Acquisitions Anonymous - #1 for business buying, selling and operating - Will Bill buy this company for Girdley’s Christmas present? - Acquisitions Anonymous Episode 153

Episode Date: December 28, 2022

Want to receive this listing in your inbox? Signup for our weekly newsletter:https://www.getrevue.co/profile/acquanon-----Michael Girdley (@girdley), Bill D’Alessandro (@BillDA), and Mill Snell (@thegeneralmills) talk about a very profitable firing range with 25% Profit Margins in North Carolina.We discuss the perks and benefits of operating one of these businesses and the importance of owning a Federal Firearms License.We will also dig into the value of this deal and how this company staffs its locations, considering the seasonality and its relationship to the asking price.Company: Very Profitable Gun Shop and Shooting RangeLocation: Carteret County, NCAsking Price: $388,000 | Cash Flow: $140,000-----Thanks to our sponsors! CloudBookkeeping offers adaptable solutions to businesses that want to focus on growth with a “client service first” approach. They offer a full suite of accounting services, including sophisticated reporting, QuickBooks software solutions, and full-service payroll options.-----Show Notes:(00:00) - Introduction(00:29) - Our Sponsor is CloudBookkeeping(02:48) - Deal & financials: Very Profitable Gun Range with 25% Profit Margins(04:32) - What’s so interesting about this deal?(05:33) - What do we think about this deal?(06:30) - How would we approach the lease situation?(07:06) - Will this business last?(08:29) - Why is a Federal Firearms Licensees (FFL) license important in this business?(10:20) - Why does Bill think this is a coupon-style business?(10:37) - What does the listing tell us about the Seller? (12:51) - How is this business protected from institutional buyers?(15:11) - What do we think about the staffing and seasonality for this location?(15:55) - Tip for buying a business in the Firearms Industry(18:47) - Would we buy this?-----Additional episodes you might enjoy:#151 - Should we buy this Pot Business Credit Card Processor?#150 - Let’s buy a medical staffing business#149 - Is this car spinner business a good side hustle?#148 - Growth Marketing explained: Shopify Superfood Greens Brand with 40% subscription rate w/ Baller Jesse PujjiSubscribe to weekly our Newsletter and get curated deals in your inboxAdvertise with us by clicking here Do you love Acquanon and want to see our smiling faces? Subscribe to our Youtube channel. Do you enjoy our content? Rate our show! Follow us on Twitter @acquanon Learnings about small business acquisitions and operations. For inquiries or suggestions, email us at [e-mail]

Welcome to Acquisitions Anonymous, the internet's number one podcast about small business, buying and investing. Today, we have a great episode for you. Me, Bill, and Mills, and I'm Michael. We spent about 20 minutes talking about a gun range for sale in North Carolina. And it turns out they're really interesting businesses, and we ran into a really interesting seller. So hopefully you enjoy this one as much as we did. And here is the episode. Hey, Michael here. want to talk to you about today's sponsor for the episode, which is cloudbookkeeping.com. So cloud bookkeeping is actually run by my neighbor, Charlie. So I've met him in person and can attest that he's a real human being and a good person. And what cloud bookkeeping does

is offer a full suite of bookkeeping services all in the cloud for you around QuickBooks and other technologies that you're using as a small business owner. So if you're interested in getting the bookkeeping part of running a business off of your plate and focusing on running your business, Charlie and his team are one to call. They can put together a bunch of other stuff in terms of helping you manage and grow your business besides just bookkeeping, sophisticated reporting, definitely helping you get your QuickBooks online set up in the right way, and a number of things around payroll as well. So definitely know them and recommend them. If you want to find out more about cloud bookkeeping, you can go to their website at cloudbookkeeping.com,

reach out to Charlie. I know many of you have and see if he can help you, make running your business easier and more fun by letting them help with a lot of the bookkeeping solutions. And when you call, mention this podcast, it would help us and help Charlie know that we're supporting him as well. So thanks a bunch. And cloudbookkeeping.com as the sponsor for today. episode. So, hey guys, I was a guest on another podcast this morning, the Story Loads podcast, and we were doing the like before show banter. And the other host asked like, how do you make it

