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You’ve decided to turn your passion for fine cigars into a profitable small business — but one question is holding you back: How much does it cost to open a tobacco shop?

In this blog, we’ll explore everything you need to know before starting your tobacco store, including an estimate of your total startup costs and a list of the individual expenses to plan for. 

How Much Does It Cost To Open a Tobacco Shop? A Comprehensive Estimate

Let’s dive right in.

While startup costs can vary depending on your store’s location, size, and specialty, you can expect to spend between $50,000 and $200,000

That’s a huge range — which is why we’ll dive into the specific line items that make up these totals. Let’s explore the eight significant costs to consider when opening a tobacco shop. 

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1. Filing the Paperwork

Before selling your first cigar, you need to get your tobacco shop on the right side of the law. 

First, decide how to structure your business. The two best options for tobacco stores are sole proprietorships or limited liability companies (LLCs). The upside to starting a sole proprietorship is that it’s free in most states and requires minimal paperwork. However, this structure doesn’t protect your personal assets in the event of a lawsuit. 

The other option is to start an LLC. Most states charge between $35 and $500 to file LLC paperwork, but you’ll be personally protected from lawsuits or business bankruptcy. 

2. Securing Insurance

Business insurance is a must for any small business — and even more so for retailers in the tobacco industry. 

Tobacco products are highly regulated, which can increase your likelihood of lawsuits or other legal trouble. 

Fortunately, business insurance is an affordable way to protect your tobacco store. Most policies cost between $500 and $1000 annually. 

3. Applying for a Tobacco License

One of the most important steps when starting a tobacco store is to apply for the right licensure. 

Most states require retailers that sell cigars, cigarettes, and vape products to apply for and maintain a special tobacco retail license. Some counties and cities require additional licenses and permits. 

The cost of a tobacco license varies from area to area, but most states charge between $15 and $200

Related read: How Much is a Tobacco License? [Costs & Criteria]  

4. Leasing a Location

The next step on your journey to open a tobacco shop is to find the right location. 

On average, retail space costs $25 per square foot, but rent varies based on factors like location, market conditions, and more. 

If your shop is on a busy street corner in the middle of town, expect to pay more for rent. If you choose a remote location farther from the city center, you can get more space for lower rent. 

Don’t forget to budget a few thousand dollars to get your space retail-ready. Invest in eye-catching signage, light fixtures, shelving, humidors, and other decor to create the perfect shopping environment. 

5. Securing Initial Inventory

Now your tobacco shop shelves are ready to be stocked! 

Purchasing initial inventory is one of the biggest line items when calculating how much it costs to open a tobacco shop. To win over your first customers, you should stock a wide range of products — from popular cigarettes to artisan CBD tinctures. 

Set aside at least $10,000 to purchase initial inventory depending on your store’s size and expected foot traffic. Larger stores can expect to spend anywhere between $10,000 and $50,000.

Pro tip: Before placing your first order, make a plan for vendor management and inventory tracking. This will make inventory management a breeze as your store grows and turnover rates increase. 

6. Investing in POS Software and Hardware

The right point of sale (POS) system is a must-have for opening your tobacco shop. This powerful tool processes sales transactions, monitors inventory levels, and offers insights into your customers’ preferences and shopping habits. 

Since the tobacco industry is unique and highly regulated, you need a POS system designed specifically for smoke shops. Here are some key features to look for:

  • Built-in age verification to prevent underage tobacco sales
  • Real-time inventory management with carton-pack tracking
  • Automated purchase orders and receiving to simplify the restocking process
  • Custom cigar label printing for accurate inventory counts and checkouts
  • High-risk payment processing to enable CBD, delta-8, and kratom sales
  • Advanced sales reporting and analytics to grow your business
  • Marketing tools like a customer loyalty program and promotion management

Expect to pay between $50 and $100/month for fully-featured tobacco shop POS software, and around $1,000 upfront for hardware. 

7. Hiring a Team

Running a tobacco shop isn’t a one-person job — which is why you need to hire a team you can count on

Staffing is one of the most expensive parts of opening a tobacco shop. To attract reliable team members, you need to offer competitive wages and benefits for full-time employees. 

Let’s say you hire two part-time team members. The average hourly pay for smoke shop employees is $17, so you can expect to pay them around $2,500 monthly to run your store. 

8. Marketing Your Tobacco Shop

You’ve secured a tobacco license, found the perfect location, stocked your shelves, and hired a team. Now, it’s time for your tobacco shop’s grand opening. 

Marketing is critical for attracting your first shoppers and building a loyal customer base. 

Set aside funding (anything up to $5,000) for a grand opening celebration, new customer promotions, and email/SMS marketing integrations. Expect to spend a few hundred dollars per month. 

Note: Tobacco marketing is tightly regulated, so research the regulations and make a compliance plan before spending money on marketing campaigns. 

9. Planning for the Unexpected

Predicting how much it costs to open a tobacco shop is nearly impossible — which is why you need to set aside a healthy emergency fund. 

This fund will give you peace of mind and protect your personal savings if you run into unexpected costs.

Your savings goal should eventually be three to six months of operational expenses, but a few thousand dollars is a good starter fund. 

Simplify Retail Operations With A Performance-Driven POS

Set Your Tobacco Shop Up for Success With Cigars POS

Our number-one tip for new tobacco shop owners is to invest in the right POS system. 

Cigars POS, our all-in-one smoke shop POS solution, includes all the features you need to start and grow a thriving tobacco store. With our software, you can manage inventory, stay compliant with industry regulations, launch marketing campaigns, and learn about your customers. 

Plus, our team of tobacco industry experts is available 24/7 to answer questions, solve technical issues, and help you make the most of your new POS system. 

Ready to start your journey toward tobacco shop success? Schedule your live demo of Cigars POS today.