Buying a Gun Shop... FFL & Distributor Questions


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anthonywork6727
October 24, 2011, 10:48 PM
So here is the story. I'm opening a gun shop and it just so happens that a local pawn shop that has been in the firearms business for over 30 years is closing its doors.

So i've been thinking about approaching this gun shop and seeing if I could "purchase" the distributor contracts from him. So here is the catch, the business owner has had some issues with the ATF ( which is partially why he is closing his doors) so I don't want to purchase the company outright ( i don't want anything to do with the legal liability)


What i was considering is some sort of profit sharing, etc in exchange for those contracts.



So my question is, can this be done? Can myself and the current owner of the business just add myself to the distributor accounts and say that we are changing business types from a pawn shop to normal retail ffl and be done with it?


Am i missing something? Or is this just a bad idea all together?

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Bubbles
October 25, 2011, 08:34 AM
Too much trouble, and you don't know how good his credit is with the distributors. Also, once you have your FFL getting signed up with distributors is easy.

ETA: Most distributors don't even bother with formal purchase contracts anyway. Some manufacturers have minimum buy-ins (e.g. purchase at least $25k worth of product or we won't sell to you), and Glock has MAP agreements. Otherwise it's here's your price + shipping, take it or leave it.

Byrd666
October 25, 2011, 08:53 AM
If he's having trouble of any sort with the ATF, you'll definitely want those ties severed. TOTALLY severed.

Do you have an FFL of your own? If so, getting associated with the multitude of distributors is pretty much as easy as a few phone calls and or emails. Then if you can purchase his location without purchasing his business, you are in a known location and ready to go.

GoingQuiet
October 25, 2011, 11:16 AM
That's a bad idea. If you inherit bad paperwork, you will have to deal with that and that's a huge issue.

anthonywork6727
October 25, 2011, 12:27 PM
I guess my concern is getting an open account with distributors. Most require about 4-5 references from other distributors... It wouldn't be a problem i'd think if I had 250K to spend buying things, but I don't have that much so I'm just looking for ways to get my foot in the door.

Thoughts?

tinygnat219
October 25, 2011, 12:50 PM
Don't buy the existing FFL. Create your own. There's a reason why he's shutting down.

Byrd666
October 25, 2011, 12:56 PM
Start with say, Lipseyes and maybe try RSR Group or Sports South and get a few sales under your belt with them. Then you have a base to build on. It's a slow, onesey twosey business at the beginning. But than again, most, if not all businesses are like that.

Try going down the street and talking to the owner of your local gun shop and see if he/she has any contacts within the industry. Or try talking to another "solo" FFL holder and see what they have for pointers. A guy at my range just got his FFL and is doing just what I just mentioned above.

If I might ask, what area are you trying to do this? There are a lot of cities that are just inundated with gun shops and FFL guys trying to undercut the other. So that might not be the best place to hang your shingle.

Fred in Wisc
October 25, 2011, 01:20 PM
It's difficult for a new business in any industry to get an open line of credit from a manufacturer or a distributor. The failure rate of new businesses is very high in the first year or 2, it's too much risk for them. You may be able to get a line of credit by signing a personal guarantee if you have excellent credit and assets.

You may need to start out purchasing on a credit card (make sure you get one that gives you airline miles, cash back, or something that benefits you), wire transfers, or bank checks.

Don't try to transfer over accounts, they will run a whole new credit check when ownership changes. Plus you don't know his credit history, it could be worse than starting from nothing. Nothing good will come of that.

Getting credit from suppliers is a LOT harder than getting accounts with them.

Things to remember: Establish a great credit history for your business from day 1, always pay your bills on time even if you have to lend the business some personal money to do it.

Concentrate on using 2 or 3 suppliers as much as you can- you are a much more important client to your supplier if you are buying 100k each from 2 vendors, than if you are buying 10k each from 20 vendors. After you establish a good history with some of those suppliers, feel them out about an open account, maybe after a year or so. Expect that your credit limits will start small.

Watch your inventory turns, only stock the fastest moving items if your inventory dollars are limited, order the rest. It's easy to get too much money tied up in inventory and have nothing left to pay bills. that leads into a pretty fast downward spiral.

Good luck to you in your new business.

Jim K
October 25, 2011, 01:55 PM
How about finding an attorney with experience in business law? Doing what you are trying to do by asking questions on an internet forum tells me that you have no experience in business or in the complexities involved. If you have enough money to consider buying a business, you have enough to hire a lawyer to keep from losing it all.

I am no lawyer and no expert, but I do know that if you buy a business, you buy all the existing contracts and all the assets (including "good will") and liabilities of that business. The way to avoid that is to let the current business close and then buy the property (if it is owned by the store) and the other assets (tools, stock, etc.), and open an entirely new business with a new name.

But don't take my word for it. Hire that legal eagle.

Jim

MtnCreek
October 25, 2011, 02:11 PM
Getting a line of credit is not a problem, assuming your personal credit is good. With a new business, you’re going to have to sign a personal guarantee anyway. I think there are a few distributors out there that are not accepting new credit lines (Ron Shirk maybe?), but there’s plenty that will.

Credit card is a no go. You’ll be in a low margin business that won’t bear the additional 3% card fee. You’ll need a credit line or go COD (smaller fees).

oneounceload
October 25, 2011, 02:56 PM
Now that you will be a gun shop, go to the SHOT show and get established with the makers there - if they do not sell direct to you, they will have their distributor's names to give you for free

anthonywork6727
October 25, 2011, 03:12 PM
All:

Thanks for the input. I appreciate the advice.

Cluster Bomb
October 25, 2011, 03:45 PM
It would be easyer to start off from scratch. But you could buy his gum/amm/asc stock from him at a severe discount then resell it a mfsrp.

I would just start from scratch. less legal hassle.

ReloaderEd
October 25, 2011, 04:32 PM
going into business with the Pawn Shop is risky at best. I had an FFL for about 8 years kept impecable records and went out of business when we moved from state to state.. All records went into the ATF with no problems since. Working with distributors is easy if you have a good wholesale house. Buy bulk firearms such as deals from Springfield and pretty soon you will be one of their distriutors, I was. Stay away from the Pawn Shop, have fair and honest prices and your business will expand.

ATLDave
October 25, 2011, 06:23 PM
If you are thinking about buying a business, buying the assets of a business, entering into a partnership/joint venture agreement, or anything of the sort: HIRE A LAWYER. A couple of hours worth of advice is so much cheaper than years of litigation when it turns out your seller/partner/pal is a total screw-up or lying dirtbag. Get some competent legal advice.

And that is all I have to say about that.

AlexanderA
October 25, 2011, 07:35 PM
You might consider making the pawnshop owner an offer for a "bulk purchase" of his inventory, at a price well below wholesale. He might go for it, if he's anxious to get out of the business. Make sure that everything you buy from him is logged into his books properly, and log it into your books properly.

Other than that, stay away from any other "legacy" transactions with him. He doesn't have much else of value to sell you anyway, and there's a big potential downside in dealing with a troubled business.

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