How to Value a Cigar Shop?

[BagfullofPings]

Ok guys, how is a cigar shop valued? Especially if management has f**ked it up and there is very little inventory.

The only thing going for this shop is location, furnishings, and loyal customers (they like the location, not the management).

Any help would be appreciated.

Thanks!

 

[BGC]

I have 3 to choose from by me, The one I frequent has a great staff, great prices on what I smoke and a decent lounge. I'll go to the others if they have a cool event or something or if some friends are meeting there.

 

[BagfullofPings]

Sorry, I may have been somewhat vague.

If somebody wanted to buy/sell an existing cigar shop, how would somebody come up with the buying/selling price.

Thanks

 

[Vegan702]

Get a business appraisal done.

 

[SkinsFanLarry]

Several ways:

1. Meet the previous owners asking price and buy it outright.
2. Buy the shop and inventory, "not" the name!
3. If it's a fair price and you don't have the money, put together a group of investors.
4. you are buying inventory only, don't accept previous debt incurred by past owner
5. partner with the existing owner, but you buy no less than 51%
6. check the current lease on the building, most management companies will re-do a better lease for a new owner, they don't want empty space.
7. if the shop is doing good business you won't have to re-establish yourself with the Rep's.
8. if you don't want investors you may be eligible for a small business loan

 

[cigarlvr]

Keep in mind all the screw ups and negative experences go with the business. Sometime starting from scratch is easier unless they had a good reputation

 

[BagfullofPings]

Get a business appraisal done.

Very smart, but not an option with this crew.

 

[Vegan702]

Then I would value the inventory, the fixtures in the store and look at any outstanding debts, the current lease in place, etc and come up with a reasonable price. You also need to look at how easy it will be to replace the inventory, i.e. get contracts, etc in place with suppliers.

 

[BagfullofPings]

Several ways:

1. Meet the previous owners asking price and buy it outright.
2. Buy the shop and inventory, "not" the name!
3. If it's a fair price and you don't have the money, put together a group of investors.
4. you are buying inventory only, don't accept previous debt incurred by past owner
5. partner with the existing owner, but you buy no less than 51%
6. check the current lease on the building, most management companies will re-do a better lease for a new owner, they don't want empty space.
7. if the shop is doing good business you won't have to re-establish yourself with the Rep's.
8. if you don't want investors you may be eligible for a small business loan

Great options and info.

 

[Treinenwj]

I imagine it would be like any other business, you consider location and look at it's past profit vs expenses.

 

[Clint]

And when you aquire the shop, hire me to do your marketing!

 

[BagfullofPings]

Keep in mind all the screw ups and negative experences go with the business. Sometime starting from scratch is easier unless they had a good reputation

1/2 of f**k up is out of the picture. Fortunately everybody knows the owners are the problem. A kid at the shop wants it, and everybody loves him. If he can't get it for a good price, he will start his own.

 

[njstone]

If the owners have "F-ed up" as you say, then renaming the shop is a MUST, imho. Get a nice new sign and a new name. The regulars that support the shop will be easy to win over--be overly nice to them, give them great deals and freebies of new sticks you want them to try (and eventually BUY), etc. And the new sign and name will draw others.

The big shop near my place has been around for a while and has a "name," but if I were to buy it, I'd definitely rename it and put up a big new sign--and the new name would have the word "Lounge" in it, like "Nate's Cigar Lounge and Humidor" or some such. A community feel is huge these days, especially among the younger generations. (This is a collage community, but this shop does a TERRIBLE job a catering to them.)

 

[SkinsFanLarry]

Along the lines of what Nate is saying, I worked at a shop that had gotten into the same situation as you described (crappy owners, no inventory and deep in debt), when the "new" owner bought it he put an add in the local papers letting people know that it was now under "New management and ownership."

 

[BagfullofPings]

My buddy will be changing the name. Some of us are helping him...throwing ideas at him. He is a good kid...29 and wanted to have his own shop by the time he was 30. He is just compiling a list of ideas and facts to discuss with his attorney. I hope he gets it.

 

[njstone]

If there are 2 things I've learned from the shops down here, it's this:

1) You have to get people IN THE DOOR to make sales. Do promos, sponsor events, have "Cigar Tastings," etc. Get people to be familiar with your shop. I drive an hour or more to go to these events instead of going to the B&M that's 10 minutes from my house!

2) PRICES drive sales, period. Again, I don't buy from the B&M that's 10 minutes from me. Why? Because they routinely charge 10-20% above retail. Instead, you hsould charge 10% BELOW retail, average. Then, let people know that you can make them a good deal ... make them feel like they "know a guy," if you know what I mean. If I could get cigars from my B&M for near the price I can get them online, those guys would have gotten thousands of dollars from me--albeit with lower profit margins. But instead they've gotten zero--and 100% of zero is still zero.

 

[whodeeni]

'Or Me.... :king: Or the both of us!:eyepoke::stickbeat:boxing::argue::bickering :hysterica I'm helping a guy launch a new cigar
brand as we speak! The project is still in it's infancy stages, but when we're
done, They should be a household name as one of the "New Guys"!

It's really a blessing to do what you "Love" for a living....

And when you aquire the shop, hire me to do your marketing!

 

[TJ2001Cobra]

There are 2 things to look at when doing a purchase: Assets and Goodwill.

The Assets are exactly what they sound like. They are the inventory, the building (if it is owned), the equipment and furniture, etc. All of that can be valued.

Goodwill is what the current owners or the purchasers are willing to pay for the intangibles: customer base, the name, the location, the reputation, etc. If you say that the shop has been run into the ground, then there will be very little goodwill. In this case, you will probably run into a problem as the current owner will probably think there is more goodwill than the potential buyer thinks the shop currently has.

So, when valuing a business, those are the 2 things you have to look at. One is very cut and dry and one in far less tangible. Typically, either the owner or the proposed buyer will come up with the figured that they think are fair and will throw them on the table. Negotiations will go from there.

Make sure to split the 2 up, though. Dont lump the two together. Keep them separate because goodwill is something that you will have to determine how to absorb that into the business once the sale is complete. You pay for it but dont have anything to show for it other than customers walking in your door.

 

[tmoney2007]

Very smart, but not an option with this crew.

Why? If he is looking to buy it, it needs to get appraised.

 

[Robinsond]

Oh what I would do to work in a cigar shop