Buying a well established gun shop

General General Discussion
1

Hello-

I and a friend are interested in buying the gunshop owned by a guy in town that I’ve done business with for the last 3 or more years.

It’s in an old Indiana City that’s decently sized. The only real competition in the area is a store in a nearby town that has a second shop in another city about 10 miles away. They are severely overpriced.

We have a Gander Mountain and Dick’s sporting goods nearby as well as a new Cabela’s that opened up 3 weeks ago.

Right now, the owner does pretty good for himself and has built a very good clientelle base that would have no problem with me taking over.

As a side note, I do NOT conduct myself with these people as you think I might- I’m very civil and understanding with the customers that I help out with quite often.

What’s really involved in taking over a “mom and pop” style gunshop?

Right now they sell a lot of used guns they acquire through shows as well as low end guns like Jiminez (under the new name) as well as a lot of catalog bought “junk.”

They don’t sell a lot of the neat and highly popular stuff like higher end 1911s or H&Ks or even new springfields or S&Ws…

Any help would be greatly appreciated.

2

It is at least three times as much work and money as you think. Believe me!:wink:

3

Survival is the issue!

Between internet sales and the Gander Mountian’s of the world, 5 such shops have gone out of business in the last year here in Denver, and one was one of the largest Police Supply stores in the region.

Unless you have “Large Pockets” to inventory an internet busines along with a the huge costs of a retail storefront, I would reconsider this very carefully. And knowledge, contacts etc. of the industry is crucial.

4

If I won the lottery tomorrow, I would move back to the town where I went to college and buy the gunshop I worked in when I was there. Notice “if I won the lottery” because I would not want my income to be dependent on the shop. :wink:

With that said, I think that Grant’s business model is pretty good. He has both a brick and mortar store and does online sales. I have always thought that this should be a good way to keep prices low in the physical store by doing volume on the 'web.

The thing that really kept the shop where I worked afloat was .gov purchase orders for various types of police gear and uniform supplies for the state prisons. Being that it was female-owned they got a good deal of business just for the minority participation. If I were doing it today I’d make the wife 26% owner, mom 25%, and me 49%. You know a mother-in-law and wife are never going to agree on anything for long enough to take you over. :wink:

5

I would probably wait to see what impact Cabelas will have on the area gun shops. They are like the wall mart of gun stores. Huge selection of used and new.
On a Sunday morning they may have a several hour wait just to get the clearances done for all the buyers lined up.
Also Dicks sometimes sells some of there guns on special probably for less then a small shops cost. Where I live Dicks had both higher end Mossy and Remington shotguns for considerably less then the small local shops had for lesser models.
Sounds like very tough competition where you are.
One thing that does help out the local shops if it has a range attached, that in itself creates customer flow into the stores and generates gun, ammo, accessory sales that the chain stores don’t have.

6

That’s the key, SuicideHz – that is, you need to ask yourself, “What’s my business model?”

The presence of Gander Mtn., Dick’s Sporting Goods and Cabela’s hints that there’s an attractive and sizeable local market in the shooting-sports business, and also that the current customer base responds well to a bricks-and-mortar “retail wonderland” experience.

It’s a sign of the times that mass-merchandisers clobber more and more small businesses every day, whether it’s The Home Depot v. The Corner Hardware or Circuit City v. Ye Olde Appliance Shoppe. Small businesses that survive in the same market as mass-merchandisers do so because they understand that they can’t possibly compete directly – their business models seek to occupy a niche that’s not been claimed by the big boys.

One of my in-laws owns a small, well-established gun shop in a medium-sized Midwest city. It’s an old-school kind of place, run-down but comfortable and friendly, with a coupla well-worn overstuffed chairs in front of the counter where the regulars sit and chew the fat like old men in a barber shop.

My in-law makes a decent living and apparently holds his own against similar retailers in the area, in part due to an indoor range on the premises. As I see it, however, there are at least three threats to his business: no WWWeb presence or sales; an aging customer base; and a Cabela’s that seduces his customers to travel 50 miles for the “retail wonderland” experience.

So this shop has its niche – but I fear it won’t last long without addressing the threats.

Another single-location gun shop, in a similar-sized city just down the road from me, has taken a more aggressive tack. Its barn-wood exterior and spacious, professionally merchandised interior mimic Gander Mtn. The facility features an 18-lane indoor range, and the staff offer 'smithing and training classes. The gun shop adjoins an affiliated pawn shop and Subway restaurant as well, and has an WWWeb presence (albeit not sales).

