EAR: Is starting a cigar store a good business?

[El Presidente]

EAR= Email assistance required. 

"Alright, Rob, here's the deal. My daughter just wrapped up college, and after 30 years on the grind, I'm mentally done with my job. I'm good financially, sitting on 500K in disposable cash, and I'm trying to find something that'll bring some real quality to my life for the next 15 years. I'm not out here trying to strike it rich, just looking for a solid return to cover the bills. I've seen you start and shift businesses over the years, so what advice do you have? And feel free to throw this out to the group, too—seems like a lot of folks here are running their own businesses or might be in the same boat as me."

Over to you good folk. I will put in my 2 cents as well. 

[JohnS]

The idea of starting a business at a later stage in one's working like isn't a bad idea, for a change, but there are challenges to consider:

1. Don't do it strictly for the financial return because the initial outlay may be quite a lot and it may take time to recoup one's initial investment.

2. Be flexible. Things are not going to go to plan. One will require to take the initiative to think ahead and negotiate potential pitfalls.

3. What really matters is asking oneself, "Can I meet the demands of my market base, my customers?" If starting a cigar store is your passion, then don't go into it blindly as it's never been harder to do business in that field than right now.

4. Surround yourself with a dependable support network. Ask yourself, "Who can help me meet my business goals?" Identify these people...they will be vital in the long-term.

[El Presidente]

43 minutes ago, El Presidente said:

EAR= Email assistance required. 

"Alright, Rob, here's the deal. My daughter just wrapped up college, and after 30 years on the grind, I'm mentally done with my job. I'm good financially, sitting on 500K in disposable cash, and I'm trying to find something that'll bring some real quality to my life for the next 15 years. I'm not out here trying to strike it rich, just looking for a solid return to cover the bills. I've seen you start and shift businesses over the years, so what advice do you have? And feel free to throw this out to the group, too—seems like a lot of folks here are running their own businesses or might be in the same boat as me."

Over to you good folk. I will put in my 2 cents as well. 

 

In no particular order. 

• Tobacco is a tough game. Being in the US (Georgia), it is easier than most locales but that means barrier to entry of newcomers is also non existent. 
• Be prepared to work 12 -14 hour days, 6 days a week for the first 2 years.  Do you really want to? 
• Lounge, Lounge/B&M or simply B&M? If a lounge, liquor?, staffing, complexities increase but so to do revenue and expenditure. 
• Know your legislation. 
• Buying existing shop is enticing if they have the major accounts (Padron/Fuente etc). Discount the revenue by 1/3rd. Increase expenses by 1/3rd Work your numbers on that. Speak to the landlord. Ensure rent and outgoings have been paid ontime. Understand the terms of the lease. Understand your get outs and the landlords long term intentions. Extend the lease with an optional extension if needed. 
• Starting from scratch is high risk. 500K won't go far. How do you plan to secure those top accounts (Padron/Fuente etc?).You can set up your shop with boutique brands but that is unlikely to generate the cash required. I was being polite, it's not. 
• Payment gateways in this industry with no record are not easy to establish and can be expensive. What is your demographic? How many customers  do you need to see buying per day. What is the average spend. Know your numbers. Margin is not profit. Discount your projected revenue by half in the first year. Increase your expenses by 1/3rd. Does it still work?
• What is your personality? Unless you are a "people person" park your funds in an investment fund, take the 9% and go fishing. What is your tolerance of risk? What is your wife's tolerance of risk? Are you prepared to drop the 500K and be happy that you had a serious dig or will it haunt you and your relationship for the rest of your life. You have a love of cigars and that love is at risk without the right mindset. 
• Online for a retail store is no panacea. Park that for year three once you have an understanding of the market in totality. 
• Staff can be a pain in the arse unless you are married to a magnificent woman who will be part of the operation 

Upside. 

      I have known very good boutique lounges run to scale (both small and large). If you are genuinely financially independent, have the right appetitie, mindset, personality, then you have a shot at curating a unique business that meets your needs. It takes years however. You need to love the journey, be fearless and go balls deep. 

[JY0]

The main question to answer.....can you afford to lose that 500K and if you lose it can you replace it?

[PigFish]

Better to become an influencer. No skills, little knowledge, and not much brains can take you pretty far. You just need a camera and convince the thinking world that the last sentence is true!

