What Would It Take?

[texmexpipe]

Sometimes I wonder what it would take to start a B&M in my area. To my knowledge there are about three discount tobacco shops in my area. None of which carry much more than Borkum Riff, and maybe PA, but certainly no pipes of the tobacco kind anyways. They also are low on the premium cigars, none that I am aware of carry more than one brand of premium cigars and sometimes I'm not sure they would qualify as such. If I were to start a B&M I would move across the border into PA as NY taxes and regs are just silly. Personally I have to get my tobacco online (and I enjoy sticking it to the man at the end of the year, like Im really going to tell them how much I purchased online,) however I would make a 30-60min trip if I had a tobacconist in my area just to show them some support.
Anyone have an idea of the amount it would take to set something up? Is it just too little profit for people to start up a business like this? I rarely hear of new B&M and most that I find where open before 1990.

 

[ashdigger]

I think with the FDA looming over the industry as well as tax increases, it would take a lunatic to start a B&M.

 

[pipesmokingtom]

From what I understand, selling tobacco in PA is becoming somewhat of a nightmare as well. This is one heck of a time to launch a tobacco shop!
Interested to read the responses here.

 

[papipeguy]

A move like this would take real guts. I think that starting from zero would be very expensive. The money is in premium cigars so you'd have to contact the bug guys to see if they'd even sell to you. Don't bother with cigarettes as there is no margin in them. Also, you have to consider that Pa just enacted a $0.55/oz tax on pipe tobacco and other "loose" tobaccos. Pipes? I'm not sure if the popular brands will place them on consignment in a new business so that would be a big carry forward cost. Smoking Lounge? That's how you keep customers happy, hanging around and buying. So furniture, cable TV costs need to be factored in.

Humidification and smoke evacuation systems need to be considered. And finally, a credit line established with a bank and suppliers.

My guess is that to start a modest would require $250,000 to $300,000 if you want to do things right.

 

[pagan]

It would take the same as starting any other business, location, funds and good business sense, then the horror of dealing with the FDA and GOV regulations

 

[texmexpipe]

Pap those are the numbers I was thinking, and I all but forgot about the whole PA tax thing, however its still better than the taxes here in NY which run around 50% if I remember right.
I dont know that I'm really game for something like this, but it is a curiosity of mine. NY has such a rich history in the tobacco industry, its a shame that the politicians have ended it so effectively.

 

[ashdigger]

Papipeguy, if you invest $300,000 into a B&M do you realize how long it would take to recoup it? My guess, only a guess is minimum of 10 years. That's just the current cost, not upkeep and new battles between the FDA and State taxes.

 

[skraps]

Tex, there is also the issue that in NY, I'm pretty sure that as a new B&M, they would not allow you to have a smoking lounge. Existing B&M's were grandfathered in... so there goes a major part of your business draw.

 

[warren]

The desire to run through a lot of your own money in a short period of time is probably the best attribute you should possess.
If you are serious, sit down and draw up a business plan, research wholesale costs of inventory, insurance and licensing costs, square footage needed and the rent, research the possible customer base for any possible locations, furnishings, staff costs, workman's comp fees, all of the attendant taxes, advertising, and etc. Take this to a reputable banker and watch him either laugh outright at the very idea of a loan or just gently usher you to the door while sadly shaking his head. I'm sure I'm missing some steps, others will fill them in.
Then you mortgage your house (a second?) for the necessary startup cash, scale back your style of living, prepare yourself for ten to fifteen hour days, no time off as you'll be wanting to open and close the store every day, as you can't trust staff to handle the moneys at the start.
If you are married be sure and set something aside for the divorce which will come in a few years. I write that only half in jest.
Don't forget a web presence. You have to have that in this day and age I think.

 

[papipeguy]

ashdigger, you are absolutely correct. If you were very lucky you may be cash neutral for the first several years at least.

 

[Sjmiller CPG]

Have no business knowledge so won't make a comment. (Cough)....speakeasy......(cough)

 

[pipesmokingtom]

I would entertain the possibility of taking over a business with proven revenue.
Ground up, no thank you.

