Maybe you've seen deals offering discounted Front Sight certificates for their training courses.

Are these too good to be true?  How can Front Sight afford to do this?

Front Sight has used a variety of innovative marketing techniques in its successful efforts to grow its user base.

While the 'list price' for attending a Front Sight Course or buying a lifetime membership is high, they offer regular discounts.

I've seen deals go as low as, one-time, an unbelievably low $69 for a full four day course.  Sure, there were restrictions associated with this deal, but even so, one has to wonder -how can Front Sight afford to do this?  Is this some sort of giant Ponzi scheme that will implode any time soon?

Or is there a sensible business strategy underlying their actions?

Deals Below Cost Price?

Some people have expressed concern about Front Sight's business model, because sometimes it seems that Front Sight is selling course certificates and/or life memberships at what might be below their cost price.

Is this relentless drive to expand and grow, even possibly if it involves growth with no profit associated, indicative of underlying financial problems - is it some sort of pyramid scheme that desperately needs future money today to pay for yesterday's expenses?  If Front Sight stopped growing, would the bubble burst and Front Sight fail?

These are good questions and relevant concerns.  We as observers can't really answer them with 100% certainty because we're not privy to Front Sight's financial situation.  But there are some thoughts and comments we can consider.

Only short time risk with most certificates

First, if you are considering buying a course certificate for a specific course, and if there is not a lot of elapsed time between when you buy the certificate and when you take the class, then you have only a very short period of risk involved.

If you're buying a course in May and will be attending the course in June, you've only a month to be concerned about Front Sight's future.  That's much less exposure and risk than if you're buying a certificate today because it is a drop dead great value deal, but have no plans to redeem it on a course for some years to come.

If you're worried about Front Sight's future, don't buy certificates far in advance of when you might use them.

Just because you can buy a certificate 'below cost' doesn't mean that Front Sight sold it below cost

Here's another thought.  Maybe a person bought a lifetime membership for some thousands of dollars, and included in that lifetime membership were two or four certificates for future courses; certificates that the new lifetime member didn't need of course (his new lifetime membership will cover his future courses) but offered as a 'sweetener' to encourage him to sign up for the lifetime membership.

The new lifetime member then decides to simply cash in the certificates and sell them on eBay or however else he can.  The certificates have cost him nothing, but he is keen to cash them in so as to reduce his total outlay to buy the lifetime membership he now has.

Who knows how much he will choose to sell the certificates for.  Maybe he'll find someone who was going to pay full list price - $2000 for a four day course (currently most courses are priced at $500/day), and that person is delighted to buy the certificate for $1000, saving them $1000 in the process.  That's a great deal for both buyer and seller.

Maybe he'll find someone who makes him a lowball offer, and maybe he accepts a mere $100 or $200 for the four day certificate.  That's an even better value for the purchaser, but no-one was forcing the seller to accept the low price.  Perhaps it is still a good deal for the seller - he has managed to 'unlock' $100 or $200 of value and to reduce the net cost of his lifetime membership.

So consider the outcome.  Everyone benefits.  Front Sight got to sell another lifetime membership, the new lifetime member managed to cash in some of the bonuses that encouraged him to buy the lifetime membership, and the purchaser of the certificate got a course certificate for pennies on the dollar of its full list price.

Does that transaction mean that Front Sight is in financial trouble?  Or does it mean Front Sight has cleverly marketed a lifetime membership, giving something of greater value to the purchaser than the underlying cost to itself?

Loss leaders to get new customers

In addition to the preceding scenario (including free certificates as a 'deal sweetener' when selling a lifetime membership) maybe Front Sight sometimes sells course certificates at close to their underlying cost price of training another student.  Is this a bad thing and cause for alarm?

Not necessarily.  Much of the time, such certificates are restricted to first time students only.  You can get a great deal to go to Front Sight for the first time, but if you want to go back a second time (and just about everyone does!) then you have fewer low cost options, and you're more likely/willing to pay a higher price, because you now have a first hand understanding of the value you receive from a Front Sight course.

Maybe Front Sight doesn't make a lot of money from your first visit, but they hope your first visit will lead to a second and third visit subsequently.

