The 3 Lessons I Learned After Accidentally Buying a Liquor Store
February 18, 2014
I bought a liquor store last year….it was sort of an accident.
No, I wasn’t binge drinking at the time. I wasn’t really shopping for a liquor store. I wasn’t even shopping for a bottle of wine. But, here I am … proud owner of a liquor license and a terrific selection of craft beers, pinot noirs and small batch bourbons….among many other standard liquor store offerings.
Since 2010 I’ve been investing in real estate in Pueblo, Colorado and when a commercial building with retail on the ground floor and multifamily residential on the second floor was listed for sale I went to take a look. I liked the building, especially the location in the heart of Pueblo’s Mesa Junction neighborhood. As I walked around with the owner, it became clear that the liquor business was being sold with the building.
Hmm. Intriguing. My college buddies would be so jealous.
So, deciding to roll the dice, I made an offer. I fully expected a counter-offer that wasn’t sufficiently attractive, allowing me to walk away and go back to business as usual.
Instead, the owner accepted my offer…..hey, that’s great newwwwzzz….holy shit.
With the building under contract I began due diligence. I remember thinking, before I ever contemplated the notion of liquor store ownership, retail liquor stores enjoy a tidy little monopoly. Must be nice. Well, yes and no. It’s not quite as easy as it sounds. Since taking ownership of the store I’ve learned a few things about the liquor business that might surprise you.
Lesson 1. The liquor business is highly complex. Retail liquor, at least in Colorado, is a fascinating business. Huge number of SKUs. The quantities of categories, brands, flavors, price points and size variations are mind-numbing. Talk about Big Data. Liquor distribution is heavily regulated in Colorado with a 3-tier system composed of manufacturers, distributors and retailers; each tier has its own set of rules and requires its own special license with an application paperwork trail that only a lawyer could love. Inventory is expensive and margins are thin, managing inventory and cash flow is extraordinarily difficult and SKU level demand is nearly impossible to forecast accurately. Running a small liquor store requires business acumen – accounting, operations, human resources, customer service, marketing, sales – the whole enchilada. If you were thinking that a liquor store is like an advanced lemonade stand you’re completely underestimating the task. This is good by the way. Communities need opportunities for individuals to learn how to run a complex business with full P&L responsibility.
Lesson 2. Distributors hold all the power. As a retail liquor store owner I am only allowed to purchase inventory from a licensed distributor. Seems reasonable to keep tabs on who’s moving liquor around the state. But, here’s the catch. Every licensed distributor has a complete monopoly on every product they sell. So, any self-respecting liquor store should have various sizes of Jack Daniels on the shelf, right? I think I’ll call around and see who has the best deal on a case of 750 ml bottles of Jack, compare prices/terms and place the order, right? Wrong. If you want to buy Jack Daniels or any other product whether it’s a brand of beer, wine or spirits, you have your choice of exactly one distributor who carries that product. So, negotiating price isn’t an option. The only possible way you can get any sort of discount is by purchasing large volumes. As a result, the distributors pass along more favorable prices to the mega-stores who can afford to purchase 100 case deals; if you’re a small liquor store you just have to bend over and take whatever price is offered. When I learned this was the way the system worked I was stunned. What? [fade to the Caddyshack scene with Chevy Chase talking to Danny Noonan, “Is this Russia? This isn’t Russia.”]
You mean to tell me that we aren’t allowed to shop around for a supplier who might provide better service, better prices or both? Nope. The Budweiser distributor welcomed us to the industry by requiring cash upon delivery for the first 90 days. No checks. No 30-day net invoice. Not even a money order. Cash on the barrelhead. Nice manners, Bud.
Lesson 3. Owning and operating a small liquor store can provide a comfortable income and job security but it’s no cash cow. If you read my About page you’ll see that I have a day job in a completely separate industry. I don’t work in the liquor store. I hired a manager to run the operation and she supervises a handful of employees who staff the store when she can’t be there. She’s paid a decent salary providing a reasonably comfortable living in Pueblo. We pay hourly employees a decent wage as well. It’s not lucrative but I’m willing to bet we pay better than comparable positions at local grocery or convenience stores. The store is humming along. We did a good bit of business around the holidays and customer traffic is steady. But here’s the thing. This business is not designed for an “absentee” owner because after payroll and inventory replenishment there’s not much left over. However, the setup is perfect for an owner-operator.
As an owner-operator of a liquor store you have roughly the same job security as a tenured college professor. The store could go under if you fail to compete effectively or if the market for liquor dries up somehow (just like a school could close or an academic department could be eliminated). And, your take-home pay will vary with some years better than others depending on volume. But, so long as you have customers who walk in the door, no one can really take away your job.
Sure, I wish the store was a huge cash cow; you know, pay myself a nice salary every month and do whatever I want all day. Sounds great in theory but as a member of the community I’m glad it’s not so easy because big corporate greed would quickly follow. It’s nice to have the owner behind the counter. Customer service is better. And, it’s nice that the liquor store provides a comfortable income. That way the owner is highly unlikely to sell booze to minors – there’s too much at stake to break the law for a few extra bucks. Mostly, it’s nice that a big company can’t swoop in and take over every liquor store in sight. In the name of low prices, they’d shut most or all of the small stores down and open newly constructed mega-locations on the outskirts of town where land is cheap and profit maximized, laying to waste neighborhood small markets within walking distance….sort of like what’s happened with the grocery industry.
This dispersed single-unit ownership system is better for the community because it provides economic activity in a variety of locations along with solid living wage jobs that can’t be readily outsourced or automated. More people have skin in the game and a strong incentive to take care of their stretch of sidewalk in the community. In fact, aside from the distributor monopolies and the cumbersome government licensing process, it just might be a model worth considering for distribution of other commodities, like fresh food.
But that’s a topic for another blog post.
[…] you follow my blog you may have read that I purchased a liquor store last year. One of the lessons I’ve learned since is that a small liquor store is a great […]
Are you feeling any impact from big box stores?
Hi Kat – it’s hard to say. I think if someone is going out to do a big shop they are more likely to go to one of the big box liquor stores rather than to our small store. But for most of our customers the convenience of our location is a more important factor. Other customers come specifically to see our manager and benefit from her knowledge to get good wine or craft beer/spirits recommendations. Hope that answers the question for you. Best, Justin
To me this is number one in choosing where I spend my money, no matter what the item is. I am willing to pay more for this type of service. This is lost in big box stores. I can remember the day of good advice at stores, car part shops, etc. It won’t be long when no one remembers as my generation retires and “moves on.” It might not be such a concern to the millennium generation, so Corporate America can keep squeezing the middle class to funnel funds to the board and CEO’s. That is such a shame what they have done to our country.
Cutter, it is indeed a sad state of affairs. We’ve sacrificed local economies and real estate values for lower prices on doodads and processed food. As part of the deal our communities have become more car dependent and less business savvy. Residents complain about the struggling local economy yet send their money to Wall St via 401k plans rather than investing locally. And no one seems to notice the irony. Thanks for sharing your thoughts. Best, Justin
Justin, just a quick question. In the restaurant business there are manufacture rebates and spiffs available that if worked diligently can really effect your bottom line. As I know price negotiating with suppliers is impossible without substantially increased volume with beer and liquor, I was wondering if rebates/incentives are available from liquor manufacturers?
Hi Jay, I’m not aware of any such programs but I may have missed the boat. In Colorado you can buy directly from Colorado-based manufacturers but most small brewers/distributors have either already made exclusive deals with distributors or can’t afford to make major price concessions on small orders. Best, Justin
I am a proud owner of a liquor store for more then 10 yrs. Amazing how close and sharp your notions are for the nature of the business . Same kind of problems we have here in NJ. Big businesses with the deep pockets have all privileges of buying cheep and drive the prices down. Our privilege is locality and customer-friendly service. Amen. But, but
My only hopes it will stay the same way for another 10, or so yrs., because longer you stay in a business, more money you make.
Nice to hear my article resonates in NJ.
Hi Justin, thanks for sharing your experience and wisdom with us. I am from Colorado Springs and in 2017 accidentally I purchased a property with a flower shop. Last month I sold my business with real estate and I was almost about to buy a liquor store. But thank God I did a Google search and found your article. I need your help to find a new opportunity. I feeling completely lost and don’t know what to do next.
If possible love to meet with you in Pueblo or Colorado Springs. Looking forward to hearing from you. Thanks!
I’m not sure I can help but I sent you an email.
[…] if you read my blog regularly you’ll know that I’m biased because I happen to own a liquor store in Pueblo. And, even though the store is currently for sale I recognize this as a clear conflict of interest […]
Thanks for the info. My husband and I would like to buy or start one in a small northern colorado town. With the oil and gas influx the traffic would be good. I am an accountant and am looking to change. This would be my undertaking.
Hi Brenda, best of luck to you and your husband! Be sure to start with a good war chest of cash so you can take advantage of volume deals on your best SKUs! Cheers, Justin
Very good information and clearly explained. My partner and I are studying the possibility of buying a liquor store in Miami and we are just studying the same issues you mention in your blog.
Good job, thank you.
Hi Caesar, thanks for the comment! Glad to hear that some of the info is transferable to other States. Best wishes to you and your partner! Cheers, Justin
I know your post is a couple years old now but, I have been looking in the South Fla area as well for a liquor store. I would be interested in comparing note/sharing information, if you wouldn’t mind.
Thank you, hope your venture was/is successful.
I’m Pierre and I’m studing the liquor store business in Florida for the last moth.
Will be glad to sit and talk about our business point of view, share ideas and opinions.
How small of a store is Mesa Junction? Just trying to differentiate between a Mom and Pop operation and a megastore.
Hi Adam, the store area is 2600 sq ft with about half of that accessible to customers. We have 2 employees working during business hours but just 1 register. Not sure if that’s what you’re looking for – I can’t reveal financial information here. Best, JH
Hi – I’m thinking of just specialty beer (and maybe wine) shop in CA. License is *much* cheaper, but can’t make as much per sq. ft. of space, and will require substantial refrigeration. Do you think this model is viable? Or is hard alcohol required to make it profitable?
I don’t really have sufficient expertise to provide useful guidance here. What I will say is that, at least in Colorado, profit margins on liquor (hard alcohol) are quite a bit higher than they are for beer. I would imagine you would also lose a whole lot of revenue as beer aficionados may also need to grab a pint of Jack Daniels from time to time. Rather than focusing on specific product categories I would suggest focusing on a specific customer segment. Talk to beer aficionados and find out what they would want on the shelves. I’m guessing they would want to see some standard wine and liquor offerings for convenience. Hope this helps! Best of luck!
Thanks! Great info.
Justin, I know you posted this comment quite a while ago, but I have some experience with what you’re talking about. In 2012, I opened a small boutique store that specialized in fine wine and craft beer. We had weekly wine and cheese parties, sold a variety of accompaniments, made seasonal gift baskets, and even even held raffles to bring in extra business. There was absolutely no shortage of customers, but the business itself was simply not lucrative enough to thrive. We had a loyal customer base and our location was ideal for this type of store. The problem was just that profit margins on those kinds of items aren’t high enough to maintain a business on. I closed the doors of the store after a year and a half of consistently shoveling money out of my pocket into the business account. I don’t want to get too into the actual numbers, but I ended up taking a pretty massive loss on that business.
I’m sorry, that response was directed at Tom, not Justin.
in which state were you located ?
You know the life of a entrepreneur is start and fail…till one day you find your thing and sucess 😉
Where in CA Tom?
What’s going to happen with the new petition to let grocery stores sell hard stuff? Would this pass? will it put a lot of liquor stores out of business?
Grocery chains have been trying to change the liquor laws for years. The liquor lobby seems to have the upper hand, at least for now. If laws were to change, liquor store owners would need to innovate to survive. Some locations would have no chance.
This applies only to Colorado.
Hi Justin, a couple questions.
1. Wonder if you’ve heard any new news around the grocery push to get full alcohol sales? I’m considering a pre-retirement investment in a Denver store, but very wary if the law changes in 2016 which I’ve heard is gaining strong support.
2. Sounds like you had a store in a suburban median income area. Did you find it difficult to decide what crafts to bring in with all the proliferation of skus?
Thanks so much.
The big grocers have been trying for decades to get full alcohol sales. So far they’ve failed and I think they’ll continue to fail; but they will certainly keep trying and .. who knows … maybe they’ll get their way one of these years. I hope not but stranger things have happened. I would avoid liquor store locations in shopping centers right next to large grocery stores. They will be the first to go under if the laws change. I prefer urban locations to avoid the Big Box developments. You might also keep an eye open for stores with large enough square footage to allow for conversion to a grocery + liquor market if the laws change. I would expect some sort of transition period if they do make the shift. Still, I would bet against it.
My store location was urban and fairly low income. We mostly had a difficult time keeping the cheapest 24-oz beers in stock. SKU proliferation is a big problem. It’s so expensive to have a good selection of craft beers, craft spirits, wine and everything else that people want to see on the shelves. My advice is to have a huge pile of cash in the bank to provide a cushion.
Hope this helps. Good luck!
I know you cant mention profits or cash flow, but could you share an estimated ROI from your store?
Hi Ruben, it’s difficult to say and probably warrants a separate blog post. I’ve now sold the store and still own the real estate. The new store owner will probably exercise an option to purchase the real estate in 2015. When all is said and done I expect to have at least doubled my investment capital. Probably more. But my profit has more to do with buying the store + real estate at a good price than anything else. I didn’t make any money operating the store. If you’re looking for a buy/hold situation you have to be willing to work at the store as your regular gig for it to make sense. As a passive investor you can either make money by flipping, like I did, or by purchasing a higher volume store with more potential to generate regular cash flow. However, this latter option requires a much larger pile of cash up-front. Hope this helps. Best, Justin
Thanks you for this article i found if very informative. I am looking for a small business opportunity in NY. I understand this business isnt a cash cow and the margins are thin but you also describe is as stable and able to provide a comfortable living. Would you suggest this a a valid first time business owner opportunity? what percentage of your gross income results in owners cash? this is and example of a store for sale in my area does this seem reasonable?
