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View Full Version : I want to open a gun shop - How much money do I need?


scorn
January 7, 2002, 09:16 PM
I would like to open up a gun store. I am trying to sort out the basic costs. Obviously I need merchandise, I can figure that part up. But what about other costs? I need to know how many tens of thousands of dollars I am going to need to get a storefront in a small town, set up the interior, security and any hidden fees and keep it running while I get on my feet.

Any info is appreciated, I am just starting out the plan so I know very little.

Thanks!

Brian Williams
January 7, 2002, 09:20 PM
Ditto on your idea but I was also thinking about an indoor gun range. If any one has info on starting either please expound in detail on either type of shop

ViLLain
January 7, 2002, 09:36 PM
Not much money in store front operations (per hours spent). Big money is at the gun shows. Those that are successful do both. The store supports the show business and not the other way around. You'll need a cool quarter mill, lots of energy and a very serious work ethic, just to get you going. Hopefully start on an upswing.

Gabriel

scorn
January 7, 2002, 09:49 PM
Gun Shows sounds good.

I need more info on the cost of starting up the storefront though. What kinds of costs are involved. Things like racks, glass counter/cases, security etc.
Once I get the store going, doing a gun show will be easy (get some tables, throw guns on them...). The shop is going to be the tough part to set up and the most upfront expense (besides merchandise), and I have to be able to keep up that shop for maybe a year while before getting the business going.

And I will probably attach an indoor shooting range to it if I can afford it because in this area there are none.

Indy_SIG
January 7, 2002, 09:50 PM
I've been going down this road too the last 3 months. The two biggest hurdles I've found so far are zoning restrictions and liability insurance costs. Also, gun dealers have told me that without sales of accessories (ammo, parts, etc.) they could never make a living selling just guns. Also, plan on working a lot of long hours every day you are open. In the beginning, as in most small startups, hiring help is next to impossible to afford. There are a lot of costs to employees that most don't know or consider. SBA loans are possible, but you must find a banker who is gun friendly and believes in your business plan. Oh ya....gotta have a business plan. Don't know how to construct one? Forget the gunshop/range idea or prepare to pay someone $500-800 to develop one for you or already have $50,000 in liquid capital. Do you have an attorney? If not, plan to find one and pay a referral retainer of $1000-3000 up front. All this is gonna do is get your door opened.....heaven help you if you need legal service often after opening. Have you priced gun cabinets and long gun racks? Very pricey. You'll also need display shelving and pegboard display for the walls. Most of that can be obtained used. BATF is particular about how you secure your guns. Have distributors already lined up? Start looking for those who will supply you at least 3 months prior to planning to open your business. Inventory? Plan on spending a minimum of $30,000 just to get your door open. Double that if you have any real competition in your area of business. Unfortunately, if you're not moving as much inventory as the guy down the street, you probably aren't getting as good of deals on your wholesale purchases....translation = you can't match the guy down the street's prices. Gun range? If you are in an incorporated city limits, I would forget it. If you are in a very gun friendly area and/or one that desperately needs tax revenue, you might get it done. Again, plan to pay at least $1000 a month for liability insurance on the range. Have you done or paid for a market impact study for the area you want to open in? (i.e. is there anyone there who wants to buy what you're selling?) If you are in a small town, without a large potential customer base to draw from, it is unlikely you will generate enough traffic to stay open w/o selling by other means (i.e. the internet). This will be somewhat influenced by how many other sellers are in your area of operation.

Most people who start a small business fail not because they don't know their chosen field, they fail because they don't know how to conduct business. It is very, very difficult to be successful. If you have no prior background in operating a business, I would find someone to partner with who does. 85% of all small businesses in the U.S. fail within the first 2 years.

Hope this generated some ideas.

AR-10
January 7, 2002, 09:54 PM
Check on insurance before you get too excited.

I believe you need three types for a gunshop.

Fire and theft will probably run you about ten percent the value of the stock you carry, per year . I don't remember if this coverage even applies to the buiding, or if it is strictly contents.

Then you need liability to cover anyone in the store or walking by that might trip and hurt themselves. That's not as expensive as fire and theft.

