The Gunsmith’s Gun Shop

I normally keep from talking about the second potential income-producing feature of gunsmiths shops—gun sales. While additional income can be had from selling guns, my rule of thumb is to recommend against selling new guns and shooting accessories. However, as with any broad generalization, this is hardly a rule. Retail of new guns and accessories may make sense in your shop provided you put some serious thought in before rushing into buying a stock of guns. Please read carefully.

The biggest mistake a gunsmith can make is to get carried away because some customers start telling you they would like to buy anew gun from your shop. You could make a mistake and put in a bunch of your money based on someone’s casually-stated intention. Even a small inventory will easily sink five figures that you have to hope someone will actually buy. Right off you are faced with several things.

First, the customer who tells you he is wanting to buy anew gun may eventually find someone else with an FFL and get it through them to save a few dollars. The second is that it is cheaper for him to go to a big chain retailer that has selection and pricing you’ll never be able to match. Third, and most dangerous for you, even if by some miracle you successfully move your entire inventory, you’ll do well to gross only 25% on your money.

That means it takes a $10,000 investment upfront to make $2,500, which you’ll only make if everything works in your favor. Doing it twice successfully in a year yields a gross (not net) profit of $5,000 a year. I’m guessing that isn’t enough to keep you and your shop going. You might be tempted to think that’s not so bad. After all, retail sales are secondary income and might bring people into your shop to consider your gunsmithing services which is the main point.

Even if you ignore how much money is needed upfront and the cost to secure and maintain that inventory while those well-intentioned customers find discount FFL services, you also need to take into account the time taken from your shop work which reduces your income from the primary reason you opened your shop in the first place. There’s also additional time to shelve, maintain, demonstrate for a customer, and then record keeping to bring the inventory in and then again upon sale.

Most gunsmiths would net more money by investing in equipment to expand their shop services. If you grossed $80 on anew gun and had to spend the better part of an hour on it in total, you lost, anyway you look at it. I’d rather have that money in a stock index fund passively earning even 4% (and most will do double or better than that!) and still have the $10,000 in principal.

Should you decide to sell new guns, I recommend by special order only with the sale of the gun at wholesaler/dealer cost plus shipping, taxes, and a reasonable FFL fee for handling it in line with your normal hourly rate. Your customer pays, in full, up front, and you get a clean brokerage fee without risking any of your money carrying an inventory.

This requires no upfront money from you and the only new guns for sale in your shop were bought with your customer’s money who is pending pickup, reducing the time and risk of securing items in your shop. The thing wrong with inventories of new guns is that you buy several guns that you like and that your customers say they want. Then you find they don’t sell. I don’t know of anyone smart enough to buy an inventory that will sell out completely within a short period of time to make the turnover profitable.

If I could do it I would be a highly-paid buyer and not a gunsmith. There is always a change in the market. Every time anew gun comes out and the factory sends them out to the gun writers there is a flood of stories that makes people buy the new ones so you keep adding to your inventory until you wake up and realize that all the profit from your shop is held up in inventory. Maintaining a shop front business makes maintaining your FFL reasonably easy.

The few remaining small stocking gun shops are doomed as there just isn’t any need for them and if they try to stay they won’t for long because the sales are

going elsewhere. Between the FFL holders and big chain and discount stores you will, in a short period of time, see fewer retail gun stores. Where there is money—bigger money and less inventory—is in used guns. Buy all you can get, but buy them right. You probably know the market, but do you know what margin you should work on? Let’s assume for discussion that a particular gun lists at $600 and after it is used it will market out at around $450-$470.

If you use your head you will tell the customer what it is worth on the used market. If he is reasonable he knows he can’t sell it as new and will listen to you. Now, if you want the gun because you think you can sell it, talk straight to him and tell him you work on a 40% margin. Figure this out. The gun should be bought for $300 or so. If he doesn’t want to sell, you are out no money. If he does, you can mark it up to $470 and see where you go.

Remember, when someone brings a gun into your shop they want to sell it’s likely because they need cash quick and don’t know anybody willing to buy it. Short of handing him a tissue to wipe his eyes, you show some feeling for his position but that you don’t really want the gun as sales are slow but long ago you made up your mind that you just don’t want to lay out cash unless you are prepared to take a chance on not selling the gun right away.

If he doesn’t agree, it’s likely the only immediate alternative is a pawn shop that will likely offer less than $100 for it. In other words, if you can’t make good money on it—forget it. When your sales are likely to gross 40% or more, which is double the new gun margin, you are at least happy with yourself and now you can have a Happy Meal for lunch. Then too, you might get in that broken gun that is going to cost more to repair than the customer wants to spend, which you can pick up for even less.

New gun and retail sales grosses (not nets) a margin of about 25%, usually less. That means it takes a $10,000 investment upfront to gross less than $2,500, which you’ll only make if everything works perfectly. With smart purchasing, used gun sales can readily allow for a margin twice as much, more if the gun requires repairs which you’re in a position to make. Something else to consider with this angle.

With BATFE now saying that if you repair guns for resale you are subject to an excise tax and are considered to be a producer or manufacturer, your shop could be liable for the tax AND not having a manufacturers license. As I look at these regulations, BATF is telling us that we’re subject to penalties to repair guns for resale. This may limit you to repairing guns owned by someone else. If you buy them after they have been repaired then that is alright. The same applies to custom jobs.

If you want to consider sales in a small, independent ship, the ideal situation is to slowly go into having a stock of used firearms and take in trades that you can sell at a high margin, which makes the return on investment about double. It also ensures your shop is offering unique items rather than selling the exact same recent manufactured goods as the big chain stores. Stay away from strangling new gun inventories. Stick to this along with your gunsmithing and you should do well.