They also hope that you'll be so enthusiastic about your first experience (and nearly everyone is) that you'll recommend their courses to your friends, acting as an unpaid advertisement for Front Sight.

Other businesses offer loss leaders all the time.  If Front Sight chooses to do the same, there's no harm in that.

What is 'below cost' for a Front Sight Course and Certificate

Before we worry about Front Sight selling course certificates for below cost, perhaps we should try and guesstimate what 'below cost' actually is.

While we don't know the real numbers associated with its operations, we offer some assumptions and guesstimates below to get a feeling for the general ball park situation from the perspective of a four day course.

Costs per student

Let's look at the variable and semi-variable costs for Front Sight accepting one more student onto a four day course.

Paper targets :  Let's allow $2.50 for paper targets per student.

Instructor cost :  A typical range has 40 students, a range master, and two or more assistant instructors (let's say three).  Let's say the range master is earning $25/hr, one of the assistants is also earning $25/hr, one is earning $20/hr and the third is earning $15/hr.  So that is $85/hr for all four people; now let's round that up to $100 to cover benefits for the range master (who is probably salaried - the others probably are part timers on contract only) and whatever other costs are involved.  Update - the official manning level is a range master plus two instructors, not three.

Let's say Front Sight pays for 45 hours of time per four day course to its instructors.  That is a total wages bill of $4500, split 40 ways - a cost of $112.50/student.  Update - the hours for the four day course have been reduced - see our article that updates on changes to the Front Sight courses.

(Update, Jan 2011 - I've been advised that these pay rates may be on the high side for assistant range masters.  A couple of years ago FS was apparently paying $100/day plus a free lunch to its assistant range masters - that works out to less than $10/hr - instructor costs per student could be as low as $100).

Water, Plastic Cups, Gatorade, Misc :  Let's allow $5 per student for these sorts of costs (update - they no longer provide Gatorade).

Handout notes :  Let's allow $2.50 for the cost of copying hand-out notes (update - instead of providing these for free, they now sell them for $40).

Wear and tear in general :  Let's add a miscellaneous $15 per student for 'everything else' (whatever that might be).  Update - now that the basic courses don't use turning targets, the wear and tear is reduced.

The total cost per student therefore comes to about $137.50 - let's round that up and call it $140.  (Update - that is starting to look a bit on the high side with the various cost cutting changes that have occurred.)

Offsetting revenue items per student

In addition to the costs they incur, Front Sight also stands to make some money from each course attendee, over and above whatever attendance fee they charge.

Let's look at these other ways that Front Sight makes money from its students.

First, each new student pays a $50 fee for a background check (returning students also need to continue to pay this once every year).  Let's say that $10 of this represents above the line costs to search some sort of online database, and so the other $40 is profit.

Gun and accessory rental - I estimate that about one third of students rent a gun and accessories for their four day course.  This is a $100 item, with perhaps an underlying $20 cost and therefore $80 profit.  With one third of students renting, that averages to be $26.50 per student.

Ammunition sales - All students who rent a gun and accessories must also buy ammunition from Front Sight's Pro Shop - typically 600 rounds for a four day course.  Some of the other students who bring their own gun and equipment also buy some or all of their ammunition from the Pro Shop, so as to save on the hassle of transporting ammunition.

Let's say that 40% of students buy 600 rounds, at a current cost of $264 for 9mm (ie $22/box), $336 for .40 S&W ($28/box) or $384 ($32/box) for .45 ACP.  I estimate a profit of about $12.50/box - $150 in total on these prices.  With 40% of students buying their ammunition, that works out to $60 per student.

Other Pro Shop Sales - Maybe a student buys a training manual (everyone should).  These sell for $40, with an underlying cost of  less than $5 - a $35 profit.  (Update 2011 - now they sell both training manuals and lecture notes too, for $40 each.)  Perhaps they buy a Surefire flashlight or a holster or a cap or some other piece of clothing, or an extra magazine, or who knows whatever else that catches their eye.  Talking about eyes, maybe they buy some eye protection, or hearing protection, or gloves.  The list of 'goodies' for people to buy is extensive.