so it's not weird when you transition from the pre-show banter to recording? And what is your strategy for acquisitions anonymous? And my response to him was, I don't know a way to not make it weird. Three to one go. And that's how we start these things. Like, okay, go. Somebody, click go we have to go anyway okay so we have a very holiday spirited the most holiday spirited potential deal possible since we're recording right before christmas uh it's a gun shop now i'm just joking it's definitely not holiday spirit but uh so bill it is a it is a gun shop though so anyway very christmas everyone okay go ahead bill all right so here's what we've got it is titled not your normal gun shop or shooting range a very profitable gun shop and shooting range a very profitable

gun shop and shooting range with a 25% margin. It says it is in a profitable high demand market. It has an excellent building and location. It's a must see for an enthusiast that can be part of an industry that is in high demand. It is a fully permitted and profitable firearms range with an attached gun shop. It has a climate controlled indoor shooting range, which is family friendly and staffed by a knowledgeable and safety certified staff. They have eight lanes. It's wheelchair accessible and a dedicated the lane for the wheelchairs. The large range is suitable for rifles and pistols, firearms training, events, competition stages. The shop sells a wide variety of products, including handguns, rifles, ammunition, shotguns, optics, accessories, and much, much more. They have a 25% net operating

margin, which means that they throw off $150,000 a year of cash flow. They do not say how much revenue it takes to throw off that $150,000 a year of cash flow, but it says they carry about $100,000 of inventory, which I presume is guns, ammo, et cetera. It says the business attracts enthusiasts, collectors, sports men and women, and private citizens practicing their Second Amendment rights. They have established business with local, state, and federal law enforcement who train at the facility. They also have a classroom where they do concealed carry classes, safety classes with certified

instructions. They do group functions. They do birthday parties. The business comes with an FFL license, which we can get back to. which can be transferred to new owners, which you will need to sell guns. That's a big deal. The business is in full compliance with all ATF regulations. It has a favorable lease.

So it's interesting that they lease this and do not own it while they contaminate it with all kinds of lead all day every day. But we'll come back to that. And they have great vendor supplier lists. And it's price reduced for a quick sale. They are asking $38,000 exactly for their $150,000. cash flow business. And it is in Carteret County, North Carolina. Where is Cataray? I do not know. I would have to Google it. If the nearest gun shop is an hour away,

it's got to be somewhere. Oh, so this is the outer banks. This is like on the ocean, far, far eastern North Carolina. Moorehead City and Emerald Isle. Emerald Isle, ochre coke. This is the kind of the smack middle of the outer banks. Wow, there's a lot of nothing out there. Yeah, there's a lot of marsh. It's beautiful, really beautiful out there. But thinly populated. So, I mean, what do you guys think?

So this is, I would think, semi-defensible, they're probably not permitting new ones next door, right? There's a lot of sunk costs associated with these buildings, too, because, like, Bill, you mentioned the environmental considerations, but the filtration systems for these things are, wild because you know you're shooting a bunch of lead down range and it creates this just insane amount of dust lead dust and these filtration uh i've talked to a guy who works in one of these and uh they have to wear they have to wear full like hazmat suits full face respirators and they have to get blood tested uh once a quarter to check the lead levels in their blood so it's it's no joke um the i think eight lanes is pretty small um And obviously, they're doing, if you just, they're doing about maybe $600,000 in revenue.

So this place isn't huge. But it's, it's a big deal. If you wanted to just take a metal building and put a range in it, you'd be spending a lot of money upfitting it, which to your point makes me a little bit worried, like how much longer do they have on the lease? You know, that, that owner, the property owner is going to know what they've got when it comes time for lease renewal, probably. It says five years left on lease here with no increase for the turrise. of the current lease. So it's not the shortest we've seen, but it's not very long. I mean, you spend way more than the $38,000.

