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Old 08-01-2010, 11:00 AM   #46
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Join Date: Aug 2009
Location: Houston, Texas
Posts: 527

Physical Shop

1. Kits and major items: 10-15% profit margin
2. Parts 15-30% (competitively priced) margin
3. Service 75-80% profit (non racer basher crowd mostly)

Like alot of others said with the internet selling the parts are the big risk with such small margins. UNLESS

1. they have to have it, hence you have a race and they brake and need the part now,
2. they love you and want to support their LHS (dont bank on this alone, foolish),
3. they are ignorant to the lower price alternatives (New to hobby bashers)

So you can see the real money is bashers, and/or people who need parts ASAP and who cant do service themselves. My service department not only pushed parts to bashers looking to upgrade (traxxas is good for this as race kits need little moding) but the service part could be $20-100 bucks per invoice and only cost me $8-10/hr for the tech who did the service. Make a "service department" look like a miniversion of an auto shop. When you do there is less price resistance to the service fees, they think its cool and will have you service more and keeps people who dont know how to fix their cars from learning thus perpetuating their reliance on "your" service department. Before you think thats harsh fact is real auto shops do same thing, cuz hey they have bills to pay and provide a service. Racers are more fun but you will go broke if you rely on them at a physical location. Unless they need a part NOW 90% order on line and do all their own work on their cars.

Stocking your shop: This is a make or brake too. Traxxas is standard especially if your stocking to make money with bashers first and foremost. Pick 4-6 of Traxxas's best sellers, sock multiple kits of those, their parts and mod parts for them. On the race side Pick 2-3 of the most popular race models, stock them well (pick the ones most guys in your area own and run) then screw the rest. Not only will you lose money on a low turn over item but by not stocking it will slowly motivate them to purchase kits you do stock which only helps your stocking situation.

I would be hesitant stocking other lines you know nothing about as turn over will be low. Simple concessions (especially at a track where people are hot tired and hungry) are high profit high turnover, low investment money. Another line that is 70-80% proffit, high turnover and low investment is Jokes and Gags. They give a fun alternative to the Hobby stuff, poorer people who discover they cant afford your R/C walk out with $10-30 in Gag stuff and when people know you are gag shop it will bring in alot of people as R/C customers. I dont know how many times a kids found us cuz another kid did a prank/gag on them to get gags for themselves and their dad who drove them over saw the R/C and drooled in delight walking out with several 100 to 1000 bucks in sales. Complementary lines. The gag suggestion is gangbusters if your in a very public high traffic environment it will belly flop if your in the middle of no where like some LHS/Tracks. Turn over on gags was 2x/month!!! and did $1500-2000 in profit off of 1000 in inventory on the walls. (pm me for more info if you do gags)


1. $20-50K+ to fully equipt
2. At $5-15 per person, per race; it takes alot of events to even see the black on paper. Tracks have been known to drain otherwise successful shops if not managed or utilized well.
3. Great draw to your location and visual marketing to NEW or basher crowds (your cash cow)

So to make money here you need to:

1. Have it in a very public or busy street to draw noobs/bashers. Hide it, and the low to NO profit racers will be your appreciative customers until you go bankrupt.
2. Make it too calm and no one will ever brake a part and NEED to use your shop. People like air, give it to them with big arm and bulkhead braking jumps. It will increase their learning curve while paying your rent, hehe.
3. To keep build costs low and maintenance cheap, involve local RC clubs to volunteer labor and supplies. You might be surprised how 20-60% of your costs and be avoided by organizing this as people may work for a construction company, hardware shops or know where to get lain pipes, rope or tubes for free etc etc.


You know from the corporate world that you need to fill a void. While your online could be great, dont count on it to pay the bills at first so your local crowd will be vital. In San Antonio RCHQ is a great shop with many loyal patrons especially with 1/8th scale and offroaders. . Fighting with other LHS will result in price wars that kill your profits and when people get used to price war pricing they will not go back to regular prices and shop even more online. In fact to ensure less headaches here and a greater focus on other things I would meet with the competition. They wont like to hear another shop is opening but will probably meet for lunch just to see what your doing. Sure you are going to compete on some things but coordinate on filling gaps in the where the other is not so you each can profit better in those areas and assuring each other you will not undercut each other into mutual starvation. When customers know they can not pit you two against each other on price they will purchase for other reasons. Even if location and specialty make this suggestion a mute point. I'd do it anyways. Its always easier to be cordial than nasty with competitors as this ultimately reflects on your image with customers.

On-road may be great venue along with the whole indoor thing for when it rains and to get away from the heat so your on the right track there. An indoor track would likely be electric only but thats cool cuz bashers start with CORR trucks and they would be easy to race indoor on a carpet or even dirt track.

I probably dont have to mention this to you but "just in time inventorying" is vital as you should turnover all inventory 7 times/year at a minimum!, overstock will kill you and the avg. mom and pop turn their inv. 3-5 times/per year if they are lucky and thats why you see outdated dusty product (money) sitting there until they go out of business. Get a good POS inventory management system to ensure JIT is done right and to control your inventory levels & reports.

Lots to think about, GL

Last edited by jasonwipf; 08-01-2010 at 11:13 AM.
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