The Pro Shop is always very busy selling things.  Let's say they make an average of an extra $7.50 in profit per student (if only one in five students bought a training manual and nothing else, that would be $7 per student on average).

Lunches -  It seems that between half and two thirds of students order boxed lunches from Front Sight's official caterer.  I can only guess as to what type of arrangement Front Sight has with this company, but it seems reasonable to assume that Front Sight receives a fee per lunch sold/delivered - let's say $2.50 per lunch (just under a 20% commission - with the lunches costing $12.95, there could easily be $3 or more in fee paid to FS and still allow the lunch company to make very good money).  With four lunches on a four day course, and let's say 60% of students buying lunches, that is an average of $6/student.

If you buy a soft drink from one of the vending machines at Front Sight, you're probably contributing the better part of $1 each time you do that to FS's profits, too.

So in total, Front Sight is easily averaging $140 of income per student who attends one of their courses.

Front Sight Breaks Even on Student Training

Now you're going to think that I've deliberately manipulated these figures to establish a point, because look at this - Front Sight averages costs of about $140 per student, and averages income of about $140 per student - in other words, Front Sight pretty much breaks even on every student before charging any fee at all to attend.

If Front Sight sold four day courses for any price at all, the total amount of the course fee ends up as being profit (well, then it has to be allocated to overheads, depreciation, management and marketing, and so on).

For the record, I have no dog in this fight.  I'm dispassionately doing the sums as best I can guess them, without any interest in if the final result is positive or negative.

Note that you can argue a different set of numbers probably just as convincingly as I've offered these.  But the range of averaged results from best case assumptions to worst case assumptions suggests that, worst case scenario, maybe Front Sight loses $50/student for a four day course, and best case, maybe Front sight earns $25.

New Calculation Based on 2011 Changes

For 2011 it seems that Front Sight incurs the following charges, more or less :

Paper Targets - $2
Instructor Costs - $75
Water and Cups - $2.50
Wear and Tear - $7.50
Total Cost = $87 - call it $90

Offset against this are the following revenue items :

Background check - $40
Gun rental - $25
Ammo sales - $50
Manuals - $10
Other Pro Shop - $5
Lunches/Food Franchise/Drinks - $6
Total Income = $136, call it $130

In other words, in 2011 Front Sight is now making a $40 profit out of every student, up from a 2010 scenario where it was probably slightly better than breaking even.

No wonder Front Sight has been recently and aggressively marketing very low cost lifetime memberships.

Extra Profit on Certificate Sales - Breakage

Now let's think some more about what happens when Front Sight sells (or gives away) a course certificate.

Like any other sort of thing entitling its bearer to a future benefit (eg a store gift card, a frequent flier mileage award, a mail-in rebate, etc), some of these certificates will never be used.  Some will be lost, others forgotten about.  Maybe the current owner of the certificate gives it to someone else, who isn't really interested in ever redeeming it.  Maybe the current owner dies and the certificates are lost when his stuff is cleared out.  Or maybe any of many other eventualities.

One quite common occurrence is that a person with a collection of certificates then becomes a lifetime member and no longer has a use for the certificates.  Maybe that person will then try and sell them, maybe they'll give them away, and maybe they'll simply throw them away.

One can only guess about what percentage of breakage occurs with Front Sight certificates, but it is reasonable to assume that this is at the very least a minimum of 10% and potentially as high as 50%.  Let's set this at 25%.

In other words, with 25% of certificates never being redeemed, if certificates are being sold for $100, this equates to a net of $125 per actual redeemed certificate.

Front Sight's very liberal terms associated with certificates - giving them no expiry and allowing them to be assigned to other people - actually encourage breakage because people feel no pressure to urgently redeem them.

Extra Profit on Certificate Sales - Future Redemption

Front Sight's very liberal terms not only encourage breakage (see above), but also encourage people to hoard them for an extended time before redeeming them.

How long does the average certificate sit in someone's filing cabinet before it is redeemed?  It would be rare for a certificate to be bought or given away on one day and to be redeemed for a course the very next day.

On the other hand, it would also be unusual for a certificate to sit unused for ten or fifteen years.

