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Old 06-23-2010, 9:07 AM
freakshow10mm freakshow10mm is offline
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Default Starting an Ammunition Reloading Business

Since I'm not dealing with the California market anymore and see a lot of people wanting to enter this business mostly due to AB962 on the horizon, I'll post some advice and experiences from my 3+ years as an ammunition manufacturer. Take it or leave it, but it's here to help others out if they want it. This isn't the gospel, it's my opinion derived from my experiences in the business the last few years.

My business failed due to cash flow management issues and bad business choices. The economy had nothing to do with it. Business failure is a management issue, not an economic issue. A good manager can bring profit in any economic condition. Unfortunately, I'm a poor business manager and that led to the failure of my company, my dream job, my life savings, and my family's future. I'm sorry for that and the following but you will get my blunt honest opinion and experience.

You have no clue what you are getting yourself into. This industry is harsher than what it seems on the outside. Making ammo, being the "good ol' boy" to the gun guys, the little guy that strikes it big, etc. Forget all that. That's bull****.

One thing I've learned is this business takes money. I mean serious money. I started my business with a few hundred dollars and a Dillon 550. I just now (November 2009) after 3 years in business could afford a Dillon 1050. Trouble is I couldn't afford to keep it running.

Right now if I were to enter this industry, I wouldn't think of doing it with less than 6 figures of solid cash. Not a loan, that's stupid. I mean solid cash. You either need automated equipment or one Dillon 1050 with bullet feeder PER CALIBER with an exact copy as a backup. One goes down, get it the **** out of there and bring in the backup to run the ammo. Get that broken one to Dillon ASA f-ing P and get it repaired yesterday. You need one press per caliber I don't give a **** what anyone says. If you want to run 9/40/45 you need a press for each one, 3 total, plus a clone backup for each, so 6 presses for 3 calibers. Each additional caliber is another two presses. My 1050 went through FOUR MONTHS of failures before I got it back in working condition. BRAND NEW PRESS!! Had I had a backup I would have been fine.*
Absolute minimum is a 1050 for each caliber plus one press and that is still extremely risky. Should be one backup for each main press. You also need to get those running full time 8-12 hours a day. You will NOT have a press loading 1,000 per hour like Dillon says I don't care. That is an inflated and optimistic figure. Right now I'm cranking out 9mm on my 1050. I've got everything filled up and primer tubes topped off. Buzzer goes off, 5 seconds to dump 100 primers in and get going again. I just did about 600rds in about 45 minutes, so about 800rds per hour. *That is primer tubes full, topping off case feeder with 200pcs brass, smooth press operation and everything going perfect. I do about 450-500/hr on my Dillon 550 with no case feed and manual index. The 1050 cost $1600 and my 550 cost $400 (although I got mine 5 years ago used for $275 with tons of extras). With a KISS bullet feeder ($500+) you can get a realistic 1200rds per hour everything going perfect.

Buying Dillon direct you need $3,000+ to get dealer pricing as a manufacturer, so basically 2 1050s will get you there. Dealer discount is 21% off retail, so about $1265 each, you'll need 2 plus a couple extra items. Get an assload of primer pickup tubes. Like 20-30 each size minimum. Get a primer tube filler, one in each size (lg &sm). There's $600 for the fillers and another couple hundred in tubes. Too expensive yet? Ha, this ain't the industry for you. Trust me. Nothing is cheap.

Let's say you test the waters with 1050s running 9/40/45 nothing else. You factor about 750rph for production. You absolutely need each press running 8 hours a day 6 days a week. Now factor your minimum wage, payroll taxes, etc for all that. 750rph on one machine 48 hours a week is 36,000 rounds per week of one caliber or 1.872 million rounds in 52 week year. Don't get excited yet. Loading ammo is easy as hell. Selling it is the hard part. Making a PROFIT doing it is the really hard part.

My cost for reloaded 9mm Luger using plated bullets and range brass bought from any source is (lemme check my spreadsheet....)$109/1,000 rounds including packaging. That's bullet, brass, primer, powder, box for 1,000 rounds. Then markup is labor and FET . Having a spreadsheet helps out since you can formulate your retail price based on cost, factor your FET, and a dealer discount. I update my cost/price spreadsheet each time I buy a new component. It's always current.

Now, your markup is whatever you want it to be. Set dollar, set percent, whatever formula, use it and REVISIT it weekly with sales to make sure you are making profit. Sales does not equal profit. PROFIT EQUALS PROFIT. You are in business to make money making and selling your ammunition, not to impress people on the Internet. That was one of my mistakes. I was too preoccupied with listening to the forums instead of running my business for profit. That's a fatal error which led to my demise.

A note about your labor. You have markup on your product to make money, but your labor is free. You have no reputation so time is free until you have a reputation, then you charge for your name. Make sense? If you sell your 9mm ammo for $50 per case (1,000rds) profit it doesn't mean a pinch of **** if it takes you an hour or three hours to make. It matters that is is the finest ammunition your customer will put in their gun and send down range safely. Another mistake I made was I was so goddamn obsessed with production values and output I let it consume me at the cost of my reputation. I spent so much time factoring production I couldn't actually produce much of anything. Which brings me to another point.

Last edited by freakshow10mm; 06-23-2010 at 9:21 AM.. Reason: format clarification
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Old 06-23-2010, 9:08 AM
freakshow10mm freakshow10mm is offline
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For your first year in business, do not spend a single dollar on advertising, marketing, and stay the **** off the forums. You need to focus on three things: production, sales, profit. Get the ammo made. Price it to make a profit. Get the ammo sold. Word will spread. You will get more customers.

Get a website but do NOT ever, ever take orders. Not via website, email, or otherwise. The website is for information about your products, it's not to sell your ammo. You sell only at gunshows. You list your show schedule on your website and that's it. That's your sales outlet for the first year or two. You do not sell to dealers I don't care if they want 100,000 rounds a week. You need to build your business. You need the profit, not them. Dealers expect 20-30% discount on ammunition and you cannot afford to take that loss this early in the game. You need that profit to sustain your business, grow it, and then in 3-5 years of continually being profitable and growing to meet demands of your customers, if your production nets you excess inventory, then you can make dealer sales.

Do not take credit cards. They are more trouble that they are worth. They contain unnecessary costs you have to pass down to the consumer which raises your price and makes you less competitive in your market. Ever wonder where that Discover Card 5% cashback comes from? THE BUSINESS WHO ACCEPT THE CARD!! **** that. Cash only. You have thousands of dollars invested in components and you need to get paid NOW, not later when the check clears (or doesn't) or your CC merchant deposit hits your bank a week late. You sell ammo for $250. You need $250 CASH *in your hand right now and they take the ammo home. Stick to your guns.

Do NOT take back orders, have a waiting list, or do any group buys or pre-sales. They will ruin you. You only sell from stock on hand and you only sell at gun shows. Trust me. I started out the way I told you, minus the backup cash and equipment. My first show I gave away 50rd boxes of my ammo and refused to take payment. I had a note in each box that I was going to be at the next show and gave the date/time. I gave away 5,000 rounds of ammo at the show (don't forget to pay the FET on that too, you pay FET on what you give away as well). The next show I SOLD 25,000 rounds, every single box I brought. The guys that took the sample 50rds shot it, told their friend about it, and they both came back to buy several hundred rounds. Almost everyone that tried my free ammo bought at least 500 rounds at the second show. THAT is the kind of stuff I'm talking about.

I was so great at business when I started but I saw the money coming in and instead of focusing on what I was doing to bring the money in, I went too big. I tried to get too large too fast and it ruined my life. You've got it made. I gave you advice and insight on things I learned the hard way. I wish I had that when I started. Things would have been different.

This business will make you callus in no time. You will see the other side of the gun owners, a side you never thought you would see.

And get a CPA from day one. As soon as you file your corporation or LLC papers, get a CPA/accountant. Even if it is just you working one press 8 hours a day 5 days a week and selling on the weekends at the gun show. You need a CPA. Your job is to get the components, make the ammo, and sell it. They handle the taxes. A good accountant is worth their weight in gold (but don't let them know that, LOL). Use Quickbooks for accounting software. Do NOT use the inventory feature. Just use the Cost of Goods Sold account. You will have minimal paperwork with my business plan of loading during the week and selling on weekends at gunshows.