Financing$ 199,000.00 Down and Sales Price does not include inventory
Owner’s Cash Flow$91,920.60
Hi David, glad my post was helpful! In your example, the asking price is about 33% revenue which is a bit high. Try for something in the 25-30% range so if you like what you see maybe offer $150k. If the owner is providing financing it will be more difficult to get a lower price. Another key factor is real estate – can you buy the real estate? If not, are good lease terms available, etc. Cash flow of $90k on a store doing $590k is solid and probably requires that you work a *lot* of hours. You could hire help if you’re willing to pay yourself less. I do think a liquor store is a decent first time business owner opportunity. Just be sure you have a good pile of cash in the war chest for start up expenses. You’ll make mistakes – some of them expensive – and you need a cushion. Think of it as tuition to be paid. As a reward, so long as the location is good, you’ll have job security most can only dream about. And 90k/yr isn’t a bad salary to go with it. Just don’t count on it in year 1. Hope this helps. Cheers, Justin
Good advice for those considering a liquor/wine store as a business. I have owned a liquor store/beer store/wine store going on 6 years. Retired from IBM at age 55 and have been operating this store ever since. My brother and I both put up 150.00 to buy this business. We have a long lease. I’m afraid the lease may last longer than my brother or I. My brother and his wife and I and my wife operate the store. My brother and I each draw 90,000 a year. Wives are not paid. We are in Texas and it never ceases to amaze me how consistent the revenue is from one year to the next. In our six years we have been very fortunate to have minimized the mistakes that most new business owners make. The one thing that really stands out is your statement, any liquor store owner is at the mercy of the distributors. How true it is.
Rickey – thanks so much for sharing your experience and thoughts! Congrats on retiring from Big Blue and moving to a situation where you have more control over your own destiny (aside from those darn distributors). Thanks also for sharing your purchase price (I assume you mean $150,000 each?) and annual draw. I’m sure this is a huge help for others considering a similar move. I went into my own venture with too little capital, underestimating the amount of money needed to accommodate proper inventory levels and cash position. Thanks again and best wishes, Justin
I am trying to buy a liquor store in Memphis, TN. I need your help! Thanks 901-281-7762
please call me anytime
What’s my commission? 😉
You are a life saver!!! I need help buying a liquor store. Can you call or text me at 832-335-3661. Thank you Justin
Do you have one or couples of mistakes that you’ve done in your liquor store?
Thanks for your insight, it was very helpful. My husband and I currently own a 7-11 franchise in northern colorado but are considering leasing the building next to our store and opening a liquor store. (Unfortunately, I don’t think the real estate would be an option to buy) What advice would you have in terms of installing equipment? Do you think we should try to negotiate some of that cost into our lease agreement? (I’m also not sure what a good deal would be on leasing a commercial space, it’s not a very large space) Do you have a rule of thumb in terms of competition compared to the surrounding population? Lastly, can you educate me on what you can and can’t sell? (Soda,juice, crackers, limes?) Did you do any in-store beer/wine tasting at your store? If so how does the licensing work for that?
Hi Ashley! Could you carve out a portion of your existing 7-11 for liquor sales? That might be better. It’s possible under Colorado Liquor Laws. You just need separation between the two areas within the store. Doesn’t need to be a wall. You also need separate cash registers. But that’s it. Worth investigating. For lease negotiations, competition, non-liquor items, tastings, etc I will try to answer when I have more time. Let me know what you think about dividing the 7-11. Cheers, Justin
Hi Justin, you are a wealth of information, I wish I could add you to my pocket in our venture. We are selling a business in the next few months and looking to purchase a liquor store in Colorado Springs area and we would own/operator the business ourselves. We see a sea of liquor stores for sale and wondered why and if it would be a wise choice for us. We are both in our ‘upper” ok fine, top 40’s and are moving to Colorado where the weather is not as extreme as Minnesota. We have owned and operated our existing business for 10 years and neither one of us is afraid of putting in the time to succeed. What other experience and advice would you be willing to share that would help us decide if this is the right choice. We do not want to purchase a store that has a lease, we would want to buy one that has the building included in the sale. We would also be going into this business with a good savings for purchasing inventory as we know there is always a large investment in inventory and we would always pay our vendors at delivery.
Hi Penny – location is everything in this venture. You’ve already narrowed down to Colorado Springs but I think you should look carefully at the density of existing stores to assess competition before making any commitments. Maybe there are too many stores in the Springs and that’s why so many are for sale? Not sure. That would be a good question to answer. You can add me to your “pocket” for the transaction if you change your mind and target Pueblo instead. We need good business people with solid Midwestern values to help improve the economy in Pueblo. Plus your real estate dollar will go about twice as far as it would in Colorado Springs. Good luck! Best, Justin
Any ideas on how to promote a new liquor store that been opened for 2 months in Houston, Texas
Hi Tamara – I don’t know much about the subject but I think it depends on location and customer type. What sort of location? Downtown/urban? Or suburban shopping center? Who are your customers? Office workers grabbing a 12-pack on the way home from work? Retired/disabled stopping by for a regular half pint of cheap vodka? You don’t want to waste money advertising until you understand your core customer base and where they are coming from to visit your store. Once you better understand who you’re trying to reach it becomes an easier problem to solve. Hope this help. Cheers, Justin
Message from a french guy, reading your blog. Interesting to see how american people can discuss business and share experience. I have always thought that I’d love to work over there. Reading your post and comments make me think I should really try to!
Bonne continuation à tous
Venez aux États et nous pouvons commencer un magasin d’alcools spécialisée dans le vin français!
1)Looking into buying a liquor store in NorthWest of Denver. Gross is 1.6 mil, and the net to owner after all the expenses is $135,000. Asking price is 750,000 and not inlcuding inventory. 8 years on the lease left. Based on these numbers, how much would you offer? Do the numbers look healthy?
2) Although I am doing my due diligence such as requesting annual credit card statements, tax returns, P&L and inner computer generate reported to make sure that all match the 1.6 million figure or at least come close but any thing else you recommend or ideas that helps my due diligence to make sure those numbers are legitimate?
3) Store sells liquor and lottery but I also want to add cigarettes? Will that help with sale or is it worth it?
Any other recommendations that you might pass on to make sure I am making a good decision or something I need to watch out for? could be legality issues, competition etc.
Again thank you so much for your help!
(1) For a liquor store grossing $1.6 Million I would offer $400k and I wouldn’t pay more than $475k. Also, is the lease renewable at the end of 8 years? I would insist on an option to renew after the current term. How much for the inventory? You need to know what you’re getting and you should only be paying wholesale cost. You might also refuse to purchase any “dead stock”, i.e., inventory that’s just collecting dust and hasn’t moved in the past year or so.
(2) Tax returns should suffice. Find out what the breakdown is for Beer, Liquor and Wine. Beer is the least profitable category so, ideally, the store would do a strong % of sales in liquor and wine. If Beer is well over 50-60% your margins will be relatively thin. You might request to work the store alongside the owner for at least one full week to validate sales numbers. This time of year is slow but the store should be bringing in about $25k per week. Less than $20k and alarm bells should go off in your head.
(3) Adding tobacco is probably a good idea. At my store 10-15% of revenue was from tobacco sales so it can add a significant chunk. Plus it brings traffic. Add groceries and other convenience items is good too but you have to comply with State law which requires a separate cash register and a clear distinction between the retail space dedicated to liquor vs retail space dedicated to other sales.
There are lots of other factors. Competition is key, of course. So is parking, visibility, traffic flow, and on and on.
1)Buying a liquor store Southwest of Denver. Gross is 1.6 million from past 2 years, Net to owner after all expenses is $135,000 and 8 years left on the lease. Asking price is 750,000, inventory excluded. What would you offer? and lets just say if those above numbers are true, do you they look healthy?
2) I am doing my due diligence to make sure 1.6 mil is a legitimate figure by requesting annual credit card statements, tax returns, p&l and inner computer generated sales so I can match them. Any other ideas you can pass it on so I can verify the accuracy of the sale?
3) Store sells liquor and lottery, but i also want to add cigarettes and add groceries to boost the sale? Is that a good idea?
4) Anything else you can recommend for me to be aware of such as license, marketing or lease, competition?
Thank you much for your help!
Thank you again for the response. Is it possible to exchange numbers and talk at some point? I am coming close to making an offer and would love to talk with you and get some advice and I am willing to hire your services.
Wow, thanks for all of your information. I’m in GA and currently looking into purchasing a package store(liquor store). The business is 8 years old, and sells have increased every years, 6% last year to be exact. $1.2 Gross sales and the least is 10 years remaining and can be extended. The store is fully supplied and fully staff but the inventory is not included in the $50,000 asking price. There is $300k in inventory which is not apart of the asking price. How should I approach this, especially the inventory price?
I assume you mean the asking price is $500k? If the price is really $50k pull the trigger! At $1.2M gross I would think the store is worth $350k or thereabouts. For the inventory, I would only agree to pay the actual cost that was paid by the current owner as documented by purchase orders/invoices/etc from distributors. In addition, I would ask to review the entire inventory and have the option to not purchase “dead” stock, i.e., inventory that hasn’t moved in the past year or so. You shouldn’t have to pay for the previous owner’s merchandising mistakes. Make sense?
Good luck with the purchase! Let me know how it turns out.
Hi Joe, did you pull the trigger on this? Mind if I pick your brain a little? 615-542-1295.
Hi justin, I have been able to save 75k cash.will I be able to open a liquor store
Yes, a small one. Look for opportunities with owner financing.
I am planning to buy a liquor store with real estate priced at 600k includes 100k inventory. Annual sales are 1 million. How much would I net with that kind of sales and no lease payments or mortgage payments?
There are a few more variables necessary to come up with a net income estimate. It depends on cost of utilities (refrigeration is expensive), annual licensing expenses, credit card fees and other misc costs. It also depends on your sales mix; for example, if you sell 80% Beer you’ll net less than if you sell 80% wine/liquor. Finally, how many paid employees will you want/need? The more you work, the more you keep in your pocket. All that said, and assuming you work the store full time, I think you could plan on clearing ~$100k per year. Maybe plan on a bit less the first year or two. By the way, given the numbers you laid out I would expect the real estate included to be worth ~$200k. If the real estate is worth less you may be paying too much. Good luck!
It has been interesting reading your blog. You sound like an amazing entrepreneur! I am currently finishing my Bachelor’s in Business Management with an Entrepreneurship/Leadership specialty. In one of my capstone classes, we have been asked to complete a business plan start to finish. I chose “party store” as we call it in Michigan, which is ideally a convenience/liquor store with a sandwich deli, pizza, and delivery options. (They let us deliver alcohol in MI!) Finance and start up costs are posing to be my most difficult area to come up with answers as most businesses do not display financial data for everyone to see. If I was starting up a small (2500ish sq foot) operation on a rental lease basis, where I would be responsible for purchasing inventory and deli equipment, what would your general advice be for me to come up with a “Mock” number to attach to it? Also, I understand Colorado is different than MI, but how long/how much did it cost to obtain a liquor license? Any suggestions to add to my plan would be greatly appreciated. Your article has already helped spark new ideas to add. My parents owned one when I was a teenager for about 8 years so I have a general idea of how things are ran and operated, I simple hate finance and this is the weakest area on my business plan.
Alyssa from Michigan!
Hi Alyssa, thanks for reading my blog! What do you have so far for a pro forma? I can give you some ideas for the liquor inventory piece of the puzzle but there will be many expense categories to cover. Furthermore, it’s difficult for me to know how much you might need in liquor/wine/beer inventory so you’ll have to make some guesses as to volume of sales as well as a likely breakdown for beer vs liquor vs wine sales. Make sense? Best, Justin
By the way, you can’t be a successful entrepreneur without understanding your financial data. So, get over your “hatred” of finance and think of it as an important tool for growing a business and achieving success. You might also hate mops but customers like clean floors. For small businesses financial analysis is just a matter of gathering basic information and translating into a set of numerical estimates. You’re probably making it more difficult than it needs to be. Start with a list of anticipated expenses. Revenue forecasting is far more of a challenge.
Hi Alyssa P !
I would like to have a look at your business plan that you did. I found you on liquor store blog.
here my Facebook : Rock Noel
Scenario: How much would you offer for a store grossing $600,000-$700,000?
What’s the % net income that’s resonance for this size (1,600 sqft) that gross between 600-700k? Is 15% good number to use as rule of thumb? Rent is $4,000 per month.
Lots of factors to consider but, generally, I would want to stay in the $150k-$200k range. Net income varies depending on too many factors to list but 15% is feasible. The rent sounds high to me. Check market rates to see if it’s in line.
Great blog! I need to have a tutorial on the basics of selling into an account. Understanding margins, how to negotiate case prices for a brand new product, etc. Do you know of a good book? I would love to speak with a store manager. I wont be selling the product in Colorado and would sign a non disclosure agreement.
The product has a lot of potential. I cant discuss in a public forum. We are thinking of seeking out independent sales contractors who sell into accounts for us, having a wholesales group handling distribution. The distributor agreements with their sales force cuts heavily into profits. Looking to see if we can work around that.
Would love your recommendations, etc.
Hi Bailey. In Colorado retail liquor store owners are required by law to purchase through a licensed distributor. There are exceptions for Colorado-based brewers and distillers and I think you can buy wine directly from an out-of-state vintner if they don’t have their own distributor. So, at least in Colorado, you won’t be able to make an end run. Don’t know about other states. Sorry I can’t be of much help. Good luck! Best, Justin
I’m in the beginning of my search to buy a liquor store, but i tought the same thing. I have studied in logistics and supply chain, cost price, management, inventory are fun to me.
I’m Canadian, and here only the governement can sell liquor, wine and beer are permitted to grecery strore and C store.
But every time I go in the US I’m always surprised by the ULTRA-UDGE inventory that the liquor has in store. I mean we have wall-mart here as well and pretty much the same stores but liquor are different. But having let say 12packs of 8 bottle of 12$ cost price of a kind for total of 1152$ is uneffective. And that’s the reason liquor store have 100 of thousand of dollar sleeping at no interest rate. Eventually when you see quickly the question : 1,6M Gross sale 365 days = 4383,56 gross sale per day daily expenses is 266$ (8000$ moth) and cost of goods lets say 80% (I know its less than that but just to be safe) 20% of 4383,56 = 876,12 – 266 = 610 EBITDA so at the end is it normal to have 200k 300k inventory… no. But i guess the licenced distributor is the Guy there… so He decides. How many different kind of bottle a store can handle ? I dont know that answer but for sure best seller are best seller but you dont need to have the inventory for the next year…I read that a good Lstore can change his inventory 8 to 10 times in 1 year. Well thats almost every 6 weeks. every 6 weeks you’ll have to rebuy a 300 k inventory. humm lets say again sells are 80K month and cost 80% so … the answer is yes. In real time logistics, I’ll take the exemple of wall mart… when the cassier scan your article, it goes as a sell to the warehouse and your product that you bough is back on the store next day…that’s real time logistics but liquor store who plays with inventory every 6 weeks that sounds a big lack of the industry… probably something is wrong with that inventory. I dont know how the supplier work seems to mw that hes the BOSS of your business in a certain way. What do you think Monsieur Justin ? Justin tu achete un inventaire de rhum peu importe la marque. Combien de bouteille il faut acheter pour arriver a un bon prix. et combien de temps ca prends avant que tu ne vendes ta derniere bouteille…. disons pour ton meilleur vendeur, et ton pire ?