Despite the flash and features, this shop still presents itself successfully as a small local business. There’s a substantial price-of-admission for that kind of reinvention of a small business, and there’s no guarantee that it’ll stave-off the mass-merchandisers. Time will tell.

Still, the point is avoiding the temptation to bring a knife to the gunfight – find a niche, build a business model around it, and do as much business as the model allows.

7

Great point about the business model. You gotta have a plan. “Brick and click” is just one method of implementing the plan. Don’t confuse a method for a plan.

Something else to think about. The ship probably has an aging customer base. It may be a challenge to keep the existing customer base happy, while bringing in new blood.

8

I agree with Kinta, but this is what it all comes down to…

  1. How much $$$ do you need, and does the current business provide it?
  2. How soon do you need it?
  3. Do you have the staying power to make it if you don’t get what you need when you need it?
  4. How Long could you go without income, or income that doesn’t cover your current expenses, and future growth investments I.e, inventory, website setup, advertising etc.?
  5. Does the current owner have relation sips with the clientèle that would go away if he left?

Rob_S earlier posted on Grant’ success. I can remember 7 or so years ago his wife taking my first order on the phone while in their kitchen bouncing a toddler on her leg. He has done well, and at least for his demographic, seems to know the secret. He also doesn’t rely on just the store front.

Really do your homework on this. Even with a business plan, it has to be based on reality, demographics, and probabilities that can be “Measured” before and after you make a decision to do this. That’s why you never see a McDonald’s go out of business.

9

As Grant has mentioned a few times, he purchased a gunshop from a retiring couple that had been the local hunting and fishing supplier for years. I have been in his shop and seen some of this clientel walk in and get confused looks on their faces when they see only EBRs and pistols.

10

Absolutely.

And remember, SuicideHz, even if this is something you’ve “always wanted to do,” proceed with your head and not your heart. To paraphrase a popular investing maxim, “Don’t fall in love with your business, because your business doesn’t know that you love it.” :wink:

11

Thanks for the extremely large amount of input.

A few more points that I should have mentioned before-

The larger stores like Dick’s, Gander and Cabela’s are 5 miles to the North. Nothing North of them except for lake Michigan, bad areas and the boats.

Then there’s this shop. NO shops South of it. There’s a small 3 lane indoor range too.

The clientelle would not leave with the current owner. They enjoy the shop. A lot of guys come to shoot the sh!t and end up buying stuff while they’re there if they see good deals.

It’s got a very homey feel- It’s in a 100+ year old building on the city square. All sorts of junk hanging around- AT4s, bomb shells, etc.

It doesn’t have the “high tech look how fancy we are” look and I wouldn’t want to try for that look because that just costs too much money.

They make a lot of money going to the gun shows in South Bend and Indianapolis by looking around before the shows open and snatching up the best deals out there.

For some reason they have no problem finding local guys (that are honest and trustworthy) to work behind the counters during the day for peanuts- like $6 an hour.

My friend and I were thinking that we’d keep a modest inventory of firearms and accessories and also do online sales. Too often we see these clowns at gunshows that try and sell guns at $90 over what places like Bud’s has guns for and they won’t budge. We figure we’d be better off just moving as much as we can for a very small profit.

We had a friend who’s father owned a small used car lot. He’d get attached to the 5 decent cars he did have, mark the prices up thinking people would try and negotiate down the price and noone would bother with them then. He’d end up sitting on these cars forever and finally went under.

We’d buy nice guns and sell them for just over cost if that’s possible. We wouldn’t take the stance that someone is going to want to *** :wink: us down on the prices and really hike them up just in anticipation. We’d rather price them as low as possible and hope that the price will speak for itself. If someone wants $50 off, we tell them too bad- we can’t do it. But we think the majority will know it’s a good price and just take it.

The shop started doing a little better when one of the owners started going out and buying up large quantities of ammo from other places when it went on sale. They used to have dick for ammo and it was sad- considering they have a range. The other nearby range is in Valparaiso and it is very nice, I’ve shot on a league there but all they sell is non-range type fancy ammo. They don’t sell anything decent for a decent price.