When you get back just record your total sales for the show day by day as "Fresno Gun Show FRI, Fresno Gun Show SAT, etc". Then you list your sales and it's all on one sales receipt. You sell 10 cases 9mm, 14 cases .40, and 5 cases of .45 at the show, just list that as your line entry.
9mm 115gr FMJ 1,000rd case 10 $225 $2,250
.40 180gr FMJ 1,000rd case 14 $275 $3,850
.45 230gr FMJ 1,000rd case 5 $300 $1,500
CA Sales Tax 9% (or whatever it is) $684
TOTAL $8,284

^^ Like that. You can include your sales tax in the price so it will deduct automatically, or add it on the price at the show and put an additional Sales Tax sales item in your list and itemize it, then all sales for your "Fresno Gun Show.." customer name will be tax exempt, otherwise it will double tax you and your CPA will beat you silly. Keep it simple. You will then have one sales receipt for every day at a gun show you made a sale. Figure 3 days per week, 52 weeks is a maximum of 156 receipts per year. Making a receipt every day allows you to track sales by show by day. Fresno Gun Show Friday will be different customer than Fresno Gun Show Saturday. You can look back and see how you did last year's Fresno Gun Show on Friday and see what you sold, how many, and use that to anticipate this year's sales and production for that show that day.*
The Camdex guys are weird, I'll give you that. But they are also what the big guys use. Precision Cartridge, Georgia Arms, Ultramax, Miwall, all those guys. They are $30 grand because they are worth it. If I had the money, real money, I'd go with a Camdex in every caliber and go balls out. REMEMBER THIS: This industry's equipment is like sports cars and insurance. Don't buy the press if you can't afford to run it full tilt. $30K on a press that runs 4,000 rounds per hour you sure as **** better have the cash on hand to keep it running 40 hours a week, 52 weeks a year. At my previous $109/K 9mm cost, that's $400+ per HOUR to run it for just component cost. High dollar machinery means high dollar overhead.

Last edited by freakshow10mm; 06-23-2010 at 9:25 AM.. Reason: format clarification
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Old 06-23-2010, 9:08 AM
freakshow10mm freakshow10mm is offline
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**** isn't easy. In the ammunition industry you are competing with guys who've been doing it longer than you've been alive. I'm 29yo. Precision Cartridge Inc (hails from Indiana) has been in business since 1986. That's your competition profile. It takes YEARS to build a reputation. Think of this business as a real estate investment. Your payoff is in 20 years. What I did was go backwards. What I should have done was stick to the gunshows, then slowly develop the local gunshop, then load for the cops (easier with tiny agencies like mine), then regional, then state, etc. Once you've been around 5 years and have a few full time employees, then you can venture out to the Internet. Me? I got excited after 6 months of gun show success and took on the Internet. I wish I had someone warn me. Stupidest choice I ever did. Now with my reputation ruined, my only lifeline is the local gun shop, but they are the only retail store in 2 counties and buy a case at a time.
*
LE agencies usually won't allow reloads for training which means new brass, higher cost, more competitive, etc. Most large agencies are tied in tight with Winchester or Federal. You are breaking a bond going on decades of business. My angle locally is I'm in bum****ingegypyt Upper Michigan (as in the Upper Peninsula). My local village PD is the chief and 3 PART TIME officers whom also work for 2-3 other agencies just to get a 40hr paycheck. The sister village is the full time chief and 2 PT officers that also do PT work for my village and the university police, plus one of those guys also drives 2 hours east to work the county jail one day a week. We are more laid back here. The PD's have tight budgets and love local business so I was in from day one. My Freakshow Mfg reloads for $165/K .40 FMJ versus twice that for new Winchester like they had been buying for years. You guess which one they picked. They saved 50% off their ammo cost which meant they could buy more things for officer safety and communication rather that ammo. For the most part, in your area, LE ammo contracts are politics. It's easier for a government agency to continue to do business with last year's company than a newcomer. No matter what Obama says, the government doesn't like change. They like to be in a rut and keep moving.*


I made a lot of mistakes, but I've learned what I don't know and what I do know. My business model was unorganized and I had no set protocol from the very moment components arrived to being assembled and following through with the sale. My current job is making a subcomponent to be used later in manufacturing by other companies, some of which have up to 48 steps in their manufacture. This job will help me to reorganize my business for sure. Each department does one step. I'm in the plating department and there is a binder with every single step and specification drawn out, even the obvious is explained. That's effective management AND quality control. My business plan was buy low, sell high, and do it with ammo. I got my FFL and started selling. No plan in place. Just a dream.*


You basically set the dies, swage rod, and priming system to run smooth with the brass you have. Dies are pretty easy; sizer down to shellplate, powder die to bell the mouth slightly, seating die to depth, crimp die to remove the bell. Same as any other press. On the 1050, since it's an auto indexing progressive, you will have vibration and such when the plate advances so a little more bell on the case mouth to make sure a bullet won't fall off is all. Swage rod takes getting used to. I only use it to probe for a spent primer that didn't get all the way decapped in the sizing station. I bought the 1050 for the swage function on the press so I could buy the cheap .223 military brass and load it on the press in one pass. Really, if you aren't running military brass, you can get by with 650s instead of the 1050s, but the 1050s will be a hair faster because it primes on the downstroke (when the dies come down to the shellplate to do the die functions. On the way up it advances the shellplate and raises the toolhead back up. The other presses bring the shellplate up to the dies, whereas the 1050 brings the dies DOWN to the shellplate. On the other presses you have to push the handle forward a bit after returning to "ground zero" to prime the case. This takes time, not much, but the 1050 is faster since you just go back and forth smoothly with the handle. Also the seating depth of the primer is controlled by a bolt on the 1050's toolhead, not by how much you push forward on the handle, so your primer depth consistency is much more accurate on the 1050 than the other presses. All this stuff that happens on the press to bring a product in sellable condition is amazing and takes longer than you think. That's why I said not to sell in advance. Get it 100% complete, then it's on sale. Thousands of handloaders and commercial reloaders load .223 on a 1050 with zero issues. I think mine was a lemon.
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Old 06-23-2010, 9:10 AM
freakshow10mm freakshow10mm is offline
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Then again the more you invest the more you have to lose. Also it's a 4-6 month wait time for a Camdex to be made and delivered (they're about 10 hours south of me in lower MI). You could start off with 1050s in 9/40/45 for the first year or two and handle most anything while you build capital to get a Camdex. One 1050 being conservative at 750rph feeding bullets by hand 40 hours a week (2080 hours per year) is production of 1.56 million rounds. If you have yourself and two full time employees triple that, as the figure for each caliber is 1.56M, so your total production capacity is 4.68 million rounds a year. That is quite a lot of ammunition. Even my little 550 at 500rds per hour 40 hours a week is 1.04 million rounds per year.

Then again, that might be your entrance into the industry. The surest way to built trust with your retail clients is to have a resume of LE agencies that use your ammo. If you can pierce that opening you can make a living on just loading for LE training ammo. I know a guy that reloads for nearly every agency in northeast Wisconsin. He's got a single 1050 with KISS (Mr Bullet) bullet feeder and that's all he does is load the **** out of .40 S&W for cops. Nothing else. Just .40 S&W. I got my 06 FFL in January of 2007 (had to drop off the application to my chief, it's literally a block, 10 houses, down the street) and talked to the police chief about my intentions of business, all that stuff. Didn't think much of it, just wanted him to see me and give some background on me as I was a transplant from Green Bay. Out of the blue 5 months later he calls me up, says he saved all his brass and he wants to know if I could reload 1,500 rounds of .40 for his officers to practice with. Sure, gave him a price, picked the brass up and delivered ammo on an invoice the following week. When I delivered it to the PD, the sister village's chief of police was there. He ordered 1,000 rds of .40 from me and 500rds of .223. He also works PT at another village PD so that chief bought 1,000rds of .40 from me. Well, that chief also works at the college PD so they bought 3,000 rounds of .40 from me. Then one of those officers is a deputy at the county sherrif's office so the sheriff bought 5,000 rounds of .40 off me. Well the undersheriff is the brother in law to the neighboring county sheriff so that sheriff bought 2,000 rounds of .45 from me. That all happened within a month or two. Trouble is, they buy that much once a year and that's it. Now if you could get a small agency under your belt, that's more open to guys like us, they talk. They will mention you to the bigger departments, etc. I traded 2,000 rounds of .40 S&W ammo to the Dos Palos PD for one of their old Beretta M92 9mm pistols. They couldn't find ammo anywhere. I delivered in 2 weeks flat. They're right outside of Fresno, so hit them up for sure.

