The $2M Gun Range Deal: Worth It or a Trap?

0:00Hello, everyone, and welcome back to Acquisitions Anonymous. This is the Internet's number one podcast on buying, selling, and operating small businesses. And today, I'm one of your hosts, Bill D 'Alessandro, and I am with Heather Anderson and Mills Snell. And we have an interesting one today. This is a gun store and gun range located in Colorado. It is doing$2 million of sales. They sell guns, but they also operate a gun range. So we talk about the dynamics of the firearms industry. We talk about some interesting things about gun ranges and that they're not really replaceable or you can't really build new ones because no communities want them there.

0:41And there's also a whole hazmat angle. So in some ways, it's a very defensible business. We also talk about some of the challenges, some of the benefits of the firearms industry, gun ranges specifically. We talk about the inventory challenges. We also talk about more broadly how to diligence an industry. Say you're not familiar with the firearms industry. How would you get familiar enough to entertain a deal like this? So without further ado, I hope you guys enjoy this episode of Acquisitions Anonymous.

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2:52How are y 'all doing? hey great enjoying the summer it's not 7 30 a.m heather's time so she's so i'm happy i have energy it's different yeah heather's looking alive um so we have we have a listener submitted deal today so if you listen to the pod go on x somebody an anonymous person on x tweeted this at us our ex this at us uh and we're gonna do it because it's a cool uh it's a cool deal so uh this is from our friends over at trans world business advisors um so trans world trans world is a franchise is it not they are it's like a franchise business brokerage um so anytime you see trans world it's really you gotta figure out which individual broker you're buying from.

3:42But this is a turnkey and established gun range and gun shop in Colorado. They're asking$2 million. It makes$460 ,000 a year on 2.7 million of sales. It's got almost $900 ,000 of inventory in guns, I would assume. $125 ,000 of furniture, fixtures, and equipment. 13 employees and it has been around for almost 40 years since 1985 and it is selling because the owner is retiring it says this well-established turnkey gun shop and shooting range offers an exceptional opportunity for a firearms enthusiast or investor known for decades of expertise and service the business has earned a stellar reputation and a loyal customer base the operation features a diverse and extensive inventory of firearms ammo and accessories and it benefits from a recognized brand within the firearms community.

4:42With a proven track record of strong sales and growing memberships, the business is on pace to surpass performance from the previous three years by the end of the current fiscal year. This is a rare opportunity to step into a fully operational business with a solid foundation, trusted name, and continued growth trajectory. Seller financing is available for a well-qualified buyer. That's all we got. Has anyone ever looked inside the finances of a gun range before? I don't think I've looked deeply at one before. I have looked at gun retail sales. And this is what interests me about this one is how much of it is selling guns, the retail shop.

5:21It's a lot of inventory versus, you know, the revenue that they get from running the gun range. I would think it's more heavy on the gun sales. But I honestly, this is a question because I don't know the answer. What is the average cost of a gun? Average? It depends. But I mean, you know, for a pistol, you can spend between$500 and$2 ,500 for a rifle or an assault rifle or shotgun. I mean, it can be a thousand to many, many, many thousands. Okay. Yeah. So, I mean, they've got probably, and remember, I assume this inventory is held at wholesale costs. They probably have$900 ,000 of inventory. that is going to be hundreds, if not thousands of guns in stock.

6:06Okay. So it feels to me like it's more of a retail shop that is also a gun range. And are most gun ranges that way? Like I've been to gun ranges before that didn't sell guns. Is this common to have both? It's way more common to have both. A lot of outdoor ranges will just be a range, you know, and a lot of times those are like state owned. There are some private ones too, but yeah, the vast majority, the only way you can really make money is if you have the retail sales, because then you're able to sell ammo. You're also able to sell accessories. You can have memberships to the range that get people in.

6:43But the big thing in this space is having your FFL, being a registered firearm dealer. So if I go online and I want to buy a gun, it has to get delivered to an FFL. And I tell the online gun store where to send it, which FFL to use. And that gets me in the door for a background check. And for all the, every state has slightly different laws. Like I think in Colorado, there's a waiting period. You can't just walk in and buy the gun and, you know, walk out, um, things to like promote some kind of public safety factor. But usually you get to charge a fee for being the transferring FFL. So you've got, you know, you make 50 bucks just right there.

