Should I Open A Gun Store?

[Rovert]

Howdy, folks.

I'm hoping some of you who are FFLs, or manage a store and know the books, might be able to help me with a decision I'm trying to make.

For some time, I have been toying with the idea of applying for an FFL and opening up a gun store of some sort. I'm not sure exactly where yet (geographically), but it would probably be in Northeast PA.

I do think I'd like to focus on the shooting sports, not so much on hunting or general sporting goods like bait or fishing poles or general recreation stuff. I would want to be more 'purist' in focus catering primarily to CCW and self defense, Competitive shooting Bullseye/DCM, and the accessories and gear that go along with it.

I realize what I'm going to ask is confidential, so if you're not comfortable answering in public, feel free to PM or Email me to discuss sidebar if you're willing.

Anyway, what would be helpful for me to know before I take the plunge to help me balance the obvious risks (investment, economy, this administration) versus any potential upside, would be the following.

UPDATE:
Folks, we have a lot of good qualitative comment and diverse opinions but I need to ask if you'd please focus your replies on the FINANCIAL, QUANTITATIVE aspects of these questions:

• What sort of capital did you have to invest to get yourself going?
• What is your customer/market base like (hunters? sport shooters?)
• What is the square footage of your store?
• What is your approximate annual Gross Revenue?
• What is your Gross Profit by Category in $ or % (i.e. guns, ammo, accessories, apparel, etc and by segmentation if possible - for example new, used, collectible/historic; handguns, shotguns, rifles...)
• What is your average sale per customer?

I know that markets vary widely - a store in Butte Montana will look different than a store in Bergen County, NJ. I also know that commitments to various types of dealer programs bring with them benefits (Glock's program comes to mind) that can enhance the bottom line in the form of free samples which can be sold, and so on.

But even having a sense of whether or not it makes sense to do this would be helpful. I'm just trying to get my head around whether or not it makes sense to tie up my money and take the risk.

Thanks in advance!

[kilimanjaro]

Not an FFL, so take a grain of salt with this, but specializing in CCW/DCM/targetry is all good, you will gain with a good commercial niche there, but do realize that the hunter, reloader, plinker, and collector are also going to put the roast beef on the table and braces on the kids' teeth.

Do include a website with sales capability.

[Tom Servo]

You'll need to find a bank willing to provide a loan for opening a gun business. In some areas, that can be tricky.

You'll need zoning approval, which can also be tricky.

You'll need a lawyer on retainer. You'll need very good insurance.

If you're going to have an on-site range, expect interaction with OSHA and the EPA.

You'll need to cut some big checks to vendors and distributors just to get inventory on the shelves. Be prepared to lose money your first couple of years.

You need to understand that profit margins are thin. You'll need to have a very good feel for your area and potential clientele. If there are other gun shops around, you need to have something that distinguishes you from them.

[Rovert]

Originally Posted by Tom Servo

You'll need to find a bank willing to provide a loan for opening a gun business. In some areas, that can be tricky... You need to understand that profit margins are thin. You'll need to have a very good feel for your area and potential clientele.

Originally Posted by kilimanjaro

do realize that the hunter, reloader, plinker, and collector are also going to put the roast beef on the table and braces on the kids' teeth.

I'm a 30+ year sales and marketing veteran with Fortune 100 background, so I understand all these very valid points. That said, I have to start somewhere with what margins are looking like in the trade to determine if I want to use my 401K and sink it into this, or if I'd do better staying in the market. What I'm missing is an understanding of the ROI opportunity to make that decision.

[Tom Servo]

What I'm missing is an understanding of the ROI opportunity to make that decision.

Inventory management is critical. Expect about a 10-12% margin on guns (you'll learn to despise the phrase "is that the best you can do?"). Vendors don't generally allow returns, so you want to be very careful not to order $5000 boutique pieces that just gather dust.

Margins on used guns can get up to 30%, but you'll need someone on staff who knows what to look for.

You might squeeze 30% on accessories. 25-30% on ammunition and optics. The problem is, people will go online to save that extra 5%, so deciding how much capital to sink into that is tricky.