Nice thing about selling to LE agencies is if you sell manufacturer direct to agency, there is no FET due on the ammo. No taxes, sales or FET. Just the ammo price and your income tax. Simplifies things. Tons of commercial reloaders sell only to LE agencies to make money selling ammo without the additional government BS with FET taxes.

Another management thing: For the first year do not reinvest profit. Set in the bank and forget about it. Say you want to work 10 cases per caliber at a time. Invest that capital in components, sell the ammo, take the profit and bank it. Take that initial capital investment and buy another 10 cases each component. Keep working with 10 cases per caliber each production run. You will start slow, but you will turn the inventory over quicker and quicker until you are loading 10 cases during the week and selling those same cases that weekend per caliber. Watch how much inventory you keep. In shortages like here, primers are OK to stockpile. Pick a point to resupply. I buy a case of powder at a time, 16lbs. When I'm done with the first keg (8lb) I order another case of 16lbs. Ramshot will sell you bulk powder by the drum of 45lbs. That's 315,000 grains per drum. 9/40/45 will run average of 6gr per round, so you'll get about 52,500 rounds per drum of powder. What I advise since you have a good amount of capital to work with is this:

Buy a drum of powder from Ramshot. Should be about $500 shipped, it's like $10.63/lb plus $25 shipping or something. Say you want to buy Accurate #5 that will work in all three calibers with an average charge of 6.8gr/rd. You'll get 46,323 rounds per drum or 15,441 rounds per caliber per drum. Now buy your brass and bullets in that quantity each caliber, and whatever primers you can find. You'll run about $485 each batch of 1 case each caliber 9so one case of 9/40/45 each is $485) at 46 cases will run about $22,310 +/- a few. *Load up every single round you can before you think of selling it. That's only a week or two of loading and boxing up. Not hard. Then you can list you have 15 cases in stock each caliber. You will have a few hundred rounds of each caliber left over. Use that as pacifiers to sell when you are waiting on your next batch of components to come in. You box these up in 100rd boxes for additional markup versus your case quantity (if you are selling by the case). You make more margin on low quantity sales than case quantity. The manufacturers do this all the time. Self defense ammo is $1/rd in 20-25rd boxes, 50rd boxes a bit cheaper, then a small half case of 500rds is cheaper yet. Sell the ammo by the case and keep the few hundred leftover rounds for short sales as samples. Say your case price on 9mm comes out to $240 or $12/50rds. Sell your 400 "extra" rounds that don't make a complete case at $15 per 50rds or higher yet. This give you a higher profit margin than the case quantity but you make more money per sale on the case quantity than the box quantity. You entice buyers to buy in bulk while "penalizing" them with higher unit (price per round) price buying in small quantity. Done in every industry you can imagine. The more you buy the more you save.

Two things you buy whenever the opportunity presents itself: brass and primers. Powder you get by the drum and bullets you buy when you need.


Gunshops are nice for volume, but remember it's at a discount. You are playing with economies of scale. Walmart uses this method to make profit as well as the gas station. They aren't making money by selling 5 of something, they make money by selling 500 of something. The reason I say to stay away from gun shops your first year is you are getting used to a production environment associated with the manufacturing (assembling) of ammunition. That is completely new to everyone. Once you make ammo for a living, it changes everything. Yes you will get more sales, but at a discounted price which means less profit. You are just getting started so you need as much profit as you can that means consumer direct sales only. Slightly contrary to my aforementioned statement, but Miwall sells only a gunshows and they do several hundred thousand dollars a year in sales, if not one million. Leaving this topic with one final statement: It is better to turn away business for the production you can handle than to be a yes man and be overwhelmed with business. It's OK to say No.*

The gunshop only method works with small shops or automated equipment. A range in central CA wanted 100-200 thousand rounds a month from me. I couldn't produce with even a 1050 and an IV of Red Bull if I wanted to do so. That's Camdex territory.*I know it's tempting and I fell into that trap myself. My opinion (and experience) behind that is when you are out jerking off to your own awesomeness on the forums you could be loading ammunition. You could be searching for the gun show schedule. You could be sending an email to your supplier to check on the next price break that will reduce your cost my 5% thus increasing your profit 5% overall. You could be spending that extra time inspecting your ammunition carefully to ensure your product is the best on the market.

Do NOT do custom loads. They are more hassle than they are worth. Do NOT offer a reloading service but offer brass exchange. Give yourself profit here. You buy 9mm brass at $20/K, you give a $10 discount for dirty range brass off a case of ammo. Always go half your actual cost or less. I credit $1 per pound of brass no matter caliber.

Last edited by freakshow10mm; 06-23-2010 at 9:14 AM.. Reason: format clarification
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Old 06-23-2010, 10:18 AM
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How much was liability insurance??
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Old 06-23-2010, 10:30 AM
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Would like to hear some info on cost and type of FFL licensing required.
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Old 06-23-2010, 10:34 AM
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Given the numerous threads here about your sketchy business practices, Adam, I'd take all of this with a dumptruck of salt.
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Old 06-23-2010, 11:11 AM
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Quote:
Originally Posted by oddjob View Post
How much was liability insurance??
Liability insurance starts at $2,100 per year and goes up from there.
Quote:
Originally Posted by ZakAttackMan View Post
Would like to hear some info on cost and type of FFL licensing required.
06 FFL is what the ammunition manufacturing license is. It's $30 for three years. You also need to register with the US State Dept under the ITAR rules. That's $2,250 per year. You can get a CJ, which you will have to look into doing with a lawyer. I won't advise on that but it can and has been done.

I can't comment on state stuff as my state, Michigan, does not regulate the ammunition manufacturing industry one bit. I have no state business license, county license, blessing letter from any LE agency none of the BS you have to deal with in California. I've got my FFL, LLC incorporation paperwork, and the sales tax license. Nothing else required.

The biggest issue with an FFL is zoning. My village has no zoning laws so I can operate from home and enjoy the benefits of ultra-low overhead (it costs my company less than $250 per month in overhead to operate). I know of a few guys on here that are home based as well. It's a great place to get started but you are limited for space.
Quote:
Originally Posted by Full Clip View Post
Given the numerous threads here about your sketchy business practices, Adam, I'd take all of this with a dumptruck of salt.
Like I stated in the beginning, it's not the gospel. I'm sure many of my critics will disregard the above as BS and that's fine. Any advice given on the Internet is by default questionable no matter the source. The above is my perspective on things since I actually lived it and have been in the business for over three years and not just read about it on the Internet. I have actual experience in this industry, not many out there can say that on this forum or many others. The advice is there to anyone who wants to use it. If they choose not to use it, that's their choice. It's easy to ride the wave of mob mentality when I've had business deals gone bad rather than admit there is substance in my above posts. That's fine.

Last edited by freakshow10mm; 06-23-2010 at 11:13 AM..
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Old 06-23-2010, 11:13 AM
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Adam - Thanks for taking the time to write that all out. I enjoyed the read.
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Old 06-23-2010, 11:56 AM
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I read the whole thing. Good insight, sorry things didnt work out for you.

Don't buy the press if you can't afford to run it full tilt.

I like it.
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Old 06-23-2010, 12:09 PM
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Adam,

I'd also like to thank you for taking the time to write this out. I've been mulling over starting an ammo business when we move to AZ. I'm encouraged because many of the things you have mentioned as mistakes are things I've already thought of. I do have a couple of questions for you:

1. Do you use power drive units on your presses (i.e. Ponsness/Warren units)? Why or why not?

2. You say that you would not take a loan for your startup/operating costs. What about cash for the startup hardware and then a line of credit to cover operating costs?
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Old 06-23-2010, 1:41 PM
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I am sending in my application for 07 FFL in a week, as soon as the zone change is done on my property. Ammo will not be the only part of the business, but I do plan on making ammo. Since you seem to be giving out a bunch of information, could you PM me a list of places I should look to buy components?
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Old 06-23-2010, 2:21 PM
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Good read, thanks for sharing.

“It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly; who errs and comes short again and again; because there is not effort without error and shortcomings; but who does actually strive to do the deed; who knows the great enthusiasm, the great devotion, who spends himself in a worthy cause, who at the best knows in the end the triumph of high achievement and who at the worst, if he fails, at least he fails while daring greatly. So that his place shall never be with those cold and timid souls who know neither victory nor defeat.”

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Old 06-23-2010, 2:26 PM
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Good read, thanks for sharing.
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Old 06-23-2010, 2:27 PM
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Good read, thanks for sharing.