7:24Plus they're in your store. Hey, you need some ammo. Hey, you need a case. Hey, you need a scope. Yeah, exactly. And it's, it's kind of like the interesting bond that ties all these different theoretical competitors together. Cause you would say, well, the online retailer is a competitor to this, you know, typical retail. That's the typical dynamic. But in this case, the online feeds the retail, you know, the brick and mortar retail and they rely on each other. And there's a very interesting pricing dynamic that happens. So I actually looked at the firearm space. We did a couple episodes on firearms in the past, if you're interested in this space.

8:01But I looked at buying businesses in firearms. And there's a very interesting margin dynamic that happens, at least on the internet, which is that the margin in the actual firearm is almost zero. I mean, I'm talking you can sell like a thousand dollar pistol and make$5 of margin. Wow. Like almost nothing because all of the margin then pools and aggregates in the accessories. The optics, the optics especially can be hundreds if not thousands of dollars for various types of optics and they're 50 % margin. So everybody is kind of slugging it out to sell accessories. The guns are the loss leader or the break-even leader.

8:43Interesting. And it's also interesting that the online stores always have the best prices because they're all price competing with each other all the time. And then the in-person stores always have worse prices, but almost by exactly the cost of an FFL transfer. Right? So you can buy it online at the best price and then pay 50 bucks to the retailer, or you can just walk into the retailer and pay 50 bucks more and you as a consumer are basically awash. So the retailers, it's weird in this industry, the retailers have defensible way to capture margin against the e-commerce stores. Yep. The other interesting thing about this is the regulatory risk around anything firearm related.

9:23I remember looking at a really, really large company maybe eight years ago that was a brace manufacturer. So like firearm laws are incredibly stringent. I would say kind of borderline in the same level as like, you know, beer and, you know, spirits distilling. Like it's just you need a very, very, very specialty focus to know what you're doing in this space, like health care law or anything else. Like it's this level of detail. But we looked at this company that was making braces, which a brace is an accessory that goes on the back of what's called a. There's pistol is kind of like a elastic term now, like Heather, you probably think like a pistol is just like a handgun.

10:10Well, now there are AR pistols, which looks like a small assault rifle, but it's still designated as a pistol. And the rules state that you can't put a stock on the back. You can only have a brace. Well, we looked at this company that was making like, I think it was$9 million a year in EBITDA selling braces. But the problem was, is the regulatory risk around them. It was almost like go to zero risk. Like the company was printing money hand over fist. but one law can come out, you know, one assault rifle ban, one headline, you know, those things drive change in this industry, but it's almost inverse.

10:49So from the folks that I know in the industry, when, you know, Biden was in office, every time he opened his mouth, they would sell more guns. But then when Trump came in office, people were like, oh, well, we're not scared that we're going to lose access to firearms and ammunition. So it takes the pressure off of selling. So it's this weird dynamic that you really have to be tuned into to know whether or not you're kind of on the rising or the falling tide. Well, they always say Democrats are the best gun salesmen for that reason, right? But what's interesting is reading the description of this business.

11:22So as we sit here in 2025 with three and a half years of Trump left to go, they say they're having a great year. They say that this year they're going to do better than each of the last three years, which would have been Biden years. So they're having a positive trajectory, even during a time, I would think, when the firearms industry cycles downwards. So that's positive. I like to see that. They don't really say they have a niche, like you're talking about braces or anything like that. It's probably a very diverse inventory. No, this would be very diverse. Yeah, that would be more like a manufacturer.

11:53This is, I mean, I don't think we have a city, right, Bill? We don't know if this is like in a rural Colorado. So, I mean, I'm thinking for it to do, $2.7 million. I haven't looked at a ton of these, but I think this is still a small gun retail store. And so maybe it's in kind of more of a rural area or a suburban area and not a major metro. The one thing that I like about this is that it is not going anywhere. The people who come to this store and buy firearms, buy ammunition, use the gun range, it's very steady. It's going to keep happening short of some major, you know, political regulatory compliance thing that comes in and just, but there's never, there's never going to be zero gun stores in Colorado.