If you have a range, that's more profitable, but the initial investment will be around $1.5 million. Don't hire general construction; you'll want someone who knows the ventilation, safety, and noise-abatement requirements. You'll also need to plan for lead abatement and maintenance.

Payroll is another consideration. You'll need to attract people who know guns and customer service. Those things are all too often mutually exclusive. A person who meets both criteria will expect more than retail average. Expect to pay ~$12/hour or more for counter help.

If you're going to offer instruction, you'll have to decide whether you want the instructors on your payroll or whether to contract out.

[Rovert]

Tom, that's very helpful as a start, and aligns with some of the information I've heard already though there are numbers all over the map depending on who's answering and the nature of their business.

What sort of margins can one expect from ammo sales, and if I may ask, how big is the store you're referring to in annual revenue, so I can get a scale of what we're talking about.

[zukiphile]

Originally Posted by Tom Servo

You need to understand that profit margins are thin. You'll need to have a very good feel for your area and potential clientele. If there are other gun shops around, you need to have something that distinguishes you from them.

This can't be over-emphasized. I've represented a couple of ranges, and selling firearms, while a feature of the business, wasn't much of a money maker.

It's a strange consumer market in my area. There is the woman who wants a nightstand revolver for a couple hundred dollars. She doesn't know a lot about firearms and isn't a hobbyist, but she listens and if you stock the right kind of items, her transaction will have a pretty good margin.

Then you have the empty nesters and retirees who treat your place as a club. "Great!" you say, "they will be regular customers!". Maybe. A large portion of them will be FFLs themselves who know exactly what you paid for an item and lots of their chatter will be about which place sells a $900 sig for $5 less.

Those are distant ends of a bell curve. In the middle, you will have walk-ins who are sure they will wow you with their expertise.

That doesn't even get to employee theft. Hardly any business is easy, but I think that one is quite tough.

[Tom Servo]

What sort of margins can one expect from ammo sales, and if I may ask, how big is the store you're referring to in annual revenue, so I can get a scale of what we're talking about.

I can't go into our specific numbers, but expect 20-30% on ammunition. Self-defense ammunition will be ordered through the same distributors you get guns and accessories. For range ammunition, check with local reloading companies. If you have a range, you can sometimes get price breaks for giving them your spent brass. That can boost margins a bit.

[Need2know]

Rovert this frequent lurker is making a rare post to tell you that unless you have a background in retail in general and also experience in the specific retail that you are considering, than NO, do not invest your 401-K into ANY retail store. I own a retail store and online sales have destroyed profitability. Customers want to come in to look and handle and ask questions and basically use your showroom to shop, then they tend to go home and order online OR ask you to match online prices and accuse you of being a ripoff because you have to cover overhead, which some online sellers do not. There is no way to compete on price. And overhead goes on and on, way beyond rent and utilities. Many people fool themselves about that last matter and is why you need some real experience as an owner or general manager.
The above is true for almost any retail and is especially true for firearms.
With the current trend there will be damn few retailers left in the near future except for big-box discounters and online sellers. Moving huge quantities is the name of the game. The days of the small specialty retailer are just about history. Keep your investments safe. Retirement age is no time to be starting over.

[BobCat45]

If you opened such a store anywhere near me, I'd be a regular customer. But you would still go broke because there are so few competitive shooters compared to hunters. You will go broke unless you sell hunting gear, scopes, sleeping bags, flashlights, hiking boots, and general outdoors stuff.

In Houston there is what passes for a large chain of retail gun stores - 4 in various parts of the metro area - and they are pretty prosperous. I can't walk in to any of their stores and buy a box of 80 grain Sierra Match Kings. All the Gamekings you want, whatever caliber/weight, but nothing for Highpower. No coats, no sights, no scope stands, mitts, gloves, or stools. For those things you go online to Champion's Choice, Creedmoor Sports, or places like that.