Buy a class A motor-home, a new Rolex, put a humidor in the motor home and drive around and review cigars and tobacco stores and video your adventures.

See if you can get flying j or pilot to pick you up as a sponsor.

[BrightonCorgi]

I'd rather mow a handful lawns and for sure make money than risk it on a cigar lounge that will take all one's time, energy, money, and positive outlook.  30 accounts will pay for all the cigar smoking with a few buddies and have plenty of time for family and other pursuits.

[Puros Y Vino]

Rob's list Is very comprehensive. The only thing I can stress is location matters in terms of what is allowed locally. Up here in Canada, there are only 2 cities with grandfathered lounges. Trying to set one up legally elsewhere here is a non starter. In some places, smoking indoors is fine, but then enjoying alcohol at the same tome is a no go. I'd just enjoy your nest egg. Maybe don't open a lounge and just arrange one off needs for profit? 

 

[99call]

Be aware of the strains the cigar industry can have on your life. For example, here's a picture of Rob in the early days...

Then just ten short years later...it's tragic

[Chibearsv]

Going into any business with an expectation of "covering the bills" shouldn't be a motivator. If you aren't going into business with an expectation of reasonable return on investment, then it's a hobby, and a potentially expensive one. I know a handful of bar owners and restaurant owners that went into those business with the same thoughts and hopes, that are now broke. I think that type of retail business is the toughest there is and I don't think a personal enjoyment of the product you're selling makes it any easier.  

[Cigar Surgeon]

Well, assuming as Rob alluded to that EAR OP is in the US:

• $500K USD in cash will disappear quite quickly.  If you're assuming that OP is building or reno'ing an existing space, with proper air makeup and cigar inventory most of that will be gone.
• Before we even get to that point you need to know whether the area you're in has existing shops, and whether there's even a market to add an additional shop.
• If you can do a shop with both a lounge and licensed alcohol sales that's going to be the way to do it.  You'll make more profit on alcohol sales than cigars.
• You won't have to worry about striking it rich, that's not going to happen.  If it does happen, it will take 4+ years before you're turning a profit.  Up until that point all your profits will be going back into the story for inventory and growth.
• Is your relationship with your spouse strong enough for you to be spending 6 - 7 days in your shop for 14+ hours a day? It will be that way for a long while until you are generating enough revenue to hire staff.  Even then you're almost certainly not going to have much of a life outside of the shop.

I don't want to paint a bleak picture, just one that removes the romance from store ownership.

[joeypots]

Some people I know who took a chance and started a business mid to late middle age were disappointed with their choice. A few have said that they’d be better off if they put the money under management and played golf. If one really wants to start something be sure the allotted capital will truly not be missed if lost. 

I get tired just thinking about starting a business. The annoyances of being in retail and food service cannot be overstated and linking them to quality of life seems difficult at best. 

I’d rather invest for the long term and, as Brighton Corgie stated, start a service with low overhead.

[Fugu]

16 hours ago, Chibearsv said:

Going into any business with an expectation of "covering the bills" shouldn't be a motivator. If you aren't going into business with an expectation of reasonable return on investment, then it's a hobby, and a potentially expensive one.

Very much this! Spot on. If there's no 'demand' to be successful, you won't be, unless you just won the lottery.

[vladdraq]

 If you are a more sedentary person it might work. Experience in retail sales it's a must. I see way too much risk tbh. I'd rather put my money in SP500. Or an Airbnb in Destin, and go fishing.

[teamrandr]

Only thing I have to offer is you could try managing in the business you wish to start. Then you get paid and can learn a lot about the business.  

[ATGroom]

13 hours ago, PigFish said:

Better to become an influencer. No skills, little knowledge, and not much brains can take you pretty far. You just need a camera and convince the thinking world that the last sentence is true!

Buy a class A motor-home, a new Rolex, put a humidor in the motor home and drive around and review cigars and tobacco stores and video your adventures.

See if you can get flying j or pilot to pick you up as a sponsor.

Say what you will about it, but there are a few perks to influencing, namely

-you turn your lifestyle expenses of travel and cigars etc into a tax write-off

-even a pretty low level influencer can get access to things like factory tours, invites to events, and meetings with industry people that you otherwise wouldn't have access to

-if you're any kind of success at it then you'll start to get a bit of free product here and there

 

As a business to make your fortune, not worth it. To be in the top 0.0001% of influencers who actually can make a living at it would be a massive slog and without a combination of talent, luck, and hard work would almost certainly end in failure.

