Cigar Shop Economics

[Tobacco Giant]

After running into this craigslist ad...

http://philadelphia.craigslist.org/bfs/2684936050.html

...I started thinking about the economics of a cigar shop. This guy's ad claims $140k/year in sales. That sounds great, but...

I figure half that is product cost. Then add another 30-40k in overhead (salaries, utilities, permits, rents, etc.) and the owner of this shop may only be going home with 30-40k/year.

So, anyone who works in or owns a cigar shop (or anyone who feels like speculating), how much does a cigar shop need to bring in for the owner to make a decent buck?

 

[onocoffee]

To be honest, $140K per year is not that great.

Are you thinking about making an offer on the shop? If so, claimed numbers are nice but you really want to see state and federal income tax filings. Regardless of whether or not the owner is skimming, it is the filing numbers you will base your evaluation and negotiation.

I don't know the cigar business per se, but I have been running my own business for 12 years now. Let's say you can keep your product costs to 40%, add 30% for labor and 20% for utilities, rent and taxes and maybe you can eek out 10% profit.

Now, 30% of $140K is $42K. Subtract the company cost of providing that salary and you're really talking about $35K per year in labor. That can be your total revenue (if you're the only one working) or you can spread that over how many employees you want to hire. Either way, it's not much.

Presume that you can find someone to work for you full-time for about $25K per year, now you've got about $10K for yourself and then let's presume you can really control your costs, keep operations tight and generate 10% profit. Potentially, you can pocket $24K per year.

Not too bad if you still have your day job and this is a little mad money to buy hookers, booze, weapons, etc.

But if you're going to live off that money, that could be a completely different story...