difference is in the business model: UDC Tours sells bicycling, not bicycles.
UDC Tours has two main products: bicycle tours and bicycle rentals. Both use the lightweight carbon-fiber bikes on display. The tours cover the most scenic routes in Northern California. The rentals are available in the shop, or by delivery to local hotels. Rentals are particularly attractive to out-of-town cycling enthusiasts, because of the difficulty and expense of bringing bicycles on planes these days. Customers can book both tours and rentals through an elegant Web interface, custom designed by owner Terry Morse.
It makes the experience somewhat like making airplane and hotel reservations online, but easier and more fun. We recently asked Morse to talk about the experience of starting and running UDC Tours, and here’s what he had to say.
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When and how did you start your business?
I started Undiscovered Country Tours in 2005 with my wife Mary. I had taken some time off after having previously had a software business. I chose this business because I wanted a better alternative for people who love cycling. We originally operated out of my home in Palo Alto, but we quickly outgrew the house, so we moved to Mountain View (Calif.) off Old Middlefield Road. In November 2012 we moved to our current location on Grant Road in Los Altos. Before we moved, I did lot of research and felt that with the product we’re offering, the location here was ideal.
How did you fund your business?
Some of it was personal money I had, and some came from investors, mainly friends in the software industry.
Running the Business
How did you learn to run your business?
I had previously run my own software company, so when we started I set up my own software to run the touring business. But the bicycle part was a bit more of a challenge because I had never done retail before.
What have been the biggest challenges in starting and running your business?
The biggest challenge was how to market. It’s a struggle that we’re still experiencing. Our customer base is varied, and it’s spread out all over the world, so reaching all these people is a challenge. We still get comments that people don’t know what we do or even that we exist.
So with people that do know us, word-of-mouth is probably our best advertising. But before that happens it’s necessary there’s some way to get word out, so that people can discover you in the first place.
We use all the key phrases on our website for when people do a search. And we use Google Ads. But it’s still a challenge. Although Google Ads is our main form of advertising, we did try direct marketing by mailing literature to people within a 10-mile radius. The cost and distribution were kind of expensive, but at least more people know about us.
Our model is we don’t really want to sell a lot of bicycles. We don’t want to compete with shops, we want to provide a service, which is bicycle tours and rentals. We want to get people on bicycles, to give back. By starting with the touring it wasn’t like retail at first. Mostly people contacted us, so there wasn’t much advertising and marketing. But with the overall tour industry going down, we are pursuing the rental business more, and it is increasing. This started when [friend and store manager] Mike Boester noticed that we had a lot of bicycles sitting around when they weren’t on tours, so we decided that renting them out could be a good source of revenues.
We’re not trying to sell the bikes, we’re selling the experience. The challenge is reaching new customers. We get a lot of repeat customers and focus on that too, because it’s less expensive if we can keep people happy. Getting new customers costs seven times what it takes to sell to an existing customer. But there is a limited number of people who want to rent a bike, so we have to keep getting new ones.
The other challenge is having enough operating capital. We have about 55 bikes, as well as three vehicles we use to help support tours, plus three trailers and everything that goes in the trailers. We also have to have different types and sizes of bikes. We don’t want them sitting here, but don’t want to run out of them either. Each bike goes through a rigorous [maintenance] checklist after it comes back, even if it was out for only an hour [rental periods are 24 hours].
What has been the most pleasant surprise about running your business?
How happy people are with our service. If you look at our reviews on TripAdvisor and Yelp, we have gotten good online reviews. We had only one problem, in the case of a mechanic who didn’t repair a bike to expectations. That mechanic is not here any more, and we fixed the problem with the customer.
What I’ve Learned
What do you wish you had known before starting your business?
How low the profit margins are in the cycling business. You don’t make a lot of money for the amount of work you do. You have to love it or you won’t stay in it.
What advice do you have for others who are starting their own businesses?
Do thorough market research to make sure there’s a need for your product. And, again, make sure you enjoy what you’re doing.
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