Tobacco Shop Purchase

[geoffreycox]

There is an opportunity in my area to buy an established Cigar Shop. It has been my dream for many years to have my own shop and lately things have been getting bad at my 'real' job. I've never been a business owner before so even thinking about this gives me some trepidation.
I don't really know what I'm asking the forum members but opinions and observations would be welcome.
Any ideas for financing?
thanks

Jeff

 

[oppie]

I would say if it's your dream go for it! If you don't do it, it will always be in the back of your mind. What if????? Best of luck if you do.

 

[pstlpkr]

Hey Geoffry,

I don't want to be a wet blanket, but there are a lot of little things to consider when contemplating becoming a business owner. (costs)

There is an encouraging word in your post that being: "established".
You might talk to people who are currently in the business for your reality check.

I have included Skip Elliot's link to his web page. I've known him for years and really knows the industry. He has a toll free number on his web page. You might give him a ring.

The Briary owner Skip Elliot

 

[cacooper]

Greetings,
After owning and operating a tobacco shop for 10 years, and closing it down in 2005, my advice is...Don't do it!
I know I sound like a stick in the mud, but with S-CHIP, FDA regulation, and local restrictions (now and future), running a successful tobacco business today is next to impossible. Taxes WILL go up, more smoking restrictions WILL happen, guaranteed! Maybe even to the extent of banning smoking in your own store. This would be devastating to the business, and it has happened in several states.
In a few years, FDA WILL be coming after pipe tobacco and cigars, after they're finished with cigarettes. This will only increase costs and limit choice. The FDA sees no difference between cigars, pipe tobacco, or cigarettes. They're all tobacco to be regulated.
Example: Jeanie's Smoke Shop in Salt Lake City, UT, will be closing soon. Not because of declining business, but because the state raised the cigar tax, and imposed a floor tax on exsisting inventory. His tax bill: over $125,000 due on July 1st. This amount was too much to bear, and he is forced to close the doors after several decades in business. The Utah legislature killed a successful family business with the stroke of a pen.
I ran my shop from 1995 to 2005, and even then things were tough. I would dearly love to re-enter the business where I now live, but given the regulatory and tax climate, my hopes have been dashed. I'm rather bitter about it, as you can probably tell.
If you do decide to buy the store, I strongly suggest you have an exit strategy. Short term lease (month to month, if possible), a buyer(s) for remaining inventory, and a long term plan for future employment. In other words, plan, plan, plan. And don't burn any bridges.
The tobacco business can be rewarding and fun. I met some of the finest people in those 10 years, and am still good friends with most of them. The industry is filled with great people, too. The annual IPCPR(RTDA) trade show is a blast! A 4 four day smoking extravagaza! More pipes on display than you can imagine. And cigars, cigars, cigars. Ahh, those were great times.
Sorry if I put a damper on your plans, but think it over carefully.
Good luck!
CACooper

Cooper Pipes

PipeandPouch.com

 

[jonesing]

CA you old tamper damper.
I fully understand what you're saying. And while I don't have an direct experience to call upon, a general business acumen, and some level of basic understanding of the tobacco industry, would indicate that unfortunately a smoke shop would be a tough way to make a living.
I've always dreamed of owning a bar. And a smoke shop would be a close second. But I suspect the romantic idea of being a congenial proprietor of a cozy little gathering place with characters right out of cheers is in fact not a reality. Rather than spending most of your time chit chatting with your customers and espousing wisdom and opinion on the topic of the hour, I suspect much of the owner's time is spent wading through regulations, completing compliance paperwork, paying bills, collecting receivables, managing inventory etc.
These things go along with any business. But today's environment around tobacco and to a lesser degree booze tells me it's only going to get worse, And the volatility of the political and legal minefield around vice is simply prohibitive.
I cant' imagine finding investors would be easy and even if one did find a way to borrow money, you're playing with fire and your personal livelihood.
Too much risk and stress for me.
One thing I could see myself doing later in life is moving into a semi-retirement and taking a job at a smoke shop. Seems a great way to get a lot of the good without the bad. Would be fun to talk tobacco, help newbies, challenge the vets etc. Personally though I'd likely spend all the money I made on pipes and tobacco. PAD and TAD shoudl be covered by work comp.
I'm curious Geoffry as to what state you live in. It could have some bearing. at least you'd have some way of foretelling just how bad the state will get ya on top of the actions of the throne.

 

[cacooper]

A tobacco shop is a lot like a local bar, just without the drunks.
My shop, located in Scottsdale, AZ, became a kind of "Cheers". My daily group of regulars were eclectic and quite entertaining. We had "The Maestro", the former conductor of the Phoenix Symphony, and the life of the party. His jokes are the stuff of legend. Mr. Ken, Mr. Neal, "The Colonel", a bunch of doctors from the Scottsdale Mayo Clinic (in fact my own doc was a customer!), Chili Davis (baseball player, Angels & Yankees), a few actors(Dennis Farina, for one), golf pros, a local news anchor, pro hockey players (Phoenix Coyotes), local police officers & fire crews, etc. A diverse group, to say the least.
It is a great business, but quite a lot of work. The monthly tobacco tax paperwork was daunting and time consuming. My wife would spend an entire weekend, once a month, just to file the tobacco tax returns. Then, if there was the smallest error, the AZ state dept. of revenue officer would pay me a visit, and issue threats of closing my shop and confiscating my inventory if the error wasn't immediately corrected. The state tobacco tax gestapo is BRUTAL! Don't EVER be late in filing, or here they come. Stressful doesn't begin to describe it. In fact, a year after I closed the store and moved to Colorado, I received a large envelope from the AZ dept. of revenue. Inside were copies of invoices dating back to 2003. They were demanding over $1200 in taxes on cigars they claimed I calculated the tax on incorrectly. I said to myself "if you want it, come and get it", and round filed the whole thing. Like I said, gestapo. "Papers please!"
The Maestro used to say, "ya gotta take the bitter with the sour". Quite true.
Cheers.
CACooper

Cooper Pipes

PipeandPouch.com

 

[sapo59]

I say it would be a major pain in the ass but if it's your dream go for it. Like Cooper said though be sure to have a exit strategy.

 

[geoffreycox]

Thanks for the advice guys. After thinking about what ya'll have posted and my own thoughts I've decided to back off of the purchase...unless I win the lottery next week.