Wednesday, August 15, 2012
Nothing worth succeeding is easy or free
A little more about III Arms.
We've got the business end of things progressing nicely, as noted in the post below this one. Now we are moving into meatier areas. Because III Arms is brand new, with an aggressive timeline for getting prototypes and production units built and into customer hands, there are a few steps we need to take that the average manufacturer can avoid. Getting a company FFL should be relatively straight forward, though time consuming. Before ATF will consider issuing an 07 (which is the FFL designation for a company that is permitted to manufacture) the company needs a physical space the local ATF Agent can visit and inspect, and that meets all state and local zoning codes. Once we have a suitable space and we submit the paperwork to ATF, they usually rule within 60 days.
Step 2 for being legally allowed to manufacture is to satisfy the State Department and pay their ITAR tax, which is a bit more than $2k. They can take 90 days to 1 year to issue the license, and only then is III Arms Company legally permitted to build the first firearm and deliver to a customer. So, you may be asking, how do you intend to deliver product by November 6th?!
That's a fair question. But before I can answer it, you need to know one more tidbit.
We are 99% sure of the following, and need an attorney to give us the green light before we go much further on this path. Only a licensed FFL holder may accept money from a customer for the purchase of a firearm. That FFL holder must be an 07 (manufacturer) or an 01 (your average gun shop license, a FFL 01 is a dealer license). Lucky for us, we have several 01s in our ranks, and Jim is an 01 who is already carrying a lot of weight for us all.
So, to satisfy the State Department and BATFE here is the model we are noodling through at the moment: Our current 01 will accept orders and payments from customers, then he will pay the 07 who is building our initial production firearms. When the firearm is ready, it will either ship directly from the 07 manufacturer to the customers FFL (gun shop) or it will ship back to our 01, and then out to the customers gun shop for pick up.
This looks legal from my research and Jim's, so next week we'll get an attorney involved who specializes in BATFE matters and get a written opinion from him/her so we know we are on safe ground. It won't be cheap, but it will be priceless. Once we have that opinion, I think we'll go and sit down with the proper people at ATF and see if they have any problem with the arrangement.
I can't stress this enough: We will make sure every party involved is on safe legal ground before we take a step. We must have a good relationship with BATFE and we must be standing on solid legal ground. If we are cavalier or arrogant and they shut us down, the entire project hits a brick wall at full speed.
We will use this business model for as long as necessary (Using an outside company that is already licensed as a manufacturer). During this time we'll be selling units and delivering them to customers, while putting the profit margin in the bank for III Arms, and slowly building our own infrastructure. Once we have all of the III Arms ducks in a row (A company FFL, trained gunsmiths, facility and required equipment) we'll begin moving production in-house.
This process simply can not be rushed. During this time the company will be sending Jim and at least 2-3 other III Patriots who are selected to be our core builders to several high-quality gunsmithing courses with some of the most renown 1911 custom builders in the country. If all goes well, our building team should be ready just about the time our FFL is approved and our ITAR paperwork is complete. Once we are ready to start building on our own, that will be the time our core build team will need to move to Idaho.
Do you want to be among that team? First, let me know. Second, use this time in these days to learn as much as you can about serious gunsmithing. Go to your local gunsmith and ask if you can intern and learn from him. Learn to weld and other machinist skills. Learn what you can about running a CNC system. Check your local community college and see if they have any classes that will help you. Study as much as you can about the art and science of metals and gunsmithing.
Please don't hate me if you apply and don't get selected right away. The first core group has to be selected carefully. I promise I will find a way to use everyone who wants to be in the company, but we have to approach this as a hardcore business.
We've got our Trademark secured, which is awesome. There is much to do before we can sell our first pistol made by the hands of our own people, and we will get there as soon as possible.
In the meantime, we are working right now to find the best established 07 (manufacturer) to build for us until we can do it ourselves.
There is a side benefit to this arrangement. The first 1000 or so pistols sold by III Arms will become collectors items because they may or may not be marked on the frame as "Built by III Arms Company". The rules require the actual manufacturer to mark the frame with his company information. So if we contract with ABC Inc. to manufacture our first 1000 pistols, he may have no choice but to stamp "ABC MFG" on the frame of our pistols. We will of course also have our III graphics lasered onto these pistols, and there are 2 ways that we may even have "Made by III Arms Company" stamped on the frames, even when being built by our contracted 07. We can apply for a variance with ATF or we can license our name to our contracted builder. If we can get that in place, then all pistols, even the first 1000 will bear our name only.
I hope I am explaining these details and possible scenarios articulately. I've had more than a week to digest this stuff, so don't feel bad if it reads like Greek.
Here is an important bit of information: Any III Arms pistol or rifle sold that is manufactured by a contracted third party will have a collectors value once we evolve and move everything in-house. Kinda like having a Babe Ruth Rookie card, if you get my drift.
I learned a LOT about the business end of the firearms industry by studying the great Harry Sanford and the problems he hit while trying to get the legendary Auto Mag in production. We won't make those mistakes.
Much of this is inside baseball, watching how the sausage is made. Many of you won't care how we get it done, so long as we do get it done. Others will be pleased to be kept in the loop. I hope this post hasn't bored the heck out of you.
So, our immediate goal is to get our prototypes built and out into the community. While that is happening, we'll be crafting our marketing campaign.
The question was asked about the possibility of assigning special serial numbers for our Founders who choose to buy a pistol - the answer is yes. We'll get that done.
The prototypes will be the most valuable firearms the company ever sells, probably. I haven't decided how to use them yet, but I think auctioning them to raise a bit more operating capital would be a prudent move.
Know this: You have entrusted me with the task of getting III Arms launched and successful, and I take such obligations deathly seriously. No impediment will kill this project. There will be challenges, and they will be defeated.
III Arms Company will succeed in our goal of offering an industry around which Patriots can build lives in our community. The success of this project is more important than any individual. The stakes are too high to waste time with unmotivated people.
We've got this...
Yours in Liberty.
Posted by K at 8:25 PM