But, if you're looking for a fun pursuit for your retirement there are worse options.

Being self-funded you might even be able to not appear like a total chiseller and avoid some amount of the internet mockery!

[Theoeand]

I ran a small shop for two years, and foot traffic was way more important than I expected. Also, local laws and tobacco licenses were a hassle, so plan extra time there.

[BlueWS]

Starting a business from scratch in retirement (and he's not officially retired yet) is a pipe dream. No one mentioned needing partners. Most of these shops are partner owned, because it's too big of an investment as a sole proprietor. That's a recipe for getting an ulcer. Dealing with some f*****g a******e (or several) who get power hungry. If I'm not mistaken, another risk with having a brick and mortar is supporting repeat business i.e., a handful of wealthy clients. Private lockers. Curating a collection. Hosting events. If you have a liquor license add to that cost. They're bread and butter, not random foot traffic. It's all smiles in the beginning until it isn't. Lose the top tier clientele, lose the store. If you can't sell the store at that point, you're in big trouble.

[1LegLance]

I can offer some real life experience here.....

I am 56yrs old,  live the Phoenix, Arizona (5 million people) and bought a "passion business" for $450k last year. Oh and I owned a couple of cigar shops in the late '90s/early 2000s so I know that biz also.

My current retail store is Knives & Pen...yeah collectible & everyday carry knives and Fine Writing fountain/rollerball/ballpoint pens along with some stationery, pen repair/restoration and recently nib grinding.

I am semi-retired as I work 2 days a week as an ICU RN which gives me a base home income and pension...if I lost everything at Penchetta I would still be okay. House was already paid for and no real bills. The previous owner started in 2009 and built a great local following so I just had to add the online side of things.

Now to the numbers....margins are shrinking everyday, he had 50% gross when he started and 40% when I took over. I built my plan on 30% knowing we were going online against big players and we have settled at 35% which I am trying to grow...retail sucks because someone is always willing to race to the bottom.

Staff can make or break you...I have my wife, older son, a great family friend and a pen maker/part time guy. We hired and let go one person so far because they were a stand around vs go-getter type person.

Unique selling position is a real thing...we are the only Fine Writing store in an area of 5 million people but I really compete against Amazon and big online vendors these days. We are one of 3 knife stores and again I compete against the online. It really sucks when someone wants an hour of your time trying different knives just to find what they like and leave to go search for the lowest price online. Or almost worse is taking an hour then spending $8 on a small bottle of ink...I should have just given it to them in 5 minutes and gone to do some real work.

Oh and don't forget phone calls, emails, office paperwork, ordering, scammers, phone sales people and all the time suckers out there.

We entered this with a 5 year plan to grow & sell, grow and pass on to the older son, or shut down at the end of the lease...1 year of 5 and that is still the plan, it just has gone slower thanks to the economy slowing, and TARIFFS are REAL.

[BrightonCorgi]

I had a cousin who was a big shot lawyer and wanted to open his own business instead of lawyering. He looked at a car wash in Brooklyn. He did a walk through and saw that were a few slot machines in the hallway that runs along the car wash. He said to the current owner, "if I buy this place, those slot machines are gone." The owner said, "the machines stay."  

He didn't want to be in a "Sopranos situation" and ended up with a dry-cleaning business in Midtown.

[BlueWS]

9 hours ago, 1LegLance said:

It really sucks when someone wants an hour of your time trying different knives just to find what they like and leave to go search for the lowest price online. 

It's brutal. You end up being the store that lets the shopper "try on everything" before they go home to purchase online. If someone values price over service how do you compete with that? "It's $5 cheaper online" and they walk out. 

[1LegLance]

Between the slowing economy and tariffs folks are shopping more on price...and they want "price matching" and Amazon type returns...and I can tell you from my Tobacconist days, YES you still deal with returns in a cigar shop.

• Lighters - "I don't like the XXXX after all!"
• Ashtrays - "too big, small or whatever!"
• Humidors  - "too small or too big or they are too dumb to make it function!"

Oh and you can talk about restock fees and all that but folks are FAST to leave a 1 star review for stuff you tried everything to make right.

I even remember folks coming back on Mondays with a baggy of sticks saying they wanted to return them because they bought more than they needed for a weekend party.