Looking at a firearms wholesaling business to purchase and would appreciate feedback

[Saint Pitbull]

A buddy and I are looking at companies to buy and a rather interesting one has come across us. It is a small, specialized surplus firearms wholesaler in Texas. The company purchases surplus guns from police and guard companies, prepares them for resale, and sells them to other firearms dealers. The company achieved profitability last year, has no debt, and is said to be growing regularly.

The company was built from the ground up and is said to be designed to be easy to operate (It was operated remotely through the internet and ship one day/week). It maintains a dedicated leased office/warehouse. Buyers could continue operations at this location or move them.

The entire business is up for sale (i.e., this is not just an asset sale) - the entire LLC, including its business processes and intellectual property, physical assets, and an FFL license valid through the end of 2015. In fact, the price would seem to indicate that there are actually very few physical assets that go with the purchase.

The business currently does no face-to-face retail sales, instead selling through Internet, phone, and mail. It seems that this could be an additional revenue stream.

I would appreciate any feedback on the pro's and con's of buying and operating such a business, especially in this climate right now. I'm 54 and am just looking to eke out a small living doing something that I like to do.

 

[ratfinkron]

I can't give you advice but I can wish you well in your decision! I know I would like to earn a living dealing with guns but I think my love for them would cost more than it makes me lol

 

[Saint Pitbull]

Excellent point on spending any money made on the very items that I'm trying to sell. It would probably end up being more like an expensive hobby.

 

[MacTavish]

Welcome to the ODT. Your business venture sounds very interesting. I would suggest you look into all of the licensing issues at both the fed and state levels to see just how much cost you will have before even opening your doors. Your liability insurance issues will be another big cost factor. Good luck with this effort.

 

[woodstock]

Assume you would at the very least need to be an FFL. Getting a solid non compete from current owners and employees (if any)?

 

[BME013]

How long have they been in business if they just turned a profit last year?
Sounds like you would just be buying the concept and the connection. Keep in mind gun stores in GA do the same thing selling surplus.
You might just look into it on your own start up.
To get a FFL you need a store front and not something out of your house. Also insurance
As far as wholesale or distributing guns in the south we already have several big distributors and it will be a tough road and a big pile of cash to go up against them.
Best of luck

 

[Lockout]

The question is do they have contracts from the police that will continue to bring in money? contracts from dealers you sale to?

And the cost to buy/close on the business and after paying everything legally and owning such could you do your own start up and come out cheaper?

are you getting the employees also? if so how many? and what do they make?

Sometimes it's cheaper to keep them vs hiring new and training.

 

[bambam]

I would like to see a new ammo company that makes ALL the components. I know it would take a lot of start up, but to be capable of making powder, primer powder, primer cases, brass, and bullets would be impresive.

 

[Yancey Derringer]

Others have raised some great questions so far, and they deserve some thought, if not research. I can think of a couple of things off hand, why purchase the company out right vs. an asset purchase? If they have any liability or unrevealed lawsuits outstanding, the company would be liable, and you could lose everything. Whereas with an asset purchase, the liability stays with the entity (company) and does not follow the assets. Also, I don't have any experience with a FFL, but is it legal to operate under someone's FFL? If the company has employees, who is responsible for any benefit plans, (ie. accrued vacation, 401k contributions made by the company as a matching fund, etc. anyone on disability?). Would current employees be terminated as of the date of sale and then rehired by the new owners? If you decide to purchase the company, do they have Accounts Receivable, if so how will this be valued (are all debts collectable?). Someone should review revenues, look closely at returns and allowances, and also bad debt write-off's. Look at revenue trends, have they increased prices just so they can turn a profit, if so, will they lose some of those customers over the next year or two? Do a complete valuation of all assets and liabilities, know exactly what you're buying and how much you're paying for it or how much you owe for it. You should really seek professional assistance both from a legal and accounting standpoint, someone with experience in acquisitions, this could save you a lot of money in the future. Sorry for the long post, but this is just scratching the surface.

 

[Yancey Derringer]

I left out verification of existing inventory, valued at their cost.