Crowdfunding a Cigar Business

[dustin.pike]

I've raised this topic on some other boards and I'm curious to get more opinions. I'm exploring the options for funding a new cigar lounge, and have toyed with the idea of using crowdfunding to fun part of it.

For those unfamiliar with crowdfunding, please see HERE

I'm curious what people's thoughts are on how successful this could be? I know the cigar community is a very gracious one.

My other hang up is what to offer in return. Generally crowdfunding is used for launching new startups offering a product, so the cigar lounge doesnt quite fit that mold, however I think it could work.

What are some things you'd like to see if you invested? Please remember, you cannot ask for a profit return or equity share in the company, so it has to be things like discounts, advertisment gear (shirts, hoodies, coosies, cutters, etc), free cigars, etc.

Looking forward to seeing what the BOTL community thinks.

 

[Craig Mac]

Personally, if I was investing I would want a return on my investment not swag, and I have enough cigars already.

 

[icehog3]

I gotta agree with Craig on this one.

 

[dustin.pike]

Personally, if I was investing I would want a return on my investment not swag, and I have enough cigars already.

The way the crowdfunding sites are site up, its more about receiving a lot of little donations. Most come in the $40-$100 range. Any return on an investment like that would be minimal. Also, SEC rules govern setting equity shares for a company/project, so most crowdfunding sites like Kickstarter and Indigogo dont allow it so they dont have to deal with it.

I'm looking at all forms of investment, both traditional forms, like loans, and silent investors, as well as non traditional, such as crowdfunding.

 

[Kantucky]

Definitely shits. Love those.

Sorry it had to be said

 

[Mr.Maduro]

What are some things you'd like to see if you invested? Please remember, you cannot ask for a profit return or equity share in the company, so it has to be things like discounts, advertisment gear (shits, hoodies, coosies, cutters, etc), free cigars, etc.

I love free shits, so much so I take free shits daily (almost). LOL.

 

[AlohaStyle]

Sorry, but I agree with Craig and Tom above... I don't need any more swag. If I'm going to give someone money to open a lounge, I definitely would want more than free shirts/cutters etc that you are just getting for free from the manufacturers anyway. I would say offer a tiered free membership to your private lounge area depending on how much money is given. Say 2 months free for x amount, 4 months free for x amount, 6 months free etc. I would gladly pay money to help someone open a lounge as long as I could be able to use it.

Good luck with your business.

 

[TonyRome]

Yeah tiered system with swag on the low end locker access and maybe a private catered party for higher donors

 

[H3rrington]

Yeah tiered system with swag on the low end locker access and maybe a private catered party for higher donors

This.

 

[icehog3]

Yeah tiered system with swag on the low end locker access and maybe a private catered party with hookers for higher donors

Fixed it.

 

[fsfrancis]

are you talking about just a place to smoke where you bring your own, or a cigar store that also happens to have a lounge? I only ask because you are going to need a whole lot more $$ than crowd funding to stock a humidor with anything that's worth smoking. Looking at the shops here in the Atlanta area that are worth going to, they all have BIG $$ invested in their inventory, I'm talking millions. PLUS they had to sell crap for a long time to get the good accounts like Opus, Padron or Liga. You can't just get these sticks, you have to get in line behind everyone else that wants them, and then you have to sell a ton of them. I end up talking to my B&M owner a little while I'm there, and opening a cigar store seems like a really tough business to get into that requires a substantial investment.

 

[dustin.pike]

are you talking about just a place to smoke where you bring your own, or a cigar store that also happens to have a lounge? I only ask because you are going to need a whole lot more $$ than crowd funding to stock a humidor with anything that's worth smoking. Looking at the shops here in the Atlanta area that are worth going to, they all have BIG $$ invested in their inventory, I'm talking millions. PLUS they had to sell crap for a long time to get the good accounts like Opus, Padron or Liga. You can't just get these sticks, you have to get in line behind everyone else that wants them, and then you have to sell a ton of them. I end up talking to my B&M owner a little while I'm there, and opening a cigar store seems like a really tough business to get into that requires a substantial investment.

