Mountain Biking - LBS sale

I was planning on buying a 07 Rocky Mountain Fusion in the spring until I just found out that the shop that I want to buy it from is having a pre-order sale which includes 20% off. I've never heard of this before. I thought that bike shops make very little profit 5-15%. How can he afford to do this? The bike is regular $950 Canadian and I can get it for $875 tax included (a savings of $218). I need to come up with the money before November 15th. I also found it weird that I have to pay the tax on it even though it won't be processed as a sale until they arrive in the spring. The shop also offers free tune ups for life. Sounds pretty damn sweet to me. What do you guys think??

Sounds pretty good. And I think that they make more than 5-15%.

I was planning on buying a 07 Rocky Mountain Fusion in the spring until I just found out that the shop that I want to buy it from is having a pre-order sale which includes 20% off. I've never heard of this before. I thought that bike shops make very little profit 5-15%. How can he afford to do this? The bike is regular $950 Canadian and I can get it for $875 tax included (a savings of $218). I need to come up with the money before November 15th. I also found it weird that I have to pay the tax on it even though it won't be processed as a sale until they arrive in the spring. The shop also offers free tune ups for life. Sounds pretty damn sweet to me. What do you guys think??

He probably will put it in his books as a sale right now which means that he's incurring it as revenue. If he is, he'll have to pay his GST/PST liability at the end of his current period (quarter or monthly). As such he'll have to forward the GST/PST to the government for the sale. Rather than take it out of his cashflow, he's asking you to pay for it.

The 20% discount sounds about right. My club has an agreement with a LBS for a similar deal. Any autumn orders for the following spring get a 20% discount.

I purchased a Kona Caldera for cost through a friend who owns a bike shop. He was a bottom-tier Kona dealer (which means his Kona sales volume is very low). As he told me, the higher Kona sales a dealer does, the less the dealer cost from Kona. His cost was 25% less than msrp.

I purchased a Kona Caldera for cost through a friend who owns a bike shop. He was a bottom-tier Kona dealer (which means his Kona sales volume is very low). As he told me, the higher Kona sales a dealer does, the less the dealer cost from Kona. His cost was 25% less than msrp.

Oh oh. The "that's the way it is" police are going to hunt you down now for divulging that information.

Oh oh. The "that's the way it is" police are going to hunt you down now for divulging that information.
Aiyeeee! Bike shops make a profit on their bikes! :eek:

Aiyeeee! Bike shops make a profit on their bikes! :eek:

Apparently it's a trade secret.

Actually, (according to my accounting for non-business majors class I am currently in) the revenue would not be recorded until the goods change hands. This is known as the revenue recognition principal. The transaction would be recorded as unearned revenue and would be counted as a liability against the cash until the transaction is completed, at which point it is counted as profit. This means that as far as determining income, the government wouldnt see anything. Of course, I could be very wrong, and this may not be the same for canada.

And I think that they make more than 5-15%.

On bikes? I wouldn't be so sure.

Actually, (according to my accounting for non-business majors class I am currently in) the revenue would not be recorded until the goods change hands. This is known as the revenue recognition principal. The transaction would be recorded as unearned revenue and would be counted as a liability against the cash until the transaction is completed, at which point it is counted as profit. This means that as far as determining income, the government wouldnt see anything. Of course, I could be very wrong, and this may not be the same for canada.

I'm referring to the tax liability. Here in Canada we have a tax input and tax output system. When the vendor buys his merchandise he will issue a purchase order and/or receive an invoice with the taxes due on it. These taxes fall within the reporting period as a tax input. These act as a credit towards any tax liabilities.

Within the same tax reporting period the vendor issues invoices or receipts to clients he's collecting the taxes from and these are considered the tax outputs. The difference between the tax inputs and outputs is what the vendor owes the government for the taxes or what is due to the vendor. All of this is based on the tax reporting period (typically quarterly for small businesses) and the categorization is done based on invoice and receipt dates.

IANAA so don't take my word for gospel, this is how I understand this to work.

I'm referring to the tax liability. Here in Canada we have a tax input and tax output system. When the vendor buys his merchandise he will issue a purchase order and/or receive an invoice with the taxes due on it. These taxes fall within the reporting period as a tax input. These act as a credit towards any tax liabilities.

Within the same tax reporting period the vendor issues invoices or receipts to clients he's collecting the taxes from and these are considered the tax outputs. The difference between the tax inputs and outputs is what the vendor owes the government for the taxes or what is due to the vendor. All of this is based on the tax reporting period (typically quarterly for small businesses) and the categorization is done based on invoice and receipt dates.

IANAA so don't take my word for gospel, this is how I understand this to work.

Interesting. It would probably work the same here I think, I wasnt considering tax on sales, only income.