The Houston area has two clubs that hold Highpower and Bullseye matches, and there is another close by in Beaumont. There are several more clubs that do IDPA / 3 gun / IPSC / Cowboy Action, and other action shooting sports. I think the ratio of competitive shooters to hunters is larger in this area than in general in the US. Still have to go online to buy most competition-oriented stuff.

Competition gear does not sell like hunting gear and a store that specialized in competitive gear wherever located, would have to have an online presence and compete with the established folks I mentioned, to survive.

Not wanting to rain on your parade, just providing a viewpoint.

[jasmith85]

Customers want to come in to look and handle and ask questions and basically use your showroom to shop, then they tend to go home and order online OR ask you to match online prices and accuse you of being a ripoff because you have to cover overhead, which some online sellers do not. There is no way to compete on price. And overhead goes on and on, way beyond rent and utilities. Many people fool themselves about that last matter and is why you need some real experience as an owner or general manager.

I can attest to this because I am one of those customers that uses stores to look at something and then buy online where I can save money. I at most buy one out of ten guns at my lgs and quite honestly I buy that one as a thank you for doing all of my online purchase transfers. I understand stores have to pay overhead but if I can save a couple hundred dollars buying online I will buy online.

[carguychris]

Originally Posted by BobCat45

You will go broke unless you sell hunting gear, scopes, sleeping bags, flashlights, hiking boots, and general outdoors stuff.

Several of my local shops sell almost none of that stuff, or only the bare minimum; their focus is almost entirely on CCW/SD/etc. One of them does so well at it that they advertise nationally in Shotgun News.

Of course, another LGS specializes in high-end collector pieces and the $5,000 boutique pieces that Tom Servo talks about, but it's located in a VERY affluent area, and is definitely not representative of your average LGS. It's almost like a museum where you can handle the displays.

My point is that there's no true norm as it relates to gun shops- it's totally dependent on local market conditions.

[lamarw]

Hire a professional Market Research firm to provide you with a market survey prior to investing in a particular geographical area or a particular market niche.

It will be money well spent prior to becoming prosperous or filing for bankruptcy. The next thing, as another poster already mentioned, retain a good lawyer to help you separate your personal funds from your business investment. In the event your endeavor does not work out, you do not want creditors coming after your home and the bread off your table.

[Tom Servo]

You will go broke unless you sell hunting gear, scopes, sleeping bags, flashlights, hiking boots, and general outdoors stuff.

It really depends on the clientele. If there's a market for that stuff, the markups on it are much better, and you're more likely to make impulse and addon sales with it.

[2123]

I can think of a lot of other businesses that will require less money, trouble, and risk, than opening a gun shop.

I've seen way too many gun shops close within a year or two of opening. It must be something in the water.

[cjwils]

Check the local political situation as well as the zoning. I know of a gun store/indoor range that opened a few years ago. Even though zoning was on their side, the local mayor was able to block them from selling guns. Tied up in court for a long time. The range was open, and they were allowed to display guns, but not sell them. Pretty strange to go into a gun store to look at a gun, but to be told you have to go their other store in another town in order to buy it.

[Machineguntony]

I am a business owner of X years. Rarely is there an 'easy' business that is guaranteed to make you money. Margins will always be thin, competition will always be strong, and naysayers will always be plenty. Don't let that stop you; rather, just be prepared and knowledgable.

I dream of starting a gun business, and I daydream about starting a shooting range. This is only a daydream, and will never be a reality, as I do not to turn my hobby into a job.

I can't offer you advice on the gun business. I can encourage you and say that you are brave and awesome to think of going down this path. I wish you the best!

[2am]

Well, I have not posted in a while, and I am very new here, but I am in the process of doing something very similar.

Start with your local economic development people (city, county, ect), develop a COMPREHENSIVE business plan in the format that is recommended by you ED contact (mine is 70 pages long and took 7 months).

Make a list of questions, and call your ATF field office, talk to an investigator. Take notes, they are very helpful.

Zoning SUCKS, I have lost two production buildings in the last 3 months due to zoning rules.