Then there's the coverage to protect you from lawsuits when someone buys a gun and somebody gets hurt in some way. My understanding is that this type of insurance would be very expensive, if you could find someone to provide it to you. I could not actually find a company that would underwrite a policy like that.

Then there is the whole employee cost to benefit ratio. Ever had employees? It is neither inexpensive nor uncomplicated.

A good filtration system for an indoor shooting range, when I priced one, looked to run over $100,000.00, although I might be wrong about that figure. It might be less.

Something to think about when you pay $100.00 over wholesale for a pistol and wonder why the shopowner won't give you a better deal.

Gun shows could provide a good portion of the cash flow, as ViLLain says, but there you are EVERY weekend, dealing with idiots like me and eating sloppy joes.

Internet might be the saving grace, if the powers that be do not start passing new laws in the near future. You can reach a large buyer base on the web, but who knows what the laws will be like five years from now?

I looked into this stuff a year ago. You need a lot of cash and several years to hit the break even point. If I was well off, I'd do it as a hobby (class III):D . But.........

I'm not saying it can't be done, or that you should forget about it. I'm just pointing out that it is not the romantic and lucrative business that I was thinking it could be. Some of the things I posted may be grossly in error, but I don't think I'm too far off on the figures I quoted.

Good luck to you both.

AR-10
January 7, 2002, 10:17 PM
Couple more cheery thoughts.:)

I love to mess with guns! They are way fun to me. A lot of the shop owners I come into contact with do not seem to have that youthful lust for firearms that I feel. It's more like work to some of them. I started worrying about my joyfull hobby becoming the old ball and chain. YMMV.

My wife was gung-ho at first. Then she started thinking, and looking at me sideways. She came to the conclusion that I might very well "eat" the profits, and we would starve to death in a cold, dark, very well armed house. Her fears are justifiable. :D

It is better for me to earn a living another way and enjoy guns as a hobby. If you can make a go of a shop, I'm thrilled for you. Open one in Iowa. I'll help you retire in comfort.;)

MatthewM
January 7, 2002, 11:05 PM
The population where I live is about 200,000 total in the three towns here.
There are two gun shops and an army surplus that has a gun counter.

Over the hill, there are a small store, normal sized store, one large store. That is for a population from the half dozen cities of well over a million.

Of those 2.5 stores, there seems to be only an average of two customers at a time per store.
We have a lower % interest in firearms here, but a lot more disposable income.

So, with so few stores per capita, you would expect to see business hopping in these stores and very happy owners. I only see this in the one real big store in Oakland.

Besides other credentials, I'm a CPA. My strongest trait in that area is answering questions like yours....
I would never recommend starting a business that you could not prove to me to be profitable within months and which wouldn't be paying you a guaranteed healthy income within a year.
When planning to start a business, find someone in another town doing the same thing and get them to share the numbers with you. Compare their and your competition and customer potential and adjust the numbers accordingly. Using their bottom line, adjusted as above, is a VERY quick way of making up your mind.

*If this is just a hobby / retirement plan, maybe consider just an outdoor range along with offering classes and also community outreach to training new users and converting anti's.

444
January 7, 2002, 11:34 PM
I can't answer any of your questions.
But, I know a guy that actually makes a living as a part time class III dealer but where he makes all his money is on internet sales. He seems to have a knack for knowing what people want. He will go to a gun show and buy something and ask an outrageous price for it on line, and get it. The point is that there are ways to get into the gun business that don't nessessarily involve all the stuff mentioned previously. I know a few guys that make some good pocket money as a gun dealer without any merchandise at all. They simple take orders or do internet transfers.
To me, the current gold mine here is teaching CCW courses. My dealer charges something like $85 per student and always has a waiting list. He makes far more on that than he does on gun sales. I know another guy that puts on basic classes on gun handling, self defense tactics etc. He owns a retail gun shop, but contracts with another dealer who has an indoor range. I get the impression that the classes are something like an IDPA type shoot. Of course he can tout these classes while he is teaching the CCW classes.
Get creative, instead of going full bore, try a few of these less risky angles and you might end up building it into a good business at some point.

taco
January 8, 2002, 12:51 AM
Don't turn your hobby into a job... you'll hate it.