“It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly; who errs and comes short again and again; because there is not effort without error and shortcomings; but who does actually strive to do the deed; who knows the great enthusiasm, the great devotion, who spends himself in a worthy cause, who at the best knows in the end the triumph of high achievement and who at the worst, if he fails, at least he fails while daring greatly. So that his place shall never be with those cold and timid souls who know neither victory nor defeat.”

Theodore Roosevelt
Nice quote by a honorable man. It would be an insult to Teddy to try to apply it to present company.
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Old 06-23-2010, 2:54 PM
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Nice quote by a honorable man. It would be an insult to Teddy to try to apply it to present company.
Wow. Don't know the guy personally, but I think it is meant to apply to anyone that pours blood sweat and tears into his work only to fail despite his efforts.
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Old 06-23-2010, 3:20 PM
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Wow. Don't know the guy personally, but I think it is meant to apply to anyone that pours blood sweat and tears into his work only to fail despite his efforts.
Failing and scamming are different things. Read up on his dealings on calguns and other Internet forums before giving him the benefit of the doubt. Heck, you don't even have to do that. Go to your local gun store that deals with OLLs on a busy day and say something about Freakshow mfg and listen to the responses you get from the guys. You will find at least one guy who has had the misfortune of dealing with him. Lengthy analytical posts aside, there was one key reason why he failed. He ignored almost every business ethic that a decent businessman adheres to. It speaks volumes in favor of Calguns that community members are willing to forgive him. Bunch of decent and kind guys, but I am surprised he is back to tell his stories from "been there, done that" land.
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Old 06-23-2010, 3:40 PM
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Given the numerous threads here about your sketchy business practices, Adam, I'd take all of this with a dumptruck of salt.
Your critique is an example of a logical fallacy known as "poisoning the well": http://en.wikipedia.org/wiki/Poisoning_the_well

Focusing on profit and being careful not to let your business grow faster than your cash are very sound pieces of business advice.
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Old 06-23-2010, 5:32 PM
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You again...
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Old 06-23-2010, 7:31 PM
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i can understand where adam is coming from....running a ammunition company is not easy... cash flow is a very big deal...not to mention components...you need to have a supplier and then a back up supplier and then another two or three after that! you have to order product before you need it so that it can be made to sell...

if the machine is not running; your loosing money.
a camdex is a awsome machine. a very cool machine that runs great. it does 3k-4k an hour but quality ammo is made around 3-3.2k and hour....thats what i have noticed. the powder charge would be within a .1

now if you screw up a order and something goes wrong how do you take care of it? you have to back your product. you need to make it right with the customer or your name wont be worth the paper it is printed on. because word will get around that you messed up.

i made 10k rounds of 223 and i thought it was pretty good. after i sent it out i found out that the brass was bad. the primer pockets on about 50% of the cases where oblong....when firing the primer would blow out and jam up the gun. i had to recall all the ammo and remake the order. i paid for shipping back to me and back to them. i exchanged some ammo and gave cash back to others....i still have all that ammo in my shop.

R
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Old 06-23-2010, 9:33 PM
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I've looked into remanufactured ammo to sell. I had a buddy of mine who owns his own business (not ammo or gun related) help me out on several things and I basically dropped the whole idea.
The initial cost of purchasing the equipment and components would put me in the red before I can even start cranking out the ammo. With mortgage payment and supporting my family well it became a no-brainer that family comes first.
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Old 06-23-2010, 9:44 PM
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Interesting ............ Let's see what happens

He's been on a few forums
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Old 06-23-2010, 10:57 PM
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Originally Posted by Corbin Dallas View Post
Adam - Thanks for taking the time to write that all out. I enjoyed the read.
Just a portion of my book I'm writing. Thanks for the comments.
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Originally Posted by joelogic View Post
I read the whole thing. Good insight, sorry things didnt work out for you.

Don't buy the press if you can't afford to run it full tilt.

I like it.
Thanks. Time management is also a huge issue. Having a 3yo son at home means I can't dedicate the time I need to take to load ammo because my son needs care. Time is my enemy. I have done some deep searching within and talked with many business owners in my area for them to critique my management and help me turn things around. Finding out about the SCORE program helped immensely. One of the things my SCORE mentor told me is many successful business empires failed miserably much more than my company did and by similar methods. They all learned from their mistakes and are now among the Fortune 500. I will never get that successful (and don't want to) but turning things around to make a comfortable living for my family is my goal. One of the things I preach to my younger co-workers is live within your means. Thinking on that, run a business within your means. If you can't afford to operate something, then don't do it.

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Originally Posted by mstlaurent View Post
Adam,

1. Do you use power drive units on your presses (i.e. Ponsness/Warren units)? Why or why not?
Absolutely not. Everything is done by hand. Many reloaders use them for speed and consistency but looking over the BE forums and other small reloaders that use Dillons all say they tried them out and they are faster running a bullet feeder and hand operation. They don't operate any faster than a human but a machine won't have short term fatigue.

I advised another commercial loader how to get a sweet setup (once I get settled up and have the cash for this, I will get it too) for his rifle stuff. He only loads .223 and .308 and he has a 1050 in each one. He has a 650 stripped down (I know the big guys at Dillon so I got them to fill a special request). He bought the press stripped down with no priming system or powder system but with a case feed assembly instead. He has one conversion kit and one toolhead each caliber. He has one Dillon power trimmer to swap back and forth on the toolheads.

I told him to run the 650 automated with a PW system for brass processing. The toolhead is loaded with a RCBS lube die (modified by my machinist to run an IV bag type setup for lube so he gets 10,000 pieces lubed per bag of lube) Dillon power trimmer and empty blank dies (7/8-14 threaded rod my machinst made for him) to stabilize the toolhead. Brass is dumped into the case feeder and the feeder turned on and the PW autodrive turned on. The press will feed a case, lube it, size it, trim it, and poop it out into a 5 gallon bucket for collection at the rate of 900 rounds per hour. Then he tosses the brass in a cement mixer with tumbing media to remove the lubricant. Then it's set to be loaded on the 1050. The station #2 (sizer) is setup with a Lee Universal Decapping die only to make sure the flash hole is clear of media. Then the normal loading is done and it's like loading pistol with carbide dies except no sizing is done on the 1050 since it's already been done on the automated 650. Processes rifle brass at 900rph and loads the same rate on the 1050 which also swages the primer pockets during the loading process. Has a bullet feeder for each one.

The autodrive works better with rifle than pistol. If you go this route definitely have one dedicated per press. Tune it and leave it. Changing the autodrive to different presses is where the real problems start.

Quote:
2. You say that you would not take a loan for your startup/operating costs. What about cash for the startup hardware and then a line of credit to cover operating costs?
Cash and cash only. Borrowing money to start a business IMO is a stupid move. You are only starting in debt. That's not where you want to be. You exist to make profit. By borrowing money you are negative profit. You may make profit at the year end but until your equipment is paid off you will always remain in debt. The only things you should ever borrow money for are real estate and your house. That's it.

I do not believe in lines of credit. You're shifting the debt. If you owe someone and use your line of credit to repay them, you haven't eliminated the debt you just changed who you owe money to. Credit lines are not debt management. Debt is to be eliminated, not managed or controlled. Credit = debt.

This is why I said start with cash, don't reinvest profit for the first year. There's your emergency fund. Cash. Credit lines are frozen due to economy? You're alright because you have cold hard American cash.

Look at the sales on this forum that went south. DS group buy. If I had backup cash, refunds would have been issued promptly. LPK group buy? Backup cash would have taken care of refunds promptly. .223 ammo group buy? Backup cash would have taken care of refunds promptly.

But a line of credit would have given refunds promptly too. BUT it would have only shifted the debt and burdened the business by not making profit. No business should ever owe anyone money. They should be making money.

Two final things: Sell from in stock on hand inventory only and deal in cash for all purchases.

Don't buy commercial property unless you have the cash to get at least 3-4 automated (like AmmoLoad or Camdex kind of automated) loaders and run them for two 8 hour shifts 5 days a week. By this time you will have proven yourself a respectable player in the industry and can afford it.

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Originally Posted by RLW View Post
I am sending in my application for 07 FFL in a week, as soon as the zone change is done on my property. Ammo will not be the only part of the business, but I do plan on making ammo. Since you seem to be giving out a bunch of information, could you PM me a list of places I should look to buy components?
Pretty much any reloading supplier like Midway, Grafs, and Wideners offer dealer discounts to OEM manufacturers. If you have a large enough order, you can go factory direct. When I say "large" I mean if you say 50,000 bullets per month, they will laugh and say "go buy from a distributor".

