Pilgrim Power Sports in Plymouth, Massachusetts has served the local race communities of Plymouth, Cape Cod, and the South Shore of Boston for over 14 years. They are a local business staffed with knowledgeable employees who have a passion for racing…and race what they sell. With over 75 years of combined experience, the employees of Pilgrim Power Sports assure customers leave with the right part or bike at a great price.
Our interview with Larry Liberti, General Manager/CFO, provides insights into how a combination of owner and employee passion, coupled with the right financial partners, can help a business overcome the operational hurdles many small businesses face.
Larry, what do you do at Pilgrim?
I am the comptroller and handle all the accounting and financial aspects of the business. I work very closely with the owner and his son — we actually share an office. Paul Jr., who is the owner’s son, handles working mostly in the business, taking customer sales calls, handling the acquiring and pricing the inventory.
What type of business is Pilgrim Power Sports and when was the business started?
The business started in 2004 under previous ownership and Paul and his father bought it in 2010. It was originally a single line dealership with Kawasaki, but about three years ago we acquired KTM and then this year Alta electric bikes to add to our lines.
What was the motivation for the business to start?
Paul and his father had owned a vending machine business for many years working together. When Paul’s father was ready to retire, Paul Jr. felt that the direction the business was going in didn’t have a huge future. Paul Jr. has been racing motorbikes since he was around 19 years old, and as racing was his passion, starting this business was always something he wanted to do.
What are the top few hurdles you’ve faced in growing your business and what are some solutions you have used to overcome them?
First and foremost, a lack of capital. Paul Sr. bought the business in cash after selling the vending business. And he had to put in almost the same amount of cash to fill the inventory because the previous owners had run the business down. After starting, they had been cash strapped for a number of years, and that is where Breakout Capital and other lenders we have used in the past have helped us a lot. We generally try to only use that capital we borrow for purchases, because we average about 30% margins so we like to use it to take advantage of “opportunity buys” where we can get a high return.
“If this wasn’t challenging, I wouldn’t be doing it. I thought as I got older I’d be looking for some cushy job that I could just wait out the years until retiring, but I really found that I would be bored out of my mind. It’s just too much fun doing this… it can be stressful and it can be frustrating but I’m not interested in not having a challenge”
The second hurdle is the industry itself. Power sports in New England is basically a very seasonal business. Our selling season is from April 1st through August 30th. The rough time is surviving the winter where we only bring in about 30% of our entire yearly revenue.
The last hurdle is just finding good personnel in a specific industry like this. These are specially skilled technical mechanics who we need to excel at diagnosis. It’s hard asking employees to come to work for a seasonal business where they may only be able to make money with us for half the year.
In order to help overcome this hurdle, we limited our core to six people and everyone else is seasonal. We’ve managed to avoid the normal response to flooding the store with inexperienced people in the spring which is what most shops in the industry do in this part of the country, and find people that are ok with having the winter off. For example, we have a couple of college students that come back every summer full time. We also have found a couple truly great mechanics and in order to keep them, we do pay through the winter. We also offer unpaid days off to some of the personnel so that they can take a break in the winter time when it’s slow. It’s a challenge for sure. Part of our plan to help with those costs is to build our online e-commerce business to help cover that. Part of that goes to our hiring of an experienced parts person who has a lot of skill and someone with and expertise in e-commerce as well to grow that side of the business.
We’re also looking to combine resources such as our website provider and our DMS (dealer management system), in order to lower some costs, eliminate steps, and save time.
What would you say to other small businesses facing the same types of challenges as you did?
Find a financial partner like Breakout Capital – a lender that you can partnership with and get to know them.. more importantly have them get to know you. This way, when you need to get that loan for more capital, it’s not a long process for them to figure out who you are. Which is why I went to Steve at Breakout Capital to work on the SBA loan. I have talked to a bunch of conventional banks and we do business with a few, but when it came to doing the SBA loan, Breakout Capital knew who we were and was able to bridge the gap between ourselves and SmartBiz for the bank loan. And of course, neither SmartBiz nor the bank providing the loan knew us at all, but they know Breakout Capital. I think that’s the best advise I can give anyone.
“I’m a very competitive person and my motto here is Take No Prisoners”
How will moving from an alternative loan to an SBA loan help your business?
Number one, cost consistency – we know now how much it’s going to cost us because this is a 10 year loan we’ll keep until we pay it off. It also has us on the books now with SBA so hopefully we’re going forward next year with another SBA loan to purchase a new site since we’ve greatly outgrown our current location.
Where are you heading as a business and what are your goals for growth and success?
Our longer term focus over the next year or two will be starting to look for locations and speak to a couple of other manufacturers. We’d like to partner as they have some points open in the area. Since we’re smaller, we can’t really begin that conversation until we increase our size. This SBA loan is the perfect step to get those conversations started.
In the short term, we are looking to increase our marketing approach, specifically social media, and grow our online e-commerce, and believe that we’ve put ourselves in a really good position to have a very successful year. In 2016 we had a 30% increase in volume and we went from losing money to making money. And then in 2017 our increase will end up being around 12%, which off of a big jump is really encouraging. Since taking over the store in 2010, Paul has probably doubled the volume in this store. It’s all heading in the right direction and we’re ready to start looking a bit beyond next year.
With regard to expansion of your e-commerce, does that mean that you would expand where you sell to and maybe doing more shipping?
It’s mostly parts and accessories that we do through e-commerce. And actually, some of the money that we borrowed from Breakout Capital we’ve used for “opportunity buys” – these are where inventory that was perhaps returned to the manufacturer was sold in an auction. We can purchase these for an extreme discount off retail and have great margins. What’s great about this for e-commerce is we sell these items all over the world and will ship anywhere. When it’s our winter, other areas are buying from our website since it’s their active season.
What do you like to do in your spare time away from the business?
Everyone here is really passionate about the power sports industry. They all at least ride, and most of them race. I’m the only one in the store that doesn’t ride a bike currently, but I did once before an accident sidelined that part for me. For me, my passion is my family and my new grandchildren.
Another benefit from the funding we received has been that it gave us more capital to use for promotional events. The above pictures are from our April 2016 event the night before the Supercross. They highlight how we were able to draw in a large crowd of 1000 customers into a very small store, with the help of Kawasaki’s lead rider Eli Tomac and KTM’s lead riders Ryan Dungey and Marvin Musquin.
Pilgrim Power Sports exhibits how passion, dedication, and proper cash flow management can overcome the challenges many small businesses face with inventory, seasonality, and retaining skilled labor. The right financial partners and the right staff can make all the difference.
Breakout Capital is proud to have helped graduate Pilgrim to an SBA loan and we look forward to seeing their continued success!