Turning a hobby into a business

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BY KERRY ANDERSON

‘Sometimes doors open; as it’s meant to be,’ observes Erik Mellegers, from the doorway of his business, Crank’n Cycles ‘n Toys in the country town of Collie, Western Australia.  Approaching his eleventh year in business, he is reflecting on the pathway that has got him to where he is today.  As is often the case, it began with a personal hobby.

Born in Holland, Erik grew up as a young child surrounded by bicycles, but it wasn’t till his family emigrated to Australia that cycling actually became a real passion.  It was a charismatic teacher at Erik’s high school in Collie that set the wheels in motion and introduced cycling as a sport.  Even then, it wasn’t until some years later after the family moved from Collie to Australind, that he took the next step. 

While in Year 10 Erik had, like many his age, a part time job at a local supermarket.  He rode his racing bike to and from work, a 32km round trip, and was encouraged by a co-worker to enter some local cycling events in Bunbury.  Erik had always enjoyed his riding, but had never raced.  He thought he’d never be good enough to compete.  He was eventually persuaded, and turned up at a local road time trial with the Bunbury Cycling Club.  His childhood hero – the high school teacher and record holder of the event - was there.  Erik raced, and to his surprise defeated his former teacher by four seconds to win the event.  There was suddenly a realisation that he was actually pretty good at racing, and concreted his life long love for the cycling.

Following a short stint at university and deciding that engineering wasn’t for him, owning a bike shop became a goal for Erik; even if was for the sake of just hanging out with like-minded people and supplying his own sporting needs.  “But I couldn’t get the money together,” recalls Erik when a Bunbury cycle shop came up for sale. “I was a struggling and broke twenty-year-old.”

Instead Erik embarked on a retail career with Retravision and Harvey Norman working his way into management positions and learning valuable customer service, stock inventory, and financial skills along the way.

‘The retail training was awesome and I found myself getting sucked into the corporate franchise world, meeting targets, and working towards owning my own franchise store. Then I saw the bad side of franchising and decided it wasn’t for me.’

That decision pushed Erik back towards his love of cycling, applying to work as a salesman at a Bunbury based cycle shop. ‘It was a huge pay cut but I put it to the owners that potentially I could buy into the business in the future.’

Erik’s plan faltered when the business came up for sale within 18 months as he still wasn’t in a good enough financial position to buy in.  In a gut wrenching experience, the business was sold to another buyer.

Fortunately, fate decided to smile on him in another way.  Within six months Western Australia’s housing boom increased his home equity giving him some buying power.  He decided to take a road trip back to his childhood home town of Collie.

‘I remember driving up Roelands Hill and thinking I can’t believe I’m driving to Collie,’ Erik smiles in recollection.  Bikes R Us, the local cycle and toy shop, had been on the market for a couple of years.  ‘I walked into the shop, saw the potential and bit the bullet,’ says Erik.  A business loan was quickly secured with his home as collateral.

His career in retail had prepared him for this moment. ‘I opened up accounts and bought a heap of stock even before I was handed the keys to the shop,’ says Erik ‘Through Harvey Norman I’d learnt how to retail, I had the supplier contacts from my work with the cycling shop, and I knew consumers,’ surmises Erik.

Of course it wasn’t all smooth sailing (silent chuckle from me).  Erik still recalls the painful aftermath of his first Christmas in business.

‘I sold heaps of stuff up until Christmas and kept ordering in new stock.’ However, by the end of January which is traditionally quiet for many retailers, he found himself looking at a huge pile of outstanding bills.

Rather than curl up into the fetal position, Erik decided to just ‘roll with it.’ He explained the situation to his suppliers and negotiated paying off the bills over an extended period of time. 

In business circles I have often heard this referred to as the Third Bank, and good reason why everyone should have a good relationship and open communication with their suppliers.  To his credit, Erik has always attended supplier events and shown a genuine interest in their products.

Despite their understanding, there was an important lesson learnt. ‘I had to learn to manage what level of stock I could get away with,’ he admits although he still manages to stock the ‘cool’ stuff ranging from top of the line road racing bicycles to the fat tyred mountain bikes and everything in between.

During the telling of this story it becomes obvious that Erik is a man who notes his milestones.  Winning the cycle race and deciding he wanted to own a cycle shop was one.  Ask him how long he has been in business and his immediate answer is ‘since 18 February 2007.’  The third milestone is a significant one for a young man who has created an income to support a simple lifestyle.

‘Getting married and having a child forced me to go from living in the back of the shop and running it as a hobby to running it as a business and making money.’

Today, as a small business owner with part time support staff, Erik has deliberately kept the processes simple with no elaborate stock tracking systems. ‘I don’t spend money unnecessarily,’ he admits, ‘but this would have to change if I ever put a manager in.’

While he continues to generously stock the shop with a diverse range of cycles to create a welcoming and stimulating destination for cyclists of all genres, he is very aware of which lines turn over more quickly and offer the biggest profit margins.  A children’s toy section offers some sales diversity.  The original shop was expanded into next door when it came up for lease.

Most of all Erik is excited about the future of the Collie region. He is currently helping to lead community conversations as part of the Operation Next Gen program.

‘Collie is on the verge of huge potential,’ he says. ‘We have these incredible forestry tracks around Collie and mountain biking is a huge growth area.’ He is very excited about developing a new business focussed on cycling events and experiences which may or may not see him to continue to own the retail business. 

I think I can sense another milestone approaching.

Erik’s top tips for aspiring business owners:

  1. Know what you are getting yourself into.  Do your research and get experience by working for others first.
  2. Ensure you have a strong support group. Sit down with your family and make sure they are on board.
  3. Build a good community network if starting a business in a new area. Ie. Rotary Club, Sporting Groups.
  4. Don’t get into business if you’re a worrier.  It can be rocky but you have to look at the long term benefits.
  5. Take time out for yourself.

CRANK'N CYCLES 'N TOYS WEBSITE


KERRY ANDERSON: Author of ‘Entrepreneurship: It’s Everybody’s Business,’ Kerry works with small businesses and rural communities to help them embrace new opportunities. READ MORE