Now, I have to ask, how much reloading experience do you have? I only ask because you are looking for component sources when if you are a handloader currently you have an idea of whom to talk to. Not trying to be a *****, but if you are just learning handloading and want to start a business doing a portion of it, I seriously caution you to get some experience under your belt before you make ammo for other people. Sorry, it just seems sort of weird to me the way your question is stated. I'm glad to help, but meant no offense.

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Originally Posted by longhairchris View Post
Good read, thanks for sharing.
Thanks.
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Originally Posted by nn3453 View Post
Failing and scamming are different things. Read up on his dealings on calguns and other Internet forums before giving him the benefit of the doubt.
Scamming? Things didn't work out the way I had planned to fill orders. Customers have been refunded and are continuing to be refunded until everyone that is owed is paid back.

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Heck, you don't even have to do that. Go to your local gun store that deals with OLLs on a busy day and say something about Freakshow mfg and listen to the responses you get from the guys. You will find at least one guy who has had the misfortune of dealing with him.
Calgunners like to hang out and buy from CA shops that deal in OLLs. So what. That's almost expected from Calgunners. Yet those same dealers have Saiga 12s, Uzi pistols, Masterpiece Arms, AR pistols, AK pistols, off list pistols, and a host of other weapons that weren't in California before my company came along and opened the floodgates. You also have PRK Arms to thank for sticking their *** on the line for gun owners in California. Those guns on their wall? Who do you think got those cool TEC-9s, Texas MACs, that badass 45/70 drum feed pistol into the state for the gun owners? My company. Who do you think took over a year culminated in a meeting during SHOT Show 2010 that introduced Masterpiece Arms executives to the company that is now the only authorized MPA distributor for the state? My company introduced PRK Arms to MPA. Which company flooded the state with single shot AR and AK pistols properly converted? My company. Which company shipped the first FN SCAR to California? My company. Which company shipped the first and only FOUR STG44 clones to California? My company. Which company was the only company that would transfer MSAR rifles into California before anyone else jumped in? My company. I've done a lot of good and I've done a lot of not so good. Everyone loves bad news. Paging through my log book I've transferred in excess of $8 million worth of firearms and accessories to California and you think I'm scamming? Get real. My group buys failed and that made my business fail. I'm fixing the mess that is left and reorganizing to be a better business. Takes 5 seconds to ruin a reputation but many years to rebuild it. I'm up for the challenge.

Quote:
Lengthy analytical posts aside, there was one key reason why he failed. He ignored almost every business ethic that a decent businessman adheres to.
Having no business background and watching all these other businesses doing group buys and presales without issue made me think it was easy and I could do it. Nope. I only saw one side of the counter and not the chaos that goes into organizing and running a group buy. Knowing what I know now, that's why I said "don't do group buys" in my above advice.

Quote:
It speaks volumes in favor of Calguns that community members are willing to forgive him. Bunch of decent and kind guys, but I am surprised he is back to tell his stories from "been there, done that" land.
First off I'm very grateful for the patience shown and given to me by the customers. Can't thank them enough. They will be refunded and they will get their money back. Secondly, I'm trying to prevent other guys like me that had a hobby and a dream thinking they could make money out of it. Many gun businesses are started like that. Guys see an opportunity to make money but have no sense of the real world of business. It's brutal. I got suckered in by the seemingly easy silver lining watching the businesses on the forums making money hand over fist. I'm trying to tell future guys to take it slow, work within the means of the business. If I had just stuck to local and regional business this never would have happened. I did not and do not have the capacity for the Internet market. I learned my lesson and am making drastic changes to my business to run it the way it should be run to be profitable. I took a hard look at sales since the .223 buy failure and realized I was over-equipped. With the small local business I deal with right now I have no real need for the 1050 so it's being sold (hopefully). Everything I need to load can be done on the 550 until I have enough business and cash to handle it. Could I sell more ammo online? Sure, but I don't really have the money to compete not to mention my company's reputation is tainted all over the Internet so local business is my only sales market and it's slow due to demographics.
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Old 06-23-2010, 10:57 PM
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Focusing on profit and being careful not to let your business grow faster than your cash are very sound pieces of business advice.
I've learned a lot of businesses fail from that very thing. Growing before justification. I have a desire to create demand by creating a supply but it rarely works out like that. Even demand creating a supply is a crapshoot. Used to load .32 H&R Mag. Got the dies and conversion that ran me about $120. Got a thousand rounds loaded up to test the market (thank goodness it was only that many). I loaded that case in 2006 when I started my business. In the time I've been in business, guess how many cases of .32 H&R ammo I sold? One. One thousand stupid rounds of .32 H&R Mag. Thankfully the local dealer bought it for cost and I got to sell the dies for cost and recouped my investment but wow that sucked. 3 and a half years of something being available and it doesn't sell. Pull it from the catalog and be done with it. Knowing what customers are looking for and when is such a chaotic science.

I'm a small company. Right now the local shops will call me with "I need some .380 ASAP". OK give me a couple weeks. Scrounge .380 brass off a few forums to make a full case of ammo when payday comes. Sometimes two since refunds are taking up a majority of the paycheck I get. Have powder, bullets, primers on hand. Get it loaded. Deliver. Get paid. Send out the next refund. Zero working capital until next payday.

Quote:
Originally Posted by Triple R Munitions View Post
i can understand where adam is coming from....running a ammunition company is not easy... cash flow is a very big deal...not to mention components...you need to have a supplier and then a back up supplier and then another two or three after that! you have to order product before you need it so that it can be made to sell...
For sure. You know exactly what I'm talking about. Cash flow is an issue with any and all companies but especially so with this industry. I'm even giving my CPA a headache with the current component supply.

Quote:
if the machine is not running; your loosing money.
Yup. That's for sure. I haven't been able to load all week yet.

Quote:
a camdex is a awsome machine. a very cool machine that runs great. it does 3k-4k an hour but quality ammo is made around 3-3.2k and hour....thats what i have noticed. the powder charge would be within a .1
The Camdex guy at SHOT told me most guys change to fast powders when loading pistol so they can crank up the speed. TG is good for 9mm for that purpose. They say the .38 and .357 Mag, etc can be run balls out since it won't spill powder which is the big issue. Said most settle it down to 3K per hour anyway and run a pair or more of them for high production.

Quote:
now if you screw up a order and something goes wrong how do you take care of it? you have to back your product. you need to make it right with the customer or your name wont be worth the paper it is printed on. because word will get around that you messed up.
And even if you do, it won't mean anything.

Quote:
i made 10k rounds of 223 and i thought it was pretty good. after i sent it out i found out that the brass was bad. the primer pockets on about 50% of the cases where oblong....when firing the primer would blow out and jam up the gun. i had to recall all the ammo and remake the order. i paid for shipping back to me and back to them. i exchanged some ammo and gave cash back to others....i still have all that ammo in my shop.

R
I inspect after I clean the brass, before loading, after loading, and while packaging. Some stuff gets loaded but is usually caught before packaging. Never had anything blow. Did have a batch of 3 cases of 9mm that was questionable. Delivered then went back to load the next order of the same thing. Powder charge was .2gr over my max. I called the previous customer and told him not to shoot it I'll be back to pick it up and then remedy it. Pulled all 3,000 rounds of ammo and measured each charge by hand only to find out each was exactly spot on. Reseated the bullet and gave the order back. No problems. Lots of time wasted that could have been spent filling other orders. BUT I'm glad I took the time to recall the ammo and double check the situation.
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Old 06-23-2010, 11:20 PM
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Default I am glad to see that you are working on refunds

I hope my refund will be one that will be paid back soon. I ordered with Adam 2 Lower parts kits as well as a OD green adjustable complete stock set when Adam ran a group buy on them years ago and I am still waiting for the refund. Adam Please PM me on a estimated ETA.
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Old 06-23-2010, 11:26 PM
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Sent PM.
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Old 06-24-2010, 7:12 AM
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[QUOTE=

Pretty much any reloading supplier like Midway, Grafs, and Wideners offer dealer discounts to OEM manufacturers. If you have a large enough order, you can go factory direct. When I say "large" I mean if you say 50,000 bullets per month, they will laugh and say "go buy from a distributor".