I’m just looking for a 99,000 store with good cash flow in myrtle beach area.. I’m not planning on being rich but comfortable 55000 take home. I don’t that’s greedy
First off, awesome blog. There are not too many liquor store owners that would take the time to write such useful information. I would like to know what kind of Point of Sale software you would recommend? The options are daunting,
Hi Jay, we used “Lightspeed” and it was pretty good. Price was significantly less than some alternatives. Easy to use and runs on Mac which was a priority for my manager. My only complaint was limited reporting capabilities. Best, Justin
Thank you for the information it has been a great help.
I am in the process of putting together a bid for a Liquor Store in Southeastern Colorado. The Store is listed for $150,000 which includes inventory and real estate. Real estate does not have a great value and coolers need updated. I have also been told that the seller wants to retire very soon due to age and health which tells me that he would take less. The store owner told me that beer sales are around 60% Wine 10%. I have asked for the P&Ls and tax returns which I have not gotten yet, but should get soon. I have a feeling that the books might not be clean; cash might be leaving the business and not getting reported. Because of this I am going to look at purchases also. Can you tell me what kind of purchases/sales I should expect to pay this amount? Also can you tell me what the average margin is on the 3 main product categories.
Once again Thank you for your help in this matter and the help you have given everyone with this blog.
Hi Glen. $150k for the business + real estate + inventory sounds very inexpensive. What sort of revenue numbers are they quoting? When the price is too good to be true it may be a red flag. Ask for tax returns if you don’t trust the P&Ls. I can’t speculate on appropriate revenue for these numbers because I have no idea about real estate or inventory values. Average margins would be about 15-20% for beer, 35-40% for wine and 30-35% for liquor. But it all depends on your customers and their preferences. I suppose it always depends on your customers. Anyway, hope this helps a bit. Best, Justin
What is the best product to get inventory for, in other words what alchohol grosses the most money
I don’t mean to be flippant but the best product is the one your customers want to buy the most. Every liquor store has unique customers and each store’s “customer profile” is slightly different. When you buy inventory it should be tailored to your particular customer base. Some customers like cheap beer, cheap vodka and cheap whiskey. Some like high-end wines and spirits. As a store owner you need to find out what your customers want to buy. Then find ways to build a profitable inventory to serve their purchase patterns. Best, Justin
Thanks Justin I am a little new to the buisness and have not made any relations with suppliers, is there any suppliers who are trying to cheap stores and have outragous costs, I want to make sure I buy from the right people.
If you’re in Colorado then ALL distributors (licensed suppliers to retailers) are “trying to cheap stores and have outrageous costs”. Unfortunately there’s no where else to go as each and every distributor has a monopoly on products they distribute. Building a relationship with suppliers is still a good idea but don’t expect to be able to shop for better pricing (unless it’s for non-alcoholic products). Your only path to lower costs is via volume purchases. And, of course, you can only afford to make large purchases for product SKUs you sell the most. Sorry to be the bearer of bad news. Perhaps you’re outside Colorado where retailers have more negotiating power. Best wishes, Justin
Hi Justin, lets say the proposed change in the liquor law passes and grocery stores are allowed to sell liquor. If my liquor store is anchored by a grocery store how likely would the city give another alcohol beverage license to a business that is right next door to a place that already has an existing license, would the grocery store chain attempt to buy my liquor stores license. What are your thoughts on that scenario.
Difficult to say. My best guess is that you’d be SOL. Might want to try to add a clause to your lease releasing you in case of change in the law. Or proactively begin communication with the grocery store management. They may want someone to manage liquor inventory for them. That said, I don’t expect the law to change so I would be more concerned about maintaining/growing revenue and profit. Best wishes, Justin
quite possible what is your favourite tequila.
The one that sells the most.
Hi Justin, Like others here, I am looking for opinion and knowledge before seriously contemplating a store purchase.
In a nutshell, the store has been operating for 35+ years, the present owner is an absentee owner with other business.ventures.
The owner will lease turn the key business for 1500 a month for 1 year with lease fee deducted from purchase price if property is bought after one year. Asking price is 160,000. Of course inventory would be purchased at start of lease. The gross for last year was 287,000 but I do not have a breakdown of this gross as for profit/loss.
In your opinion does this seem like a good venture? Would you have any idea what the gross profit percentage might be?
I should add they now sell beer, wine and liquor, but there is an additional 800sq ft available in store but not used at present for retail space. What other products could be added to increase sales?
Your advice would be greatly appreciated.
Unless the deal includes real estate or some other special consideration the price tag for the business seems too high. I wouldn’t pay more than $100k and $80k sounds about right to me. Not including inventory. Gross revenue is pretty low. How has it changed over the past five years? Going down? Holding steady? Moving up? I think I would favor a deal with higher gross. I like Mom & Pop size operations for owner-operators but this sounds more like a Mom *OR* Pop (not both). Being that tiny makes you even more vulnerable to the pricing whims of distributors. To add sales revenue I would add tobacco for sure. Maybe lottery. Depending on state law maybe use the 800 ft to sell snacks etc convenience store style. Hope this helps. Best, Justin
Hi Justin, I’m sorry, in my last post I didn’t clarify that the asking price included everything, equipment, building (1900sq ft) and large paved parking lot.
As for change as I understand, the gross has gone down since the present owner has had it by about 30-40k. The owner admits this is mostly from not operating it himself and not managing it properly because of his other commitments.
It is close to a lake, maybe bait and fishing gear along with the convenience items? Oh, I didn’t mention the state is MN.
Thank you, again
Is the location rural? If so, might be very slow when it gets cold, i.e., most of the year….unless there’s a big ice fishing scene on the nearby lake. Fishing gear is a good idea. But I would want to see a transaction count to better understand seasonal variability.
The price seems reasonable since real estate and equipment is included, depending on market values for similar property in the area. You may want to request a provision to avoid depleted inventory when you take over. You don’t want empty shelves.
In this situation I would probably want an owner carry deal. If he says he wants a clean exit so he can take the money and move on I would run the other direction.
Im from Canada and I’m thinking of buying a liquor store in California, Los angles area. Any tips?
Be sure to start out with plenty of cash in the bank (after you purchase the store) to ride the inevitable ups and downs while you learn the particulars of the customers and suppliers in your market. Cheers, Justin
Very impressed with your blog, business acumen and willingness to help others! I’m contemplating the following opportunity and would value your opinion. I’ve read that inventory should turn over 8-10 times per year – this seems to be about 6.5X at value below. Store is in NY – wine and liquor only. Also curious as to what you think about an owner putting in 40-50 hours with employees covering evenings and weekends?
Store is located on a very busy roadway in a large shopping center next to a supermarket. This business has had continued sales growth each year since it was started in 2006. Past year the store grossed $1,833,796.03 (+7.5% from prior year) with a net income of approx. $263,000.00. At 2,500 sq. ft. – large retail sales floor and a tremendous amount of storage space. There are 6 years left on the lease (it can be extended). I’m told all sales and figures are verifiable. State of the art POS software. Price is $675K + $285K in current inventory.
Sounds like a good opportunity with strong cash flow. Asking price of $675k seems high. I would offer $550k and try not to go beyond $600k. Be sure to verify inventory and ask for an option to reject inventory that hasn’t moved in the last 6-12 months (start with 6 mo, agree to 12 if push back).
Owner working 50 hours per week should be fine if you have good people and treat them right. I think you’ll want to work on Saturdays as it is typically the busiest day of the week. Maybe take off Sun-Mon.
Did you end up buying the store – I am looking at one, also in NY, that seems to be very similar (Not the same one though). Just curious, thanks.
Great article sir! Thank you so much for taking the time to answer all the questions; I’ve learned so much from your blog. Justin, I’m looking into a store in a small town, and wanted to get your advice. Liquor store is doing 2.2m in annual sales, they are asking 1.5 m; it’s with real estate. Location is great, right off the main road in town, with ample parking. Beer sales are 18 % and the rest is wine and liquor. Please let me know what you think.
Hi Jay, how much do you think the real estate is worth? Also, does the asking price include inventory?
Hi Justin–great article and appreciate all the responses you’ve given to the comments. You’re giving out a lot of vital information/details.
I’m looking to open a new liquor store with maybe a different approach than others. I have a partner and would like to invest 75k each. According to above comments, we would need to be in the $600-$650k gross range if we invest $150k total, right? If that’s the case we should be in the $90k cash flow range (divide by 2), we should each see about $45k annually in a traditional, owner ran store?
Now, rather than both or one of us behind the counter we want to hire employees and have the pay be commission based. The two owners would be focused on marketing and managing the operations/inventory while the employees are behind the counter. In past experience I’ve noticed employees don’t really care about growing a store unless there is some incentive for them. I do understand paying commission will eat into our profit but I think in the long run we could have employees that could push sales and would be willing to educate themselves in the products. If we were to go with commission based pay, how much or what percentage do you feel would work well? I’m thinking with wine and liquor having a higher margin we could give a higher commission percentage to the employees for those products.
After paying commission to the employees if we both only see $30k cash flow each, I would be okay with it as we could try to grow and own multiple liquor stores with the same concept in place, possibly adding tobacco, water pipes (and other smoking devices), and lottery.
Any help/advice is appreciated!
Hi Harvey, thanks for visiting and posting your questions. By “new liquor store” do you mean start from scratch? I can’t say that a $150k investment will achieve/require $600+ gross. Depends on too many factors, especially the local market dynamics, location, competition, etc. $90k sounds about right if you’re able to achieve $600k+ gross but that assumes at least one of you is working full time. If neither of you works the store you may not have much of anything left at the end of the year. For a store at that volume I recommend you work behind the counter. You’ll need to be there more days than not if you’re responsible for inventory/ordering etc. More importantly you need to get to know your customers so you can provide the level of service necessary to keep them coming back. I’m not a fan of commission schemes. If you take good care of employees they’ll take care of you. If you set up a commission plan you’ll end up spending a lot of time administering the plan; your time is better spent elsewhere. My advice is to find a partner who wants to work at the store full time. Sorry, this is probably not what you wanted to hear. You and your partner may be able to make money by building the business and selling it but I wouldn’t expect any cash flow along the way if neither of you will be working full time hours. Best wishes, Justin
First of all, thank you for all the information you are providing and for posting this great blog. It is very informative for the first time business buyers. Also, it will motivate people like me to post and share our experience so people make less mistakes and excel.
I plan on buying a liquor store in IL. I would really appreciate any kind of input/advice from your side.
Here are the numbers from P/L:
Asking 330K + 160K (inventory)
On lease for $4600 (as per my DD slightly high for that area)
Total Income: 989,906
Gross profit: 228,406 ( PM around 23% for last 3 yrs)
Net Income: 30,781. (Owner has 5 employees and also pays salary to self) I have to find out how she pays herself.
Payroll expenses are 82K. Currently she is paying 3k per month in salary to employees so I am guessing 82K-36K=46K is her salary.
Any thoughts/questions/advice are greatly appreciated. Thank you Justin.
Hi Om. These numbers seem pretty good. Asking price is slightly high but not unreasonable. The seller will take $300k which isn’t too bad but you might try offering $270-275. Make sure inventory value is based on wholesale prices and try to avoid taking “dead stock” (product that hasn’t moved in the past 6-12 months). Depending on your financial circumstances, you might ask about the possibility of owner carry so you can begin with the strongest possible cash position. Good luck! -Justin
Thank you very much for your input. What the owner gave me is the P/L documentation. How do you verify the sales and makes sure the numbers are correct? I am guessing tax papers?
Yes, once you’re “under contract” it would be appropriate to request tax returns to verify the P&L numbers.
Great. Thank you Justin for your input. I will update you if the deal goes through. ~Om
Hi Justin. How are you? I have couple Qs please help me out, any comments or your advice is appreciated.
Story: One liquor store in GA sell 6,5 millions plus 1.0 million inventory = 7,5 millions ( including store real estate 12k sqf = $2,5million)
***Based on I -1065 sale increase 5% each year. Total sale 7,7 millions
Cost goods sold. 6,4 million
Gross profit. 1,3 million
Repair maintenance. 68k
Rent ( they filed) 16th
Tax , license. 54k
》》》 ordinary business income is 290k
*** BASED. on owner info given
Sale without tax 7.8 million
#employees : 14
Yrs business. 19yrs
inventory 1.0 million
Payroll : 400k/ y
Lic fee: 6500
property tax 14k
Tel+ Internet 2000
Credit fee 4500/month x 12= 54000
40% of sale is wine
43% is liquor
15% is bear
Rest is misc
Dear Justin, they asked 7,5 million, could you please give me an advise HOW MUCH WE CAN MAKE AN OFFER? OR WE BUY.
Thank you for your time and kindness to help me out, any your advice or comments is appreciated.
If I understand correctly they are asking $4M + $1M inventory for the business and $2.5M for the real estate. I also see $7.8M gross annual sales in the most recent 12 months. Is that correct?
(1) I can’t help with the real estate valuation. You should get an appraisal from a good realtor who knows the local market.
(2) The business looks very profitable so you should expect to pay a premium but I think the asking price is high.
(3) Keep the real estate, inventory and business separate in your negotiations.
See (1) for real estate.
For inventory, offer to pay the cost of documented (they should be able to show purchase receipts) on-hand inventory but reserve the right to reject dead stock (hasn’t moved in 12+ mo). You shouldn’t have to inherit purchasing mistakes.
For the business, I would offer $2.5M and I wouldn’t pay more than $3M.
All of these suggestions assume the business has been growing, the surrounding trade area is stable or growing and there’s no sign of new competition with deep pockets entering the market.
Hope this helps. Good luck! -Justin
Hi Justin. It’s very helpful. Thank you very very much Justin.. I am very happy to accept your advice and I will make a deal like that. I also check the real estates to see what going on.
Hey Justin I am looking into one large liquor store would like to get your advice over phone if it’s possible?
