View Full Version : How much does it cost to build an AR company?
Just curious does anybody have information on how much building a company to produce high quality AR. How much of this can be outsourced? Are there licensing fees that have to be paid for the use of parts of an AR like licensing fees for the the gas system or receiver design?
I hone no clue but it aint going to be cheap, specially meeting states laws and regulations, good luck with it.
Well you will have the basic costs of staring any company. You will need:
* Cost of sales: Product inventory, raw materials, manufacturing equipment, shipping, packaging, shipping insurance, warehousing
* Professional fees: Setting up a legal structure for your business (e.g. LLC, corporation), trademarks, copyrights, patents, drafting partnership and non-disclosure agreements, attorney fees for ongoing consultation, retaining an accountant
* Technology costs: Computer hardware, computer software, printers, cell phones, PDAs, website development and maintenance, high-speed internet access, servers, security measures, IT consulting
* Administrative costs: Various types of business insurance, office supplies, licenses and permits, express shipping and postage, product packaging, parking, rent, utilities, phones, copier, fax machine, desks, chairs, filing cabinets – anything else you need to have on a daily basis to operate a business
* Sales and marketing costs: Printing of stationery, marketing materials, advertising, public relations, event or trade show attendance or sponsorship, trade association or chamber of commerce membership fees, travel and entertainment for client meetings, mailing or lead lists, etc
* Wages and benefits: Employee salaries, payroll taxes, benefits, workers compensation, etc
I suggest you talk with a reputable company like Noveske, DD, Bravo, etc and try to setup an appointment with the owners of those companies and ask the various questions. I am sure you will not get direct numbers as those can be proprietary bits.
Most of these guys partnered (I would imagine) with people who had machining and design experience or manufacturing experience.
I would guesstimate somewhere in the neighborhood of at least a few hundred thousands ($250k - $400K) cash on hand and a line of credit upwards of at least $250K. A decent CNC Milling machine can cost upwards of $12,000 or more. You can certainly buy them used or new for less, but you need to look at features, etc.
CNC Lathes are a little cheaper.
As far as outsourcing, you can do what most manufacturers do and that is buy the unfinished uppers and lowers and mill them out, etc as well as buying the lower parts kit, stocks, buffer tubes, and the like. The quality manufactures will make their own barrels or outsource them to be made to certain specs. The same thing can go for bolts and BCGs, etc. However (if I am not mistaken), companies like Noveske, Colt, DD, and Bravo? all make their barrels and bolts in house (someone correct me if I am wrong).
Regardless, it is not easy and not going to be cheap if you want to do it right. I believe if you are not going to do something right, don't do it at all. Start small and grow as demand increases.
I hope this helps.
DISCLAIMER: I have no firearms manufacturing experience. However, I have worked as a Senior VP for a few years at a medium sized manufacturing facility.
Sabre defense was purchased for 4.9 Million dollars. While this isn't exactly the cost to build up a firearms manufacturing company (and it should be mentioned that a large percentage of the value of the company was contained within contracts it had with the federal government), it should give you an idea of just how expensive purchasing/building up one of these companies can be.
Cesiumsponge
01-11-12, 19:31
I wish you could buy decent CNC mills for $12k. You can only buy Bridgeport clones with servos bolted onto them for that price. Basic enclosed CNC mills good for production work start at $30k or so for something basic and entry-level (like a Haas VF series) and I don't know if their capacity is high enough to achieve reasonable productivity. Add 25-50% once you slap on some factory options, add another 25-50% for tooling, fixturing, and consumables.
"Good stuff" in the CNC world starts at $100k and goes up from there. Manufacturing at a productive level is incredibly expensive which is why most companies that provide a finished product don't do any of it in-house other than perhaps assembly. The more you do in-house, the more expensive it gets.
I recall we had a job that required drilling Stellite material for small, basic bushings for an aerospace part I won't specify. We'd get 3-5 parts out of a 1/2" solid carbide drill before the drill would blow. At $100 per drill, that adds up very fast even for an order of 100 parts. They paid top dollar for those parts.
