“Look at the unfun things, you know, [like] what kind of savings you have,” he says. “What’s your plan B? Do you have health insurance? Secondly, go buy a home now if you can before you start your business because nobody wants to lend to small businesses. Get the basics of life down before you jump into any new business.”
It’s also crucial that aspiring entrepreneurs and business owners understand the industry they’re trying to enter into. Ernesto urges all not to get too caught up in what they perceive but rather to experience the industry and business for themselves. The best way to do this is to go and work for someone else before starting your own business, just as he did before launching in Padilla Cigars in 2003.
“The real, best advice ever that nobody ever gives in interviews is: One, get your shit together. Two, if you’ve got a million dollars, you better start with $2 million because you’re gonna lose a million.”
Speaking about the cigar industry in particular, Ernesto cautions those wanting to enter the industry that they must accept the reality that it is smaller than one may expect and that it takes time to build the relationships that are necessary to be successful.
“It’s fun business, and it has its moments, but you’ve got to remember that it is a business—it is not a hobby,” he says. “Don’t treat it as a hobby. If you want to make private cigars for yourself, go ahead and do it, and give them away to some buddies. Don’t try to bite off more than you can chew. Ask yourself, ‘Would I buy this product?’ What are you offering that the other guy isnt?”
Those looking to start a business within the premium cigar space have their own set of obstacles they must overcome. In addition to finding quality premium tobacco and not overspending on bands, packaging and other marketing needs, those trying to get into the cigar business today must be aware of the limitations introduced by regulations. In 2009, the Obama administration passed the Family Smoking Prevention and Tobacco Control Act. This gave the U.S. Food and Drug Administration (FDA) the ability to regulate tobacco products, including cigars, and placed a limit on new releases introduced after Feb. 15, 2007. While the cigar industry celebrated the delay in the filing deadline for substantial equivalence (SE) applications, Ernesto points out that this is only a temporary win and that the regulations and the limitations placed on cigar businesses are still active and present.
“This is an industry that is going through federal regulation,” Ernesto says. “You need to make sure that you don’t burn any money that you’ve saved. You are going into an industry that is facing serious regulation and technically does not allow you to enter it right now unless you can prove that the blend you’re using is the same as one released before Feb. 15, 2007. The powers that the FDA have are no joke. They are serious. You do not want to be ‘that’ example. So be patient. Do your research on the law and the regulations.”
Those that still want to enter the industry must go all in, Ernesto says, but they also must be patient. Don’t expect success right away. It will take time to build a business. Ernesto acknowledges the challenges associated with being a small business in America, but that hasn’t changed his opinion that the U.S. is the best country to start a business in with ample opportunity but very little in terms of a safety net. You can’t be deterred or taken off course. Have your life in order before you start, understand the industry you’re getting into, and give it everything you’ve got, he urges.
End Goals
Over the past 18 years, many have written off Ernesto Padilla and his brand, but he’s still here. When asked what the secret to his longevity is, Ernesto quotes Steve Jobs: “The difference between successful people and non-successful people is perseverance.”
Dealing with regulations, tobacco conglomerates, and trying to service retailers across the country without a large sales force is a challenge, but much like President Roosevelt’s words say, it all comes with competing in the arena.
“Comfort never built any muscle—that’s a fact,” he says. “Trust me; it sucks building muscle, and it sucks building a company. Many times, ask yourself, ‘Why am I doing this?’ When you start seeing success, when you see other people take notice, when you start going in the right direction, nothing can beat that feeling. In order for there to be good, sometimes you have to experience the bad.”
As he’s done since the beginning of his entrepreneurial journey, Ernesto is focusing on the end result, and that goal is to have Padilla Cigars in the humidors of every brick-and-mortar tobacco store in the U.S. Brick-and-mortar stores, he says, are the soul and foundation of the cigar industry and align with what his brand stands for. He knows that it may take time, even years, but it’s a goal he feels is attainable and is one worth pursuing.
“Changes are always coming, and one should always adapt,” he says. “I’ve gone through the highest tax increase in American history, the S-CHIP, survived the Great Recession, and here I am going through the great pandemic—and who knows what next? But like cockroaches, I’m still here.”
Ernesto Padilla is in the arena, boldly staring down the challenge ahead of him but knowing that even if he fails, he will have won simply by trying to carry out his goal of seeing Padilla Cigars on the shelves of every tobacconist’s store throughout America.
This story first appeared in the January/February 2021 issue of Tobacco Business magazine. Members of the tobacco industry are eligible for a complimentary subscription to our magazine. Click here for details.
– Story by Antoine Reid, senior editor and digital director for Tobacco Business Magazine. You can follow him on Instagram @editor.reid.