Now, I have to ask, how much reloading experience do you have? I only ask because you are looking for component sources when if you are a handloader currently you have an idea of whom to talk to. Not trying to be a *****, but if you are just learning handloading and want to start a business doing a portion of it, I seriously caution you to get some experience under your belt before you make ammo for other people. Sorry, it just seems sort of weird to me the way your question is stated. I'm glad to help, but meant no offense.


[/QUOTE]

I have been reloading for a few years now and am well aware of places like Midway, Grafs, and Wideners. I guess I was thinking there were some distributors like BVAC and others who only deal with Manufactures. And saying that factory direct is not an option because they will laugh at you for saying you need 50,000 pcs doesn't help. Telling me how large of order you would have to place to do factory direct would help though?
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Old 06-24-2010, 7:28 AM
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Originally Posted by RLW View Post
I have been reloading for a few years now and am well aware of places like Midway, Grafs, and Wideners. I guess I was thinking there were some distributors like BVAC and others who only deal with Manufactures. And saying that factory direct is not an option because they will laugh at you for saying you need 50,000 pcs doesn't help. Telling me how large of order you would have to place to do factory direct would help though?
I think if you had mentioned places like Midway, Grafs, Wideners, BVAC, etc... Adam would have known you are not new to reloading.

I was wondering the same thing when I read your post...

Anyways... I think to be factory direct you need to order 250k+ a month at a minimum. Could be wrong...
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Old 06-24-2010, 7:54 AM
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Originally Posted by Corbin Dallas View Post
I think if you had mentioned places like Midway, Grafs, Wideners, BVAC, etc... Adam would have known you are not new to reloading.

I was wondering the same thing when I read your post...

Anyways... I think to be factory direct you need to order 250k+ a month at a minimum. Could be wrong...
Yeah, I took a look at my post and I see where he was coming from. I would not be doing 250k pcs a month so if that is the kind of numbers I would need then its a no go at first for sure. If on the other hand I could place an order every few months as needed for 250k pcs then I would be able to do that.

Also, when you say you could be wrong are you just throwing it out there or did you get your info from somewhere?
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Old 06-24-2010, 8:15 AM
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The sad part Adam, you could have reduced your liability, and increased your chances of success with a library card, a time investment of reading, and scouring the internet for advise. There are plenty of sources generic to starting a new business, they provide research for you to examine, and basic in terms of cash flow to look at before taking the plunge.

In addition, with the internet and email, you could have picked the brain of those already in the business to understand what will be the minimum needed, and so on.

Choosing to walk into a business in ignorance was the beginning of the end.

Although it is nice that you have put to words some of your learned mistakes, making amends and paying back all of those who believed in you and paid for your service and product, is the best course of action.
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Old 06-24-2010, 8:20 AM
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Originally Posted by RLW View Post
I have been reloading for a few years now and am well aware of places like Midway, Grafs, and Wideners. I guess I was thinking there were some distributors like BVAC and others who only deal with Manufactures. And saying that factory direct is not an option because they will laugh at you for saying you need 50,000 pcs doesn't help. Telling me how large of order you would have to place to do factory direct would help though?
Cool, just making sure. I've had guys that just started reloading wanting to go into business right away. Um, no.

Most of the major reloading houses offer dealer discounts to OEM manufacturers and unless you can afford to do serious volume, the factories are off limits. BVAC aka Steele Components is good for primers but that's about it. Buy 100K CCI primers and they drop ship free from the factory. Be prepared to wait. I ordered 150K in June of 2009 and was told 12 weeks tops. March 2010 is when they showed up finally. A month after my first order I was told it was a 6 month wait on new orders, so I put an order in for 100K small pistol and 100K large pistol primers. When my first order shipped I was told it wouldn't be until mid to late 2011 until my second order would ship. Lead times in this industry will kill you. That's why I stated earlier to buy primers when they are available and when you have the money. You can never have too many primers. Be careful about storage laws. Luckily I store primers in an separate building off site so I'm fine.

Hornady is a PITA to deal with direct as I found out at SHOT show 2010. So is Hodgdon. Both are arrogant and treat small businesses like crap. I get bulk powder from Western Powder for cheaper than Hodgdon could ever offer. Like stated above, go Western and go drum only. If you load .223 or .308, Ramshot TAC is the best powder in the world. Varget velocity with excellent metering and better consistency than other "standbys" like H335. H335 is good but TAC is better and cheaper. Forty-five pound drum is only $10.63 per pound plus freight ($25-30). Just submit your OEM license by fax and they will fax you an OEM pricing sheet right back. They also distribute other brands of powder but the OEM is Accurate and Ramshot, which they (Western) own.

Hornady told me minimum is 200,000 bullets per month. Hodgdon told me $10,000 per order. Nosler requires a storefront even if you have a dedicated building but do no retail sales, like if you do only dealer or wholesale sales, they will not deal with you. They will default you to Wideners or Grafs.

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Originally Posted by RLW View Post
Yeah, I took a look at my post and I see where he was coming from. I would not be doing 250k pcs a month so if that is the kind of numbers I would need then its a no go at first for sure. If on the other hand I could place an order every few months as needed for 250k pcs then I would be able to do that.
This industry for the most part is about volume and is the poster child for economies of scale. Coming into an established market with established and stable prices (the trend setter is Georgia Arms, whom is the 5th largest ammo manufacturer, right after the ATK family, Hornady is #4, then GA. Miwall is like #6 or #7) means your only means of making it is a marketing team rivaling H&Ks smoke blowers or contolling your costs. Cost control is your only realistic hope. To control it, you buy in bulk for discounts. Primers from SC/BVAC in minimum orders of 100K to save on shipping. Bullets by the pallet. Brass by the drum. Powder by the drum. For small time businesses like us, your best bet is to just buy from the reloading houses at dealer prices and work with that until you have capital built. This business takes time. People don't take you serious until you've been around for 10 years.

continued...

Last edited by freakshow10mm; 06-24-2010 at 9:09 AM..
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Old 06-24-2010, 8:40 AM
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Yeah, I took a look at my post and I see where he was coming from. I would not be doing 250k pcs a month so if that is the kind of numbers I would need then its a no go at first for sure. If on the other hand I could place an order every few months as needed for 250k pcs then I would be able to do that.

Also, when you say you could be wrong are you just throwing it out there or did you get your info from somewhere?
I have a buddy here that loads commercially but already has a client base that keeps him very busy. He orders primers by the 100k + and still is not factory direct. I remember the last group order he did to save on shipping and hazmat was in the 200k range and still came from a dist.

So am I spot on? Maybe not, but an educated guess none the less.
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Old 06-24-2010, 8:53 AM
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There are two parts to this manufacturing. Reloading brass and using new brass. Both have pros and cons.

Reloading brass reduces cost for you and your customer. Everyone wants cheap and commercial reloads or remanufactured (same thing) is the way to go. That's one of the virtues of commercial reloads but in order to be competitive you need to buy brass by bulk methods. That means getting a purchase contract with local LE ranges or gun clubs to buy the brass. The con of that is you have to sort, clean, inspect literally hundreds of pounds of brass before it's in loadable condition. A local guy I used to get brass from bought 800lbs of brass at a time. He used a cement mixer to tumble them clean and sorted them by hand. It took too long, he lost his ***, and closed business. Sorting and inspecting is the time consumer. Tumbling allows you to do other things while it's running. Camdex makes a brass sorter but it's $11,000. Yikes. That's a lot to recoup over time.

Using new brass is a lot less labor intensive, since you don't polish or sort but give a quick once over the brass for an inspection and then load it. I've seen new brass miss flashhole punching, off center flashholes, etc so still inspect it. The downside to using new brass is cost. You're looking at $100-130 per K pieces just for brass versus maybe $15-25 for the same (9mm prices) thing as range brass. For the cost of an entire case of ammunition that's reloads, you're paying that for the brass alone.

Where this culminates is in pricing. I hate pricing products. I really do. Do I use a set dollar per case amount since the labor is exactly the same? Do I use a set percentage amount so it's easier to compute margins? Should I just price it to the market and control costs to increase my profit margin? What is the exact COGS including start to finish overhead? Goods are sold far less efficiently than they are made.

At my current job in a manufacturing environment, each unit is priced depending on plating needed and the surface area needed. Some units are $1,200 each and I ran an order of 80 units last night that were gold plated over 2sq ft of surface. Price? $77,000 EACH. That one order was over $6 million in product. That is simply just plain nuts! That one unit of product is more than my house is worth PLUS the amount of my student loan debt COMBINED!

