How to Start a Cigar Shop

Start a cigar shop by following these 10 steps:

1. Plan your Cigar Shop
2. Form your Cigar Shop into a Legal Entity
3. Register your Cigar Shop for Taxes
4. Open a Business Bank Account & Credit Card
5. Set up Accounting for your Cigar Shop
6. Get the Necessary Permits & Licenses for your Cigar Shop
7. Get Cigar Shop Insurance
8. Define your Cigar Shop Brand
9. Create your Cigar Shop Website
10. Set up your Business Phone System

We have put together this simple guide to starting your cigar shop. These steps will ensure that your new business is well planned out, registered properly and legally compliant.

Exploring your options? Check out other small business ideas.

STEP 1: Plan your business

A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:

• What will you name your business?
• What are the startup and ongoing costs?
• Who is your target market?
• How much can you charge customers?

Luckily we have done a lot of this research for you.

What will you name your business?

Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Cigar Shop Name Generator

If you operate a sole proprietorship, you might want to operate under a business name other than your own name. Visit our DBA guide to learn more.

When registering a business name, we recommend researching your business name by checking:

• Your state's business records
• Federal and state trademark records
• Social media platforms
• Web domain availability.

It's very important to secure your domain name before someone else does.

What are the costs involved in opening a cigar shop?

The startup costs involved in opening a cigar shop business are significant. Lionel Melendi, who owns a cigar shop in Brooklyn, recommends that business owners have at least $500,000 in funding. Savvy business owners, however, might be able to open a shop for a little less up front.

Some of the biggest expenses incurred when opening a cigar shop include:

• securing a location for the business
• building out the location
• purchasing inventory to sell
• acquiring a humidor for storing cigars
• buying cutters and lighters (if also serving as a lounge)

In addition to these, there are legal and insurance costs.

Business owners who have limited funds can save by selecting a smaller location that’s still in a high-traffic area. If only selling cigars (and not serving as a lounge), something as small as a mall kiosk could work. Alternatively, a little storefront at a significant intersection could be excellent. Cigars don’t require a large place to display or store, which is why total space isn’t all that important.

To reduce overall inventory costs, business owners can order a variety of cigars but not too many of any one cigar. Cigars are small and light, so they can be shipped in one or two days if necessary. While regularly overnighting orders isn’t a wise long-term plan, it does let business owners get started without tying too much capital up in inventory -- which can take months to sell.

The one expense business owners shouldn’t skimp on is the humidor. A good humidor can cost $20,000 but is absolutely necessary. It’s the humidor that keeps the cigars in stable conditions so they don’t spoil. Without a high-quality humidor, a shop’s entire stock could be ruined.

What are the ongoing expenses for a cigar shop?

The ongoing expenses for a cigar shop are manageable. They include employees’ wages, lease and utility payments, and inventory expenses.

Who is the target market?

The cigar-smoking population is traditionally thought of as older men. This remains generally true, but trends among cigar smokers are changing. The target market for a cigar shop business is:

• 98 percent male, but growing among women
• mostly between 40 and 60 years old, but growing among young adults
• Well-educated about cigars, regardless of gender or age

How does a cigar shop make money?

A cigar shop business makes money by selling cigars. Cigars are normally sold by the stick or the box.

How much can you charge customers?

Holt’s Clubhouse notes that cigars typically start between $5 and $8, and can go up to between $40 and $50. In a few cases, sought-after cigars may be priced even higher.

How much profit can a cigar shop make?

A successful cigar shop business can bring in a significant revenue. Mike’s Cigars in Miami currently sells 25-30 million cigars each year. Just from cigar sales, Mike’s Cigars has an annual revenue in the tens of millions.

How can you make your business more profitable?

Cigar shop businesses have several ways to increase profits. Shops may sell lottery tickets, beverages and food items, along with other smoking items. Some shops sell smoking accessories, tobacco, hookah, and vapes. Alternatively, shops can create their own white label cigar brands to sell.

STEP 2: Form a legal entity

The most common business structure types are the sole proprietorship, partnership, limited liability company (LLC), and corporation.

Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your cigar shop is sued.

You can form an LLC yourself and pay only the minimal state LLC costs or hire one of the Best LLC Services for a small, additional fee.

STEP 3: Register for taxes

You will need to register for a variety of state and federal taxes before you can open for business.

In order to register for taxes you will need to apply for an EIN. It's really easy and free!

There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.

STEP 4: Open a business bank account & credit card

Using dedicated business banking and credit accounts is essential for personal asset protection.

When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.

Open a business bank account

Besides being a requirement when applying for business loans, opening a business bank account:

• Separates your personal assets from your company's assets, which is necessary for personal asset protection.
• Makes accounting and tax filing easier.

Get a business credit card

Getting a business credit card helps you:

• Separate personal and business expenses by putting your business' expenses all in one place.
• Build your company's credit history, which can be useful to raise money later on.

STEP 5: Set up business accounting

Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.

Make LLC accounting easy with our LLC Expenses Cheat Sheet.

STEP 6: Obtain necessary permits and licenses

Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.

Federal Business Licensing Requirements

The sale of tobacco products is regulated by the federal government's Food and Drug Administration. Review this FDA page regarding tobacco retail laws. 

State & Local Business Licensing Requirements

Certain state permits and licenses may be needed to operate a cigar shop business. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.

Certificate of Occupancy

A cigar shop business is generally run out of a storefront or stand-alone building. Businesses operating out of a physical location typically require a Certificate of Occupancy (CO).  A CO confirms that all building codes, zoning laws and government regulations have been met.

• If you plan to lease a location:
• It is generally the landlord’s responsibility to obtain a CO.
• Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a cigar shop business.
• After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.

• If you plan to purchase or build a location:
• You will be responsible for obtaining a valid CO from a local government authority.
• Review all building codes and zoning requirements for your business’ location to ensure your cigar shop business will be in compliance and able to obtain a CO.

STEP 7: Get business insurance

Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.

There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.

Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.

Is this Business Right For You?

Anyone who enjoys cigars may like running a cigar shop business. Having a passion for the product helps business owners connect with and give advice to customers.

What happens during a typical day at a cigar shop?

A typical day at a cigar shop involves a variety of activities. Businesses owners:

• check inventory and humidor settings
• welcome customers and recommend cigars
• cut and light cigars (at shops that double as lounges)
• order more inventory as necessary
• sell other products (see “make your business more profitable”)

Similar to a bar setting, business owners might also spend time talking with customers. Some customers will want to have lengthy discussions on almost any topic, while others will simply want to buy a cigar or visit with their friends.

What are some skills and experiences that will help you build a successful cigar shop?

In order to successfully run a cigar shop, business owners must be familiar with both cigars and running a retail business.

Business owners can learn about cigars through:

• Smoke and Cigar Aficionado
• The Cigar: An Illustrated History of Fine Smoking
• Cigar Association of America, Inc.

For business owners who don’t already have retail experience, and preferably retail experience within the tobacco industry, there are several resources that might help. Working in an existing cigar shop business will provide firsthand experience, and business owners in other areas may be willing to serve as mentors. Online courses in general retail can also be helpful. Coursera and EdX both offer such courses.

What is the growth potential for a cigar shop?

A cigar store may be a small operation with just one location, or it can grow to be a multi-site business. Cheap Smokes & Cigars is an example of a franchised business in Alberta, Canada. Ithaca Cigars and Sheik’s are two examples of local cigar shops in Upstate New York.