I enjoy reloading a lot and last year I thought about opening a reloading shop to supply reloads to local shooting ranges (there are 6 within 25 miles, 11 within 50 miles and 21 within 75 miles). My wife (a CPA) and I (a MBA) spent 3 months finding out all the details like wholesale cost for components, competition, market size, seasonal cycle, potential internet sales, etc. and wrote a business plan just to look at numbers. We came to conclusion that the business had potential to generate decent numbers within 3-6 months. However, my wife wisely suggested that we do not persuit it since reloading (and shooting) is a enjoyable hobby for me and that by turning it into a business will make me come to hate it over time.

dZ
January 8, 2002, 11:24 AM
Ya know how to make a small fortune in the gunshop business?


















Start with a large fortune!

;)

Lavan
January 8, 2002, 11:33 AM
and figure on spending at least 25 of that before you open the door. Get insurance $2500+ (very plus) and incorporate because you are very open to lawsuits and will need the corporate shell and even that is not perfect.
I have a pawnshop and they won't even LET you open one unless you can prove $100,000 in assets and don't count your house.

And although I love em and collect em, I do NOT pawn guns.

Even though it would increase my business 30% or more, I am NOT interested in defending myself against the lawsuits that my colleagues are funding.

4V50 Gary
January 8, 2002, 03:04 PM
BTW, what state? Can't be Kalifornia. If it's around TN, I've got a great salesperson for you.

CMichael
January 8, 2002, 03:42 PM
Scorn you need to get actual numbers. Shop around and get numbers for renting space.

Your main cost will most likely be rent. Then there is utilities, merchandise, phones,

You need to figure out all these numbers and get a monthly cost. Also factor in how much you can pay yourself. Put in money for contingency and any fees associated with selling firearms.

Opening up a small business is a risky endeavor.

Michael

Double Naught Spy
January 8, 2002, 03:52 PM
You need enough money to run the operation for 6 months after you open the front doors. So the $ amount will be the total cost of your inventory, plus 6 months of rent, 6 months of utilitiies, 6 months of paychecks, 6 months of payments on the note to the bank, 6 months of insurance (all types) and so on. Is this just you or you and family? What if you get sick and have to go in the hospital for a week? What happens to the store?

Ideally sales should generate enough income to replace products sold of the shelves. Six months should give you enough time to become established and working daily in the black.

Many sole proprietor shops end up with the owner not actually getting a regular paycheck for quite a while. It would be in your best interest to have 6 months of home rent or house payments, food, utilities, and incidental expenses saved up as well.

People who have never opened a business do not realize just how much it can cost and how hard it can be on the family. While you may get the business operating in the black in a few months, it may actually be quite some time after that when you have actually managed to pay off the amount of money that you have loaned to the business to operate, such as all those missed paychecks. While the business may be doing well, it may not actually be operating in the actual black until into the second year of business.

People sometimes suggest 3 months of operating expenses as enough. Don't count on it.

Keep in mind that you prices need to be competitive, not just with other shops in your area, but with the internet as well. Also understand that your big profit items likely will not be the guns themselves, but accessories like ammo.

Have you actually worked in a gun shop before? Do you actually know the business or just like guns? You would do well to spend a year or so working in somebody else's shop to see how they do things, especially if you have never run a business yourself before.

moa
January 8, 2002, 04:11 PM
Just as a aside, an acquaintance of mine opened a gun shop up in the early 1990s in a Maryland suburb of Washington DC. There where several other gun stores in the area, maybe six.

He was telling me in his peak earning time, he was making an average of $40,000 a month. And, this was not a big store. This was before the Federal "Assualt Rifle" ban. He was selling a boatload of Chinese AK47s. He had representatives like from H&K in his store helping will sales of their products.

Then things started to come apart. First problem was he hired a manager who robbed him blind. Incidentally, the first time I meant this manager he gave me the creeps. I refused to buy anything from him.

Then he had a break-in and major theft of ton of guns including machine guns. Result was the insurance became so high, he could no longer aford to stay in business, and closed down. Had some great close-out sales.

