How much does it cost companies to create popular firearms?

[deadin]

An example would be this sight. I made it from scratch and it probably doesn't have more than a couple of $ in material and maybe 10 or 15 hours of my time in it. (which isn't worth much as I'm retired)


It's the $5,000+ dollars worth of machine tools that add up.....

 

[btg3]

Buy used!

 

[orionengnr]

I don't know if Glock is a publicly-traded company (nor do I care, as I do not invest in single stocks).
But S&W is, and you can be certain that if they were producing pistols for $60 and selling them for $400, their profit margins (and shortly thereafter, their stock prices) would reflect that...probably in a dramatic fashion.

My point? As some earlier posters stated, the actual raw materials/production cost is only a portion of the actual cost associated with producing a consmer good, and is a small percentage of the selling price.

 

[Shadow 7D]

Ok, so lets do this again

the company make the gun for ~$60
they sell the gun WHOLESALE (so it sells for $450, what is the store buying it for??? most likely less than $350)

well, the manufacture also has to pay wages, and facility, and insurance, and utility and infrastructure (CNC machines, tooling etc.)

So after all that, they make about $40 on the gun SOLD AT WHOLESALE

Yeah I'm sure they would love to make multiple hundreds of dollars, but they don't thats not how it works, they have to pay their bills too, and so does the distributors and so does the gun shop

And ALL of those add cost into the final retail sales price.

 

[OH_Spartan]

S&W is publicly traded company (SWHC).
Revenue: $415 M
Gross Margin: $115; 24%, this is after direct cost-of-goods
EBITDA: $24 M, 6% (accounts for management, R&D, legal, HR, etc.).

Earnings after all write-offs: -$86 M.

The only made 6% before write-offs, and lost $86 M overall.....DURING A COMPLETE BOOM IN FIREARM SALES!!!!! This isn't exaclty an investment that excites me.

 

[OH_Spartan]

Ruger is a publicly traded company (RGR).
Revenue: $300 M
Gross margin: $84 M; 28%
EBITDA: $68 M; 23%

Earnings after all write-offs: $35 M; 11%

 

[gearhead]

And across the board for US manufacturing companies that's pretty typical. 8%-12%. I've designed and costed consumer products for years and depending on the accounting methods used very few mature industries can sustain over 15% margins after all expenses and write-offs due to the level of competition. Manufacturing is expensive.

 

[Sobel]

S&W is publicly traded company (SWHC).
Revenue: $415 M
Gross Margin: $115; 24%, this is after direct cost-of-goods
EBITDA: $24 M, 6% (accounts for management, R&D, legal, HR, etc.).

Earnings after all write-offs: -$86 M.

The only made 6% before write-offs, and lost $86 M overall.....DURING A COMPLETE BOOM IN FIREARM SALES!!!!! This isn't exaclty an investment that excites me.

Thank you for those numbers, I wonder if any parts of our society make lots of profit. Would a place that just customizes guns make more? I didn't realize how expensive the tools to make all the parts were so expensive.

 

[browneu]

I didn't notice anyone mention this during my scan of the posts but there are other things adding to the costs besides tooling, raw materials, and labor from machinests and engineers.

Costs from departments that aren't related to the manufacturing of the firearm greatly adds to the wholesale price. I'm talking about having a finance department that does the accounting and budgeting for the company. A marketing department to promote and develop interest in the current products, ensure the pricing is correct, and doing market research for new product development. Included in the marketing department will be a sales staff to execute marketing campaigns. And we cannot forget the attorneys to protect and apply for patents, ensuring marketing isn't making false claims, and doing other things to protect the company's interests.

All of this adds to the cost of the final product and unfortunately for us (fortunate for those of us in these fields) these professionals are not cheap.

 

[Sobel]

I don't wanna ask yet another question but what makes surplus weapons cheaper? Is it because they just have newer items so the old stock becomes something they want to get rid of?

 

[JohnKSa]

Legal/insurance costs are probably very high. We often don't think about such things, but they can really affect the profitability of an enterprise.

A peripherally related example is an M.D. acquaintance of mine who runs a small general practice in a rural TX town. About 15 years ago he dropped the Ob/Gyn part of his practice because he could no longer make a profit while offering that service. His insurance costs just for that part of his practice were running him $60,000 a year.

It wouldn't surprise me to find that insurance/legal costs easily outweigh manufacturing and materials costs for a firearms maker.

 

[Sam1911]

I don't wanna ask yet another question but what makes surplus weapons cheaper? Is it because they just have newer items so the old stock becomes something they want to get rid of?

You got it! Sunk cost in something that really isn't needed for anything anymore.

The Soviet Union set up their factories to make things like Mosin Nagant rifles, SKS carbines, and AK-47s/AKMs/AK-74s, (along with heavier stuff) and simply go, go, GO. They made millions and millions, and sent them to every corner of their union, and to all their outlying puppet states -- and then sent the technology, including whole factories to those places as well, and told them go, go, GO!

The eastern bloc was very long on mass production and rugged reliability (with weapons at least) but very short on efficiency and inventory control.

If you get the chance, read C.J. Chivers' The Gun. Tons of great info in there about this stuff. I don't have the book right to hand at the moment, but he cites one of the ex-eastern bloc countries (Bulgaria I think. Maybe it was Romania.) as conducting an inventory during the last decade to try and figure out how much of their military gear was still sitting around and hadn't been stolen and/or sold on the black market. At the time, even with all the losses, they had on hand one hundred AKMs for every single soldier in their army. Wow.

