(Customer) Value in a Niche Market: Why a vintage moped repair shop is a dumb business idea

In the beginning…

My first mopeds: a Honda Urban Express and Puch Maxi. They took a full summer to tune up.

As a child in the 80’s and early 90’s I traveled to Europe, and each time I witnessed small step through motorcycles. I had no idea what I was seeing, but these rad looking mystery vehicles were burnt into my mind for life.

Fast forward to 2008: I was working next to a garage sale that had a pair of the toy motorcycles of my dreams. That day I came home and surprised my girlfriend with a red Puch Maxi moped and black Honda Urban Express noped. For a few years after, we enjoyed riding them doing the stock 25mph to and from Belle Isle or around downtown for a bite to eat… then one spring they would not start!

I was a pretty skilled fellow having worked a diverse number of jobs  and hobbies, completing a down to the studs restoration of a turn of the century farm house, and received a formal education from the University of Michigan… but I did not know how to turn a wrench. I called all of the scooter stores in metro Detroit as well as more than a few powersports stores around town for service, but not a single store would service my old moped. How could there be no way to pay to get this super cool toy fixed?! I was astonished.

By 2012 I learned that my good friend who worked on his own Triumph motorcycles had also worked for years as a bicycle mechanic. He also was a certified Volkswagen mechanic and used to wrench on and fly helicopters. I was certain that he could get my mopeds working quickly and with ease. I bought brand new 70cc cylinders, performance pipes, and larger carbs. Then he and I spent all summer getting the bikes assembled well enough to ride. (Knowing what I do now, they were not built nor tuned that great, but still they were “good enough” to ride.)

The early days: My girlfriend Holly and I learned a lot by riding and wrenching with other people in the moped community.

With our two peds a little quicker, we got involved with the local moped community and began learning moped maintenance and customization, but there were still some performance things that seemed intimidating / way beyond my skill set. Beyond that, I was working 60 hours per week at a well-paying salaried job, so I felt pretty comfortable paying what seemed like quite a bit at the time to get my mopeds worked on by someone with experience and knowledge. Again, I could find absolutely no one to do the performance moped work that I had in mind. I asked a few folks in the moped community who occasionally worked on mopeds for money but I could not get any of them to follow up on my requests. I asked around and discovered that there were many other folks also attempting to get moped work done who also could not get these folks to respond. (A situation that I now find myself on the other side of, and feel much more sympathy for.)

I just knew that I could not be the only person out there with a decent disposable income and interest in mopeds. I was just certain that if someone could run a moped shop with professionalism, consistent hours, and good time lines, the business would take off. This blog is already long, so I’ll skip the part about how we started this shop but in 2014, with the help of the best local moped hobbyist mechanics, I started a shop and it turns out that I WAS RIGHT! With no advertising and just small social media presence, the business totally took off and demand was massive (and is still growing now).

Learning the hard way why no one else repairs vintage mopeds professionally

When Detroit Moped Works first opened in 2014, I did not expect what would happen next.

The super obvious thing that I naively and optimistically overlooked is that there must be some reason that no one else will do this work. It turns out the reason that no one else was fixing vintage mopeds for a living is that a vintage moped repair shop is a dumb business idea. As a younger person I thought I was the only genius that noticed this large and unfulfilled demand. I just knew that I had to find a way to get the repairs done efficiently and everyone would be happy. But the problem is… Mopeds.

Think about other “cool” old stuff that can be restored and sold. They all have many top dollar items that can sell for tens of thousands of dollars up to insane multi-million dollar items. Here are some old watches that sold between 2.5-11 Million dollars. An auction house sold these vintage guns for between 500K – 2 million dollars. And look at these bicycles valued between 45K  and 1 million dollars.  The lists of examples can go on and on. Here are some old motorcycles that sold between 385K  and 1 million dollars. But with vintage mopeds, these high dollar items don’t exist. There was one Puch Magnum that sold on bringatrailer.com for $4K and this was like crazy news in the moped community because we’ve all gotten this same bike in similar condition for under the $1,000 mark. As a professional shop selling completely restored mopeds with a warranty, $2,500 is pretty much the top of what the bikes we have been able to sell have gone for, and that would be the vehicle itself, plus over a thousand dollars in new / reproduced / performance parts, and a good week of labor making the bike prefect and warrantyable. Compare the $2,500 for the crem de la crem of mopeds, to the price tags you see with the other “cool old stuff,” and you can see why maybe no one else is restoring cool old mopeds.

Funny thing about many of those old motorcycles selling for prices up to a million dollars: they are basically the same as the mopeds that we work on. Seriously, the 1900-1930’s motorcycles are more or less the same technology as 1970’s mopeds. When working on those things, you have smaller two stroke motors, with no battery, many need to be push started, some even have pedals; but more importantly, you have years of unknown history, no Carfax, no diagnostic machine, nothing to help you. And, like mopeds, you have limited reproduction parts availability. Just like mopeds you basically just have to diagnose and restore / tune them by sound, smell, and feel… BUT when a customer spends 5K on repairs for an old motorcycle (or any cool old thing) and can re-sell it for 50K or 100K or more… heck, even if it only becomes worth $10K after, the person is glad to pay the bill because that expense is an investment that increases the tangible value. And frankly, those motorcycles probably don’t even need to run that well; they just need to be able to look cool in a collection or maybe fart around some vintage motorcycle show.

