How do gun shops stay in business?

[MachIVshooter]

Ummmm, no.

Unless 6) their time, and the storage place to keep the records for 20 years is worth =nothing= and given to them for free.

7) same as 6, only now we add the space where the class takes place ... which they apparently got for free and keep open for free. Wow, what lucky guys!

8) oh ya, those don't cost nuthin to put on, or take any owners/employees time

9) just sprung up out of the earth and the insurance/staff is paid for by Nationwide.

10) that old guy back there fixin them guns we bought at a yard sale years ago, he's a slave so we don't have to pay him... we found all his tools in a dumpster, and of course the space he works in is free.

First, your snark is neither high road nor appreciated.

Now, do you understand the difference between gross profit and net profit?

GP: The amount you make, less what you paid up front. Buy at $50, sell at $100, your GP is $50. Sometimes you would factor in rent fees or wages, but only if dealing with subcontractors or space/equipment that was rented specifically for the endeavor. For instance, you would consider the rental fees in GP if you had to pay them before using the space/equipment, and they are not a recurring charge regardless of use. So rent for the storefront is NOT part of GP, but rent paid up front to a facility to conduct a special class or for a booth at a gun show IS figured in GP. Employee wages are NOT calculated in GP, but fees paid to a subcontractor providing a service ARE deducted for GP.

NP: The amount you profit after all expenses are paid. Everything you mention factors into net profit (or operating profit, depending on whether you look at it before or after taxation and interest payments). Employee wages, rent, utilities, taxes, etc are variables for calculating OP or NP

ETA:

If you don't believe me, take it from elsewhere:

http://en.wikipedia.org/wiki/Gross_profit

 

[Phaedrus/69]

I'm sure that the [only] LGS with an indoor range in my town rakes in a lot of money from the range. They get $150/year for mostly-unlimited range time or $18/hr if you don't have a membership. My sister paid her $150 and only used the range once. A buddy of mine doesn't have a membership and has dropped about $500 in rental fees in the same amount of time! Both are idea customers, I suppose. I'm in the middle, a member that shoots every other week or so. In the 15 years I've been going to the range/store I have never bought a gun there, although occasionally I buy ammo. Their stock of accessories is poor and overpriced, much like their gun selection (poor in the sense of not being the kind of stuff I want, at least).

But they do sell plenty of guns to other folks. They do a brisk business in Glock pistols and in hunting rifles. Plus they're one of the only stores in the area that sells suppressors, so they probably get a little bump there.

 

[oneounceload]

By the end of two years I had $140,000 invested in inventory.

To add to this cost, is one most do not realize exists - many states have an inventory tax on your on-hand inventory at the end of the year, just another way of adding more cost to your products

 

[Steel Horse Rider]

Gross profit is a misnomer. You have gross sales but the only profit that occurs is after all the bills, payroll, insurance, and taxes are paid. I take the opinion of a business owner with far more credence than I do Wiki-anything.....

 

[burk]

Reverse your list and you will make money

I couldn't agree more. Ranges, and especially the ability to do classes is a great money maker for a store. It also builds up a great customer base. If someone comes in looking for a first gun what better way to add on to a sale then a discount on a firearm safety or concealed carry class?

As far as accessories, I think it's better to be a category killer than everything to every one. Obviously you have to carry basics like scopes, gun cleaning, knives and holsters. But to me the best thing you can do especially in the beginning is pick a category like Holsters or AR accessories and specialize in them. Try to have the best selection in town. It's not hard for instance to have a better holster selection than Cabelas or Gander. And get the hard to get stuff like a good selection on IWB holsters as an example.

Again though consider your market. If you have a much more rural market it might make sense to specialize in varmint hunting supplies. This is where knowing your market gives you an edge of over the big boxes and the hobby stores that have been there forever and never adapt. We have a local store that just opened in a not so gun friendly college town. He doesn't have a huge store, no range, but he offers lots of classes off site including non-firearm self defense classes for women. He also has perhaps the largest selection of tactical AR accessories I've ever seen, with the exception of a huge shop in TN. I'll drive an hour there to pick up something for my AR because I KNOW he has it. Despite a lot of quality larger gun shops in the area he's given a large group of customers a reason to drive to his shop.