Talking about a retail setup with a lounge. And yes, I'm WELL aware of the investment its going to take. Keep in mind size of investment also has to due with location. I'll be in a much smaller city than ATL, so I wont need to carry as much stock, etc. I've seen successful shops open with as little as 100K, and as much as 5MM. The only difference was location and type of clients.

If the crowdfunding idea seems like a good one and I decide to use it, I'll only be looking to fund a portion of the total capital investment with it. 25-50K is my initial target, but it could change. I'd also be looking at putting it back into the store for things like TVs, Lockers, furniture, and other items that make the place much more comfortable and inviting to the customer, vs putting that money into things like inventory or PoS systems.

 

[dustin.pike]

Yeah tiered system with swag on the low end locker access and maybe a private catered party for higher donors

This.

This could be a great idea. The only fear is I'd potentially isolate my higher end donors due to location. Can't travel the country hosting dinners unfortunately.

I was thinking ideas like:

Low End: Store t-Shirts/coosies/hats, etc. Maybe do a custom run revolving around the theme of being a donor
Mid End: I like the locker access idea, but need something else for customers who arent local. Maybe a standing discount & free shipping for X number of months
High End: Again, love the dinner idea, but again need to find away to expand this base with something else non location specific.

Keep the feedback coming guys. And the two who asked for the free shits...I'll be sure to get em out in a few days. I've gotta hit the Indian, Chinese, and Caribbean buffets first :eyebrow:

 

[TonyRome]

Just off the top of my head your biggest donors more than likely will be local. So the dinner thing may not be as much as a logistical nightmare as you think.

 

[StogieNinja]

Yeah, quite honestly, you'll never get a good amount of crowdfunding for a local lounge/B&M unless there was going to be some kind of equity in the company from it. It's going to be local guys that you'll need to get behind you.

If someone in my area wanted to crowdfund, Ryan's idea of lounge access would be something that would make a lot of sense to me. But I'd get zero benefit from donating to your lounge, and I'm not likely to see a hat, or t-shirt as much of a benefit, especially if it's for a lounge I've never been to and won't likely ever go to.

Bands with loyal followers can u=se t-shirts or hats or posters as good incentives. A startup B&M not so much.

 

[H3rrington]

are you talking about just a place to smoke where you bring your own, or a cigar store that also happens to have a lounge? I only ask because you are going to need a whole lot more $$ than crowd funding to stock a humidor with anything that's worth smoking. Looking at the shops here in the Atlanta area that are worth going to, they all have BIG $$ invested in their inventory, I'm talking millions. PLUS they had to sell crap for a long time to get the good accounts like Opus, Padron or Liga. You can't just get these sticks, you have to get in line behind everyone else that wants them, and then you have to sell a ton of them. I end up talking to my B&M owner a little while I'm there, and opening a cigar store seems like a really tough business to get into that requires a substantial investment.

Talking about a retail setup with a lounge. And yes, I'm WELL aware of the investment its going to take. Keep in mind size of investment also has to due with location. I'll be in a much smaller city than ATL, so I wont need to carry as much stock, etc. I've seen successful shops open with as little as 100K, and as much as 5MM. The only difference was location and type of clients.

If the crowdfunding idea seems like a good one and I decide to use it, I'll only be looking to fund a portion of the total capital investment with it. 25-50K is my initial target, but it could change. I'd also be looking at putting it back into the store for things like TVs, Lockers, furniture, and other items that make the place much more comfortable and inviting to the customer, vs putting that money into things like inventory or PoS systems.

Always start with a lower number. YOU CAN GO OVER YOUR GOAL. On sites like kickstarter.


Source: worked closely with the Lew and Huey kickstarter campaigns

 

[H3rrington]

Just off the top of my head your biggest donors more than likely will be local. So the dinner thing may not be as much as a logistical nightmare as you think.

Lot of people do this on kickstarter. But they make sure to add that if you're wishing x amount of miles they will have to provide travel and lodging .

 

[Sirspanksalot]

I've been part of music related kickstarter campaigns and getting autographed stuff always did the best. Maybe a get together for the local supporters and the swag/small sample for the rest? I just don't smaller many viable options unless, as it's been mentioned, there is a return on the investment. Good luck with your goal!

 

[Senor Perfecto]

Have you considered starting with an online niche presence, building your brand, growing your wholesaler/producer relationships, and building your investment toward a B&M?

