What are the pros and cons of starting a cigar business?
A cigar business has a few pros and cons, which you should be aware of before getting started.
Here are the high level benefits and drawbacks of a cigar business:
|• Flexibility||• Finding The Right Supplier|
|• Meaningful business connections||• Security Issues|
|• Unlimited income potential||• Low margins|
|• Predictable income stream||• Taxes|
|• Location is everything!||• Niche Market|
|• You can sell your product in various places!||• High overhead expenses|
|• Simple business model||• Strict regulations|
|• Greater Income Potential||• Be prepared to get out of your comfort zone!|
|• Easy to Learn The Business||• Difficult to scale|
|• Ecommerce retail is growing fast||• Learning Curve|
|• Results and revenue happen quickly!||• Work is not always glamorous|
|• Answering Phones|
|• Recession-Impacted Industry|
You can put as much time into the business as you'd like. If you like the work and have some initial experience, you can start small and manage all aspects of the business on your own.
• Meaningful business connections
You never know who you will meet or get to work with for your cigar business. This could be the start of an incredible business opportunity!
• Unlimited income potential
With your cigar business, there is no cap as to how much income you can make. The stronger your business skills and the more energy/time you put into your career, the more you'll make.
• Predictable income stream
With a cigar business, your income stream is typically predictable based on the number of customers you have signed up. This makes financial planning and outlooks much more seamless!
• Location is everything!
When operating a physical storefront, the location often speaks for itself and serves as it's very own marketing tool! It's important to choose a location in a high traffic area so you can spark curiosity and get people through your door!
• You can sell your product in various places!
There are various different markets to sell your product, which will help you reach different audiences and revenue streams.
• Simple business model
A cigar business has the advantage of a simple business model, which makes launching and building the business more seamless.
• Greater Income Potential
When you start your own cigar business, you have the ability to make as much money as you want. You no longer work for someone else where at any point, you could be let go or get a pay cut.
• Easy to Learn The Business
When starting your cigar business, there is a ton of information readily available to you online (Facebook groups, Youtube videos, Starter Story etc). This will help you get the business started and answer any questions, doubts or concerns you may have.
• Ecommerce retail is growing fast
Ecommerce has been grown rapidly over the years and is expected to hit a total of 4.9 trillion dollars by 2021.
With running an ecommerce business, you provide your customers with alternative and more convenient shopping experience, which will ultimately drive sales.
• Results and revenue happen quickly!
Unlike other businesses, it can be relatively quick to start seeing results and revenue for your cigar business. As long as you follow all the steps to validate your idea before launch, you are likely to see immediate results and ROI.
• Finding The Right Supplier
Most businesses in this space go the supplier/manufacturer route, which isn't a bad thing! However, finding the right supplier can take a lot of time, energy and trial/error. If done properly, this process can save you months (if not years) of time and energy. More on this below in the "finding a supplier" section.
• Security Issues
With any Saas business, data loss and security issues may arise throughout your process of building your product. It's critical that you understand exactly what you're responsible for and how to avoid potential issues down the road.
• Low margins
The gross margins for your cigar business are typically around 34%, which can make it more challenging to incur new expenses and maintain profitability.
As a cigar business, you typically pay self-employment taxes which can be quite high. It's important to understand what you will be paying in taxes each year so you can determine if the work you're taking on is worth it.
• Niche Market
A niche business is not necessarily a bad thing, in fact, it can be the key to your success. However, it can be more challenging and time consuming to find the perfect niche market and target audience.
• High overhead expenses
With starting a cigar business, there are overhead expenses that come with selling a physical product. You will want to make sure you strategically budget for these overhead costs. We discuss this more in the startup costs section below.
• Strict regulations
With any cigar business, there are strict rules and regulations as it relates to processing your product. You must follow these regulations specifically, or significant legal issues could occur.
• Be prepared to get out of your comfort zone!
Although this is exciting for some entrepreneurs, it can be a big challenge for others! You may find yourself in uncomfortable social and business situations, jumping into tasks and responsibilities you aren't familiar with, and pushing yourself as far as you can go!
• Difficult to scale
With a cigar business, it can be challenging to find ways to scale. Check out this article that discusses scaling your business and the challenges that come with it.
• Learning Curve
When you start your own business, you no longer have upper management to provide you with a playbook for your roles and responsibilities. You should know the ins and outs of every aspect of your business, as every decision will come down to you.
• Work is not always glamorous
With starting a cigar business, you may need to get your hands a little dirty. Although it may seem glamorous from the outside to start this business, the work can require a lot of physical activity and repetition.
• Answering Phones
The cigar business is still considered a traditional business, which means answering phones is a big part of the job. If you or your team miss phone calls, you could be missing out on potential revenue opportunities. If you are unable to attend to your phone throughout the day, it would be in your best interest to hire a call center or an employee dedicated to this.
• Recession-Impacted Industry
When the economy is down, cigar business's are one of the first things to be cut.