The owner wants out in 2 years for sure. He wants to pack up and move back South where he grew up. So, he’s going to be out anyway.

If noone picks up his shop under his name, the City will yank the permit for the range and it won’t be allowed ever again. I don’t need my city losing it’s range.

Again, thanks for your input.

Joe

12

Grant also had an existing online customer base to leverage.

13

Before you do anything you need to get a Profit and Loss report produced by an independent accounting firm. This will tell you exactly what the business is worth and what exactly the business produces.

It has been my experience that most business owners don’t know what their business is worth and don’t actually know what it produces, regardless of their tax returns.

14

That’s probably more true than you know. I don’t think Chuck knows his profit and loss nor has he kept good enough records for anyone else to know…

There’s a good amount of equity in the building. The building’s on a historic square and worth a pretty penny. He’s selling the shop and name for barely anything more than what the building is worth.

I guess that’s an important part I left out.

He recently took on a partner that is into old collectibles. Unfortunately, he can only sell those at shows and doesn’t bother to invest time in selling them online. So, he’s not happy.

Ben’s into the business basically to build equity himself so that in 2 years, he can get a loan for the quarter of a million the building is worth. The shop and it’s name will just be handed over as part of the sale of the building.

15

I am not a gun shop owner, but I am a client. Here are 10 recommendations I have.

  1. Re-invent the business. The most successful businesses are the ones that keep evolving. This means you must offer what others don’t. How about armorer courses? Or maybe a build class? Maybe you need to sell brewing supplies and tobacco/coffee too? Hell, put in a drive through. “I’ll have a cafe latte and 3 boxes of Corbon 45HP please, thanks!”

  2. Keep a low inventory. Have a few examples and make sure you tell them that you can get anything they want.

  3. Offer transfers for $25. You have no idea how much more business you will bring in.

  4. Have a gun range that hosts training and competitions.

  5. DON’T just sell guns and ammo. Sell what Cabela’s doesn’t. Sell tactical clothes, police equipment, alarm systems, books, DVD, legal classes (CCW)

  6. Contract with hunting clubs to have a buyer appreciation day for big spenders. Club gets free advertising and a guaranteed booking. Customers get ability to hunt a choice place cheaper than usual.

  7. Offer bulk buys. My brother and his co-workers at the steel mill used to go in on several guns at a time to get bulk discounts. They would have 30 guys buy 30 kimber pistols in one shot through a dealer. Dealer got a small mark up and didn’t have to hold the inventory. They got a price break which most spend on ammo. Imagine how popular you would be if you had a truckload bulk buy on 5.56.

  8. Invite manufacturers to come in and demo guns. Advertise on radio and web sites. There is a place in Cincinnati Ohio called Target World. They would have HK come in and rent the Mk23 silenced and MP5SDS. They offered gun smithing that weekend at cost. There were so many people wanting to shoot the demo guns, get repairs, and buy HKs that there was a line outside the door. I drove from Chicago just to go there that day. Manufacturer gets to sell more guns than usual in one weekend. Dealer gets to make a commission without holding a huge inventory.

  9. Be open when your customers are available to shop. This may be a news flash, but most people work 8AM to 6PM. So if you want customers to come every day, be open until 8PM and on the weekends. Maybe this means that you don’t open during the week until 11AM.

  10. You need at least 2 employees at any one time. But you don’t need so many that there are more employees in the store than customers.

16

Oh, and by the way. Read this book. I was going to start a business and this book helped me realize I was not ready for the commitment. It may help you have the most successful gun ship in US history.

http://www.amazon.com/Six-Week-Start-Up-Step-Step-Achieving/dp/0966963598

17

I see my business mentioned in this thread a lot so I will provide some input.

If I had to live off of my walk in traffic, I would not make it (and I really don’t have any nearby competition).

Our business is based off repeat customers in a very niche market. We are also widely known on the internet so we get customer from HI to FL. Most storefronts do not have this same capability.

Income. Profit from firearms sales range between 10-15%. This is horrible IMHO and almost not worth the time. If your going to get into the used firearms business, I think you can do well at this, but you have really be aware of what the weapon is going for on the street and if you can make any money in it. I personally do not have time to know the value of every single weapon on the market and is why I stay 100 miles away from used weapons (unless their old Colt AR’s). :wink:

Personally speaking, unless you had a thriving internet business (along with your walk in business), I would not get into this business.

C4