Common Mistakes Cigar Businesses Make in Succession Planning

Nearly two-thirds of all family businesses in North America lack formal succession plans—a statistic that’s especially cause for alarm in the cigar industry, where businesses are often passed down through generations. Without a robust strategy for what to do when leadership changes hands, there’s no guarantee that today’s success will continue into the future. Before you make a mistake that jeopardizes your family’s legacy and stability, work with Venerable Law to address shortcomings in your current preparations.

Mistake #1: Ignoring Financial Transparency

Incoming leaders often inherit a complex web of poorly organized or unclear financial information, leading to muddled decision-making and mismanagement. If the new leadership doesn’t have a grasp on the business’s health, they may unintentionally put the company at risk.

What You Should Do: Implement Standardized Financial Reporting

Transparent financial reporting systems that are easily understood by incoming leaders should be created far ahead of any shakeup. They should include:

• Detailed cash flow statements outlining how money flows in and out of various parts of your operations.
• Balance sheets to provide a snapshot of the company’s assets, liabilities, and owner’s equity.
• Profit and loss statements breaking down the company’s revenues, costs, and profits over a specific period.
• Pending liabilities or obligations to inform incoming leaders of financial commitments that will need attention.

Current leaders must remember that their decades of industry knowledge are not easily transferred to the next person; often, things need to be laid out plainly.

Mistake #2: Not Protecting Intellectual Property Early Enough

Trademarks, brand reputation, and propriety blends can be just as critical to an operation as the tobacco product and land used to grow it. If IP ownership isn’t legally transferred or protected during a succession, the new leadership could face litigation or, in the worst-case scenario, lose control of the brand to competitors or former employees.

What You Should Do: Legally Secure Your IP Before Transition

File trademarks and copyrights for all brand assets well before a leadership change and clearly indicate who will gain ownership over these protected assets after the transition. A well-drafted IP agreement will protect your blends, recipes, and processes from infringement.

Mistake #3: Leaving Out Employees in Succession Plans

While the owner is often the face of the business, most cigar companies rely on a few key individuals whose expertise and knowledge are irreplaceable, such as master blenders, farm managers, or heads of distribution. The loss of these employees during complex ownership transfers can lead to major disruptions in day-to-day operations and supply chains.

What You Should Do: Involve Key Employees

Succession plans should fully integrate these lower-level employees, not just top leadership. Knowledgeable employees are assets you want to keep around, especially during uncertain times. It’s often a good idea to promote them to more strategic roles and involve them in training new leadership. This way, they can help preserve your business’s quality and values during a transition, even if they eventually leave their role.

Don’t become old news by falling into these common traps. Your cigar business can easily transition to the next chapter in its story by working with Venerable Law to make reasonable preparations for ownership changes. Call today at 813-680-4530 or contact us through our website to schedule a no-cost consultation with our team.