RAY WOODROW 3RD
January 8, 2002, 05:56 PM
MathewM has the right idea. Buy land first and open a range along with training. Take advantage of the fact that there are no ranges in the area, correct? Your inventory would be targets and training materials. Later on you could start to sell other gun related things at your range with it's informal shop (Ammo,cleaning kits ,ear muffs Magazines, leather etc.). Build a following first then see if you want to jump into it. Offer junior programs to get the children involved in target shooting. Convert the anti's and don't forget that you have to hold a TFL shoot atleast twice a year! Where are you located again?;)

Lavan
January 8, 2002, 06:06 PM
Better yet...get an SBA guaranteed loan so if it doesn't make it because of gov't attitude towards guns, it sticks a gov't agency with the loss. Course it's the taxpayers' money.

Have you worked in a gun shop to see if you can put up with the public?


Hate to see you shoot the first cust who wants a new injector because his 45-70 won't take 70 .45's.

Indy_SIG
January 8, 2002, 06:47 PM
A couple of thoughts:

While on the surface it might seem easier to open an outdoor range, it is, in fact, much harder. Liability insurance is MUCH higher and getting the necessary zoning variance is next to impossible. Also, depending on location, you will have little or no business for a significant portion of the year. You'll need a very large piece of land, much larger than might seem necessary. You'll also have to limit your customers to using handguns...no one is going to allow rifles on an outdoor range. There's so much development everywhere in America anymore, it will be next to impossible to find a piece of land that doesn't butt up against the land of another owner. More bad news: The other owner has to agree to your zoning variance. Not easy to do. Opening your own range, realistically, isn't going to happen. You have a much better chance of opening a gun shop.

About SBA loans. They are a wonderful way to finance a beginning business. I did so myself about 15 years ago. However, you just don't show up at the SBA office and get a check. In fact, the SBA doesn't lend money at all. They guarantee loans made my participating banks and other financial institutions. So, to get a guaranteed loan, you must first find a banker who believes in your business plan. ALWAYS deal with an SBA approved bank that can make their own loan decision, as opposed to a bank that has to gain approval from the SBA before making the loan. Guarantee or no guarantee, the bank isn't going to give you a portion of their finite dollars w/o a reasonable chance that you're going to be successful. If the bank has too many SBA guaranteed defaults, SBA quits backing their loans. You will need to understand, in detail, how to construct and pitch a business plan to your banker. Many people find out during the construction of their business plan that their "goldmine" business idea isn't such a good one after all.

As I wrote in an earlier thread, I too have investigated the possibility of opening a gunshop. You're going to need at least $50,000 of your own money, plus your SBA loan, to have any chance to survive. Regardless of what anyone tells you, you will not make any money for at least a year. Don't plan on borrowing the money you'll need to survive that year; they won't let you. If you're thinking of opening a gun shop/range because it would be "fun".....forget it. I guarantee you it will not be fun. You will hate it at first. You will learn to hate guns and everything about them. Have you ever worked in a job where you had to wait on customers? If not, forget opening your own store of any kind until you have done so. 1 out of every 3 customers through the door will poop on you....if you have a personality that can't handle it, you'll fail very quickly. Fools who have no idea of how to conduct business, or of your costs, will cuss you each and every day for overpricing your guns. You will work long hours; about 12-14 a day. Every day. You can't afford to be closed any day of the week. Vacations? Forget them too...they don't happen for a new sole-proprietor for a couple years. You need to be open when your customers want to buy. Ever seen the kind of people who usually work at gunshows? Get used to seeing them a lot, for you will be going to every gun show within 100 miles of your shop. You cannot afford not to. You'll pay anywhere from $40 to $100 per table at the show, plus a flat fee of anywhere from $0 to $50. You're going to need at least 10 tables. Translation: you have to make $600 in profit before you make dollar one. Gunshows can be a good moneymaker, but you must do a large volume. One BIG asset we still have, until the liberals in Congress figure out how to get their hands on it, is the Internet. Hire someone to build you a first-class website and then push it everywhere you can (be sure to include the cost in your SBA case). Make sure that customers nationwide can buy from you via your site. Thinking of getting an FFL and just going to gunshows and selling on the Internet? Sorry, ATF won't let you. Gotta have a store front. There are those who are finding ways around this rule, but the loophole won't last long.