Hi Jack. Use my contact form to send me a private message and we can go from there. Thanks, Justin
The numbers you have given from the GA liquid store are similar to a store I am evaluating.
Is the liquid store you’re talking about located in Johns Creek (all brick building)?
Would you mind giving me your phone number or email address, I would like to know if you ever got it? Why and why not? I am looking to buy a liquid store at similar price point here in Atlanta, GA. Thanks
So did you got it or not ?
This is a great page with many invaluable tips… well done sir!
Ok… I have a friend looking to set up from scratch a liquor store in the Rustenburg area of South Africa. This is a total start up from nothing. Is there any advice you could offer on selecting location, very speculative startup costs and/or any other considerations that you would be working on in development of an initial business plan?
I have read the entirety of comments and answers on this page so now have much information to digest. How would you approach this situation early days as it is?
I would really appreciate any advice you could give.
Hi Jason. I don’t know enough about South Africa to offer advice. Generally speaking I would recommend having more cash on hand than you think you’ll need. Sorry I can’t be more helpful. Best wishes, Justin
Hi Justin, how are you? I have couple Qs, please please help me out, Justin. I do appreciate your time and kindness. The Qs regarding FIRST OFFER AND SELLER INFO
1. What do we need to know/have about seller before 1st offer ( they just gave me Form 1065 and all info i posted above) .
1a. In general, what do we have from seller before first offer
2. We have bank loan officer, they introduced me liquor store, they said seller has Agent, but I don’t see them.
2a. So do i need an agent for me.
3. Is it right? If i have first offer document, do i need an Attorney to do that. ( they charged me 750) if we don’t need that, what we have to do offer in official
4. Do I have to pay from my pocket for appraisal ? Please help me out about appraisal, when and how we need to do that
5 . Even now we dont know much seller info, but we do offer we have to have some conditions. So i list following. Plesse help me anything else we have to do.
SPECIAL STIPULATIONS REVISED
1. Seller shall owner finance $500,000 of the purchase price. Buyer shall execute a two (2) year standby Promissory Note providing for fixed, simple interest at the rate of five percent (5%) per annum from the date of closing, amortized and providing for payments commencing on the first (1st) day of the twenty- fifth (25th) month following Closing, but callable by Seller on the fifth (5th) anniversary of Closing, such that the entire amount is paid in full.
2. This contract shall be contingent upon the closing of the existing business located at ( address)
3. This contract shall be contingent upon Buyer’s ability to obtain an SBA loan of at least 75% of the purchase price. Upon written notice of loan denial, the parties hereby consent to authorize Holder of Earnest Money to return Buyer’s Earnest Money within three (3) business days of receiving said notice.
4. This contract shall be contingent upon an appraisal by a licensed Georgia appraiser equal to or greater than $3,500,000 for the land and building and $2,3000,000 for the liquor store Business.
5. The parties shall account for inventory at least one (1) day prior to closing, and the inventory must be worth at least $1,000,000, and inventory must be recent with expiration date being no less than six (6) months from the closing date.
6. Buyer shall pay only closing costs associated with obtaining the SBA loan. Seller shall pay all closing costs associated with this transaction (the sale of land, improvement, and Business).
7. Seller warrants that the gross profit margin of the liquor store Business is at least eighteen percent (18%).
8. Seller warrants that Seller and the Manager(s) employed at the liquor store Business shall provide training to Buyer, at no additional cost to Buyer, from the date in which Seller receives the commitment letter issued by the Lender until thirty (30) days after closing date. Training shall be provided every day that the liquor store business is opened and from the time the business opens to the time that the business closes. This provision shall be considered a personal service agreement between Seller and Buyer. Seller acknowledges that a material breach of this paragraph will result in irreparable and continuing damage to Buyer for which there will be no adequate remedy at law. Therefore, the parties agree that any intentional, material breach by Seller of this paragraph shall result in, as liquidated damages, the amount of $2,000 per day for each day in which Seller is in breach of this paragraph. The parties expressly agree that this provision does not represent a penalty or punitive clause but represents an agreed measure of damages, the amount of which is impossible to determine on the date of this Agreement is signed. If Buyer elects to recover liquidated damages under this provision, however, such liquidated damages shall constitute Buyer’s sold and exclusive remedy.
9. Seller shall provide all documents requested by Buyer’s Lender within three (3) business days of receiving request from Buyer and/or Buyer’s loan officer/Lender.
Justin. I know you are busy of schedule , I am proud of you and appreciate what you have done for me.
Thank you very much Justin. You have wonderful life.
I’m not an attorney and can’t offer any legal advice. You should consult an attorney before signing any sort of formal purchase agreement.
You don’t need anything from the seller to make an offer. Start with a verbal or informal “letter of intent” to begin a negotiation. Be sure a formal offer is contingent on financing, property inspection and verification of sales data so you have the option to walk away once you learn more. It’s not at all uncommon to renegotiate price/terms after you’re “under contract”. In fact, it can be a good strategy because the seller may start counting their money before the deal is done giving you leverage.
If you’re borrowing money from a 3rd party you’ll almost certainly be required to pay for an appraisal.
Justin. It’s very helpful, I’m so confident after read your reply. Again. Thank you very very much Justin
Someone is offering me his liquor license for $90k which has been served a show cause notice by county inspector. How should I go about this? I have ZERO idea about liquor business or any retail business.
Hi RK, you’ll need to consult with someone who knows the laws in your State and Municipality. In Colorado no liquor license is worth $90k unless it comes attached to a functioning business with customers, also known as “blue sky”. Good luck, Justin
Thank you so much for your insight and expertise. My husband has recently taken and interest with opening a liquor store from scratch in the Atlanta area of Georgia. We do not have any start up cash, and would be looking to the bank for a loan. We also would be looking to sign a lease for location for the business. The vast inventory alone seems daunting enough for me to try my hand at another business, however, my husband is hopeful that a liquor store is easy enough and brings home ‘easy’ revenue. He is willing to work in the store full time, and I will help out on weekends.
I have read your post as well as the comments. I know it will be challenging but, in your opinion, does it seem feasible for us to try our hand with such a business, considering we have no cash to start with and not a lot of knowledge about this industry?
Thank you for any thoughts,
Hi Jo. I would recommend against it. In Colorado it’s illegal to borrow or lend money for the purchase of inventory. Note this is based on my attempt to read the very complex and poorly organized liquor code in Colorado. So I could be misinterpreting, but it seems like a sensible regulation because it’s a really bad idea to borrow money for inventory. I don’t think the value of the inventory can be insured against theft or other types of loss. If you can find a willing insurer they’d probably charge you a fortune. Also, your lack of experience is concerning. One of you should at least have some retail, book keeping or general inventory management experience; ideally, you’d also know a lot about the products you’ll be selling. My recommendation would be to suggest to your husband that it might be wise to work as an employee in a liquor store before making the plunge. This would help him learn the ropes on someone else’s dime. He can offer to work for cheap and maybe a manager or owner could teach him more than cashiering. There’s a lot to learn if you want to succeed. Nothing in business ownership is “easy”, especially not revenue. Hope this helps. Best, Justin
I’m looking at purchasing a liquor store, few questions and comments:
1. This store needs to be closed and cleaned up, I want to change it into a fine wine and craft beer store. The neighborhood is ripe for it, highlands area in Denver.
2. The P&L didn’t match the tax returns. Per the seller, he indicated that he wasn’t keeping all his sales records, I think he’s not reporting cash sales.
3. How do I figure out the right offer when his P&L isn’t supported by his tax returns?
4. The broker is telling me that cash and credit card sales are 50/50, that doesn’t make sense to me, is that reasonable?
5. I believe you are recommended to offer 25-30% of the annual sales, is that correct?
Many liquor store operators under-report cash sales. Base your offer on his tax returns. Let’s say he claims annual revenue is $1 Million but his tax returns say only $800k. Then offer 25-30% of $800k, i.e., ~$200k-$240k.
Re cash/credit sales – ask if it’s 50% of transactions or 50% of volume. If you’re working up a pro-forma you’ll need this to estimate credit card fees. 50% doesn’t seem unreasonable to me but who knows. Check the credit card fees paid in his P&L for guidance.
Hope this helps. Good luck!
Thanks for your feedback. I’ll base it off his tax returns. 2014 tax return gross sales were 245K. They are asking 170K which is a lot higher than 30% of 245K. It’ll be a fun negotiations.
Thanks for the valuable insight!
At a glance, what are your thoughts about this newly renovated 1800 sq ft store for sale in NY?
Asking $450K + inventory. 10 years left on renewable lease. Good parking.
Prior year gross sales: $1.35m Absentee owner paying little over $100K in salaries. That would change some as this would be primarily owner operated. Nothing wrong with a competent, cost effective manager but much more would be superfluous.
Asking price seems in ball park but I’m thinking $350k with a ceiling of $400k plus a verified wholesale number on inventory, minus dead stock (estimating $200k). As an growth oriented entrepreneur, I’m confident I can increase business and timely streamline inventory to meet customer trends.
Just not sure if the math works: should I be looking at 15% benchmark profit margin ($202K), assuming I can lower salary expenses, and expect to pull $125k – 150k/year? I would like to eventually see pocketing over $200k/yr. At that rate the complete ROI would be 3-4 years.
What is your relative gut feeling on this deal?
This sounds like a good deal. I think $400k is fair. As far as profit, how much net profit are they showing with the numbers above? I wouldn’t count on the big profit numbers rolling in right away and not at all unless you’re working a lot of hours. In any case, this does sound like a pretty good deal. I can’t have a gut feeling without meeting the people involved and seeing the location but if your gut is giving you the green light I’d go for it.
Hi, can you tell me who I need to talk to to get pricing on beer, wine and liquor. I am trying to create a business plan but don’t know where to get costs.
Hi Andi – you need to contact local distributors. You could also try talking to liquor store owners in the same market. Good luck!
My friend and I are thinking of buying Liquor store in Oklahoma . Grocery stores in Oklahoma do not sell Liquor yet, but it may happen anytime . How would it effect out business if they start?
The seller is asking $250 K + $120K inventory, gross sales are about $1.2-1.3 million. The owner’s profit is about $140K, he is piddling around for about 30 hours a week , not really doing much, always has another employee there.
We are planning to work 60 hours/week between both of us and keep another employee in the evening, so eliminate about 53 hours of other employees. Rent is $2500, the sf is about 2000, about 1600sf the floor. The store is located on the busy road with Walmart about 1 mi and no other grocery stores to the east.
Can we still hope to make same amount of money ,even if grocery stores will start selling liquor ? That’s out biggest concern .
I don’t know anything about the liquor laws or related politics in Oklahoma so I can’t really speculate. If grocery stores are able to sell liquor and the neighboring Wal-Mart chooses to participate it will be extremely difficult to compete. I think you can safely assume your revenue will decrease if the laws change in favor of grocery stores. But I would think the retail liquor lobby would be able to negotiate some sort of concession for independent liquor store owners.
If it were me, and I really liked this opportunity, I would use the uncertainty to negotiate a lower purchase price with the current owner to help offset the risk. Or perhaps ask for owner financing so he shares part of the risk.
Hope this helps.
I live in the great state of Tax(Mass)achusetts. My wife and I have been kicking around the idea to open a liquor store in a pretty busy main road where I am sure one complex we are looking at the lease is high. As far as what we would need up front I assume we would have to apply for a liquor license which I am sure if expensive here in Mass. Is that along with inventory a pretty pricey up front cost I assume? Thanks
Hi Sean – Yes, inventory would be the biggest expense if you’re starting from scratch. Depending on the size of the store you’d be looking at somewhere in $40k-$100k range, possibly more, to have a competitive selection. Good luck, Justin
Enjoyed your article. It was very informative. Can you give me a percentage breakdown of what takes the most time running a liquor store? I imagine inventory/purchase orders consume a large portion of your time. Is there something that a typical person wouldn’t guess or clearly see that requires serious attention running the store?
Hi Allen, inventory management and cash flow management are the two biggest headaches. I’d say the other key is to face the reality of working behind the counter for long hours each week. A small/medium liquor operation won’t be profitable unless you are working the store full time rather than paying for lots of cashier help. Good luck! Best, Justin
Thanks for the information. Could you see a liquor store making it if they were closed from Friday evening till opening again on Saturday evening? Do you think a reputation as primarily a high end store would help or hurt with this schedule?
Hi Cole. No way. Friday and Saturday are the biggest sales days of the week. If you’re closed you’ll get your ass kicked…unless you’re the only game in town. A reputation as a high-end store is good if the population in your trade area is equally high-end. If not, you’ll spend too much on inventory that won’t move. Hope this helps. Best, Justin
Reading through your blog has been very enlightening. One of many questions I have is when buying a liquor store in Colorado, the buyer determines there is dead inventory, how does the buyer approach the seller. Do you know what the seller can legally do with the inventory? If possible I would like to talk with you in person about our endeavor. TIA for your reply.
Hi Nanette, the seller can’t do much with the dead inventory unless he can find another store to purchase it (and then only up to $2,000 if I understand the complex regulations). When I sold my store I had to take the dead inventory home. It’s become a go-to source for gift giving but much of it will continue to collect dust. Happy to chat further. Use my contact form to send a private message. Cheers, Justin
I’m considering a liquor store up for sale in Kansas. I would greatly appreciate it if you could give me some insights as to whether this is a profitable or safe buy to dive into. The business is posted for 165k asking price plus another 75k for inventory. However the FF&E is not disclosed (which leads me to believe that the 165k does not include equipments like refrigerators) How much would FF&E run on the average for a liquor store of 3400 sq ft?
gross revenue: 912k
cash flow: 67k.
Facility is about 3400 sq. ft at $3300 per month
The mix of revenue is 55% beer, 25% wine and 20% liquor
There are currently 7 part time employees, so I’m assuming the owner is working the store full time himself. I won’t mind working the store some myself too. But eventually I would like to just hire a manager and take over the store.The store is located in a strip mall, which is in the process of redeveloping, and posting says the store has good visibility as well as location to several large apartment complexes.
Could you please provide your opinion?
Also, I read that Kansas just passed a bill this year that would allow grocery stores to sell liquor and wines starting July 2018. How much do you think this would affect the sales of an individual liquor store?
Thank you so much!
The price seems reasonable but that may be due to the potential impact of grocers entering the market. If there’s a decent grocery store near your location the $900k gross could drop dramatically. And 3 years will go by pretty fast.