Some of my mentors from SCORE suggested to price at or slightly below the market trendsetter to start with. GA sells 9mm canned heat reloads for $240/K. Say with dealer pricing you can load for my cost of $109. Your gross profit is $131. Then you take out your FET, labor, utilities, licensing, and other overhead. Then you see all the profit go out the window and look at the few dollars in your hand wondering why the heck you are doing this. Then you look at companies like BHA that sell the same commercial reloaded ammo for the same cost as new ammunition. They have excellent marketing team in place.

Let's look at their blue box .223 68gr Match HP reloads for a cost analysis. I know for a fact their load is 23.8gr of Ramshot TAC. They use Hornady 68gr BTHP-M bullets. Here's the cost breakdown:

Brass: $50 -they probably get it cheaper but that's a working number
Bullets: $95 OEM pricing is $570/6,000
Primers: $17 OEM pricing for CCI rifle
Powder: $36 23.8gr TAC at $10.63/lb

TOTAL is $198 for reloads. Retail price in Cabela's is $34.99/50rds or 69.98 cents per round. Their cost is 19.8 cents per round or less. A case will cost $699.80. Georgia Arms sells reloads for $570/K of the same thing. That's a $130 premium. If you utilize your marketing team, you can "get away" with that too. Bravo to BHA for making that kind of money, seriously. That's what business is all about. Making as much profit as you can. You do that by producing the goods the cheapest you can do and selling for as high as you can sell them. The art and science of that relationship between cost and selling price is the real deal.

Last edited by freakshow10mm; 06-24-2010 at 9:11 AM..
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Old 06-24-2010, 9:06 AM
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The sad part Adam, you could have reduced your liability, and increased your chances of success with a library card, a time investment of reading, and scouring the internet for advise. There are plenty of sources generic to starting a new business, they provide research for you to examine, and basic in terms of cash flow to look at before taking the plunge.
Absolutely I agree with you. That's exactly what I'm doing now. I'm severely reducing my target market to one that I can effectively manage, getting business counseling from the SCORE program (Service Corps of Retired Executives, part of the SBA) as well as having local business owners and managers help me with processes and management.

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In addition, with the internet and email, you could have picked the brain of those already in the business to understand what will be the minimum needed, and so on.
Most I've talked with haven't been so open with things. I did chat with a few small reloaders like myself at SHOT show 2010 which was neat and very helpful. That's when I started asking for help. I'm a stubborn SOB that used to see asking for help as a sign of weakness, but now realize NOT asking for help is a sign of stupidity. Nothing wrong with asking for help, as it shows desire to learn and overcome adversity, be it business related or putting a new alternator in my truck. I'm trying to post my experiences to help others not make the same mistakes that I did.

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Choosing to walk into a business in ignorance was the beginning of the end.
Agreed. I was so blind with desire to succeed I had paid no attention to the steps and management required to do just that. I now caution others to either get business knowledge themselves or spend the money and hire a manager or executive to manage the business while they do the labor. Lots of people are great at doing something but not running a business. Others are great at running a business but have no clue the actual labor to make the product. I tried to do everything all myself without the proper knowledge to manage a business.

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Although it is nice that you have put to words some of your learned mistakes, making amends and paying back all of those who believed in you and paid for your service and product, is the best course of action.
Agreed. That very thing is being done and will be done until everyone is refunded.

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Originally Posted by Corbin Dallas View Post
I have a buddy here that loads commercially but already has a client base that keeps him very busy. He orders primers by the 100k + and still is not factory direct. I remember the last group order he did to save on shipping and hazmat was in the 200k range and still came from a dist.

So am I spot on? Maybe not, but an educated guess none the less.
He's ordering from the wrong place. BVAC/SC drop ships from CCI factory direct at 100K primers. Also lately a lot of new guys got turned down since the factory takes care of the long term customers first.
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Old 06-24-2010, 9:15 AM
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Here's a cost and pricing breakdown on .45 ACP ammo I posted a few weeks ago on the CB forum:

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Originally Posted by freakshow10mm View Post
Wasn't me but my FMJ .45 ammo is priced close to that. $17.57/50 runs $351.40 to a case. Lead is $15.47/50 or $309.40/K; although with buying a case they get free shipping which runs me around $50 per case or so. I mostly sell to local gun shops, so take 20% off those prices for the dealer discount. For delivery, I drive it free inside a 2hr radius.

One thing a lot of guys forget is overhead. I've never done this before, but I'll post some figures on my end. Many of you know I'm a home based FFL. My overhead is almost non-existant (and when I get things squared up, things will be better). You pay more for your car than I pay overhead for my business.

So, buying fired brass from a guy who buys it in bulk 800lb lots runs me $50/K, plated bullets run about $103 delivered, then primers factory direct are $17/K and powder runs me about $16 per case. Packaging is just shy of $5 using white boxes loose pack and Avery labels for marking. I rubber stamp the date on the box for the lot number. Total cost is $201 per case.

So, $351 retail out of an investment of $201 is $150 gross profit per case. But, wait, there's more. Manufacturers have to pay FET on the ammo they make, so at the retail direct side of things, the rule is the taxable sale is 75% of the sale price taxed at 11%. Confused. Easy. 351*.75=263.25 which is the taxable sale amount (think of it as adjusted gross income like on your personal tax form). Now take 11% of that 263.25 and FET due on that sale is $28.96. That comes off the top; 150-28.96= $121.04 net after FET.

So then I have my overhead to deal with before it's bottom line profit. Insurance is $175/mo, website is $12.50/mo ($150/yr), don't have a business phone anymore, I don't pay for advertising, utilities are home based paid with personal income, as is mortgage (yet the business can deduct its portion of that which is used solely for business purpose). All packaging, ink, paper, etc is factored into COGS which is in the product cost. Soooo, yeah, that's it. My business costs me less than $200 to operate. Fancy that. Using the fancy formula for break even (overhead divided by profit margin) I only need to sell a couple cases a month to break even with overhead.

Now using the dealer pricing at a 20% discount, FET is applied to the actual sale price IF the manufacturer does no wholesale sales (sells to someone who sells to someone else that will sell it at retail). So my dealer price on .45 FMJ ammo is $281.12, FET due on that is $30.92 (I pay more FET on dealer sales than I do retail sales-go figure). On a dealer sale I make only $49.20 net profit after FET.

So retail is $121.04 and dealer is $49.20 profit after FET. Quite a difference. Now people think "you've got a Dillon 1050 loading 1,000 rounds an hour making $120 per hour!!!" but that can't be farther from the truth. Real world loading on the press is maybe 750-800 rounds per hour being smooth and consistent. Sure a bullet feeder would speed things up a bit maybe getting the magic "1,000 rph". But what people don't realize is the additional labor in bringing the raw materials to a finished product ready for sale presentation. Brass cleaning, brass inspection, component setup, powder charge verification before and during loading, primer tube filling, case feeder filling, inspection after loading, inspection during packaging, folding boxes, labeling boxes, recording lot information in the log book. All that takes time.

I got suckered into thinking I would be making $100/hr plus doing this. In reality as a one man operation (with some help from a local friend of mine), to eliminate labor costs, it takes a solid 2-2.5 hours from start to finish. So now that retail sale is really $48/hr and dealer is a pathetic $19.60/hr and that's BEFORE bills are paid. The more volume the more time and the more overhead, not necessarily more profit.
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Old 06-24-2010, 10:00 AM
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You say your overhead is $200 a month, but what about ITAR? I know its not a monthly expense, but it is overhead none the less.
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Old 06-24-2010, 10:17 AM
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Originally Posted by freakshow10mm View Post
Absolutely not. Everything is done by hand. Many reloaders use them for speed and consistency but looking over the BE forums and other small reloaders that use Dillons all say they tried them out and they are faster running a bullet feeder and hand operation. They don't operate any faster than a human but a machine won't have short term fatigue.

I advised another commercial loader how to get a sweet setup (once I get settled up and have the cash for this, I will get it too) for his rifle stuff. He only loads .223 and .308 and he has a 1050 in each one. He has a 650 stripped down (I know the big guys at Dillon so I got them to fill a special request). He bought the press stripped down with no priming system or powder system but with a case feed assembly instead. He has one conversion kit and one toolhead each caliber. He has one Dillon power trimmer to swap back and forth on the toolheads.