 

[burk]

One other note, probably the costs that will surprise most people are these:

Health Insurance: This is the fastest growing cost for every small business and it will not get any cheaper with the ACA.

Insurance for the store and range: Insurance companies consider gun shops a high risk endeavor and a range can make it worse. We have a local range here that had 3 suicide attempts with rental guns in 4 months. In between accidents, theft, and liability, Insurance companies are always worried about big payouts due to the mistake of some gun shop owner. Probably one the best sources for insurance are the industry trade associations.

Regulatory costs: Some local jurisdictions have all kinds of zoning, licensing, and display regulations for gun shops. Some jurisdictions require you lock up all of the displays in a safe at night. Some won't let you have windows where "children" can see inside the store. Some want let you have a store with in a certain distance from a school. Plus you have to deal with things like parking, parking meters, signs, etc. Before you pick a location definitely consult an attorney on the local laws.

 

[orionengnr]

My LGS is a small one with a very modest inventory. Probably about 50 guns total, and two years ago they probably had 1/3 of that. However, they will order anything I want with a 10% markup.

Until a year ago, they never had ammo either, and have only recently started to get enough to be worth mentioning. Again, they don't make a killing on it. I imagine a bit more than 10%, but not a bunch more.

They do a lot of transfers at $20 each. They also have a loyal customer base. I am never in there without someone buying something, and I do essentially all my business there.

Okay, they don't sell primers, powder or lead, so Powder Valley and Missouri Bullet gets some of my money, but if I am buying (or interested in) a new gun, I go there first. Apparently, a lot of other people do, too. If I'm looking at used guns, I will transfer it through them, and make sure they get their $20.

I've been dealing with them for almost ten years, and stop by every two weeks or so just to say "hi" and see if they have something new that I can't live without.

I suspect they'll be in business ten years from now.

 

[Steel Horse Rider]

The other costly item that has been missing from this discussion is the matter of the EPA and indoor ranges. The equipment and operating costs required to keep the "lead free" air for a range required by the EPA will bankrupt you unless you have a great business or are a regular lottery winner.

 

[MachIVshooter]

Gross profit is a misnomer. You have gross sales but the only profit that occurs is after all the bills, payroll, insurance, and taxes are paid. I take the opinion of a business owner with far more credence than I do Wiki-anything.....

Well, I am a business owner, and I can assure you that gross sales and gross profit are NOT the same thing. You'd learn that in the first week of class for any kind of business degree.

Gross sales are the total sales; the revenue your operation brings in on a given day/week/month/year. If you sell $2,946.37 worth of firearms and accessories on Tuesday, that is your gross sales figure. Doesn't matter if those items cost you $1,824.67 to stock.

Gross profit is exactly that; gross sales less merchandise cost. Using the numbers from above, that'd be $2,946.37 - $1,824.67. Your GP is $1,121.70

Operating profit is GP minus all operating expenses. If it cost you $354.88 in employee wages, electricity, phone, internet, water, gas, credit card processing fees and all other expenses that day, then your OP is $1,121.70 - $354.88. OP is $766.82

Your net profit is operating profit less taxes and interest. If you have to pay out $273.45 in sales tax and business income tax for what you made that day, then your net profit is $766.82 - $273.45, or $493.37.

This is a bit over-simplified from a business standpoint, but is basically the breakdown of how gross sales, gross profit, operating profit and net profit are calculated. If you run a business, you have to understand the differences. If you're an employee, then it really won't matter to you (unless your job dictates that you oversee and improve profit margins, such as some managerial or HR positions).

 

[MachIVshooter]

As an aside, for those of you who think the LGS is expensive, take a close look at those numbers, as they would be a reasonably accurate reflection of day to day figures for a moderately busy gun shop staffed by owner and one employee.

The next time you want them to knock $50 off a gun for you, remember that it comes directly out of their operating profit, and their net profit will only reflect the slightly lower taxes on the $50 reduced sale, maybe $5 or $6. Basically, that $50 discount is taking ~$45 right out of his pocket. So it's not a small percentage of the ~ $3k he'll do in sales that day, but a rather large percentage of his take home money.