I think I’d probably slow down and learn as much as you can about the legal changes and what they’ll mean. Doesn’t mean abandon the idea of liquor store ownership as there may be an opportunity to buy out a running-scared owner at pennies on the dollar.
Hope this helps.
Your article was very informative. However I have a question. I am looking to join the craft spirits industry, and as you said, the distributors hold all the power thanks to the 3 tier system. I am a little concerned that getting products onto the shelves of retailers may be difficult as most retailers want to deal with just the major distributor accounts, and we all know that getting the distributors to pay attention to a new brand is like pulling teeth. My question is, is it possible for a retailer, or a group of retailers to force a major distributor to pick up a brand that they want on their shelves, and is there some sort of central ordering system that retailers use to place orders from their various distributors?
Thanks, and looking forward to your response.
Hi Eddy. It will be an uphill battle. In Colorado, a Colorado-based producer of beer, wine or spirits can sell directly to retail liquor stores (in Colorado) but most of them end up working with a distributor. If you’re starting small you can certainly go door to door and sell to retailers. If not, you’re stuck working with distributors who are already pushing too many SKUs. It may be possible for retailers to band together but I think the system is set up to avoid such collaboration and bulk purchasing. And, even if it didn’t run afoul of the liquor code, it would still be a challenge to form a retail coalition. You might contact the Colorado Licensed Beverage Association and ask them for input. They know much more than I do. Here’s a link to their website: http://myclba.com/
Great blog! I quick question on inventory – you mentioned $40-$100k are needed for inventory – is that to stock all coolers “once” and from then on it is on a rolling basis or do have the same amount of floor space/shelves/cooler capacity in storage in a warehouse (in effect you buy 2x capacity total upfront)?
Well, if you have lots of extra cash laying around buying extra inventory might make sense because you’d likely get lower prices for buying in larger volume. But it depends on how much lower prices would be per unit. It might not be enough. That said, most people don’t have the luxury of surplus cash. So, if you’re starting a new store from scratch you’re probably looking at stocking all coolers once and then going into replenishment mode thereafter. Also note the $40k-$100k range may not hold true depending on your market (if it’s high-end it will cost more) and your store square footage (if you have a bigger space it will cost more) but, in any case, you don’t *need* 2x capacity up front. Hope this helps.
Thanks for all the valuable information above. I am looking at a liquor store in florida, sales of 820,000 last year, previous year 540,000 and the year before 400,000 the store is only five yrs old and the owner is asking 600,000 nets 126,000. I think 430 should be a fair price as it includes 125,000 inventory. Do you think I should rely on the numbers, they do come from tax returns but only last years sales were high the years before were comparatively low. Should I rely on the recent numbers and base the price only on last year’s return?
Thanks for your inputs.
I would want to understand how the revenue more than doubled in 2 years. Seems suspicious. Maybe ask for a monthly breakdown. Even if the $820k figure holds up I wouldn’t pay more than $250k + inventory.
Hi justin ,
didn’t want anything just to say thank you for sharing your knowledge, if it were me i wouldn’t have answer half of these questions lol!!
Your a good one!!
Thanks, Bob! 🙂
I am looking at a store. The seller says that he has not kept records for some time. He did however supple me with copies of his purchases over the last 3 years (2012, 2013, and 2014) they show that he is purchasing $325,000 roughly. The mix appears to me to be 50% beer 30% liquor and 20% wine. The lease is $1150 per month on a long term lease. The seller does not work at the store anymore but I would work 40 to 60 hours a week. The seller has it listed at $275,000 I told him that I think that is high, so he said to make him an offer. My question is how much a reasonable price would be, and is there anything else that I should be looking at.
Thank you in advance for your help.
He may not keep records but I’m sure he knows total revenue on a weekly or monthly basis. Even if he doesn’t we can back into it. Assuming a 35% markup on his purchases his annual revenue is in the $425k-$450k range. If we assume $450k then a fair price would be ~$135k. Does his price include inventory? If not, he’s dreaming. If his price does include inventory you might not be too far apart. An aggressive offer would be $100k + inventory. A friendlier offer would be $125k plus inventory. Don’t go over $150k unless he can demonstrate higher revenue.
Thank You Justin for your help.
You have confirmed what I was already thinking. I was going to offer $100,000 plus inventory. That would give me some room to go up a bit.
You mentioned a 35% markup, is this realistic? I was looking at a smaller average mark up when I was running my figures.
Thanks for all the insight.
I recently sold a professional, consulting services business (with about 35-40 employees) that I owned and ran for the last 12-15 years. It was about a $5-7 million business so I know my way around employee management, P&Ls, marketing, leasing/property management, etc. Large inventories and dealing with distributors will be new to me.
I am used to working for myself and over the long haul, I like the idea of a relatively stable, long term investment that can provide me with a good income and be able to run things part absentee as time going on (obviously more hands on in the first few years). Am I crazy to think a liquor store might be an good opportunity?!… feel free to tell me to run for the hills and that I am insane for entertaining this at all!
I would like to run the store with staff (including a manager), and me playing a management/operations role (very hands on at first but not day to day behind the counter). Probably take out an SBA loan so there will be debt servicing.
Can you help be back into a few numbers?
-If I want to clear say, $200K annually (post debt servicing…lets says that’s $100K annually), what size store should I be looking for in terms of annual revenue, gross profit and free cash flow? Just a ballpark.
Or maybe this is a better way to help me get at my answer.
Here is a made up profile of a store as an example (lets assume no real estate is involved):
– Revenue $2.5 million (medium sized store 5+ years old with good books)
– $550K gross profit (what should a healthy number be?)
– $250K annual expenses (lets say $20K per month in expenses including 2 employees) (what is a healthy number?)
– $300k cash flow (what should a healthy number be?)
– $100K annual debt servicing (just an estimate to help with the math)
– $200K take home (what can I expect given this size store?)
– $500K inventory size (what should it be based on $2.5 million in annual sales?)
– Asking price for the business $900K (not including inventory)…(what is the right price to pay?)
Any help or guidance you can provide will be much appreciated.
THANK YOU, Thank you, Thank you…..this article/blog has been extremely helpful. I have been in the nightclub & bar business for 20+ years in the South and now in Colorado. It is time for a change from all of the late night work hours & I feel that with all of the buying experience and alcohol experience I have, a liquor store is a great move for me. I fully plan to work the store myself, now the next step is coming up with the proper financing. Thanks again for all of your insight and advice.
Just wanted to clarify for you and all people who read your post, that in Russia there is no three tier system and you are allowed to import your wine, beer and hard liquor from a manufacturer directly to your store or purchase it from local producers! Thus, please, let it go with this silly Russia non sense. It only grows hatred and misunderstanding between two Great Nations! It is not people’s fault that we “elect” dumb ass Government that is so blind and shortsighted!
As for rest, thank you for a great post! We are thinking of opening a liquor store in Miami and you definitely brought some light to the matter!
Sorry if you were offended. The reference to Russia is from a classic 1980 comedy, “Caddyshack”. It’s a funny movie and I love movie quotes. And 1980 was a different time in US-Russia relations. I have only love for the people of Russia. Watch the movie and let me know if you still think use of the quote is hurtful.
Best of luck with your venture in Miami!
Back in the days, natures gift “air” was provided to drivers for free at gas stations when needed to inflate our vehicles. Today, “air” is no longer free, finding ways to maximize revenue have entangled corporate and individual lives that we simply pay for air with credit cards or cash at gas stations.
Thanks for providing us your knowledge for free and helping others to make the right business decision from you experience.
I hope all those you have benefited from your free gift will do unto others as it was done unto them.
Thanks db! 🙂
I own a 26,000 s.f. shopping center (with Jimmy Johns, Anytime Fitness, Cost Cutters, Chinese Buffet, Mexican Rest) in a college town (9,000 students – Division III) right across from campus and have been approached by the local economic development people about opening up a ‘higher end” liquor store and they would support it. They also said alums have no where to go and have a pre game party – so they were thinking a nicer store with a banquet room in the back and would support on premises consumption that way.
The shopping center has 3,500 s.f. vacant that would fit well i think for it.
I’m concerned that since its a college town lots of beer sales and that means lower margin but it seems that kids parents pay for everything these days and who knows. Also alumni would be bigger spenders. Cash flow would be much slower during summer.
Also I’m a real estate guy and love to put as little cash as possible in deals 🙂
Assuming I can get the TI’s squared away what is the cash I would need for FF&E and inventory?
Also any consultants you can recommend to help if I decide to move forward – don’t want to re-create the wheel?
Much appreciated and thanks, Dan
Lots of factors to consider. My biggest concern would be management/operations. I assume you don’t want to be behind the counter 6-7 days a week? If it were me I’d try to find an owner-operator and maintain your role as landlord, collecting rent once a month and not much more. As far as up-front cash I’d guesstimate $100k to put a full inventory in place. Refrigeration might be anywhere from $10k-$40k or more. I’ve never purchased commercial grade appliances so don’t know for sure, except that it will be expensive. I would also check with the local liquor control board or equivalent to educate yourself on legal requirements. In Colorado I’m not sure the liquor control board would allow the banquet room to be connected to the store. I don’t have any leads for consultants. Laws vary from State to State so someone local would be best.
Best of luck!
All I can say is …AMEN….As a wine & spirits retail in Maryland I am experiencing the very same.
My business partner and I are interested in buying a liquor store in Wisconsin on a small lake.
The actually village is small, roughly 2000 pop. But the area is surrounded by many campgrounds and lakes so it’s a happening place during the summer……winters not so much. That could be a problem.
The store sells bait, tackle, pontoon boat and kayak rentals and boat slips along with having the largest wine selection in the county.
It’s been in business for only 3 years but each year it has grown by 100k, now topping $400k gross in 2015.
They’re asking $350k which includes the building, $80,000 in inventory and all recreational equipment which includes 3 pontoon boats and 5 boat slips.
Not sure yet on cash flow.
This would be the first business we would own so not sure if it’s a good deal or not.
Any thoughts and help would be extremely helpful, thanks!
Here’s how I would look at the deal.
1. You said the asking price includes $80k in inventory. You’d need to verify this valuation (and it should be wholesale cost, not retail value) but let’s take it at face value. By the way, you’ll probably want to plan to take inventory on the eve of the possession change and adjust the final price accordingly.
2. You also need to verify sales volume (ask for tax records, not P&L statements) but assuming $400k in annual revenue, I would say the business is worth no more than $120k.
3. The deal includes real estate. That’s the wild card. What’s the real estate worth? If the real estate is worth $150k or more then you might be looking at a good deal. If the real estate is worth less obviously you should adjust your offer accordingly.
One additional thought. I’m using a rule-of-thumb valuation for the business but this applies to a typical liquor business without the extreme seasonality you’re describing. Sounds like you’ll be completely dependent on strong Summer sales and won’t do much during the holidays, which is typically the busiest time of the year. If something unexpected happens during the summer, maybe a problem preventing use of the lake, your revenue and income could be completely shot down. This is a good reason to be more conservative on the business valuation. For these reasons, maybe $100k or less makes more sense.
If it were me I’d make an offer proposing “Owner Carry”. So maybe you agree to the $350k asking price, offer ~$150k down and ask the current owners to carry (loan) the $200k balance. They won’t want to commit to collecting mortgage payments for 20-30 years and you don’t want to pay huge chunks each month to pay off the note in a short time frame. The solution is to amortize over 20 years but allow the owners to cash out at the end of a few years, probably no more than 5. This means you’ll need to be prepared to refinance in the same time frame.
The advantage of Owner Carry is two-fold. One, you get financing and don’t need to deal with a bank (yet). Two, the owners still have skin in the game and it’s in their best interest for you and the business to succeed.
Hope this helps! Best of luck!
Thanks for the article. Very informative. Grateful if you can advise how did you manage budget on purchases on CGS? Did you manage weekly or monthly? Did buy deals or bottles on spirits liquors? Beers understand deals would make more sense considering lower cost of beer vs spirit liquors. Overbuying can hurt your PL.
I own a liquor store in NJ for approx 10 years and find it very challenging in managing the CGS purchases weekly.
We tried to manage weekly. Didn’t really have much choice because distributors expected weekly replenishment orders. It was a huge challenge to forecast demand or stay within budget. We overestimated 2013 December sales demand and it nearly killed us. It’s really tough because you need a great selection but, at the same time, you need to make money and pay bills. The best solution is to have tons of cash so you can fully stock your shelves and patiently wait for sales to roll in. But, of course, having tons of cash is a good solution to many problems.
Thanks for the comment!
I am considering buying a place in MA. The details I have so are as follows. The asking price is 310k which just included the license and all fixtures/coolers etc, not the 60-80k in inventory. They did 680k last year. The rental is 2600 lease per month but its a NNN- taxes are about 6k, no idea about insurance for the building or the business. The lease has 4 more years and has 2 5yr options to renew.
I don’t know the actual size yet, I am not sure its anywhere near profitable at this price.
My first thought is its way to expensive and should be around 200k. How much profit do you think I could make on this deal? I would have to finance 150k or so with the owner, assuming he would do it. I would then be able to scrounge up enough left to stock the store (70k) if I drained some accounts.
Assuming I paid 200k, what could I make?
I agree. I wouldn’t pay more than $200k. It’s too difficult to estimate profit. Too many variables: # of employees and wages, % liquor vs wine vs beer, how many hours per week are you willing to work, interest rates, trade area profile, competition, etc etc.
I would caution you not to drain all your bank accounts in order to purchase and stock the store. You’ll need a good chunk of cash on hand to help you through the first year or two as you learn how to optimize operations.
I would be willing to work 50+ hours a week. Its a solid location but is currently the 2nd best liquor store in town, another does much better business by the looks of things, and a 3rd may actually do more business as well being in a little strip mall on the way into town. My spot is on the other end of town on the way in from the other side. 3 in total but there is a wine store, and a craft beer store in town as well with about 15k people- well off community for the most part.
Thanks so much!
There is upside growth, the owner is older,he does not do any type of advertising at all. He does not have a web-site of course…If I did it, I would want to do wine tastings, he never does them…I would also like to add a larger selection of cigs, cheese, crackers- I would look at things like total ice sales. If they were decent but not hugely profitable because he does not I would also buy an ice machine to make my own ice, not sure he has that.