Oh, one word on carrying ammunition for sale: Don’t. If you need four words instead: It isn’t worth it. You, Records, and the Law Unfortunately, we have to keep records. We have to keep receipts, we have to keep records from birth onward, and the burden of keeping these records lies with the individual for a womb-to-tomb period of time. What we are most concerned with here is keeping good records that keep the law (any form of same) from being able to criticize us or even penalize us.

We are all familiar with the federal requirements as to the purchase and sale of guns. I don’t think we have to spend much time on this one. You simply have to learn to comply if you don’t already know. The important thing here is to better understand how properlykept records can work on your behalf. Let’s examine repair records. I’m what the kids call "old school" and still maintain records on paper.

I like using numbered cards such as Brownells offers or some similar sort of work sheets to fill out and keep in a loose leaf binder. BATFE and most everyone else will accept this form of repair record keeping. Or, you may simply want to keep an in-and-out bound book. Of course, there are any manner of digital storage options as well. While I prefer the first as the complete records I need stay with the gun from receipt to done, the important thing is to have records to show what you do in your shop.

The in-and-out bound book is all that is required by law. The repair records are for the time being a house secret. These repair tickets can be a life saver in case of a liability suit or to satisfy any claim by a law officer. They are your proof of what you did to the gun. Yet, if you so desire, you can refuse to show any repair ticket without due cause (warrant) and simply because a law officer asks you to. I don’t take this position simply

because I have nothing to hide and very simply, "why not?" In all your repairing of guns, it is possible that one day you’ll either get in a stolen gun or have a convicted felon bring one in for repair. Now we are not policemen and the law does not (yet) require us to have each customer checked or each gun checked to see if it is on the hot sheet. The assumption that all guns and customers are clean is the prevailing mood and I hope it stays that way.

Suppose you get a visit from a duly authorized law enforcement officer who asks if you did work for a particular customer or if you repaired a particular firearm. The answer from me is quickly forthcoming as soon as the law officer complies with my request to provide his request in writing and on some sort of official letterhead. I state that I need the request in writing in order to provide any and all requested information so that I have the exact, formal request to keep as apart of my records.

The written, formal request to note the specifics of the visit and my compliance with it keeps everything straight if the issue should ever arise in the future. I do this for a few reasons. First, such a request is not out of reason. Second, it gives me an opportunity to make notes just in case I need to demonstrate my cooperation. No respectable law officer would refuse such a request from you.

Remember, the possibility of the gun being stolen and some law officer deciding that you are repairing stolen guns is not entirely impossible, so get the request and then show them anything. Again, let me say that we have no positive way of knowing who or what position the customer or gun is in. We could be in the middle. The customer could lie to the law, involve you, and then you would be put in a position to defend yourself. It could happen. These situations can apply to the purchase of stolen guns also.

You have to examine each offer to sell very carefully. If the asking price is too low, the skunk oil on the gun will begin to smell. While the point of retail is the have the highest possible margin, don’t jump just because the price is cheap. There are a lot of older guns that have been stolen and the crook wants to get rid of them quick, which is why he picked your little shop. He is counting on your greed to buy them cheap. Let me give you a true story just to prove a point.

I had a nice appearing young man come in one day. He said his father had died some few months before and some of the guns in the estate needed refurbishing. His mother had put them in the garage and they could not be sold or disposed of until the estate was settled. Now he wanted them all fixed up. While I empathized for him and his family, my place in this and the interest of my shop was in doing the work.

He brought the guns in, eight in total, and an order to have them all reblued with repairs and refurbishing as needed. This was a nice order but not unusual in my shop. I completed all of the work and tried to contact the customer to tell him they were done. He had moved from the address I had first been given and was now at a different address. I talked to him and he said he was happy the guns were done and would come in to pick them up.

The time now jumps to three months and several phone calls later with no additional contact or reply. I finally sent him a registered letter and received no reply or return receipt. He was gone. Now I had eight refurbished guns on my hands and an unpaid bill. I’ve never liked this situation. Sure, I could take legal steps to sell them but there is something in me personally that causes me to spleen away from doing this. Fast forward another 30 days.

A local law enforcement officer came into my shop, showed me a picture the man, and asked if I knew him. Naturally, I told the officer that I did not know him personally but he was anew customer that had brought in eight guns to be refurbished, having told me they were from his father’s estate. I’m sure you won’t be surprised to learn those eight guns were stolen. My "customer" was now in jail and he had told them where the stolen guns were—at my shop.

In his warped mind he figured he would put the stolen guns someplace where they were out of his possession, have them fixed up in the interim, and later pick them up to sell. It was a workable plan up until he got arrested before he got the guns back. Of course, the officer initially wanted to pick them up right then and there.

I replied that I would be happy to turn the guns over but only after receiving a formal, written request explaining the situation and listing the guns by description and serial number along with the fact they were stolen and then surrendered from my shop with refurbishing work complete. They did, which provided me a legitimate and complete tax deduction as well as proof of my compliance in surrendering the stolen goods to law enforcement. So it can happen.

Until we live in a perfect world, it will continue to happen and there is not much any of us can do to prevent it. In all my time in gunsmithing, prior to the last six years, I averaged about one stolen gun in my shop every decade. However, in the past six years I’ve had eleven. This will obviously vary by region greatly but your shop should plan that it will eventually happen to you.

Again, always cooperate with any law enforcement officer’s request for information but don’t just lay down and put you feet in the air—cover yourself at all times. The fact that all law officers should remember is that we are both trying to do the same thing—we try to uphold the law but the stigma—and yes, there is a stigma, undeclared—of dealing in any form with guns makes all of usa little suspect in the eyes of too many in law enforcement. AG