 

[Phaedrus/69]

With the modern world of internet commerce, globalization and considering economy of scale I expect a lot of mom & pop gunshops to be forced out the same way the small grocery stores, banks, car lots and theaters have been. The world is moving towards big box and internet; if you don't have an innovative business model or a great hook you'll probably get run over.

 

[oneounceload]

With the modern world of internet commerce, globalization and considering economy of scale I expect a lot of mom & pop gunshops to be forced out the same way the small grocery stores, banks, car lots and theaters have been. The world is moving towards big box and internet; if you don't have an innovative business model or a great hook you'll probably get run over.

Which is why i said if he reversed his list, he would make money. Internet and big box stores typically do no have ranges, lessons, etc. - at least not around here. Some have specialized into a particular niche market for what they sell and they carry anything and everything for that niche - stuff that would take someone a lot of time to find separately on the net (and then the shipping factors in). It can be done, but as someone stated above - if you want to run a gun store and be a millionaire, start with the 2 million

Cash flow, marketing, the ability to adapt to rapid market changes - those keep you in business

 

[Dr. Sandman]

Anybody who thinks that FFLs do not make a fortune on their transfers is wrong. By far, this has to be the easiest money for the FFL to make. $35 buck for a few minutes of labor and keeping the records? Much easier money than I make.

 

[Steel Horse Rider]

It is more the time between transactions that costs, not necessarily the "few minutes" to fill out the paperwork. If you believe it is an easy way to get rich then you should quit your day job and jump into that market.....

 

[SunnySlopes]

Anybody who thinks that FFLs do not make a fortune on their transfers is wrong.

I guess that's why so many FFLs in my area are going out of business. You don't think that competing FFLs within the same geographic area perform transfers?

They might make some money, but they still have overhead, fixed costs, variable costs, insurance, taxes, interest on inventory they buy on credit, employee's wages, to name a few. Then there's always opportunity costs.

FFLs don't make a fortune. If they're lucky, they might stay in business. They might even make enough to pay themselves a salary. But they're not going to make anything even resembling a fortune.

 

[gym]

Know how to use the internet. Sounds easy and silly, but many of there gun stores don't reach their potential because they aren't reaching the right buyers.

 

[Ky Larry]

Back in the 1980's, Bud's would buy pallets of rifles and shotguns. You could look thru the pile and pick out the one you wanted. Ammo and accessories were sold at cost+10%.Bud didn't make a lot of money on each sale but he made a lot of sales. I always felt like a friend as well as a customer. Since Bud sold Buds, I don't even bother to go by even tho it's only 10 minutes from my home.

 

[mgkdrgn]

First, your snark is neither high road nor appreciated.

My "snark" is well earned by listening to an endless chorus of bozos tell me that charging $20 for a transfer is a "ripoff" 'cause its only 5 minutes of work.

 

[Bubbles]

My "snark" is well earned by listening to an endless chorus of bozos tell me that charging $20 for a transfer is a "ripoff" 'cause its only 5 minutes of work.

If it takes longer than that you're doing it wrong...

 

[gym]

Move here and do them for $20 and you will be busy all day long.

 

[rondog]

Simple - they cheat the other guy and pass the savings on to you!

 

[torqem]

Smithing, if you are skilled at it yourself. If you have to pay a guy who's skilled at it, it doesn't make much. several hundred guns sold per week, every week? That would have to be the biggerst gunstore in a huge city, I would think. I've been in some huge stores, and never saw anything like that, except right after some sparking "event".

 

[Potatohead]

although his personality probably puts some people off

This must be a prerequisite for gunshop owners/employees. Where do they get these guys?

 

[Potatohead]

Smithing, if you are skilled at it yourself. If you have to pay a guy who's skilled at it, it doesn't make much. several hundred guns sold per week, every week? That would have to be the biggerst gunstore in a huge city, I would think. I've been in some huge stores, and never saw anything like that, except right after some sparking "event".

I dont know man, I see a constant stream of people buying guns at my LGS. They treat this place like it's the only place to buy in North Kore.. *erg* America.

 

[tiamat]

although his personality probably puts some people off

This must be a prerequisite for gunshop owners/employees. Where do they get these guys?

They must come from all the closed record stores.