It appears as though the place is under agreement (again) I spoke with the owner at length today.He signed an offer the other day for 300k and would not take a penny less he says. No owner financing available. Rent was actually 2400 monthly with another 375 for share of taxes etc… He says his business if roughly 40/40/20 with liquor being lowest of course. It would be easy to check that based on purchases if deal fell thru IF I was interested and I am not. The place had a ton of storage upstairs and down but only about 1000 sq feet of sales space. He only has 2 part time workers for a total of 20 hours combined…he works the place by himself basically.
The 680K includes 3000 wk lottery sales- profits on that are roughly 7500 in mass. So alcohol sales are really only about 530k or so I am guessing.
Whats the value of this place? It won’t be mine…it looks like a dog at these numbers and a job with long hours….
I’m sticking with $200k…but I’m a cheapskate and I don’t know the market in MA. I don’t doubt someone is willing to pay $300k so I guess that’s what it’s worth.
I am considering to buy a local liquor store in Texas doing 550k last year it’s less because they hit the floor and 2014 635 k
Asking 235k and plus 40k inventory and its 1700 sq ft on lease of 3333$ a month
Location is not bad so what price I should offer him ?
How do they explain the drop in revenue? Since revenue is unstable I wouldn’t pay $235k. Rent sounds pretty steep, too. Who owns the building? A third party or current operators? I’m not familiar with Texas liquor laws or local competition so it’s difficult to know an appropriate price. If it was here in Colorado, and all else being equal, I wouldn’t want to pay more than $150k. Maybe offer $135k. It might be worth more if there’s a good explanation for the revenue change.
Sorry they hit the flood last year in May. And they depends on somewhat on Texas state students. As they said .
Building own by a company in Dallas they always renew every 5 years as last 25 years.
They say it’s 25% of margin business.they are going to email me p&l and tax returns on Monday
And 135k with inventory or without it ?
Without. Always keep inventory separate. I learned that one the hard way.
Great article! I work for a company that provides point of sale for specialty retailers, and it’s amazing how many times I’ve ran into this article while doing research for our liquor store clients/potential clients. Good stuff!
I have a quick question for you. I’m in the beginning process of writing a blog post that focuses on marketing strategies/tactics for liquor store operations. You seem like you guys are doing really well over there. Do you chalk your success up solely to location, selection, and customer service? Are there any marketing strategies that you find vital to your stores success? Any marketing successes/failures? Any information would help, and I appreciate your time!
I still own the real estate but I’m out of the liquor business. The person who bought the business seems to be doing well. I think he’d tell you the secret is to have the right inventory in stock. Don’t buy what won’t sell. Sounds simple but it’s surprisingly challenging in practice.
Hi, I’m currently looking at a NYS store that did about 500k last year. Sales have gone up consistently year over year. They are showing a GP of 141K and Net profit of 51,114. I have only seen p&l statements but I am asking for tax returns as well. They are currently asking 125k for the business and an additional 50k for inventory. I’m conflicted on the asking price because of the low net profit. Any advice you could provide would be wonderful.
The price tag sounds pretty reasonable actually. Kind of makes me wonder why are they selling. Is something too good to be true?
If it were me I’d probably get them under contract at their asking price and do some serious due diligence. Be careful to structure the contract so you can still walk away (with your earnest money) if you find something fishy.
[…] For a quick overview on distributors and how to work with them – here is the story of a man who accidentally bought a liquor store when he bought the land it was on, and the les… […]
Hi justin, i have 35,000 in the bank will i be able to open a small liquor store
If you mean start from scratch with new location and inventory and equipment, the answer is no. With only $35k your best bet would be to find a retiring shop opener willing to carry you (meaning, you make a sizable down payment and then pay the balance monthly like a mortgage). Even then you will be vulnerable to cash flow volatility. I would try to pad your account a little further before jumping in.
What would the magic number be in your opinion if it’s not 35k – to start from scratch.
Assuming you lease space instead of buy real estate, I’d guess around $100k would be good. Much better to find an owner of an existing store who’s willing to carry you. In that case $50k might suffice. Hopefully it goes without saying that these are total guesstimates on my part.
My name is Rene I am trying to open a liquor store do you have any advice that could help with persuading city council on why is a good idea to let this kind of business open and maybe what kind of evidence would be needed if I get to the public hearing any information would be helpful
One argument is that you’ll generate tax revenue for the city. Other factors would depend on the city, the neighborhood, nearest competition and a variety of other factors. Wish I could be more helpful. Good luck!
First off thank you for all the advice you are giving out for free on this blog.
I am in the process of buying a Liquor store. It is small and inexpensive $125,000 plus inventory is what I offered and the owner has agreed to that amount. He is also going to carry the inventory which will be around $50,000 to $70,000 at wholesale depending on closing day. I am putting down $25000 toward the business and trying to finance the rest. I could put down more but I want to reserve some cash for things that might come up while running the business. Here is my problem the bank does not want to lend money on this business. They say that they don’t like that the inventory will be financed along with their financing. They also won’t finance the inventory. So do you have any ideas on other forms of financing that you could share with us? I am not sure where to go from here.
Would the current owner consider financing the entire business purchase with $25k down? You could offer to pay a higher than average interest rate along with an option to cash out after a few years, maybe 5 years to give you time to build a bit of a war chest. Otherwise, you’ll probably need to find a business partner or back out.
Hope this helps.
Firstly, Thanks for all the advises that you have been giving to help people understand this liquor business. You are an awesome person.
Just like all others, I also need some advice on buying a liquor store. I am currently looking for a store that has gross sales of 1.5 million/year. gross profit is 375k. rent is 6000. and the store is in a large shopping complex with publix in it.
Asking price is 575k and 150k inventory. It has an owner operator cash flow of 200k. How should i go about this deal? what offer should i make? Do you think it will be a good business for me? I am actually a first time liquor store buyer.
I would be really grateful if you can give me some guidance about this.
I’d offer $425k and try not to go over $500k. This sounds like a pretty high-speed liquor store for your first venture. Would you be doing this alone? It won’t be easy. You might want to start smaller. Or maybe offer to work with the current owner for 1 week to get a better feel for what you’d be taking on before making a commitment.
I am in Australia
my brother is a parallel importer of liquor here in Sydney he has beer and spirits that he is going to help me out at cost price he sells to a distributor in Sydney who then goes and sells to independent liquor shops
I have just bought a liquorshop that grossed 700,000k last year his gross profit is 3000 pw and net income is around 2000 pw I bought it for 80,000k now I want to know what do you think I should do to hit the local market should I sell the products that I am getting off my brother at abit above cost to bring customers in or should I run specials on johnnie black and corona because im in an area where these are the most popular drinks
and should I start distributing products to liquor shops myself what would you do in your experience I can also get my own supply from overseas but I would be eating into my brothers margins by the way my brothers business has been open for ten years and profits around 3 million a year so he is very well off
would you start wholesaling if it was you
I don’t know the laws or the market in Australia well enough to provide useful guidance. My only suggestion would be to focus more on making your customers happy and less on moving product from your preferred supplier, even if said supplier is your brother.
how would you double your takings in the shop if you were in my position ?
for example im getting corona at 43.00 inc taxes my brother is selling contianers at 45.00 inc taxes
Can you email me your phone #? I have several questions to ask in regards to potentially opening up a liquor store!
You can send questions via email by using my contact form below. I prefer not to give out my phone number.
Hi Justin! Very informative blog post!
I’ve got a question not related to alcohol. I am involved in a startup that wants to get a product (drinking game) into a distribution network for liquor stores. My question is, how do you supply your store with product other than alcohol? Do you purchase everything through a distributor?
Also, does the distributor attempt to sell products to you that you don’t currently have? For instance, does the distributor give you a call and say “hey, we’ve got this new thing and you should give it a try”?
Thanks for your time Justin, hope to hear back from you.
All alcohol must be purchased through a distributor. Non-alcohol items (e.g., soda, limes, mixers, olives) can be purchased wherever. Distributors will push their new products, definitely. For something like a board or card game it would be challenging. I think you’d have to go direct to store owners. I doubt a distributor would be interested…but you never know. Perhaps you could get sponsored by a big distributor? They like to give away swag and other promotional items. But then of course you’d have to sell at wholesale prices and use their branding.
Thanks for all the advises that you have been giving to help people. I’ve made an offer (250K) to a liquor store gross sale 600k was asking for 300k not including inventory (50k) in queens NY. and owner has accepted the offer. Rent is $3550 for 1250sqft with a basement. landlord willing to extend contract for 13years.
After readying your advises, I feel like my offer are way too high, we haven’t signed any contract yet. do you have any advise for me what i should do at this point. should i walk away from the deal? It is really good location in front of collage dorm and its close to my house.
Thank you so much
See if you find any information on comparable sales in your area. Maybe the price you’ve agreed upon is fair. Every State/market is different so what you’ve read here may not apply. If you discover you’ve over-priced, perhaps try to include inventory or other concessions. Is the owner willing to carry or are you paying cash?
Gross 100,000 a month, 61 year old business and building grandfathered in , with fuel and tobacco. $298 price per square 25% down seller carried finance is 985,000 too much?
Hi Doug, can’t say without more info. What is your estimated value of the real estate? Best, Justin
Hello attempting to see if asking price is too far out. 3300 square foot building, $298 price per square foot, 221, 000 value of building and land, 61 years old building and business. asking is 25% down seller carried financing 985000,, 100,000 monthly gross. I know with or without inventory. currently owner absentee but would run myself with daughter. your thoughts about this thanks doug
Doug, if I understand correctly the owner is asking for $221k for the building/land and $764k for the liquor business (total $985k). The liquor business is grossing approximately $1.2 Million per year. Assuming the $221k is a fair value for the real estate, I think a reasonable total price would be ~$550-600k. Probably closer to $600k for owner carry. Maybe there are special considerations that make it a good deal but, for me, the price is way too high. Best wishes, Justin
We own the shop an property an are on the main corner of a 150k county. That is a main thru way to one of tn largest vacation areas. The county has set regulation that there can only be 6 liquor stores . I have the opportunity to be one. An at this time we are planning to in large the building size from 2000 sq ft to 8000 sq ft. 2 floors. The tn laws I have read states the liquor sales an storage can only be on the bottom floor . city government requires taxes to be Payed on liquor purchased at the time of delivery. I own an opperate a business that will be moved to the second floor an will generate the residual to cover all business exspences. My question is most banks don’t like to loan money for inventory. An most insurance companies won’t insur a liquor store? How did you get that covered ? I have owned an operated 6 businesses . but this has area’s that seem to favor local goverments before you can even open up ? Also we have mini brewer’s in our area that want to sale an promote their products at our new location. Do you see any set backs to this area of sales ? Can we give samples of mini brewer’s beer on site ? Local Moon shine also ?
In Colorado you can’t finance the purchase of liquor inventory. I bought insurance to cover the building and I paid extra to insure lost business revenue if something bad happened that would force us to close our doors. But the policy didn’t cover any inventory losses.
Because alcohol is heavily regulated in most states you have to wade through plenty of bureaucracy. Just part of the deal if you want to be in the liquor business.
Local brewer or distiller promotions (tastings, etc) are generally good for business as long as everyone is following all state and local regulations.
Hi Justin and everyone else for all this excellent information.
I live in Los Angeles, I work in a bank as a teller for years and finally saved up some money to buy my own business as I get old. A friend suggested a Liquor store that is in business for the
past 10 years. There is a CVS and 2 other liquor stores about 5-6 blocks away and there is another
supermarket coming up in the next 10 days to the south. There is also Total Wine and Ralphs about 1/2 a mile east. I am very confused to go for it or not. I am not a drinker and don’t know much
about Beer, Wine and hard Liquor.
Where do I learn more about the types of Beer, Wines and Liquor?
My advice would be to find a part-time job in a liquor store so you can learn the ropes on somebody else’s dime.
I’m looking at purchasing a store in Denver.
Asking price is 325k with 300k in inventory. Sales are 1.4m. They say cash flow is around 180-190. I plan to run this passively and hopefully pay myself 80-90k per year.
Your thoughts on the deal? Am I over paying? Thank you in advance for your feedback.
Actually, I think the asking price is fair. Maybe even low which is concerning. The seller may be terrified of the ballot measure likely coming up for vote in November that, if passed, would allow grocers to carry full strength beer and wine. Is the store near a big grocery store? You should probably look into the ballot measure and bring it up with the owner. I wouldn’t be too certain about the “passive” role. You’d need a great manager you could trust completely. Even then, there will be fire drills requiring your presence. A store doing $1.4M probably has many such drills. Inventory and cash flow will be a challenge.
One more if you don’t mind….?
Owner finance with 100k down
Sales are 900k
Cash flow is 150k
Smaller store with 80k in inventory
I’m looking at liquor stores as a business to engage in part time but not actually work the counter in the store. I’m in California where hard liquor is already sold in grocery stores so I would think that impact is already built into the numbers for any liquor stores out here. Here is one I’m looking at but still need to find out how many hours the owner operator spends at the store and if I can pay to cover the hours spent at the store as a clerk or whatever. What do you think of these numbers/price:
About This Liquor Store – Excellent Location Business For Sale – San Jose – Bay Area:
Excellent Liquor Store | Located on a major high traffic road | Business is Surrounded by Commercial & Residential Area | Check Cashing opportunity | Net Sales $85K/mo at 35% margin | Other Income $4,142/mo from check cashing, lotto and other | Total Expenses including payroll $13,350/mo | Net Profit $20,630/mo. | Asking Price $549,000
LIQUOR STORE ON HIGH TRAFFIC STREET
Square Footage: 3,000 | Parking: strip mall | ABC License Type 21 | Days Open: 7 | Hours: 8am-12am |
Asking price – $549,000
Inventory – is not included in the asking price
Business Net Sales: $85,000/mo. @ 35% margin
Check Cashing: $2,100/mo.
— GROSS PROFIT — $35,000/mo.
Payroll – $4,500/mo.
Rent – $6,900/mo including NNN charges
Utilities – $1,300/mo.
—- TOTAL EXPENSES— $13,350/mo.
5 Years plus 5 Years option
It sounds like a good money maker but, for me, the asking price is too high. If I understand your description it sounds like about $1M in annual revenue? For that volume I’d want to pay no more than $350k. Liquor store ownership works best as an owner-operator set-up. That doesn’t mean your plan won’t work but I think it would work better if you planned to be there regularly. You probably have enough volume to hire out the cashier/clerk work but I think you’ll want to be closely involved in working with distributors and purchasing inventory.