Opening a gun shop/range sounds like so much fun.....in reality, it would be anything but fun. Forget about fun....calculate whether or not you can make any money at it, and if you have the business skills to be successful. And figure out if you can bring your own money to the table to get the thing started. A lot of money. Most people can't.

citizen
January 9, 2002, 07:22 AM
I, too, felt the entrepenural urge; about a year ago.

I was of the impression the world needed me to manufacture moderately priced, self-assembled, transportable gun safes.

Spoke to a friend at a highly regarded SBA bank and was referred to local Chamber of Commerce to develop my application.

The process is like going to Mars.:(
Local COC acted, thought, performed like the most bureaucratic gov agency I could ever imagine. Research and documentation out the yazoo. Industry analysis; market perspective; historical cycles and projection, etc, etc, etc. Minimal co-operation or effort; just reams of paper requirements BEFORE they would even consider endorsing a business plan for submission.

Lost my enthusiasm; quick.

ALL the effort is in the preparation; which takes a LOT of CASH.
By the time you turn the key, you've worked a lifetime.

CMichael
January 9, 2002, 09:18 AM
I also agree with Double Spy's idea.

I think first you should work in a gun ship.

You need to learn first all the ins and out of running a gun shop. The only way to do this is to actually be involved in one.

Best wishes,
Michael

Lavan
January 9, 2002, 12:03 PM
Open a pawnshop instead. You will have variety and the profit is very fast in forthcoming. And it grows exponentially.
It is pressure but fairly fun.

SBA will not even CONSIDER a pawn shop as they will not listen to anything that loans the money they loan. Very sensible as it would be very easy to flummox.

But the MONEY is there. You will need to know something about jewelry and gold but the rest of it is fairly easy now with online auctions to check price of the rest of the crap.

People will jump through ANY hoop to get money NOW.

And as a pawnshop, you can elect to sell the defaulted guns to dealers only and remove a bit of the liability.

Jeff OTMG
January 10, 2002, 01:31 AM
This isn't the first time that this has come up. Below are some of my other responses:

You will need to do a market analysis for the area to determine who your customers will be. The trick is to stock items not otherwise available in your area. If you are in a saturated area you can make up for it in volume. That involes becoming a distributor and having dealers as customers as well as the public, but this approach requires about ten times as much money. I assume that you are thinking about a shop that sells only to customers. To receive the best pricing join a buying group and have an onsite range. You are lucky in that Zero Ammunition is located nearby in Cullman, Al. The projected range revenue can also be used in your business plan to submit to the SBA for the loan guarantee. A range also boosts ammo sales, training income, accessory sales, and gun sales to new shooters.

First thing is to determine your market niche. If he is going to be manufacturing double rifles I would imagine that his anticipated customers will be in the upper income bracket. He will need to find a location convienient to that customer base. Few people of that income level are interested in reloading. After all, would you reload if you made a few hundred thousand dollars a year? What is a few boxes of factory ammo? I don't know many people who reload .375 H&H, .458 Win Mag, .460 Weatherby, .600 Nitro express, or other big calibers anyway. Since that is the intended customers the market will be in Steyr, Dakota, Cooper, and Sako rifles, with German, Burris, and Leupold optics. If his store has the square footage to handle handguns and/or he wishes to expand his customer base, there would be little point in carrying lower end guns that would not appeal to people in his geographical location. For his customers he may have a ready market for Rock River, Les Baer, and Wilson guns. For true exclusivity maybe a Novak Hi Power, a Laughridge 1911, something geared toward his high end customers. In my experience the people with money want exclusivity, something a Glock doesn't offer. Glocks are purchased by the tens of thousands to outfit police departments, no exclusivity there. They want a Black Steyr AUG, not an SKS, a pre-ban Armalite, not a post-ban parts gun. Glocks are popular, known, and relatively inexpensive. If he wants to carry them the best way to buy Glocks is for him to join or form a buying group so multiple dealers can place a bulk order to receive distributor pricing directly from the manufacturer rather than either buying from a distributor or paying dealer price to the manufacturer. I am a consultant and would be happy to help him do a market analysis, research location, sent up or locate a buying group, arrange advertising, store layout, and ordering, but that kind of work comes with a price.