12:43So I think this business probably has some staying power. You have to be willing to work retail and retail hours, which is predominantly, you know, nights and weekends for a business like this. People get off work and they want to come buy some bullets and they want to shoot. But that's this dynamic. Well, and this is only an eight-year-old business. And they're saying it's semi-absentee. So somebody started it. Sorry, Heather. I pulled the rug out from under you. There's another gun range for sale also on Transworld, which I clicked over to. The one that we were supposed to be talking about is 40 years old.

13:17Oh, you switched on me. I switched on you. I cheated. Yep. Sorry. That was my fault. I'm not going crazy, but I am. But so we like the 40-year-old one. better than the eight-year-old one, arguably. Yeah. Okay. And this one doesn't say semi-absentees. All right. So now I'm back on track. Okay. There was something that I noticed though, valuation wise. I'm not a fan of SDE because when we service debt, we are servicing debt after salary. So 460 SDE turns into probably 300. I mean, Colorado is not super cheap place to live. Maybe this is super rural and it's less than that. But if it's 300 of EBITDA, this is over a 6X.

14:02And what it tells me is that 900 ,000 or so of inventory, they're trying to get paid like a multiple of cashflow plus the inventory, which like the math doesn't math, you know, when you do it that way. Well, that's going to be the problem. If you got to tack 900K on top of this to buy all the inventory, this is going to be really tough. Yeah. Yeah. I think that's what they already did price. This is going to be a very inventory driven business. You've got to have the inventory on the floor in order to actually have something to sell. Most people want to come in and, you know, feel it, touch it, buy it, even if they can't walk out with it the same day.

14:37But then the other dynamic here is like trends. I'm not the best person to buy this business because I don't know the trends, especially the trends in this market about what's actually moving and what's not. And if I come in and I look at their$900 ,000 of inventory, I don't know if it's relevant or not. It could be super stale. And I won't know until I own the business for two years and go, oh, none of this stuff is selling. And I paid face value for it. Are you ready to take a leap into business ownership, but you don't know where to start? Well, look no further than Acquisition Lab, the premier resource for entrepreneurs seeking to buy their dream business.

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15:44And when you do, be sure to tell them the Acquisitions Anonymous podcast sent you. A good analogy is like this is sporting goods. right? Like you got to know which brands are cool. You got to know which technology is coming out and new, you know, what types of rifles and handguns people are into. It's like, it has trends. It has fads. It has new technology, just like anything else. Yeah. And it's a lot of inventory for the size company that it is. That's, that is expensive to run a business with that much tied up in inventory. And I think this is a very competitive space. I mean, yes, you're, you're anchored as the kind of local retailer, but the attention is, you know, being competed on an online level way above you.

16:29And so if you, if you want to grow this business, I think you're incredibly limited. Do you, do you double the size of the store footprint? Do you double the size of the gun range? Let's assume your market can actually sustain that. Then you're just doubling your inventory needs. You know, you're like, it's, I don't know that it's a race that you ever kind of win. You never get off the wheel, so to speak. No, I mean, I think you're, I mean, you're right, Mills, like tripling this business is going to be tough. I think there are some things like gun ranges near me will offer classes and certifications and trainings.

17:04And sometimes I have a friend who owns one of the ranges here and they try to get kind of more exotic allocations of some interesting inventory. So I think there's things you could do to move more dollars through your existing footprint. But that's incremental. You grow the business 10, 20 % a year, something like that, or probably not a year, but probably once, and then hold it. The reason I was clicking on this other one, though, is there is also another semi-absentee turnkey firearm store for sale in Douglas County, Colorado, which is near Denver, just south of denver this one has another 621 of sde priced on a similar multiple about 4x yeah but it has significantly less inventory which i thought only five employees yeah only five employees and i wonder if you could like if i were going to buy one of these businesses i would absolutely get the book on both and figure out what one of them is doing well and the other one's not doing maybe you could buy them both and take a whole bunch of cost out maybe share employees Yeah.