January, 2018: Within a short period of time, Detroit Moped Works was even staying busy (but not profitable) during the winter.

No one actually plans to ride their old motorcycle for transportation. A vintage moped shop, on the other hand, basically has to have and apply the same skill set BUT we can’t add the dollar value to the vehicles, so we can’t charge the appropriate dollar amount, and we have to do a way better job so that the bikes can actually be used consistently. See… mopeds are a dumb business idea for the skill set needed and that is why no one else was doing it!

It took quite a few years of losing money for me to fully recognize that, but I have and that is kind of why I’m writing this long winded blog. I’m hoping that other passionate hobbyist and entrepreneurs who are thinking of starting new business can read this and consider the real customer value of their ideas before giving their selves to their dreams. Obviously this is not just for moped enthusiasts; maybe you love kites, or RC cars, or harmonicas, or vintage kitchen appliances, or kayaks, or pet lizards or urban farming… whatever, it doesn’t really matter. My point is, before you dive into a passion based business, it’s probably a good idea to confirm the value of your products and services versus what they need to cost for the business to be viable.

I’m not sharing this somewhat private information in any kind of doom and gloom type of way. Even though from a business standpoint, repairing old mopeds has been dumb, the experience has been cool. I have become a really excellent and knowledgeable moped mechanic. Having worked on so many mopeds with so many problems that I would have not ever had the chance to see and/or fix any other way. I have made many customers happy and changed the lives of folks who are now passionate moped enthusiasts involved in a thriving social community. I have also learned a lot about running a small business. I have had the opportunity to get involved in the Detroit small business ecosystem, which is interesting too. The list of new skills and knowledge that I have gained is invaluable. I even have a blog on my website where I can share my small business history and insights – how cool is that? But I probably could have done the same with a business that made sense and was more profitable. C’est la vie!

Moped-specific frustrations (and numbers)

The big problems mostly come from the fact that, as mentioned, mopeds have years of unknown history, no Carfax, no diagnostic machine, nothing. You basically just have diagnose and restore / tune mopeds by sound, smell, and feel; it just is not easy. Oh, and there is no vocational training school for it, so there is no such thing as a trained and certified moped mechanic. Further, since there are basically no other shops doing this in North America (and definitely none locally), there is not an experienced talent pool to hire from. So even when I hired the best, most experienced, most passionate moped mechanics, they have only ever worked on their own personal 10 or 20 or 50 mopeds. That is a lot of vintage mopeds to have worked on, BUT that experience is relatively little in the grand scheme of things.

Stripping down parts for powdercoating is an expensive process.

We started the business charging $60/hour for service. Then we had to increase prices to $90 for the first hour and $60/hour for every hour after. Since Covid, we have even increased prices further to $120 for the first hour and $90. These prices seem like great money to keep the business viable but the problem is the “unexpected challenges” that are not billable.

Some examples of why this is a bummer:

Let’s say that it takes a mechanic 10 hours of troubleshooting / swapping parts / riding / listening / repeating to diagnose a small precise 5 minute fix. Billing straight time 10 hours labor is $930. Billing straight time for the 5 minute fix is $10. That is a huge discrepancy. We then will bill you, the customer something like $120 for one “first hour” of repair time. You have now paid 12X as much as you should have for the 5 minute repair BUT we lost out on $810 that we would have made charging straight labor. This is a total bummer for you the customer, for your commission based mechanic who could have earned 50% of $930 for the day but instead worked for $6/hour for those 10 hours, and for the shop which also made only $6/hour for those 10 hours, which does not cover our hourly overhead to stay in business. This happens to a mechanic once or twice per month. Even with the best moped mechanics I know of, it just happens.

Next example: let’s say that someone commissions a custom build for $2,500. Seems like pretty primo money for a moped; it is the top of what we find that people are willing to pay. Most folks want to spend in the $700-$1,400 range. You might assume that on a $2,500 moped we made good money, right? But, consider that when a hobbyist does a sweet custom build, it “took 2 years” or was a “winter project” or it was a constant evolving build over years. Obviously those are not years of labor, but probably 80 hours, maybe 120 hours of actual labor over the course of the build. But we have to do work that quality or better in a fraction of the time. Let’s say that on that $2,500 build the moped itself cost $200, I spend $400 to get the bike professionally sand blasted and powder coated, then I spend $900 on parts. So I’ve now invested $1,500 into the $2,500 bike. That leaves $1,000 for me to split 50/50 with the mechanic. So we each get $500; Seems okay BUT remember that the mechanic now has a $500 budget to try to do the work that it would take a hobbyist 80-120 hours. So maybe the mechanic crushes it, had no problems, and knocks the build out in 40 hours. $500 for a 40 hour week is fine but it’s not the pay that a professional tradesman doing work that no one else can do deserves. After paying the mechanic I have now spent $2K on the $2,500 bike. By some kind of business logic, I should double my money invested, so I should turn my $2K invested in the build into $4K, but instead I turn it into $2,500 – far short of my goal. Further, $500 that the shop makes off of that repair does not cover the other general overhead of the shop for that week.