And that's just one type of weapon owned by one small satellite state of an enormous empire which produced enormous quantities of a bunch of different weapons. They literally filled up bunkers with cases of rifles, then closed the door and started filling up the next bunker, and so on.

The Soviets were the kings of this, of course, but the world is also full of Enfields, Mausers (of many makes), older surplussed US M1s, M1903s, M1917s, M1 Carbines, M14s (not so many...short service life and no one else really wanted them), Carcanos, French Mas rifles, Swiss K-31s, and newer stuff, too. All left over from the last war, or the one before that, or the one before that, or the ones folks expected but which never came.

Since there are "enough" military rifles in the world for every single soldier the world over to have more than he could possibly carry, the demand becomes low for anything that isn't the latest and the greatest. When the prime buyers don't want something, anyone who might can pick it up pretty cheap.

 

[Shadow 7D]

Surplus = unwanted inventory past experation date (kinda)
basically, it's used, they are trying to get top dollar (on huge lots) for used stuff, even if it's brand new still in the factory cosmo, much like a car, once off the lot, its lost a lot of value

AND
While the government or police department wants TOP dollar (on those $18 M16 and $12?? 1911's) realize that they do bulk orders from the MANUFACTURERS (hence cutting out the distributes and saving their cut) at a price we will never see. They actually can make money after you take into depreciation by selling their surplus.

 

[Sobel]

You guys really know your stuff, after getting legit answers like this I remember why I joined this site. Thank you and I will try to find that book. Much appreciated you guys.

 

[billdeserthills]

Wow and they charge 400+ thats a nice profit margin.

Glock charges much less for large orders of their guns

 

[barnetmill]

A friend that is a gunsmith and machinist designed and built a rear-locking lug bolt action sniper rifle for about $50,000 he said at his shop for a customer-partner. The prototype was very nice, but as a representative of Ukrainian ministry of defense (their intended customer), asked why did you make it in 7.62x54 and not .308? Nice rifle that while it worked, was not a practical venture.

 

[leadcounsel]

Making and selling guns is probably an incredibly expensive endeavor due to the legal red tape, R&D, and some advertising. The profit margins are also likely quite thin.

Let's not forget the reserve $ need for recalls and lawsuits.

 

[Cluster Bomb]

last i knew if you wanted a custom made Colt SAA clone made, it will cost you close to 2K.

by custom i mean. have it made from a block of steel to a gun.

so quit ya bitchen on a $600 gun jk

 

[barnetmill]

last i knew if you wanted a custom made Colt SAA clone made, it will cost you close to 2K.

by custom i mean. have it made from a block of steel to a gun.

It would have to be a lot more than 2 K to do that if you started from a block of steel and you had to set up your computer programs, fixtures, and the other things that are needed.

 

[Cluster Bomb]

i was referring to paying someone who is set up to do this rather than buying from a brand name. There are only a handful of qualified people who do this.

its probably 100k+ for the machine to cut the parts, etc. not counting paying for training on that machine or hiring someone who's experienced.

Not counting knowing what you are doing to put all said parts together and making them work.

Not counting the fees and paperwork, certifications and licensing involved in this with the gov.

 

[simonm2211]

With such slim margins, imagine how difficult it is to make good decisions to grow these businesses profitably (Eg. launching new products, setting prices based on predicted volume, investing in marketing or customer service). One of the primary assets of any company is brand equity; basically the reputation of the company and its products that have been built up over many years. It is something that all of us at The High Road would do well to take into consideration the next time we criticise any manufacturer on this site. For sure some criticism is well-deserved, but negative reviews on a heavily read site like this can influence a lot of buyers and affect the livelihood of many people in what is one of the few diverse manufacturing industries left in the country.

 

[goon]

One thing I've noticed is that manufacturers seem to keep coming back around to the same ideas if you watch long enough.
For example, the Taurus Judge is not a new idea. Handguns that fire the .410/.45LC combo go back to the T/C Contender and there was a five shot .410/.45 revolver called the Thunder Five made in the mid-1990's. All Taurus did was recycle an idea that they thought might work.
Also, a lot of Kel-Tec designs bear a strong resemblence to some of Grendel's stuff from back in the day.
Seems companies often just look for ways to improve something that already sold once or re-introduce an old idea to a younger market.

One thing I do like is the wide variety of concealment size handguns available these days. Kel-Tec, Ruger, and others are making decent concealable defensive handguns that most anyone can afford. I don't know who came up with that idea, but I really like it.

 

[NG VI]

George Kelgren is the founder of Kel-Tec, and the inventor of the Grendel pistols.

There's a reason they seem so similar. Kel-Tec is producing improved versions of the owners' previous creations, while Ruger is producing clones of Kel-Tec weapons.

 

[goon]

Yep, I knew about the Kel-Tec/Grendel connection. Doesn't really change that they're re-using some older designs. But that doesn't matter because they're decent designs and they make them at a price that most anyone can afford.
As for Ruger latching onto the designs, I don't have a huge problem with it. Everyone is making AR-15's and 1911's these days and no one is complaining that only Colt should be able to. Personally, I am thinking about an LCP for a small carry gun but I know the P-32 is a decent little gun and in a more controllable caliber so I might go that route. And the LCR is all Ruger - they're still doing some of their own work and it won't be long before someone else copies Ruger's innovation of using polymer in a revolver.
Copying and improving good ideas happens in the firearms industry. It is what it is.

 

[FIVETWOSEVEN]

Just make it a revolver, chamber it in .45 LC and .410 shotshells and BAM! Instant hot seller.