Kickin-Ewoks
01-11-12, 21:46
Heres a rough estimate:
http://www.youtube.com/watch?v=kk4n0SvG0-Y&feature=related
You can outsource everything. I have known a few "Manufacturers" that never manufactured anything. I will only name Ameetec, when owned by Warren Mee, as he is no long in business.
One big issue is: Can you afford to buy parts in sufficient quantities that you get enough of a price break that you will be competitive? Also you will be completely dependent on your suppliers.
You will still need all your state and ATF licensing, insurance...
I am not certain how many, if any, parts Palmetto State Armory manufactures themselves. I know from their own admission/web-site they outsource most.
Define company. One guy sitting in his kitchen putting together AR's is a company. Proper lic for that are not a lot of money. Some big names started out just like that, 1 guy working. You can get your own "brand name " on as little as 50 lowers for not much more than the cost of the lowers. Your in biz!!
PalmettoStateArmory
01-12-12, 10:01
I am not certain how many, if any, parts Palmetto State Armory manufactures themselves. I know from their own admission/web-site they outsource most.
All components at this time are made for us (all American made), and we assemble everything from scratch.
Just curious does anybody have information on how much building a company to produce high quality AR. How much of this can be outsourced? Are there licensing fees that have to be paid for the use of parts of an AR like licensing fees for the the gas system or receiver design?
What do you plan to do with this wonderful knowledge???
Beat your local Bushmaster dealer down on price??? :stop:
Just curious does anybody have information on how much building a company to produce high quality AR. How much of this can be outsourced? Are there licensing fees that have to be paid for the use of parts of an AR like licensing fees for the the gas system or receiver design?
How much do you have? I know all the companies in the industry, have all the contacts and know the difference between quality and crap. I also know how to use the internet to promote a company and sell products.
I am for hire. ;)
C4
jklaughrey
01-12-12, 11:02
Interestingly enough M4C has enough of a solid user base that collectively we could "build" a company and produce a fine weapon for sale on the commercial market. I am sure there are many of us who would relocate and switch careers to apply knowledge and experience to make an endeavor like this marketable and sustainable.
Generalpie
01-12-12, 11:32
Correct me if i'm wrong but I don't see anything inherently wrong with outsourcing. Why re-invent the wheel when you don't have to.
The cost involved would depend greatly on how large an endeveavor you would be planning on.
A semi-related, classic 07/02 FFL/SOT saying:
"The easiest way to make a million dollars in the gun industry? Start with $2 million."
You can outsource everything. I have known a few "Manufacturers" that never manufactured anything. I will only name Ameetec, when owned by Warren Mee, as he is no long in business.
One big issue is: Can you afford to buy parts in sufficient quantities that you get enough of a price break that you will be competitive? Also you will be completely dependent on your suppliers.
You will still need all your state and ATF licensing, insurance...
I am not certain how many, if any, parts Palmetto State Armory manufactures themselves. I know from their own admission/web-site they outsource most.
Yea what he said. a few of the companies making lowers will gladly sell to you once the atf variance comes in. A local sot/ffl has his lowers made by mega for instance. Mind you that being a small fry expect it to take months for many of the vendors to get your product made.
Pretty much everything else should be pretty easy to get without logos on it and you could laser engrave pretty much whatever you wanted on it.
Cesiumsponge
01-12-12, 11:49
Nothing is inherently wrong with outsourcing if done correctly. We do it extensively in the aerospace industry and it works great under AS quality control systems. It just adds an additional chain to the finished product which occasionally causes problems. There is a cost/benefit scale and it depends on what volume and productivity you're looking at. A lot of the heat treat, anodizing, coating and finishing processes aren't done in-house at most companies because of the EPA hoops you have to jump through to store or dispose acids and chemicals. That's why there are so many companies that do nothing but heat treatment, anodizing, or plating.
Furthermore a machine needs to be running to generate revenue. Machinery sitting on the floor with the power off is wasted productivity. If you have a specialized machine that only runs an hour a day, it ain't paying for itself. There is another thread under similar discussion where I went more in-depth here: http://m4carbine.net/showthread.php?t=96593
A semi-related, classic 07/02 FFL/SOT saying:
"The easiest way to make a million dollars in the gun industry? Start with $2 million."