And here is a second one listed by the same broker that is WAY more expensive for some reason:
About This Liquor Store Business For Sale – San Jose:
Nice Store | Buyer can grow sales by introducing other merchandise | Business is surrounded by residential & commercial areas | Check Cashing can be brought back | Sales $105K/mo. | Other Income $4,500/mo | Total Expenses $10,600/mo. | Net Profit $26K/mo. or $317K/Year | Asking Price $925,000
REASON FOR SALE: Dissolving partnership.
Square Footage: 2,000 | Parking: Front of store | Licenses: tobacco, ABC Type 21, | Days Open: 7 | Hours: 6am- 12am
Asking price – $925,000
Inventory (Est.) – $80,000 – is not included in the asking price
Business Sales – $105,000/mo. @ 31% margin
Check Cashing – Can be brought back (use to be $2K/mo. profit)
Lotto – $2200/mo.
ATM – $100/mo.
Western Union $300/mo.
————— GROSS PROFIT — $73,000/mo.
Rent – $3,838/mo. including NNN charges
Utilities – $1,600/mo.
Other Miscellaneous: $770/mo.
—————- TOTAL EXPENSES — $4,290/mo.
NET PROFIT OR CASH FLOW
$26,400/mo. to Owner
Here it looks like $1.25M annual revenue. For me that would translate into a value of about $400k, less than half the asking price. Either they’re just fishing for a sucker or hitting their own supply too hard. But, who knows, maybe the market is different in California and these are bargain prices.
Hello Justin. I’m in Florida looking at beer and wine only. 1st business but they basically are giving it away. 35k asking price with 1800 rent for 2 years. Does that sound to good to be true? They gave me father is sick 2 stores story. It’s nice and safe. Very little inventory. Sales are shady only 6 month of excel type documents. No debt on the company
Hi Derek, how much revenue do they claim in the past 12 months? Best, Justin
Around 40k a month give or take a few. But this is on an excel doc not taxes. It’s a fire sale they are calling it. Said the family can’t run two stores so they want out of the lease
I recently bought a liquor store and wondering if there is a recommended POS for liquor stores.
I want to POS which can help me in ordering as SKU’s for liquor store are exceptionally high.
I did some research and seems like square POS is capable of inventory management and will alert if you are running low on inventory.
And square also save emails for customers and we can send them marketing emails as well along with promotional offers etc.
On day 1 of operations we started with Square but at that time they didn’t offer any sort of POS system or inventory mgmt. We ended up using a Mac-based program called LightSpeed. It was pretty good but reporting was completely inadequate. Maybe it’s better now.
I would keep going with the Square system until you run into a major problem. They will all have strengths/weaknesses and Square is likely to be significantly less expensive than alternatives.
I am a student at Ohio University and we are creating a Business Concept for an alcoholic beverage store. It would be awesome if I could ask you a few questions and just take up a little bit of your time. If you could shoot me an email I would love to throw a couple questions at you.
Hi William. Could you submit your questions here so others can see the discussion? Best, Justin
How complex it will be to open a E-commerce site to distribute liquor in all over country?
I don’t think it’s possible.
We (me and my husband) are trying to partner up with my sister to buy a liquor store and we are trying to put an expense sheet together and just wonder if you can help me with the payroll questions.
What is the overall average payroll expenses (percentage per gross sales) for a 2mil gross sales?
How much does a store manager make? My sister will be just investing, she will help out during holidays or few weekends but my husband and me will be the one managing the store and work at the store.
There’s no rule of thumb that I can think of for payroll because it depends, obviously, on how many employees you have and how much they will be paid. In Colorado I’d say a Store Mgr could make anywhere between $30-50k depending on location and store volume. For a $2M store my guess is you’ll have close to $200k in free cash flow to divide among owners and employees. Figure less in years 1-2, maybe more in years 3-4 if volume is steady or increasing. Hope this helps. Good luck!
I stumbled upon this blog and thanks so much for all the gracious advise you are giving out! My husband and I own a micro-distillery in Oregon. At a glance it appears the regulation structure is relatively similar to Colorado. Judging by the Ducks hat you can probably confirm that. We have a national distributor but a this point, for now, our home state is left to us. This may change in the future but we enjoy getting out and introducing folks to our products which we are, of course, very passionate about. So far, this has mostly consisted of having a tasting booth at various events across the state. My question to you as a liquor store owner, is do you have any advice for us as we begin the process of contacting individual liquor stores here in Oregon to discuss our products and offer our time to come and provide some tastings to their patrons? Is there sort of a standard way most distillery owners do this? I’ve just began the process, but so far I have been calling first with hopes that I can talk to owners/mangers a bit, and set up sending them some information regarding what we are making. With stores that are farther away, my hope is that I can get them to order cases of product ahead of time, so that when I do make a trip to their store, it’s to provide tastings to their patrons for a few hours and help move some product off their shelves. I’m wondering if I should be making a couple of trips however and instead of the phone call, going in person a first time to present our products and then a second time for tastings. I’d appreciate any tips you are willing to share!
Thank you kindly and cheers, Amanda
I think going “door-to-door” and offering to do tastings would be effective. Liquor store owner/operators don’t have time for phone calls during business hours. This would obviously be time/travel intensive to cover the State which is one reason why most distillers end up working with a distributor. Good luck!
Are there currently any good passive ownership businesses in Pueblo? I’d like something simple, inexpensive with a decent cash flow. Perhaps a carwash or Laundromat? I’ve heard about “ice” box machines, do you know of or heard anything about them?
Do you have some websites you could recommend I look at for opportunities in Pueblo or Southern Colorado.
Hi Jay, you can check for business listings on BizBuySell.com but most will be owner-operator situations. The best opportunity for a passive ownership business, in my opinion, is real estate. Rental houses, apartment buildings, commercial buildings, etc. I don’t know anything about ice box machines. Best wishes, Justin
Word up Justin !
Congrats for the blog. 😉
Does liquor store owners get together : so one buy I dont know 120 bottle of Bombay and the other buy 120 of Smirnoff and they split the cost 50-50 so they have better price, low inventory and more variety ?
Does the Bank do SBA for E2 visas?
I’m looking to buy in Fl !
Hi Pierre, I’m sure it happens but I think it might be a violation of state liquor law if done on a large scale. I seem to recall an annual $2000 limit on purchases between retailers. Best wishes, Justin
Justin – Thank you!
load of great info here. I could not find a pure “wine” store in the list of comments. So, I would ask you the following. How would you evaluate the following business.(in FL)
2015=$413K Gross Wine sales + $2K goods not taxed.
2014=$417K Gross Wine sales + $1K goods not taxed.
2013=$348K Gross Wine sales + $1.8K goods not taxed
Rent @ $2200/month – 1 employee @ 20K\Year
Profit margins on wine sales are generally higher than beer sales so $400k in gross is worth more than $400k at a liquor store with heavy beer sales. But I’m not really sure how much more. If it were me I’d probably offer $120k + inventory. If the seller says it’s worth way more ask him to help you understand why sales were flat last year. I’d be worried about limited upside for growth.
thank you for the load of info. When buying a business, does your rule of 25%/30% of the Sales also applies to a wine shop? I’m looking at one, and 98% of sales are wine, 2% gift card, finger food.
Yes, I think the high-end of the ratio is the right starting point. You might consider this an opportunity to bring in beer/liquor inventory as a way to grow revenue. People shopping for wine are likely to make convenience purchases of standard beer and liquor offerings from time to time. Might as well accommodate them with a limited inventory. Best wishes, Justin
Great stuff, impressive that you are transparent and willing, really appreciate it.
How has Your Choice Colorado impacted your business, if at all?
It removes uncertainty and that’s a good thing. I’m not sure it’s the best compromise they could have come up with but it’s certainly better than allowing grocers unlimited access to the market. It also creates value for some liquor store owners in what would otherwise become vulnerable locations (e.g., liquor stores next to grocery stores). I think it will work out okay.
The new legislation has minimal impact on me because I sold the liquor business a while back and my only connection is via real estate.
First i want to thanks for all your info and caring about people. i have noticed that you emphasis on having a war chest of cash after purchasing a liquor store. what is the average war chest you recommend having on hand? 10K, 20K, 30K……
Good question. More is better. I haven’t thought about a specific amount but I’d say 10% of previous year’s annual revenue would be a good target.
My wife and me work in Houston and would like to move to Denver Area as we are almost done with the Texas heat after living here for 10 years :).We are both technocrats/dink/high income big four consultants and would like to open up a liquor store somewhere in Denver where there is growth potential.My wife would be quitting her job to run this startup full time and I would be able to help on the weekends as well.We have over 300k cash that we would like to turn into a 90k net a year.
Can you please advise on which areas we should be narrowing down to-Boulder,Golden,Lakewood,Westminister are the first ones that come to our mind but we are open for suggestions.
I think the areas you listed are all good prospects in terms of high growth areas. I’m not as familiar with the Denver market so I don’t really have an insider scoop for you. I think you might want to include Colorado Springs. Denver housing prices and traffic have gotten a bit out of hand and I think Colorado Springs (and Pueblo) will benefit long term if Denver continues to morph into LA.
Justin – I started a store from scratch in a new location 6 years ago – we broke a million last year – carry $200,000 in inventory – 6000 sq ft building – 1500 additional income space – 3500 on the floor including 12 cooler doors – beer cave and wine cave – 1000 in storage – make our own ice – retail ice cooler – concrete parking lot – three cash registers – drive through window – 75% of our volume is spirits and wine – many in the boutique category – high traffic count close to country club and college with expected growth – 4 employees – I am thinking about retiring and considering selling the store to someone who would enjoy it as much as I have – I am in Arkansas – interested to know what you think is the best venue to advertise business for sale and pricing of same
Hi Eve – congratulations! No easy feat creating a million dollar business from scratch. Well done! I see a lot of liquor stores for sale advertised on BizBuySell. You could also advertise with a local realtor and list the business for sale. Do you own the real estate as well? As far as pricing the business, I would probably ask for $350-375k + inventory. I think you can justify the higher multiple on revenue given your 75% volume in higher profit margin skus. That said, I’d probably advise you to take any solid offer over $300k…especially if you don’t own the real estate. Hope this helps. Good luck! Best, Justin
You should look into buying with a Co-Op, buy with other stores like the big guys do, that way you’ll be paying a better price for inventory…if none exist in Colorado, like here in Jerzzee, Maybe you could look into starting one, as per the rules of your local ABC of course. Good Luck!!
Great idea. I’m not sure it would be legal in Colorado but worth investigating.
I posted on your blog few mins ago. It seems it didn’t get through.
Just checking to see if I can post this message or not.
Trying to post second time…..
Your blog and posts are extremely valuable. Excellent work and thank YOU.
Here is my situation if you can PLEASE advise and shed some insight.
Me and my friend wants to buy a property + liquor business in Newark, NJ. The area is all black community. Avg salary is low (as per city data). The current owner is running this for 22 years and the business is 40 years old.
We are buying this for the first time. If you can please help us with some guidance?
Here are the details:
– 2 Apartments:
– – 4 bed/2 bath (2nd Floor – Renovated completely)
– – 2 bed/1 bath (1st Floor)
– 2 Business:
– – Liquor Store
– – Check Cashing (Separate Entrance – Side Door)
– – Good Business – Regular customers
– On-site parking
– Corner Lot
– Price: $475,000
2) Liquor Store:
– $750,000 per year – 25% margin
– Lottery commission – $35,000 – $40,000
– License Type – Broad “C” (32) – Best license type
– 22-year operation
– 4 Employees (Absentee Operation)
– Walking Cooler and Reach-in Cooler
– Ice maker & ATM
– Basement – Extra Storage
– Inventory: $100,000 – $150,000
3) Check Cashing: (very valuable license)
– Separate Operation – another entrance
– $150,000/wk./volume @ 2% charge
Price for Business (Liquor + Check Cashing): $695,000
Total Price (Property + Business): $1,170,000
=== Now more details >>>>>>>>>>>>>>
• Size of Store EST: 1,500 SF + Basement
• Located on Residential area – Safe Area
• Parking: On-site and Street parking – Corner Building
• Well known Liquor store – High Margin
Income: (Annual Sales EST: $750,000) (Excluding Sales Taxes)
. Annual Sales: 750,000
. Cost of goods: 562,500
. Gross operating profit: 187,500
. Operating Expenses: (Estimated)
Annual Rents: 24,000 ($2,000/Mon)
Payroll: 78,000 ($1,500/wk.) (4 full)
Payroll Tax: 10,140
Bank/Credit Card Fee: 624
Total Operating expenses: 134,049
• Gross Operating profit: 187,500
• Lottery commission: 35,000
• Cigar rete Rebate: 758
• ATM: 1,200
• Other Income (M.O/M.G) 5,170
• RIP: 25,000 *
• Total Gross Income: $254,628
• Total Operating Expenses: 134,059
Cash Flow: $120,569
Check Cashing Profit: 120,000
Total Cash Flow: $240,569
• Business has been established for 40 years, and current owner operates for 22 years. (Note-No Problems for 22 years – VERY SAFE AREA)
• Well known Liquor store (Type #32) – Broad “C” – Best License
• SAFE area
• Very HIGH MARGIN STORE – a lot of loose items
• Extra storage room at the basement
• Nice Reach-In cooler
• Nice 4 door Walking cooler
• ATM, Security systems and ICE MAKER
• Business Hours: 9 am – 10 (Mom –Sat), 12 pm – 10m (Sun)
• Inventory: $125,000
• Very profitable & Unlimited Potential for new owner/operator
• Extra Service:
– Bill Payment, Minute Add
Looks like an exciting opportunity! What sort of guidance? Just wanting to know if the price is fair?
Yes. If the numbers/price is fair or not?
Anything in particular (I have notes from this blog already) to look into this property and business?
Also – we are little concerned as the business is in a black community which I am not that used to living/seeing daily.
We are planning to hire a manager/extra help to manage this property.
I would start by getting a local realtor to do a market analysis on the real estate. To me, the liquor business is worth about $225-250k + inventory (at wholesale cost, not retail). But there could be good reasons it’s worth more. Maybe New Jersey has different regulations that make the license worth more. I have no idea how to value the check cashing business. If the real estate is worth $475k and the liquor business is worth $250k we’re up to $725k. I guess that means they think the check cashing business is worth another $400k or thereabouts? Or is inventory included in the $1.1 Million asking price? I would ask for a breakdown of the various components so you can understand their math and negotiate with a more complete understanding of each piece of the puzzle. Good luck! Best, Justin
Thank you Justin for your guidance and help. Much appreciated!
Thanks and take care!
is this a legit site or brokers to buy liquor business?