They're asking for this thing to outfit a new shooting range. I mean, multiples of that. Yeah. But it seems like your business is probably over in five years because one of two things is going to happen. The landlord is going to not renew you. And they're going to stick some other dude with an asset light shooting range business in that building.

in that building, or they're going to raise your rent so high, they're going to extract most of the value out of your business, I would think. You can't exactly move it because it costs a million dollars to build a new one. And I think that brings up like an interesting thing that most people, it's not obvious for a lot of buyers of assets, whether like you're buying a building or you're doing a situation like this where you're going to be, you know, buying a business with not as long of a lease on it as you'd like or maybe your lender would like, you know, it is totally possible to put forth an offer to somebody who's the seller and say, okay, here's the offer I want to make. I can pay you X for the business, but as a condition for closing, we need to negotiate an extension

with the landlord to give me, you know, five more additional years or options for X, Y, Z. So you can put those in your model and not have to worry about, you know, sitting on kind of a ticking time bomb of real estate where five years you look up in this situation and you've got no place to go and no way to make any more money and you're out your initial investment. So that is something that, you know, people, I think forget is you can make it kind of a contingency upon, you know, a requirement for you to close. Mm-hmm. Yeah. The FFL license is a big thing, too.

I mean, you know, this goes without saying, but, you know, you can't be like a convicted felon and own something like this. The cool thing about the FFL license that really helps these businesses, and it makes sense just even like from a societal standpoint, is that as more and more people buy this kind of stuff, online, you can't just buy a gun online and it gets shipped to your house. Like, there's a lot of potential issues with that. And so what you have to do is when you buy a gun online, and I think this is, this is all federal. It's not really state by state, but I'm at the outer bounds of what I actually know about this. But it has to be shipped to somebody who has their FFL license. So these guys have a gun shop, but also you could have bought it online and it gets shipped there and you go pick it up. And they process, you know, giving you the gun and making sure the gun actually gets in the hands of the

right person and the background checks are cleared and all those kinds of things. That is kind of a cool moat, right? Or it's somewhat defensible because even as more and more of your sales get cannibalized online, you charge a fee for that. And it gets somebody in the door and you're like, hey, do you need a holster? Do you need ammunition? Do you want to go, you know, do you want to go shoot it for a little while? And I think it keeps these guys relevant, whereas, you know, and other businesses that moved to e-commerce, your customer's gone and you never see or hear from them again. I do like that about this business, is that it's really expensive to build a new one. They say the next closest one is hours away, which is clearly true if all the local cops are training with them too, right?

They've got a federally protected FFL license, which stands for federal firearms license, I believe. And now you can have a gun shop without a range that could also have an FFL, right? So you could sprout up some more competitors there, but it's kind of hard to get one of these. This is the type of business that I don't know how big you're going to make it, but especially if you own the range, this might be around for a long time. Yeah.

This could be one of those coupon clipping businesses for a long, long time until you have an accident or something, and it derails the whole thing. Okay. There is something I really like about this listening worth pointing out. This is a very well-written listing, that was done by the seller. The seller put this out, right?

And like, this is the type of quality of like a listing I would expect if a broker is involved. You know, they know how to speak to a potential buyer. But like, I really like that this is one where the seller, despite being out in the middle of nowhere, like in running a tiny gun shop, like has said the things that you need to read, you know, as a potential buyer.

And it's actually been very reasonable in how they're positioning stuff. Like, when was the last time we saw it? Remember the parking lot one? saw around Hobby Airport where the guy had like all caps and was like super crazy. Like this is the opposite of that. This is like a guy you could tell like there's a good chance you're going to make a reasonable deal with this person because they've got just the way they've written it. Like it's like, man, I would want to do business with this person.

Now do I want to own this particular business? Absolutely not. But like this is the type of seller you want to run into, very reasonable just from everything you see here. And I mean, to even add to that point, he knows that it's not likely to qualify for SBA, which, you know, maybe you don't have to be in this business that long to know it, but he is not blowing, you know, glitter around saying, you know, this is a pre-qualified SBA deal, which our friends have told us is not a real thing.

I also, I mean, I don't know. I mean, this is, this is, you're, you're buying a job, right, with something this size. So you've got to really enjoy this community. You've really got to enjoy, like, this. just this vibe. The people in this industry love it, though. I mean, they are, the guys that I know in it, they're like, look, every time Biden opens his mouth, we sell millions of dollars worth of guns.

