By Paul Smeltzer
Owner/Operator Athens Gunsmithing
So you want to start a ‘successful’ gunsmithing business?
I suspect the bulk of folks who “get into” gunsmithing do so as a hobby Gunsmith rather than as a Gunsmith business. AGI produces an excellent professional gunsmithing course that can provide you with the technical “how to” education to repair firearms. I am one of those graduates. I have been running a successful Gunsmith business for nine and a half years.
This series of articles is for those who want to start a successful Gunsmith business. By successful Gunsmith business, I mean a business that turns a profit significant enough to sustain your family without support from other revenue income or “moonlighting.” By my definition you go to work each day at your business, at the end of the week you pay yourself from your net profits, with that “paycheck” you buy groceries, pay the electric bill, save for a vacation, etc. Breaking even or not losing money is not enough. I like vacations, I went to Switzerland last year for two weeks, and it was wonderful.
If you look at statistics on small business success/failure rates you will find some daunting stats. Depending on who you want to listen to, 70-90% fail the first year, out of those who make it past year 1, 40-60% will make it through 2 years, less than 5% survive for 10+ years.
Presently I run three businesses, a consulting business I started in 1984, a freelance writing business I started in 1990, and the Gunsmith business I started in 2008. Of the three, the freelance writing gig is the only one that does not fit my definition of a successful business, I make a profit, but not enough to pay the bills. Writing is a tough business.
I have been self-employed most of my adult life, I don’t think it would be possible for me to function working for someone else at this point. As the line goes from an old western “no brag, just fact,” I tell you this hopefully to build up some “creds” for the information to come. I believe the great number of failed businesses result not because their owners were lazy dreamers, but because they did not clearly understand the truth of the task at hand and make good choices based on that truth.
If you base a decision on a falsehood (lie), any decisions you make based upon that falsehood will eventually lead to disaster. No fairy tales, no rainbows, no blowing smoke. Lock this precept down – seek the truth – it is important in all you do.
In any good “how to” article there should be a step 1 – right? Not to disappoint; Step 1: Figure how much your yearly take home pay needs to be. If you never did a household budget, do one now. If you are presently collecting a paycheck(s) from somebody else’s business, that may not be a useful enough number. Your employer may be paying for all or some part of your health insurance, paid vacations, taxes, etc. You need to know what kind of money it takes to sustain the standard of living you are comfortable with, including vacations. Go over your list of expenditures a couple of times, be sure you didn’t miss anything. NO fairy tales, no misinformation, what is the real bottom line number you need to make in a year?
Now let’s do some simple math, let’s say you need to make $60,000 take home pay a year. That’s $5,000.00 a month, $1,153.85 a week, $28.85 per hour for a forty hour work week. These are real numbers to think upon, and remember this is take home money, this is what you need after subtracting the cost of doing business. Which nicely segues into business expenses.
Worse comes to worst, if you are going to rent space in a city business area, what’s it going to cost? In Dallas, Texas, the nearest big city to me, retail business space is leasing for an average $20.00 per square foot. My work space is about 700 sq. ft. Doing the math gives me a monthly rent of space of $14,000.00. That sounds scary to me, glad I don’t live in Dallas. So let’s say we can get that cut in half to $7,000.00 a month because we don’t live in Dallas. Hopefully that includes utilities.
Additional expenses for phones, office supplies, insurance, licenses, taxes, advertising, memberships in this and that (it’s not free), coffee, sugar, tea, bottled water, consumables (sandpaper to shop towels), and assuming no other employees, let’s say you add another conservative $1,500.00. So all in you are at $8,500.00 per month business expenses, this means you need $102,000.00 in annual sales to cover monthly business cost, or $1,961.54 sales per week or $49.00 per hour for a forty hour work week. This does not include parts, you’ll bill separately for those. Let us not lose track of the fact these numbers are not real in the sense they are probably not accurate for your area, the true cost of doing business in your area. Before you jump in the pool you need the real number you will be looking at every month – no lies.
So far, if we look at this example we need to add our “paycheck” numbers and our business numbers together. Doing the math we need $162,000.00 year in sales – $13,500.00 per month – $3,115.38 per week – $77.88 per hour for a forty hour work week. In very simple terms you need 8 customers per day to pay you $77.88 each for your labor, parts are extra, to work on their guns. Nuts, forgot about vacation time. Figuring in two weeks of vacation, you’ll need $81.00 per hour for the 50 weeks you actually work.
Your homework is to think about those numbers. If you don’t have your own space, find out what it would take to rent an area sufficient enough to do Gunsmith work. What would it take to get those necessary 8 customers a day?
We’ve talked about figuring out how much money you need to make in a year, month, week, day and hour. Step 2 – Figure out how you are going to make that money. Last time we came out with a figure of $162,000.00 per year in sales to stay in business, eat, and take vacations. So how are we going to generate $162,000.00 in sales per year.
All businesses sell stuff to generate revenue, you can sell a service, you can sell information, you can sell other people’s stuff, (we call that retail sales), or a combination of those things. First thing you have to figure out is what stuff are you going to sell.
What are you going to sell?