 

[cosmicfolklore]

Yeh, hmmm... as someone who owns a business and has been active with their local BPA, I'd only say that you'd better have some money to live on, or else a good night job. The way people shop has changed. 10 years ago my vendors only sold wholesale dirrect to me and businesses like me, but now they ALL undercut me by selling dirrect to my customers online. The pipe shops here all complain that most tobacco companies sell dirrect to us, the pipe community, at about the same rate as they get from them. So, people have to be willing to pay a lot more, to keep you in business.
Taxes, FDA, and government aside, you'd have to have a mass of fools that are willing to pay way more to keep you open. We've seen this by reports from forum members who complain about their B&M prices. First off, keystoning "was" the way we mark up prices. Triples. First stone pays for the inventory, second is to buy more inventory, and third stone keeps the lights on. But, that makes an $8 tin of tobacco $24. Then add in your taxes and fees. Most B&Ms take a loss with narrow margins on pipe tobacco and feed their kids with cigars. Pipes? Ha ha, there are fewer and fewer strictly wholesale pipe companies left.
This is not just pipes. All factions of B&Ms are having the same issue. I just closed my store to deal dirrect with folks online and by taking in trade work from other stores. (jewelry).
Back in the 80's a business could live well by opening a shop on Main Street. But, the internet has killed that. Until an internet tax or some other type of tarif or sir charge on payments quells the gap between B&Ms, shops of all types will be closing. But, so is the way of evolution. The car put the horse trade out of business. DVDs put video out of business, and the cable companies put the VCR rentals out. The world keeps on spinning.

 

[texmexpipe]

It is really interesting to hear everyones' opinions. I certainly don't have the means to do anything like this, it was just a curiosity, but hearing your thoughts I can see why we don't see more people opening new businesses in general. About the only new business in my small town is food related.

 

[texmexpipe]

It also makes me think that the quintessential American dream may have changed some over the last 20 years.

 

[pipesmokingtom]

About the only new business in my small town is food related.

Yup. Perishable goods like prepared foods are basically the only things the internet hasn't affected at least in a small way.
The infrastructure of big box stores makes them a more viable business model when competing against internet retail, but mom and pop shops are becoming unicorns.

 

[cosmicfolklore]

More people than ever are starting businesses. They just aren't opening B&Ms. With online making it easier than ever to reach people, people are starting all sorts of businesses.

Two reasons, one I mentioned above. The second is that property owners of commercial buildings don't want to sell. They make their living off of astronomical rents. Buying your building is your retirement, since you aren't paying into social security like someone who works for a paycheck does, selling your building is how a business owner retires.
And, commercial utilities here are ten times what residential is. I pay upwards of a thousand dollars a month just for electricity, and I use way less at the store than I do at home, with kids on TVs, WIFI, etc,.. cable is about four times as high commercially, and cable... commercial cable with WIFI is just ridiculous.
Online, you have way less overhead. You can work at home, and you can reach a much broader audience. Plus, merchant services to take cards online are about a fraction of what it costs me to have a B&M. $2 of every swipe goes to banks. This is why you see more and more stores just moving to cash and checks. And, that pisses off the card happy customers also.

 

[cosmicfolklore]

Oh yeh, and as a B&M, those couches, chairs, tables, are taxable business property. In my jewelry store, the county comes in and takes a photograph of everything in my store. And, my stereo, pipe rack for personal use, ashtrays on my workbench, along with every tool, and ribbon used in displays is taxable. Even the damn broom! Only because I am a B&M. Once my shop is set up at home, I'll tell those money grubbing tax men to kiss my ass. They cannot just come on private property here. The whole system is stacked against the B&M owner.

 

[pipesmokingtom]

Even industries like mine (insurance) are affected by the internet retail setup. Your Geicos, Progressives, etc.. Young people don't care if they have an agent with whom to consult any more. They'd much rather not talk to anyone, add their coverages to their shopping cart (even without having any clue what they mean) and "check out". Long as DMVs and mortgage companies are happy, they're happy.
Luckily, some people are old school and still prefer to have an agent. Wonder how long that will last. By the time I'm ready to hang out my own shingle, I may have nowhere to hang it.

 

[dsollars]

I tell our busines students "how do you make a small fortune in the restaurant business? ..... Start with a large fortune." My guess it would also be true for a small B&M tobacco shop these days. I do frequent our local shop some, but usually for a couple of cigars. SP and PC get most of my pipe business because of much larger selection.