So, you know, there's a scarcity mentality that goes along with this. And a lot of it is like fear-based selling, you know, don't, you know, don't be the one without the biggest gun or the most ammunition. But the people inside the industry love it. And the one thing I will say that we talked about just slightly before we hit record, it doesn't apply to this. But anything firearm related is like a complete, just black sheep to professional buyers. If you have pension funds or endowments or, you know, any investor base,

they are almost always going to just squash the ability to buy. buy something like this. So these businesses in this industry as they get larger, especially kind of $3 million in EBITDA and up, the pool of potential buyers gets very small. And the people who are professional buyers of these types of businesses crush it because there's not that many people at the dance that can help an owner exit when they get of some size, whether they're even if they're manufacturing brass casings for ammunition or if they're manufacturing a barrel, or whatever. Like, it, it is very lucrative to be a buyer when there's not that many buyers out there.

Yeah, which can be a problem, though, for you if you're counting on selling to one of these guys. Like, if you're counting on an exit from this thing, right? You know, this is the type of business is very easy to get into, you know, as an individual because you don't have any, you know, ethics restrictions or whatever written into your operating agreement. And then you're like five years later, geez, my business is a lot bigger. I'd really like to sell it. And you find that no one is allowed to buy it from you because of restrictions, you know,

in their fund docs, which can be very frustrating. So I think worth thinking about, and you see this with these businesses outside of the major metros is like, you're often either buying yourself a job or you're trying to figure out how the heck you're going to staff this business. Because I mean, the labor pool for a business like this

around this area where the biggest town appears to be 1,500, 2,000 people within an hour's drive, like, good luck finding somebody not on meth to work at some of these businesses. Like, we've run into that where we have, you know, one of our locations for our fireworks business, that's an hour and a half outside of the nearest major metro. And like, we later discovered, oh, man, like, it's nearly impossible to find somebody willing to work out there. And when we finally did find somebody willing to do it, it's like, oh, hey, you need to pay for me to drive an hour and a half each way to get to the

location. Like, just nearly, nearly impossible. So that's got to be factored into the pain in the as factor, like on a business like this? Like, how are you going to staff this thing if it's not you? Also a ton of seasonality in this part of the of the state of North Carolina. You know, a lot of, you know, tourism driven, you know, let's go to the beach, you know, type mentality. And it's not, this is not Myrtle Beach. You know, this is, this is kind of a little bit off the beaten path. But you would, you'd probably have pretty good repeat customers even in your, you know, your seasonal. guess just because these, I mean, folks who go to the Outer Banks, like, they've been going there for decades and they love it and they can't get enough of it.

So you mentioned seasonality. The other thing that is worth mentioning is cyclicality. You know, the old joke that Democrats are the best gun salesman, right? Yeah. The firearms industry, not just firearms ranges, but private equity has lost so much money in the firearms industry because they buy them with leverage. And these things are cyclical as hell, right? The Republican gets elected and it crashes.

And that happens. You can't make your debt payments. Boom, bankrupt. And then another private agreement firm buys it. It does the exact same thing like they didn't just see the movie before. So it is actually good that this guy says in his listing, this probably does not qualify for SBA. Anything firearms related, you do not want to buy with debt because it is so cyclical. Crazy.

I don't hate it. I mean, I think if you're somebody that, like, it's always interesting to me when you see, like, the little things people use to describe their relationship to the business. And I think there's a whole segment of the population that sees this is not just like a business, but like a movement. Like, it's their core value, right? Like, you look here in the listing and the guy has capitalized Second Amendment right. You know, like, it's a proper noun. Like, that's how precious, like, that it is to this. guy. And then he did the same thing with concealed carry. You know, like, like, what other words do we

capitalize the first letter of, like names, like businesses, the word God, you know, like, there's so many people that, like, view this as, like, a core of who they are. And, like, for the right person, like, if this is what you're really passionate about, like, and I have a friend who, like, they're super passionate Second Amendment, like, same as this thing. Like, this could be a ton of fun for you to, like, be with like-minded people, you know? And it's fulfills that party that's going to another place like church or the gym or whatever where you find your

tribe. It could be really powerful for somebody, especially if you want to go retire out in the middle of nowhere, which some people want to do that. It's not for me, but there's definitely people that want to do it. And you could be a retired executive or something and like, you know, hey, I have some more time in me and I want a place to go.