We can't even start to guess at the average age of a certificate when it is redeemed, but clearly some value has to be ascribed to this - whether it be six months or six years.  Let's be conservative and cautious and say it is only one year.

So that means Front Sight has had the benefit of your money for a year, interest free.  How much is that worth to Front Sight?  Depending on the type of financing they might otherwise have or need, and depending on how effectively they could employ the money from your up-front certificate purchase, depends on the value to them.

Let's say that there is a 10% value to Front Sight for getting your money for free for a year.

So that means each $100 certificate they sell for redemption in an average one year's time is the same as selling a $110 course today for immediate use.

Special Deals to Jump Start New Capacity and Courses

Front Sight recently started offering midweek courses as well as weekend courses.  This almost, sort of, doubled their capacity in terms of how many students they can train per week, month, year, etc.

Front Sight also recently added a second set of ranges, again pretty much doubling their capacity for students.

With these two doublings in the last few months, they can now handle four times as many students as before.

Doesn't it make sense to sell some additional course certificates at low cost so as to get some people in the door and onto the ranges?  It is understandable that Front Sight would wish to kickstart their massively grown business by discounting some certificates for future training, particularly on their new mid-week courses, and that is exactly what they did.

Future Sales to New Students

Have you ever been to a time-share promotion where you were given something quite generous as an inducement to attend - maybe a several night free stay at the time-share resort, in return for you attending a one or two hour sales presentation?

This is because they hope to sell you a time-share membership during your stay, and during the presentation you attend as part of the deal.  Of course, not everyone signs up for the time-share, but enough people do to make it a sensible strategy.

There is something slightly similar occurring with Front Sight, except in their case, they wish to do two things.  First, they wish you to come back again and again, paying higher fees for each future course (and when you remember that just about anything and everything you pay for a course is profit, this is an important benefit to them).

Secondly, they would like you to buy a lifetime membership at a cost of some thousands of dollars.  This may possibly be considered the 'jackpot' outcome for Front Sight and their ultimate goal.

Just like time-shares, not everyone will return, and not everyone will sign up for a life membership.  But with even a very small number of people returning, and an even smaller number of people buying life memberships, this will be more than sufficient for Front Sight, particularly when their costs associated with you attending your first course are close to nil.

Similar Considerations with Lifetime Memberships Too

We've also seen Front Sight selling lifetime memberships, sometimes for less than $1000 per membership.

Similar considerations apply to explain why this might be a good strategy.  They get your money up front.  You might never go to Front Sight at all; or maybe you might only go one or two or three times.

Only a very few people will go dozens of times with their lifetime membership, and I guess probably FS is happy to have those people as 'loss leaders' to bring in all the others who don't visit as often.

Summing it Up - A Sensible and Profitable Strategy?

Yes, it is a sensible and profitable strategy for Front Sight to sell massively discounted certificates for future courses.

First, consider that Front Sight probably more or less breaks even on the courses, without any payment at all from the attendees.

Second, to the face value of any certificate sold, you need to add a 25% breakage factor and a 10% 'time value of money' factor, so each $100 in certificate value sold is actually worth $137.50 to Front Sight.

Third, there is a measurable future value to Front Sight in getting a new student to attend a course.  That new student may attend subsequent courses in the future, and may eventually buy a lifetime membership for thousands of dollars (much of which is pure profit to Front Sight).

So doesn't it make sense for Front Sight to sell certificates for any amount they can, and even to generously give them away when it can help them sell future courses and lifetime memberships, to keep their ranges full and to keep their marketplace awareness high?

The bottom line seems to suggest that Front Sight is well advised to sell course certificates at low cost, and doing so does not suggest that Front Sight is desperately scrabbling to get money, and neither does it suggest that low priced certificate sales are below Front Sight's cost.

Instead, it is an example of Front Sight rationally growing its business - an outcome that appears supported by their claims of having 'doubled their business by some measure every year' over their 15 years of existence so far.

Part of a multi-part series

Please click the links at the top right of this page to read through other parts of this extensive series on Front Sight and the training they offer.

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Originally published 3 Jan 2011, last update 21 Jul 2020

You may freely reproduce or distribute this article for noncommercial purposes as long as you give credit to me as original writer.