At the end of the first year of your bike rental business you’ve got back your initial £3,000 investment.
YEAR 2
You could simply pocket that money, or you could use it to buy a second bicycle. So in your second year you are renting two. Applying our (admittedly overly simplistic) model you rent both bikes for £50 a day and for 60 days each. So at the end of your second year you have £6,000 in income, plus you sell the oldest bike for £1,500. You have one bike and £7,500.
YEAR 3
You buy a new bike to replace the one you sold (-£3,000) and add a further bike (-£3,000), so you can now rent three bikes. And you have £1,500 left in the bank.
Assuming you can rent all three bikes on the same terms at the end of the third year you have your bank balance (£1,500) and £9,000 income from rentals. Your second bike is now two years old, so that gets sold (£1,500). And you have two one-year-old bikes.
YEAR 4
If you wanted to continue your expansion, and had the customers and the reputation to match your ambition, you could buy 4 new bikes (-£12,000) and now you can rent 6 bikes!
Renting 6 bikes takes you to £18,000 in rental income, plus selling your two older bikes gets you another £3,000.
At the end of year 4 you’ve got £21,000 and four bikes (worth at least £6,000) from your initial £3,000 asset. And you’ve got a business and a reputation (both of which have a value).
And again – massively oversimplified, but hopefully you get the point?