 

[BrittS88]

are you talking about just a place to smoke where you bring your own, or a cigar store that also happens to have a lounge? I only ask because you are going to need a whole lot more $$ than crowd funding to stock a humidor with anything that's worth smoking. Looking at the shops here in the Atlanta area that are worth going to, they all have BIG $$ invested in their inventory, I'm talking millions. PLUS they had to sell crap for a long time to get the good accounts like Opus, Padron or Liga. You can't just get these sticks, you have to get in line behind everyone else that wants them, and then you have to sell a ton of them. I end up talking to my B&M owner a little while I'm there, and opening a cigar store seems like a really tough business to get into that requires a substantial investment.

Talking about a retail setup with a lounge. And yes, I'm WELL aware of the investment its going to take. Keep in mind size of investment also has to due with location. I'll be in a much smaller city than ATL, so I wont need to carry as much stock, etc. I've seen successful shops open with as little as 100K, and as much as 5MM. The only difference was location and type of clients.

If the crowdfunding idea seems like a good one and I decide to use it, I'll only be looking to fund a portion of the total capital investment with it. 25-50K is my initial target, but it could change. I'd also be looking at putting it back into the store for things like TVs, Lockers, furniture, and other items that make the place much more comfortable and inviting to the customer, vs putting that money into things like inventory or PoS systems.

As someone who is has, and well really is looking to open a b&m inside the next two to three years. (I know I move slow) and some of this will be different for whatever city your in. I'm lucky enough to be in a place that is very accommodating to the cigar community. Put aside your rent/mortgage for the store. And you're gonna want to own and not rent. You're gonna need your license to sell tobacco. Permits to allow smoking inside your lounge depending where you are that may not even be possible. Then you need to know your reps to be able to carry the cigars you want. If you carry low end cigars your clientele will be newbie smokers that eventually move on to a better place. Just being honest. Your rep is your life in the cigar world. If you local guys go in there and can't find the good stuff they want. They won't go back and they will spread the word in the community that you may have a nice place but you carry shit. I know of a place just like this here in AZ that opened up not long ago. I went in and buddied up to the owner and found out the guy makes about 400$ profit every month. He is now selling huka and pipes and a lot of other stuff cause they can't make it. That shop barley pays for itself. To me that's worthless. Also For example. You cannot go out and decide "ok I'm gonna carry liga privada no.9's and t-52, and padron 64's. Because I like those and they are great cigars. And people will buy them!!!" (Which is all true) And then call up your local rep and order a few boxes of those. Companies require, for example if I want to carry padron 1964s. Then I need to buy 3 boxes of the padron 2000, 5 of the 3000, 8 of the 6000, and the I can buy 1 box of the 64 and you must do this every thirty days to keep an account with them. You also cannot buy more than 1 box of 64s unless you were to buy more of the others as well. (This is just a made up example I'm not saying this is the actual amount you have to buy to carry those cigars.) although I have heard that davidoff makes you buy a certain amount of every single one of their lines of cigars to carry any of the higher end lines. Which isn't a bad thing if you can move them. But if you can't then your sitting on tons of wasted money. It's also not legal for you to just go and buy boxes from say an online vendor and then turn around and sell those in your store. You must buy them from the manufacture or private party's. (Ie if you wanted dirty rats and I had two boxes I could sell them to you, but if an online store had them you can't go buy it from them and sell them in your shop). Not to mention the utilities and building a humidor are all very costly. You then need permits to stay open past a certain time in certain areas so this may apply to you. (Stating open longer than competitors can give a new place a huge edge.) I've met with a lot of reps and just people that specialize in getting business of the ground. So with the connections I have that would allow me to get the cigars I would carry at a steal. I have still come to the estimate of needing 250k for start up. Granted I want to carry a lot and I want to have a very nice place with a lot of lockers TVs fridges ect. and have an online store right off the bat. So my costs include all that. It will also require and income of a minimum of 10,000 a month to maintain inventory and overhead. Or 7000 if I do all the work myself and don't hire help. That is with no profit. So realistically to
Justify it to me I need to making 5000 on top of that a month at least. This is just for me and my idea but it may help you get some ideas. Best of luck!!