LOL, so true.
I recently did a trade with a guy that reps for a lot of high end clothes and shoes. We agreed to use the distributor price on the gun and the gear. The rep was SHOCKED to discover that I was only making about 8-10% on the gun. Guess he assumed that I was making $500 or more on it at the MAP price. :no:
The hardest part about the gun industry though is making a name for yourself (especially as a dealer). There are just so many guys selling gear out of their basement for COST that it is very hard for a company to make enough money to keep the lights on, pay insurance & themselves a salary.
As a manufacturer, you can attack the market in three ways. Build a quality product (using only the best parts you can get your hands on), build a cheap product (cutting every corner you can), or build a mid-level product, but spend a lot of time putting "lipstick on a pig" attempting to fool the consumer into believing that your product is just as good.
Any way you slice it, the road is a bumpy one.
C4
johnpuga1982
01-12-12, 13:00
I am for hire. ;)
What he said. My degree is in Computer Graphic Arts (Print and Web Design). Sign me up.
As a manufacturer, you can attack the market in three ways. Build a quality product (using only the best parts you can get your hands on), build a cheap product (cutting every corner you can), or build a mid-level product, but spend a lot of time putting "lipstick on a pig" attempting to fool the consumer into believing that your product is just as good.
Any way you slice it, the road is a bumpy one.
C4
I would say their is a 4th way as well that would at least help get one known. Pretty much the same as way three but for a different outlook. Putting various logos and what not on lowers to attract buyers. Big thing right now are like the zombie lowers that now a bunch of companies are making. The time to have started doing this would have been before a bunch of companies started offering it but I still think it is a way into the market. Still lipstick on a pig but more in the way of getting your name out. I think if one had the capital to stock enough inventory they could make a name for themselfs selling lowers and complete rifles to people using the design on the side of the lower. It may not help but so much to drag in people who really want top quality but it could help with others. I think someone keeping a good rep on various forums went as was ready to move on various ideas for lowers they could drag a lot of people in.
All components at this time are made for us (all American made), and we assemble everything from scratch.
Nothing wrong with that and I thank you for your honesty. A friend purchased one of your uppers and is very pleased with it.
I can give a college level course on this (maybe :jester:), I agree with Grant said.
Having been there and done that (and still doing it), I can very well relate to his statement.
On top of doing the best we can, and it isn't enough, there are plenty of hurdles. One of which is none other than some of you guys lol. Allow me to explain.
When a new company comes out with something new or different, many of the folks immediately cast an evil eye on it, in all honesty it is quite understandable. There are enough terrible products made by equally bad companies to taint us all, it's about impossible to tell how well a product works, how good a company is until you've spent your money on its product and dealt with the folks manning it.
And so most people proceed with caution. Reputation takes a long time to build. Along with trust, it has to be earned through all the good qualities that define your products and company. You need to spend time on the forums, share information and listen to your customers.
Maybe you should start out small and build a solid reputation. Once you have that, it's easier to go on to bigger projects. And don't expect to make money for the first couple of years ;)
The hardest part about the gun industry though is making a name for yourself (especially as a dealer). There are just so many guys selling gear out of their basement for COST that it is very hard for a company to make enough money to keep the lights on, pay insurance & themselves a salary.
As a manufacturer, you can attack the market in three ways. Build a quality product (using only the best parts you can get your hands on), build a cheap product (cutting every corner you can), or build a mid-level product, but spend a lot of time putting "lipstick on a pig" attempting to fool the consumer into believing that your product is just as good.
Any way you slice it, the road is a bumpy one.
C4
loganp0916
01-12-12, 17:45
.
I am for hire. ;)
I'm in school for Mechanical Engineering right now. Wait a few years and I'm in. Or I'll take an internship now......
MOUNT-N-SLOT
01-12-12, 23:49
I can give a college level course on this (maybe :jester:), I agree with Grant said.
Having been there and done that (and still doing it), I can very well relate to his statement.
On top of doing the best we can, and it isn't enough, there are plenty of hurdles. One of which is none other than some of you guys lol. Allow me to explain.