18:07And even though it's trans world, like you said, this is a franchise, so it's two different trans worlds. It's two different franchisees of trans worlds. So they're competing with each other on these two listings, which is interesting. yeah three different brokers i don't think this is a take it to the moon business um the thing that's tough on the ffl too is i don't want to say almost anybody but it's a lot easier to to get an ffl and act as a discount transfer than it is to buy 900 000 worth of inventory and have a gun store so like if you search you know your town ffl you will find 50 of them you know some of which are in shady homes and stuff, you know, like home-based FFLs, which is scary.

18:51I'm not sure I'm going to someone's house to pick up my firearm. But still, like, you know, so you're getting nipped at from below. And then you've got, you know, the massive online firearms retailers that kind of take up all the oxygen above. So this is a local business. This is people in this market who want to transfer a firearm or to go shoot. and maybe they will rent a firearm while they're there to try it out and then maybe buy it if they're thinking about it. So most ranges will also rent and sell ammo. This is a local retail business with a local kind of services business. There's CapEx to put these things in.

19:26You know, you kind of need the baffle that is bulletproof and safe. So like there's a ROI. I also wonder about kind of build versus buy. Like I don't, I imagine they're kind of saturated so you wouldn't want to. So I know a little bit about these facilities in and of themselves, they are incredibly expensive to build, not just because of the, you know, bulletproofing and the baffles and everything that go in, but the air quality. I may have talked about this on a previous episode, but the air quality and the air filtration because of so much lead dust, we've done some work in one and the employees have, the ones who go back into the back to like clean the filters, they have to wear full respirators and they have to get blood blood tests done for lead poisoning every six months because there's so much i mean everything went back in the back everything's covered in dust like just lead dust everywhere and if they leak you know if the lead dust is pouring out of the building because of like a building problem um you're like the fines are incredible the environmental fines environmental cleanup oh interesting so i do think that this is one of those things that like if you could if you could get in and make sure this isn't like about to fall apart, the value of having one that's already opened, licensed, credentialed, inspected, all those things is a lot better than trying to build one from scratch because certain municipalities don't want them.

20:49I knew some guys, Bill, who were trying to do one in the Charlotte area and the county just was basically like, we're going to make it so hard. You know, we don't want you to do it. Yeah. Yeah. I'm stuck on the metrics of one of them has higher SDE, lower inventory and five employees. And the other one, you know, 13 employees for less SDE and double the inventory. Boy, that tells you there's a big range of, you know, which no pun intended, but, you know, in terms of how you can run one of these. And I'd certainly rather be the one running with five employees and less inventory. Much better. You've like, y 'all both are hitting on something, which we don't really get the benefit of doing typically on the episode, but this is kind of the game, right?

21:34And the puzzle of looking at a business for sale. It fell conveniently into our lap this time because we just had another very, very similar listing in the same geography on the bottom of the page. But whenever you pick a thesis and you can really start drilling down and all of a sudden your sample size isn't one, but I mean, our sample size is two and we're already learning something. Imagine if you looked at 25, you know, gun stores and ranges, the things that you would figure out would just be amazing. And that's why you kind of at a certain point in searching, you kind of have to pick something and run with it because you just can't boil the ocean fast enough.

22:09Yeah. Yeah. All right. I got to wrap this up. Heather, thumbs up, thumbs down. Thumbs down because lenders don't like gun ranges. So I can't I can't do anything with this one. Mills, thumbs up or thumbs down? I'm thumbs down just because it's Colorado. I like Colorado, but I don't know that it's the place that I would want to own this business. It's far away from me. So that's a big part of it too. Yeah, I think I'm thumbs down just because I don't think I can grow it and I don't love the margins. All right. If you like this one, we did a couple other firearms ones. Go to acquanon.com. You can learn about this or a ton of other small businesses that are for sale and get our reactions.

22:48So thank you for listening to this episode of Acquisition Anonymous. We will see you on the next one.

22:57Thank you.