I told him to run the 650 automated with a PW system for brass processing. The toolhead is loaded with a RCBS lube die (modified by my machinist to run an IV bag type setup for lube so he gets 10,000 pieces lubed per bag of lube) Dillon power trimmer and empty blank dies (7/8-14 threaded rod my machinst made for him) to stabilize the toolhead. Brass is dumped into the case feeder and the feeder turned on and the PW autodrive turned on. The press will feed a case, lube it, size it, trim it, and poop it out into a 5 gallon bucket for collection at the rate of 900 rounds per hour. Then he tosses the brass in a cement mixer with tumbing media to remove the lubricant. Then it's set to be loaded on the 1050. The station #2 (sizer) is setup with a Lee Universal Decapping die only to make sure the flash hole is clear of media. Then the normal loading is done and it's like loading pistol with carbide dies except no sizing is done on the 1050 since it's already been done on the automated 650. Processes rifle brass at 900rph and loads the same rate on the 1050 which also swages the primer pockets during the loading process. Has a bullet feeder for each one.

The autodrive works better with rifle than pistol. If you go this route definitely have one dedicated per press. Tune it and leave it. Changing the autodrive to different presses is where the real problems start.
That was exactly my plan, each press has its own dedicated drive, pistol calibers have one press, rifle calibers have two presses, one for sizing, one for loading. I would get them all the 900rph speed, that way they are interchangable between rifle and pistol if I need to swap out calibers. Can you send pictures of the lube die? I'm curious as to how it was modified. I have my own ideas about that, but I'd like to see how others are doing it.

I was thinking about removing the foot pedal from the PW drive and replacing it with a control box with an emergency stop button and a circuit tied into the low primer alarm. When the low primer alarm goes off, the drive stops. Also put an emergency stop button on the power circuit for the whole bench, preferably on the other side of the room, for real emergencies. That way you can have one person monitoring multiple presses instead of one person per press.

I thought about doing the brass prep on the 650, since they just came out with the PW units for them, but it occured to me that if I use a 1050 for the brass prep it gives me much more flexibility. If the brass is swaged on the sizing press then it is all ready to go if I decide to hand load it or sell it as prepped brass. And I can use it as a spare production press if I need to. If I find that I don't need to prep rifle brass this week, but I need to temporarily double my pistol production, I can swap out the caliber change and off I go.

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Originally Posted by freakshow10mm View Post
Cash and cash only. Borrowing money to start a business IMO is a stupid move. You are only starting in debt. That's not where you want to be. You exist to make profit. By borrowing money you are negative profit. You may make profit at the year end but until your equipment is paid off you will always remain in debt. The only things you should ever borrow money for are real estate and your house. That's it.

I do not believe in lines of credit. You're shifting the debt. If you owe someone and use your line of credit to repay them, you haven't eliminated the debt you just changed who you owe money to. Credit lines are not debt management. Debt is to be eliminated, not managed or controlled. Credit = debt.

This is why I said start with cash, don't reinvest profit for the first year. There's your emergency fund. Cash. Credit lines are frozen due to economy? You're alright because you have cold hard American cash.

Look at the sales on this forum that went south. DS group buy. If I had backup cash, refunds would have been issued promptly. LPK group buy? Backup cash would have taken care of refunds promptly. .223 ammo group buy? Backup cash would have taken care of refunds promptly.

But a line of credit would have given refunds promptly too. BUT it would have only shifted the debt and burdened the business by not making profit. No business should ever owe anyone money. They should be making money.
I agree that using a LOC to buy equipment or pay your lease is a bad plan. Carrying debt is a bad plan, both in business and in personal finance. Emphasis on carrying. My plan would be to pay cash for the startup costs, then use the LOC exclusively to buy operating inventory. In a reloading business you are paying $8,000 for components that you will turn around and sell next week for $10,000. It seems to me that an LOC would be perfect for that, because you can draw the $8,000 to buy the components this week, then pay it back when you make the sale. You'll pay a small finance fee, but you'll have the components you need to make the sale whether you have the cash on hand or not. You're never turning down business because you don't have the money to buy components. That to me seems like it would be the kiss of death for any large contracts. When you get so big that you have plenty of cash lying around, then you can do away with the LOC and reduce your expenses.

I guess I don't view debt as good or evil, it's just a tool that you need to respect and use wisely. Sort of like firearms.

Quote:
Originally Posted by freakshow10mm View Post
Two final things: Sell from in stock on hand inventory only and deal in cash for all purchases.

Don't buy commercial property unless you have the cash to get at least 3-4 automated (like AmmoLoad or Camdex kind of automated) loaders and run them for two 8 hour shifts 5 days a week. By this time you will have proven yourself a respectable player in the industry and can afford it.
Definitely sell only from stock on hand, especially with the component market being as volatile as it is.

Cash only may fly in Upper Michigan, but in most large markets it's going to be a problem. Pay a little extra for a CC provider who knows what they are doing, and if the service fee bugs you then have a cash price and a credit price.

I do agree that buying your property is a bad idea. Not only does it lock up a ton of cash you can use to grow the business, but it converts your lease expense into a capital improvement, and that does away with a nice tax deduction. Again, if I have so much cash that I'm free and clear, then buying starts to make sense.
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Old 06-24-2010, 10:25 AM
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If you don't make defensive articles, you aren't subject to ITAR. Each case is different and I can't advise further than that.
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Old 06-24-2010, 10:43 AM
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Originally Posted by mstlaurent View Post
That was exactly my plan, each press has its own dedicated drive, pistol calibers have one press, rifle calibers have two presses, one for sizing, one for loading. I would get them all the 900rph speed, that way they are interchangable between rifle and pistol if I need to swap out calibers. Can you send pictures of the lube die? I'm curious as to how it was modified. I have my own ideas about that, but I'd like to see how others are doing it.
It was a one-off die and I didn't take pics.

Quote:
I thought about doing the brass prep on the 650, since they just came out with the PW units for them, but it occured to me that if I use a 1050 for the brass prep it gives me much more flexibility. If the brass is swaged on the sizing press then it is all ready to go if I decide to hand load it or sell it as prepped brass. And I can use it as a spare production press if I need to. If I find that I don't need to prep rifle brass this week, but I need to temporarily double my pistol production, I can swap out the caliber change and off I go.
That's another way too. As you can see there are many different setups available for the small time reloader. There is no right or wrong way, just what works for one or the other. Right now I have a 1050 and a 550. I could realistically ditch them both and get two 650s one each primer size. Small primer calibers on one press and large primer calibers on the other. I don't do rifle so the swage station on the 1050 is useless. Same loading rate as the 1050, case feeder, empty spot for a bullet feeder and can use the RCBS type that won't work on a dynamic toolhead like the 1050's. The only think I like on the 1050 over the 650 is it primes on the downstroke which is faster than the pushforward method of the 650 and 550 (and SDB).

Quote:
In a reloading business you are paying $8,000 for components that you will turn around and sell next week for $10,000. It seems to me that an LOC would be perfect for that, because you can draw the $8,000 to buy the components this week, then pay it back when you make the sale. You'll pay a small finance fee, but you'll have the components you need to make the sale whether you have the cash on hand or not.
But by paying interest on materials cost you are losing valuable margin. Also that is banking on the premise that you can turn the inventory over for profit by the time your payment is due on the LOC. Very risky. Business is about reducing risk. Working with cash is effective risk management.

Quote:
I guess I don't view debt as good or evil, it's just a tool that you need to respect and use wisely. Sort of like firearms.
To me debt isn't a tool. Money is a tool. Debt is not money. Debt is a liability. Eliminate your liabilities.

Quote:
Cash only may fly in Upper Michigan, but in most large markets it's going to be a problem. Pay a little extra for a CC provider who knows what they are doing, and if the service fee bugs you then have a cash price and a credit price.
I used to accept CCs but it's more trouble that it's worth. Even having the cash price the additional labor in processing and tracing CC stuff means more labor costs and overhead. It's about controlling costs. That place that sells the AK47 flats (can't remember the name off hand) only takes money orders and checks and has been doing it since they've been in business. They make a killing off it. CCs are convenient for the customer and that says something about them but it's a balance between customer convenience and business convenience basically. What I do to make up for the inconvenience of mailing payment is case quantity ships free. That's a $25-50 savings off 1,000 round order right there. CCs will increase sales but in my case if I can't make any sales, what good is it to accept CCs if I'm not getting sales interest in the first place?
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Old 06-24-2010, 11:04 AM
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"Debt is a liability. Eliminate your liabilities."

Since you are now the king of finance, where's my $100 from your group buy?
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