When a new company comes out with something new or different, many of the folks immediately cast an evil eye on it, in all honesty it is quite understandable. There are enough terrible products made by equally bad companies to taint us all, it's about impossible to tell how well a product works, how good a company is until you've spent your money on its product and dealt with the folks manning it.
And so most people proceed with caution. Reputation takes a long time to build. Along with trust, it has to be earned through all the good qualities that define your products and company. You need to spend time on the forums, share information and listen to your customers.
Maybe you should start out small and build a solid reputation. Once you have that, it's easier to go on to bigger projects. And don't expect to make money for the first couple of years ;)
Totally agree with Duffy...
Impact Weapons Components started in Dec, 2009 with pre-production of our first 5 products. We opened for sale when we launched our first site in May, 2010 with those 5 products, advertising only on Forums and going to GunShows from MO to UT over the summer. By Sept, we'd sold less than $5K vs. a 5 figure investment in the Company to that point.
IMHO, I would not recommend launching a firearm business unless you can pour it all back into the Company for at least two years, you are VERY savvy with your working capital and have something unique or a differential type product when you launch.
Because Duffy's correct... this is a tough industry and a tough economic environment to make it in.
I credit God with IWC's success so far. I felt inspired with the design of our 2 To 1 Point Triglide, and rely on prayer and promptings when making business decisions. If I listen, things go well. When I don't, I launch products like our original 5 products, which have all been refined.
You have to be willing to ask for and learn from criticism in all forms of Social Media. If you can't make the customer truly excited and supportive of your businesses, products or service, don't waste the time starting up.
Lastly, you have to eat, breath and truly enjoy firearms and working at it 24/7. Because it shows in your products & service.
MOUNT-N-SLOT
Snip...
Lastly, you have to eat, breath and truly enjoy whatever business you choose to start and work at it 24/7. Because it shows in your products & service.
MOUNT-N-SLOT
This is so true... I have been the COO now for two start ups in a totally different industry but both manufactured the majority of their products.
Start up capital was always between $250K-$500K and we have always carried an op line from $250K to $500K... and it is never enough...;)
I have worked 100 hour weeks... traveled more than I would ever want to... hired and fired, been sued, had patents go through, fought with government regulatory agents, not been able to pay myself for extended periods, and closed huge deals... ups and downs... ups and downs...
It really takes 10 years to get it all figured out and functioning... and about that time another company comes along and wants to buy you... We sold the first one and am in the 8th year on our second... close to getting that one figured out...:confused:
Every business has a DNA... just like you and me... there is a global maximum and you have to know what that is and have the right expectations... I will never play NBA basketball... and the first business was never going to be a 10 figure business... just the way it is... and I wish I would have understood that before I even registered the business name.
"Behind every breakout company, is 10 years of blood, sweat, tears, and hard work."
Earl (Mount-n-Slot) is right on. You'd better be very disciplined and passionate about it, because these two characteristics of human traits will carry you through almost all of the hurdles a new business will throw at you. They give you the perseverance that you'll need to weather the ups and downs.
There have been times when it's all just too much. It's easy to do nothing, or quit doing the things you don't want to do.
Start small, set achievable goals and achieve them. The reward is very much worth it, I'm not talking about monetary reward but that of knowing you've done something not everyone is able to do.
My reward (definitely not in money :no:) is knowing our endeavor has helped those we care about, and created something meaningful and useful that, long after we're gone, will still (hopefully) live on.
Heres a rough estimate:
http://www.youtube.com/watch?v=kk4n0SvG0-Y&feature=related
:lol:
You could've at least Rick rolled him...
Earl (Mount-n-Slot) is right on. You'd better be very disciplined and passionate about it, because these two characteristics of human traits will carry you through almost all of the hurdles a new business will throw at you. They give you the perseverance that you'll need to weather the ups and downs.
There have been times when it's all just too much. It's easy to do nothing, or quit doing the things you don't want to do.
Start small, set achievable goals and achieve them. The reward is very much worth it, I'm not talking about monetary reward but that of knowing you've done something not everyone is able to do.
My reward (definitely not in money :no:) is knowing our endeavor has helped those we care about, and created something meaningful and useful that, long after we're gone, will still (hopefully) live on.
Very well said!
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