One thing to remember is that when you have a store shooting becomes a business, NOT a hobby. They are two completely different things. If you do not know anything about business I suggest that you first go back to school and get your MBA. Business is business, shooting is a hobby.

As far as money goes, you will need enough for expenses for day to day operation plus inventory and enough to live on for three years. You have to stick with the plan you make or it will blow your dollar estimates out of the water. The idea is to allow the sales revenues to support the store expenses without having to take money out of the business for you to live on.

You might be able to be a LE dealer so you can bid on contracts to provide firearms to small LE depts in your area, but remember that in retail your profit is all in the margin and that the guns themselves have a very low margin, the money is in the accessories. You put $500 into a gun you will be lucky to get $600 back. If you put $500 into clean patches you can get $1000 back. One way to improve your gun margins is to move the inventory fast. When you sell a gun, roll the money back into the same gun again and do that every week. That way the $500 make you $100 per week or $5200 per year. You aren't going to well that many patches. Remember, large margin on slow items, fast movers get lower margins, but you have to keep the stuff in stock. If it isn't on the shelf to buy you don't make anything.

There is only one insurance company that insures the industry, but many people selling policies for them. I have the info on file, if you get far enough to need it let me know.

Good luck.

moa
January 10, 2002, 08:40 AM
Might be a good idea to first get familiar with bankruptcy laws in case you have bail.:D

Tamara
January 10, 2002, 09:05 AM
See this thread (http://thefiringline.com/forums/showthread.php?s=&threadid=96424) and think long and hard.

Your fellow shooters will stay away in droves and the gun shows and bargain barns will slit your throat if you try and make more than $50-or-10% (whichever's higher) per gun.

A decent month in the off season in a medium-size city in the Southeast for a little storefront gun shop is 30-45 guns. That's $1500-$2500 profit on guns in a month. Obviously if you want to keep the lights on, you'd better sell a lot of ammo and patches. Unfortunately, Wally World can buy these things by the 18 wheeler load. I'm willing to pay a few bucks more to avoid being treated like cattle, but you'd be surprised to know how many people aren't.

That guy that just dickered you down to a bare $50 profit on that SIG P-226? He's going to buy the cheapest bulk ball ammo he can get at Mart-Mart. You might be able to sell him a holster; nine times out of ten, it'll be an Uncle Mike's nylon sausage sack.

It's not the business to get into if you want to A) get rich, B) retain any respect for the gun-owning public at large.

You will, on the other hand, meet some of the coolest and most interesting people you ever knew existed. There may be a lot of coal that moves through a gun store, but the diamonds are all that much brighter for it. And they'll expect you to provide the coffee. ;)

Kharn
January 10, 2002, 09:09 AM
Anyone have any advice for those of us that would like to become a small-scale manufacturer (07 FFL, IIRC) with the possibility of an SOT? I'm thinking about going that route when I get out on my own, a manufacturer doesnt need a store front, so I could do it out of an outbuilding on my property (if my house was on unzoned land). Of course, a property split would be called for to protect my house from the damn lawyers.

Kharn

Will Beararms
January 10, 2002, 09:52 AM
Get a job at a Pawn shop or gun shop. Learn the trade and go from there. By the way, don't forget having at least a $12 Million Dollar liability policy for frivilous law suits and as has been aptly pointed out, keep a lawyer on retainer.

Whatever you do, do not start out in debt or you will probably go the way of the other 85% of businesses that falter inside of two years.

Mark Jumper
January 11, 2002, 10:35 PM
As a small business owner, I would agree with the sound advice offered on this thread.

Their are two types of business:

Those who sell there goods and services to the general public

and

those who sell there goods and services to other businesses.

If you want to own a gun shop you had better be committed to dealing with the public. The good, the bad and the ugly. Additionally, you had better be ready to work long hours for a small return until you grow a committed group of customers.

After a while the excitement and interest will wear off and the business will be less glamorous. All those guns that you were so interested in will just be "inventory".

Get a good attorney and good luck!