You know, I don't want to just be sitting at home. And this, if this is your cup of tea, like this, you probably, you know, make back recoup your initial investment pretty quickly and you have fun doing it because you're if you're doing this you love guns and you're in a shooting range you can go shoot whenever you want I bet you I bet you this seller would seller finance almost all of this I bet that's this is an it's an interesting one too I bet the right person could get into this with very little on cash down

so that's just that's a hypothesis you got five years left in the lease you got a five-year seller and by the time you're ready to start making any cash, your lease is over. Oh, I didn't say you'd pay back the seller note. Cool. All right. Do you guys hate this one? What do we think? I would like it if it were bigger.

Yeah, that's a good point. Yeah. If it were in a bigger city and kind of like a fixture and had been there for a long time and had brand value in the local area, I mean, this is, you know, and you could easily staff it and it were bigger so it could support a professional manager so you didn't have to think about it. Like this is a, this type of business, I would think you could park capital in for a long time. 100%. Are you guys, I mean, you both, well, one of you lives in a major metro. The other one lives in something. I don't know what, I don't know what you described Greenville, South Carolina as.

One of you lives in a, one of you lives in a major metro. One of you lives in a major metro. The other one lives in a town with a stoplight. So at least here in St. Antonio, like, this is Second Amendment country for sure. And, like, these people are coming in and building, like, Dave and Busters size, Walmart-sized gun ranges and gun shops. Do you guys have these coming in? Like, top, it's like the top golf for guns, basically. And, like, we've got three or four under construction. And they're these big, like, 50,000 square foot facilities with all kinds of stuff going on.

Now, I don't think you have to worry about that if you're one of these guys, but man, that's a lot of, that's a lot of gun dollars in terms of coming into, you know, some of these big markets. Yeah, I think you want a market that's big enough that it can, you can staff it and it can support this, but not so big that all the national competitions coming in. Yeah, there's a lot of upsides to the fact that this is in the middle of nowhere. It's like, oh, you don't have to worry about competitors coming it. I'd like it to be like a place like, you know, that was not quite the total middle of nowhere, but still pretty, you know, like Columbia, South Carolina or something. Oh, did I just, did I just say you lived in Greville? I'm so sorry.

Yeah. The population in Columbia, like the metro statistical area is like 600,000 people. We're not like, this isn't, I don't know, this isn't some podunk town. But we have a Whole Foods. We have a Trader Joe's. Like, come on, come at me. The fact you feel the fact do you feel the need to defend it tells you everything I think you need to know.

Yes. Hell yes. I just Googled the population of San Antonio Gurdley just to make sure I wasn't going to talk trash. Oh, man, I got really pissed yesterday. First of all, I'm regularly disgusted with the New York Times. They think San Antonio is on the Mexico border. It's like three and a half hours away at 80 miles an hour. But anyway.

Anyway, they referred to the entire company being blanketed by, an Arctic blast, everywhere from Fargo, North Dakota to the southern suburbs of Austin. And I was like, what the hell are you talking about? There's a whole other city right next to it that's even bigger. I live here. Like it's called San Antonio, you idiots. It's a pretty big suburb of Austin, to be fair. I'm fine.

Look, Austin's got a lot going on. I am happy for our overlords to come here and consume us, like the amoeba that they are. you know, we'll all be driving around in Toyota, you know, EVs and the Teslas that we deserve and drinking matcha. So yeah, come on down, Austin. We're ready for you to take us over. All right. Well, on that note, Gurley, you probably need to go to your San Antonio town hall meeting. I don't get invited to those anymore. I have a bad habit when people ask me that give them the pluses and minuses. I tell them the truth at those kind of meetings.

So I don't get invited anymore. Can't do that. Better not do it. I will not be running for office. All right. That does it. Let's wrap it up. Merry Christmas.

Happy holidays, everybody. I'm not sure when this is coming out, but I hope you have a good one or had a good one, whichever. And we will see you guys in 2023. Yeah. Thanks, everybody.