Disclaimer: The information provided on this article does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available are for general informational purposes only.
Have you, or someone you know, ever wondered how to fulfill the dream of opening a cigar shop? Earning a living while doing something you are passionate about can be very rewarding. That passion can translate into a lucrative, enjoyable business when planned and executed correctly. Customers appreciate the passion, enthusiasm, and knowledge you can share with them. While we don’t want to dissuade you in any way, it’s important you know the cigar industry faces more challenges than other industries. This is due to the fact that the cigar industry is both a regulated and restricted industry, meaning you have more laws to comply with and restrictions ranging from a limited selection of merchant processors that will accept cigar shops to advertising restrictions limiting your marketing options.
While you puff on a fine cigar, here are eight insights for you to consider that will help guide your business to success:
Plan, Adjust, Plan
Like any business, you need to make a business plan to map out how you are going to run your business. Your plan should include sales and marketing strategies, inventory forecasting, budget and financial planning, competitive analysis, human resources plan, vendor management, software/hardware requirements, physical/digital security, and more. Due to the frequent changes in regulations and restrictions, the cigar industry requires patience as you will have to adjust for the changes. The better you can adapt to the required changes, the better off your business will be. According to the Premium Cigar Association (PCA), the startup costs for a cigar shop are roughly $93,000, plus an additional operating cost of approximately $19,000 a month.1
Expertise and Experience
Do you know more about cigars than your customers? Your customers must have confidence in you and consider you an authority to guide them in pursuing their passion. This can be a challenge if your product knowledge doesn’t equal or exceed your customers. One way to overcome this challenge is to hire employees or a manager that better understands the cigar business and the products you’re selling.
It may sound obvious after reading the above disclaimer, but seriously, consider hiring an attorney. When starting any business, an attorney can handle a host of situations efficiently and accurately. This may include tax strategy, incorporation, employment law, liability management, insurances, permits, regulation compliance, trademarks, inspectors, advertising restrictions, and financial services. State and federal laws regarding the sale of cigars, cigarettes, and tobacco products can make navigating the legal waters complicated. Look for a specialist in your business when hiring an attorney.
Due to advertising restrictions, the marketing options for a cigar business are limited. You can not purchase paid advertisements to promote or sell cigars on search engines or social media platforms. You will rely heavily on foot traffic, events, search engine optimization, and word-of-mouth advertising. Make sure to do your market research to determine if you have a viable location. Determine the marketing strategies you will employ to gain and retain your customers. Consider having funds in your budget for experts in cigar marketing to assist right from the beginning. Being prepared can mean the difference between a great “Grand Opening” and continued success, rather than a struggle to gain a foothold in your community.
Understand the connection between building relationships and inventory
The merchandise you think you should carry and what your customers really want may be two different things. Knowing the preferences of your primary customers will allow you to tailor your inventory for success. For example, suppose your research tells you that your location will draw traffic from suburban smokers 40+. In that case, you might choose more expensive products than if you were located in a college town where your customers are more likely to be first-time cigar smokers or on a limited budget.
Balance Profits and Losses
Understanding where the most profits are being generated, where you are taking losses, and your profit margins can vary from business to business, location to location, and state to state. Be familiar with your accounts or hire a bookkeeper to prevent any future headaches. It is wise to seek the advice of an attorney or accountant to provide professional guidance as to what finances are needed to run your business and how much profits you can take out.
Location, Location, Location
The real estate or location where you establish your shop is one of the most important (and potentially the most important) decisions you will make. Map out your potential locations, mark off anchor stores(stores that bring in lots of traffic), note where popular restaurants and bars are located, highlight competitor locations. When you select a location you want it to be in a busy area near many anchor stores, restaurants, and bars. An ideal location is highly visible, has good foot traffic, but is also easy to come and go from.
Laws & Regulations
The cigar industry faces additional local and state regulations, licenses, and permits that may be required. Each state and locality can be different, so it’s important to check with your local municipality and an attorney to ensure compliance. Additionally, there are federal laws governing the sale of cigars and tobacco products. To help keep up with frequent changes, you should turn to a trusted source of information for your industry. The Premium Cigar Association (PCA) is the leading authority and advocate for the premium cigar and pipe retailer industry.
One of the main goals of the PCA is to help those in the cigar and tobacco retail industry succeed. They provide helpful resources that help cigar shops succeed. One way they help is by partnering with companies like Premium Tobacco Payment Processing (PTP). The Premium Cigar Association partnered with PTP to help PCA members find a reliable, compliant payment processing solution. Premium Tobacco Payment Processing (PTP) aims to offer members the lowest processing rates and fees for the industry, with rates guaranteed never to increase. They never require a contract or charge a cancellation fee. If you are looking for or are ready to change processors, or would like a free audit of your existing processor, call Premium Tobacco Payment Processing at (321) 972-9838.
Source: Premium Cigar Association | How to Start a Cigar Shop in Your State.