In a pure repair gunsmith business you are primarily selling what you know and what you can do, basically you are selling your services, you generate revenue from your labor. The amount of income you can generate has its limitations which, assuming a steady stream of customers, is time. How many repairs can you do in an hour, day, or week? If you need to make $80.00 per hour to stay in business, and it takes you two hours to fix a shotgun, you need to charge $160.00. If the shotgun costs $225.00 new at Walmart that could be a problem. You better work faster, a customer may be willing to pay $40.00 for the repair but not $160.00. If your competition can fix it for $40.00 you are in trouble.
Time and money are joined at the hip. If you are going to be able to develop a sustainable repair business you have to work quickly and correctly, and make the most of your time. Guys like Ken Brooks and Bob Dunlap are able to work on a variety of repair jobs quickly, going from troubleshooting to fixed in a short time. That comes from years of experience and learning. Your best shot at being able to turn jobs over quickly and correctly is to at first work on those guns or type of repairs you are most familiar with, we call that “specializing.” If you can legitimately charge $80.00 to do a trigger job on a 1911 and can easily do two per hour, you are ahead of the game having doubled what you needed to make. You can now afford to do the next job for $40.00 per hour because you are ahead.
That is how you gain experience and stay in business. You made money on two 1911 trigger jobs, and you lost a little working on the shotgun you were not familiar 6 with, but you are still in business. The next time you can do the shotgun repair faster, you bought a little experience. Since you can now sell 1911 trigger jobs and shotgun repairs profitably, you have successfully added to your business.
What if your idea is to sell your labor, and to sell other people’s stuff – retail. You are going to add firearms, holsters, and duck calls to what you are going to sell in addition to your labor. Do the math, if you are the only person in the shop and have to stop selling repairs to sell a holster, say it takes 20 minutes to answer questions, try out different holsters and complete the sale, and for your effort you made $4.00 profit on the holster. If you sold a holster every 20 minutes you made $12.00 per hour, you had better get back to repair work and catch up, you are way behind. It looks like you might be putting in a ten hour day. Time and money, joined at the hip.
Retail sales are tricky, there is a reason mom and pop shops are not as vibrant as in the past. You better do your homework and know exactly what you are making in real profit from selling other people’s stuff. It may require hiring another person to sell the other people’s stuff while you continue to sell repairs. If you hire someone else, it is the same math, how much additional sales do you need to generate to pay the help? Can you sell enough other people’s stuff to at least cover the cost of the extra help?
If you can at least cover, you can say you obtained employment for someone who needed a job, if you can make more than covering the cost of your employee then you have added to your business, if you can’t cover your cost, you are chasing time. When you talk to that business owner who works 7 days a week, 12 hours a day, tired, and stressed out, he or she is desperately trying to chase enough time to produce revenue, and falling short.
Who are you going to sell to?
Once you have figured out what you have or need to sell, the next question is who you are going to sell to. Who are your customers and where are they? If you are going to sell 1911 trigger jobs, is there a market for that, where is it and how do you access that market?
The first and most important part of that equation is – is there a market? The second part is – is it strong enough to sustain the business? Again, you better not be delusional about the answer to that question. If you can’t identify your market and it’s viability, there is no point in worrying about how you are going to access that market. Many small businesses fail because they had a great idea supported by friends and family, but it turns out they were the only ones who thought it was a great idea. Could be it was a great idea, everyone loved your beanie babies, you sold a lot of them at first, but when everyone who wanted a beanie baby had one, there was no one else to sell to – out of business.
Let’s say 1911 trigger jobs has a market, and it seems to be a sustainable market, you know where it is and you can tap into it. Anyone else selling what you are selling, is there competition, if so where is it, and how strong? What do you need to do to compete, can you do it better, faster, cheaper – where is your edge? Is the market strong enough for two businesses selling the same thing? If part of what you sell is firearms, holsters and duck calls, who else is selling them? Bass Pro Shop, Walmart, Amazon, EBay, the gun shop two blocks over? What are they selling them for?
When I first started I thought I would sell a few retail firearms. Since I had to have an FFL anyway, why not? I quickly found out that Bass Pro Shop was selling Remington 870s retail for $20.00 less than I could buy one wholesale, not including shipping. It did not take me long to do that math. I no longer do any retail. A little tip here – you will make more selling your service/labor/ knowledge, than selling other people’s holsters.
When I talk about setting up a business I am not talking about getting a building and putting tools and inventory in it, I am talking about understanding what you are going to sell, who you are going to sell it to, and who the competition is. So far we have spent our time doing math, asking questions, and answering those questions with the best factual information we can. We know what our sales need to be, we know what we are going to sell, and feel comfortable that we have a market to sustain our business in the market place. Next item on the list is start up. We’ll address that in a later article.
Something Else To Consider:
Probably the biggest business expense is space. This assumes you don’t work on your own property, if you do, you’ll be making money on your space because it becomes a tax write-off as a business expense; Woo Hoo! Many gunsmiths do this. Another alternative is to lease/rent some space from another business, i.e. a gun store, sporting goods store, or pawn shop. This accomplishes two positive things.
First, you both get an expense savings because they are deriving income from unproductive space, and you are getting a reduced rate because you are not paying for space you don’t need.
Second, you both benefit because he can offer additional services on his property, and you have readymade customers for your services in each of his customers. Even if the person you rent the unused space from is not in the gun business, you still will save money on the space.
These numbers are not meant to discourage you, keep in mind that your income requirement is reduced by more than half if you work out of your own property.