Insurance is almost like a rare metal called unobtainium, you will find it but its not cheap.

Plan on spending, or investing 3x what your well thought out 70 page long business plan says.

Be ready for resistance, there is a lot of behind the scenes political strategies going on making it hard to do business in this area (lending, banking, insurance)

And like Nike, just do it. Follow your dream. I am, its a daily battle and mind numbing expensive, but in the end its worth it.

Post Script

I am not in retail, so you have all the other “retail” concerns to address.

If you like PM for my phone number and I can tell you about some of the issues I have experienced.

[lilguy]

I've been in the shooting sports for 42 years. 99 % of what I buy now is on line, including guns. It's an issue you'll have to deal with also.

[Skans]

1. Pick a location in a "gun friendly" city and state.
2. Pick a location where the largest LGS is making some obvious mistakes.
3. Have at least 2x the capital available as the LGS you will be competing against has dedicated to the sale of firearms. You will need to prove that you are bigger, better and cheaper than the LGS. You can get capital from loans, investors, self, or family. Just make sure you have enough of it!!
4. Have a gunsmith on the premises, even if part time, so long as he keeps some regular schedule.
5. Make your gun store neat, clean and "female friendly".
6. If you are in a more urban or suburban area, then have a shooting range.
7. Before you do any of this, formulate a business plan where you have run some realistic numbers so that you will know what it takes to be profitable and set a realistic horizon on how long it will take you to just break even.

[g.willikers]

Instead of having a store like all the others and trying to compete with them, how about having a niche type one?
In our area, there is no-one stocking or selling much in reloading.
Or targets and stands.
Or competition stuff.
People who go to matches shoot tons more than the average gun owner.
Nor do they have a real gunsmith.
There's lots of places selling guns, ammo and much of the same accessories, but little if any specialty items.
Not much in the way of muzzle loading, either.
Of course there's plenty of all this stuff via the internet, but a real life place that has shelves full of it is something different.
Unfortunately, the only way to find out what sells is to stock it and see, and continually adjust accordingly.
Risky business, for sure.

[BobCat45]

g. you are right and that is sort of what the OP said to start with, a place

to focus on the shooting sports, not so much on hunting or general sporting goods like bait or fishing poles or general recreation stuff.

- which sounds like a wonderful place, to me.

A lot depends on what shooting sports are popular in his area, what other stores are there and what they sell, and whether or not he intends to sell on the internet as well as in the store.

I think I'm just sour because there are many gun stores in my area but none of them sell competition-specific gear. They sell hunting rifles, scopes, pistols, ammunition, and some reloading supplies, but no niche competition stuff.

[Machineguntony]

I do love walking into a LGS and holding the gun.

Most online sellers have a B&M location, and are using the online presence as supplement to their B&M sales. So you aren't on all that unequal of a footing. And most B&M sellers will match an online price. My two favorite questions are: 1. "Will you match this price?"; 2. "Will this pistol fire full auto?" J/K on the second question.

Don't let online competition scare you away. You just have to be smarter and more awesome than your competition.

[TXAZ]

A couple of personal observations on local gun stores (Phoenix and Austin areas):

Loyalty and knowledge are worth something but not everything:
Low prices are important but given a knowledgable counter at a slightly higher price (+$25~) vs a revolving door of poorly informed, I'll pay the extra.

A counter attendant that is not knowledgable or tries to BS is a "no return" to that store policy for me.

A store that has a good range, classes and instructors is worth $$'s.

Reputations come and go with staff and ownership.


Good luck. One of the best I've ever been a member at is Scottsdale Gun Club in Arizona. They have everything, including a sizeable investment.

Good luck!

[johnwilliamson062]

There is a store 15 minutes from me that was started with $5000 as a second business specializing in transfers. The guy was prepping for retirement and works 4-8 tue-friday and 4-6 hours some Saturdays. His cash flow is positive and he is expanding his inventory as he goes. I've been checking out his operation in order to mimick it.
He is very friendly, doesn't push opinions about individual firearms and manages to continue working while chit chatting with the regulars.