A liquor store is a fairly common sight around any retail area, and they're usually a valued part of neighborhood malls as well. Most people think that a liquor store represents a highly profitable business which is less likely to experience the financial difficulties that are generally associated with a recession. Keep in mind that there are several factors which need to be taken into consideration when purchasing a liquor store, and you should bear in mind that in the majority of instances, this isn't what you'd call a "hands-off" enterprise.
One of the most significant issues to take into account and perhaps even more important than a location, is the acquisition of a license. The procedures required to get the necessary license to operate a retail liquor store can be very complex, so much so that the issue can often force a potential sale to fall apart.
Ensure that you develop a clear understanding of the factors which will impact your chances of acquiring the required licenses to run a liquor store:
* Generally, every authority - city, county or state - operates a different set of rules and guidelines.
* Some areas will allow you to transfer a license without any problem, while others dictate that you need only apply for a new one.
* On the opposite end of the spectrum, some municipalities specify a moratorium on new licenses, meaning that the store cannot even be sold!
* Retail liquor store licenses can be held in such high demand in other locations that they are treated just like stocks on the open market. If demand is high, costs can be over $1 million, representing more than the actual price of the business.
Ensure that you completely understand the details relating to the licensing in your specific location. Conduct this research yourself with the appropriate government agencies and do not take anyone else's word for it.
Generally speaking inventory is turned over, in a good liquor store, between eight and 10 times per year. While there may be a good amount of inventory included in your deal, make sure that it is current and readily salable. Liquor stores can be priced at business value plus inventory, but make sure that this total price can be broken down to fit within your own investment parameters.
Don't think that you can become an absentee owner. Liquor stores demand a hands-on approach. Just think about it, there's a high degree of cash sales, a lot of valuable merchandise, long operational hours and the business is susceptible to crime. You will need to make sure that you get competent and trustworthy staff to help you though, as the operating hours can be very long.
Ensure that you choose a liquor store that has an excellent product variety. No longer is it okay to operate with a store full of booze in a decent location. People's tastes are changing and they're becoming more sophisticated, with wine boutiques and megastores growing rapidly. A variety of different products and flavors are now in demand and expected.
If you are interested in buying a store which has a great reputation based on knowledge and selection, do make sure that you have, or can hire people who possess, the same degree of product knowledge as the seller.
A great liquor store might work really well in just about any environment and location might not be the most crucial aspect here. If you offer a great selection of product (the right mix between wine, liquor and beer) plus popular items like lottery and tobacco, you could be onto a winner. If you're going to have to compete on price alone, however, then you need to choose the very best location. Negotiate the best lease contract with the most favorable terms.
Remember, that if the seller cannot prove it then you can't pay for it! Liquor store owners can be notorious for keeping poor records or skimming off cash. This is very negative for a number of reasons:
* It may well be almost impossible to determine the real profits.
* The seller will want to factor in unreported income to his asking price but this can be completely unreasonable.
* If the seller is stealing cash, other staff may be as well.
Don't take them at their word when they say that there will be "a lot of cash" that never shows up on the books, unless they are just telling you that and not including this consideration in the asking price. They cannot have it both ways; if they avoided taxes on the income, they cannot get paid again by building in some mystery revenue to the sale price.
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Richard Parker is the author of the How to Buy a Good Business at a Great Price series. As President and founder of Diomo Corporation - The Business Buyer Resource Center, his materials, seminars and consulting have helped thousands of business buyers realize their dream of
buying a business. Want to find out more about business buying strategies that really work, then look no further than=>
http://www.howtobuyaliquorstore.com/