A freshly powdercoated Puch Maxi being reassembled for a custom build.

Another way to look at it is that, if we did one repair and charged our labor rates straight up, 40 hours comes out to $3,630. If I doubled my $1,500 materials investment, that would be $3K. This would mean that if the custom moped build was billed the way that one would bill for the same skill set and the same monetary investment in a motorcycle, the bike should cost $6,630, maybe more if market value on the specific vehicle was more. Essentially, by choosing to work on mopeds we have put ourselves in a position where we have to undervalue our investment and labor hours by $4,130, if not more, to meet “value based pricing.” And that is with a top of the line / top of the price bracket moped.

Each mechanic gets caught on one of these large custom builds per month, maybe more in the winter. So all of a sudden, we are in this situation where we are we are charging premium prices for premium service on cool interesting vehicles and we have huge demand. BUT because we are doing so on vintage mopeds as opposed to some other more valuable cool vintage product, we are actually losing. It’s very strange.

I could go on, but I’ll limit it to three anecdotes. Occasionally a moped repair goes “smoothly,” and we actually complete a repair “successfully.” We have 1-3 hours of straight labor. We charge straight rates, everything seems as it should. BUT, again, MOPEDS… Mopeds are great and will run FOREVER with constant maintenance, but they require that maintenance. When mopeds were brand new 40 years ago, they came with a little tool kit and a little book that basically said, “Here kid, figure your toy motorcycle out,” because they constantly need tinkering and adjusting. So due to the nature of mopeds, we may have a successfully executed and tested repair, call the customer for pick up, and at pick up the bike won’t start, just from sitting. Why? Because mopeds. So now I spend an hour doing an on-the-spot repair and/or adjustment to send the bike home. That one hour repair bid and charged successfully at one hour is now a two hour repair and our labor rate just got cut in half. Or, that three hour repair bid is completed, tested for a half hour, and charged successfully, but the customer takes it home and it just fails on their first ride. They bring it back for warranty work that takes us 5.5 hours to diagnose a small 5 minute repair. We now have only charged 3 hours for what, after the warranty, actually took us 9 labor hours. Because of the nature of mopeds, the time it takes to fix them and the prices people are willing to spend on them… it just kills us.

The other part(s) about mopeds

We order a lot of parts for the shop but they aren’t always the right fit.

Not only do we have the aforementioned problems due to moped diagnostic work being a difficult and specific skill AND the fact that mopeds will never hit the resale value to justify the labors costs that it should take to get them running, BUT there are also major problems with the parts. The new parts are almost never “bolt and go.” Our buddy Travis Tutorial made a video addressing this problem with moped parts. I speculate that the reason has to do with the value in mopeds. Since people will only spend so much on mopeds, the parts are made the best that they can be made within the conceivable budget for the parts. Ports on cylinder kits need to be filed and cleaned to be run. Exhausts need to be heated, bent, drilled, or brackets made to fit. Some parts need to have powder coat sanded off to fit. Some parts need to be re-tapped to fit. Carbs need to have floats adjusted before use to work. Cables need to be shortened and knarped to fit. Many assemblies will need to be disassembled and re-assembled with Loc-tite to hold up. Parts will need to be shaved down and/or spaced out to line up correctly. And, and, and. After years of doing this on thousands of mopeds, that knowledge is a skill set that we have, but it is also a skill set that is not really understood by the customers and is not really billable. Like, if a customer buys a $10 part and we charge $10 for the 5 minutes that it takes to install it, everything seems fair. But if it took us a half hour to modify the part so that it was ready for the 5 minute install, straight labor would be $70. Most customers are not interested in paying $70 labor to have us install a $10 aftermarket part, so much like the previously mentioned repairs, we charge something like $20 total labor. The customer is typically still not thrilled about spending $20 to install a cheap $10 part. We are typically not thrilled about losing $50 of what we should get on straight labor charges.

I think that these small modifications to parts are all part of the experience for a DIY moped hobbyist. It extends the time that folks get to spend getting their hands dirty and increases the intimacy with the vehicle while keeping parts affordable. It’s pretty okay in that regard, but for us, it makes the moped repair business a dumb idea.

In conclusion

Mopeds are great. They are cool looking, fun to ride, interesting to learn about, rewarding to repair (as a hobbyist) and come with a great community for events and group rides. They just make for a pretty dumb business to operate.

Thanks for taking the time to read my thoughts and understand our business. Be well.

Alex Samul, Owner
Detroit Moped Works
September 16, 2020