They are asking to pay money to register for premium service etc.
I have no idea. You might compare pricing and traffic with BizBuySell.com.
[…] Blog Post […]
Thank you for your story. I feel that when you look at a business as doing the best for your community, you can’t help but be “in it”. When you are the face of the business it holds you to a higher sense of responsibility. Thanks again.
Leads Indeed http://www.leadsindeed.com
Thanks for your comment!
In the state of Ga, is it legal for a distributor to make you purchase one item, in order to have the option to purchase another item?
Sorry, but I really have no idea.
Where I live just went wet. We were the largest dry city in the state. The store on the city limits does 300k per month in beer, liquor, snack foods. My question is a first to market a good approach here? What margins could I expect on beer/liquor for financial projections?
Don’t really know about the first to market approach. I assume that there would be an advantage for a “first mover” but I don’t know your market or legal framework. Generally, margins on beer are about 10-15% and margins on liquor/wine are about 25-40%. Hope this helps.
[…] mild taste that drinkers will like to consume more. If you need good information you should visit this site here. It is a big challenge to every liquor industry in selling their liquor product; big name […]
Hi Justin.. I am looking for a second ‘life’ after retiring from 25 years in the army. We have narrowed our choice of industry to just 2 or 3, with liquor stores being one of them (we live in Washington, DC). Your article is very informative.. and I wonder if you could recommend what to look for as far as financials when vetting a potential purchase? Consensus of articles say to value sale price at roughly 45% of gross revenue, and to expect roughly a 1.7% net profit if the store is manager run. Does this sound about right? As we look at stores, the claims of net profit seem to be highly exaggerated if this is the case.
Could you share your sources? Might help others. In my mind the rule of thumb for valuation is closer to 30% of gross revenue. This could be higher if the value of the license is worth more than it would be here in Colorado. Same if a store does a larger share of liquor or wine instead of beer. Not sure about the 1.7% net profit either. Generally, I don’t find net profit figures to be terribly reliable. Too much depends on the operator.
I think gross revenue is the most important figure. Revenue trend over the past 3-5 years is important too. That said, at the end of the day, you have to use some business savvy and street smarts to assess the opportunity. Every deal involves risk. I recommend asking for owner financing; if for no other reason than to see/hear the owner’s reaction. If an owner is willing to provide financing that’s a good indication of their belief/confidence regarding the future of the business.
Hope this helps.
Justin.. thank you for the response, your insights/experiences certainly help.
As for the valuation assumption, I looked at two sources:
-SBA: The Small Business Administration estimates that the rule of thumb valuation method places the value of a liquor store is 40 to 50 percent of the store’s annual revenues. Multiply your total by 45 percent. Add the value of your inventory and equipment to the total.
-BizStats: Liquor Stores 40–45% of annuals sales + inventory
Stores in DC in general are advertised at 50%(up to 60%) + Inventory. With the high rents in DC, it’s challenging to find how they are making their claims of net profit. When we ask to see verified records that indicate claimed net earnings, we consistently hear “well, a lot of our business is cash, so we don’t report all of that income, and that is where the net comes from”. But to us.. the money still exists, and can be accountable somewhere. The “trust me, you’ll make money” mantra is getting old.
The net profit number came from a SageWorks industry survey in Forbes from 2014. The 1.7% net profit margin is for Wine/Beer/Liquor stores.. adjusted to exclude taxes and owners compensation in excess of their market rate salaries.
I agree net profit is widely variable due to operator effectiveness, accuracy of books, etc.
We have actually focused our search on listings with seller financing. We are looking at it less from a needs-based reason, but more for the current owner having some ‘skin in the game’ as to the future success of the business they are selling.
Thank you again for your insights.
Hi Justin- I am looking for your advice on a startup liquor,wine, beer store. Specifically looking on how to forecast total revenue, cashflow and minimum revenue to cover expenses.
Goal: to be profitable in 1st year. Operating partner has 5 yrs of experience and he will be main person in inventory/buying.
Estimated Expenses about 182,000 : lease= 60,000(for 2800 sqft) Payroll= 70,000( operating partner and cashier + helper); CCard= 24,000(approx)
Investing about 300,000-400,000 on inventory and 50k in FF and 50K in Working Capital.
Store is near a cross-road, which is going to be a 4-lane road from 2-lane road. 3 miles in either direction is Kroger(they do not sell liquor).
3 stores in 5 mile driving area.
Area Population is mainly residential with avg income of $105,000/-
Not possible for me to come up with revenue given this info. Too many critical variables. Location quality and competition impossible to judge without a lot more info/context, like a detailed map. I would let go of the “profitable in 1st year” goal. The question isn’t profitability, the question is how much can you and your partner pay yourselves. My guess is it would be pretty meager in year 1 but improve from there. And there will always be tension between what you can make and how many hours you want to work behind the counter. Sorry I can provide more specific info.
Justin was messing around the net and saw your blog. Great stuff and advice you have been sharing the last few years. I wanted to add the most famous slogan of all is till true Location, Location, Location!
I own/operate 2 package stores here in Florida one is a stand alone with a tavern as part of the building and the other is in a strip mall anchored by busy Publix grocery store. We have a very tough environment here competition wise with all the Big Box stores selling liquor with Total Wine and Walmart aggressively expanding hence my “location” theme. Publix which is still family owned has entered the liquor business as well but are selective with their locations and do not build near churches or schools. This has allowed Independents like myself to fill a void and be connected to a great anchor. Fortunately the license we hold is called a 4COP which allows you to have a package store and bar/tavern under the same roof and use the license for both.
The in-line store is netting about 9% now which is about the max I think I’ll get out of it working 2 days per week there however it has been averaging a 5-7% annual growth in sales since it opened in 2012 so each year the actual net dollars are growing. The stand alone would be clearing about 16% net but I still have debt payments with a few years to go and concentrating on getting that payed off and living off the other store. It is located on a major connecting road between I-95 and the Florida Turnpike next to a McDonalds so once again Location is the name of the game. I do 2 days a week there as well and float where needed on the 5th day with weekends off now thankfully except this past Holiday season when Christmas Eve and New Year’s Eve were both on Saturdays!
Last thing along with location is competition you have to do thorough research on current and more importantly future competitors who could open near you. Owner-operator is the only way to truly make money in this business unless you have a superstore which is only possible in certain states for Independents. Other simple things I can suggest are a quality POS system which you MUST utilize for inventory and shrink and have a strong cash control policies in place! Also develop a rapport with your distributors. I worked for 22 years for a liquor wholesaler which is how I know to handle them as the retailer. Beginners don’t have that luxury and they can break you quickly with bad deals. Be tight with your money unless you have to fight a Big Box then pick and choose what brands to battle with. Great service and convenience will keep people coming back even if you are $1 or 2 more than a Big Box. I’ve witnessed it first hand!
Thank you for sharing your knowledge and experience! I am certainly also a believer in the location, location, location mantra.
Do you have any specific suggestions for dealing with distributors? How can owners without your experience avoid bad deals?
Thank you very much for sharing your knowledge. My husband and I are planning to open a liquor business in Maryland. We don’t know much about liquors, wines, beers. We just know the very basic brands. Should we hire someone with indepth knowledge about alcohol?
We have a small saving of about 75K cash flow, should we invest in this business venture? Please give us your advice.
It doesn’t sound to me like you’re quite ready. My suggestion would be for one or both of you to get a job, even part-time, as a clerk in a liquor store. This will help you learn more about the business while earning a few bucks along the way. I don’t know what sort of purchase arrangement you’re considering but $75k sounds pretty light. Maybe work for a year or more in the industry and save more $$ before you dive in. A wise man once said, “You’ll always run out of money before you run out of good deals.”
[…] The 3 Lessons I Learned After Accidentally Buying a Liquor Store […]
Thank you so much for all of your valuable information. It has been very helpful reading through all of the posts and reply’s. My father and I are very interested in purchasing an existing liquor store. No Real Estate included. To outline an example of a listing that has caught my eye, I thought I would share the info and ask your opinion if you don’t mind?
Asking price: $275,000
Gross revenue: $800,000
Cash Flow is listed:$170,000
Listed as 2PT Employees – 1PT Employee
We have the means to put 30% down for our SBA loan. However, this depletes both of our savings, and we are looking for stable income for us both, especially as he rounds up on retirement out of the concrete industry.
What is the best way for me to analyze this deal? I have a goal of approx: 30% ROI and wanted to ask if given our current financial situation, if we should have further cushion for inventory, or if Gross Revenue covers those costs.
Any further Basic “Liquor Store Guidelines” to look for as we analyze deals you would be willing to share would be greatly appreciated!
Again, thank you for all of the tremendous info you have shared on this thread over the years!
It’s too difficult for me to assess a deal without knowing all the details. But, from what you’ve provided, I’d say it looks okay. I would probably offer $200k + inventory and not pay more than $240k. I would also insist on paying the inventory cost, not any arbitrary assigned value. If you’re borrowing and then won’t have any cash cushion I would advise you to wait until you can afford to finance the deal and still hold back some cash. You need to be able to ride through ups and downs while you learn the ropes. Instead of going through the SBA you might instead make your offer subject to owner financing. When buying it’s a good idea to force the seller to keep some skin in the game, ensuring a smoother transition.
Your blog post and the Q&A and comments associated with it has been extremely eye opening. I am myself thinking through investing in a liquor store that will be operated by a couple of friends. This is based in a KCMO suburb. They want me to be involved from an investor perspective to provide cash for initial inventory. The valuation is estimated to be $808K based on net present value and future cash flow.
$350K in non-operating asset (real estate)
$112K operating asset
$346K in goodwill – WHAT IS THIS?
They have proposed that I invest $50K which they will pay back in 5 years at 9% and 5% equity in the business. I do not have to be associated with day to day operations. This is perfect as I can continue my day job and life. I feel this deal is not doing any justice to my ROI. From your business experience in this domain, I’d appreciate your thoughts and opinions.
The $346k in goodwill is the value of the business not including fixtures, inventory and real estate. Basically, it’s what you’re paying to take over a business with an established customer base and track record of bringing in revenue. It’s also sometimes referred to as “Blue Sky” and should be based on annual revenue. If the estimate of goodwill is $346k then I would assume annual revenue would be around $1.2 million. If it’s less than $1 million your partners might be paying too much. I would ask to see 5 years of revenue history.
If it were me I might ask for a piece of the real estate instead of 5% of the liquor business. Often real estate would be held separately in an LLC and the business itself would be an S-corp. You should ask them to clarify how the business ownership and real estate ownership will be structured. The interest rate (9%) is good but it is a risky loan. Liquor inventory usually can’t be insured and if your partners stopped paying you, for whatever reason, it wouldn’t be easy to get your money back. Proceed with caution.
This thread is super helpful.
I bought a liquor store in Georgia almost two years ago. It was in distress. We have increased gross sales 15-20% each month compared to the previous year.
I have had to continue to put money in the store. The inventory has grown considerably.
1) grocery stores have all sorts of marketing to predict best product placement.
I am sure there are data related to liquor store product brand placement, but I can’t find this info. Which bottles sell better on what shelf, what brands in the front of store? etc..
2) we don’t have a big wine business, and would like to grow this segment of my business, any suggestions. Thanks,Tod
Congrats on your purchase and sales growth! I’m not aware of liquor product placement data. If it were me I’d visit the liquor department of nearby grocers and see how they have stuff arranged, then copy their approach to the extent possible. I’m not sure what to suggest for growing your wine business. Maybe talk with your wine distributors and ask them to run some tasting events in your store. Capture visitor emails and promote wine offerings that way? Your store trade area may not support big wine sales so you may have better luck focusing and expanding on the categories already selling.
Thanks for all of the information in this thread. I’m eyeing on a store and here is the info. Located in a strip mall with no competition within 2 miles of radius. I was able to confirm with the local distributor who services the account that it is the largest in the area.
Asking price: $1M
Gross Revenue: $1.5M
Cash Flow is listed: $260K
Broker firm wants 10% and also told me they have bank ready to finance the amount and work with SBA (this part I’m not sure). The broker told me the seller will not pay the individual brokers commission on inventory so he is asking me to bake that into the offer. The broker also saying the asking price is a fair price based on the valuation and the SBA lenders’ confirmations…but the owner is willing to negotiate but any delayed (beyond summer) he will not negotiate.
I would love if you chime in and would like to hear your thoughts based on your experience.
I wouldn’t pay more than $450k + verified inventory cost. This “broker” character sounds like a con man. I wouldn’t believe a word (or a number) he says. Good luck.
Thanks for your feedback. The broker also shared his firm’s analysis and financial tables. Also a sperate price evaluation analysis deck…on why this business is worth the price was given. It’s like they are pushing me to pull the trigger.
The broker’s company already had a bank ready with the asking price to finance. This I found very confused. I have not even submitted the offer or even tried to negotiate.
I will keep doing my DD and focus on 25-30% range.
We are looking to buy a small wine store in Southeastern NC. The owner is selling for health reasons. The store is open to 5-6 pm during the week and until 7:00 on the weekends. Annual sales were in the upper $200k’s over the last couple of years, however the business operated at a loss for due to high admin expense. The owner is asking $100k, which includes inventory of 65k. He hasn’t done any advertising and isn’t on social media. We thought there could be potential to increase sales by staying open longer hours and advertising. Do you think it is worth the risk?
Not a bad price if the inventory valuation is based on wholesale cost rather than retail price. I would negotiate the price separate from inventory. Then pay the cost of inventory on hand at closing (plan to tally inventory that day). So, based on these numbers provided, I’d offer $35k + inventory cost. Good luck! Best, Justin
Thanks so much for your informative and valuable content on this topic! I was curious what your thinking is on the recent liquor law changes in 2016 and how this will impact the industry in Colorado?
Your question is probably worthy of a separate blog post. I don’t want large chains to control liquor retail in Colorado. I think it will hurt the State’s economy long-term. That said, the provisions are phased in slowly so I suppose it could be a lot worse. Could be an opportunity for small businesses who want to become larger.
Thank you for sharing your valuable insights! We are interested in buying a wine store in se North Carolina. It is in a growing area. The owner is selling for health reasons. He has cut back on store hours over the past two years and sales have suffered as a result. Sales are in the high 280k and in is operating at a loss due to high owner travel. He is asking 100k for the business, this includes the cost of inventory (62k) and furniture & fixtures (31k). What do you think, is it worth to take the chance?
The price sounds good but I would suggest negotiating inventory separately, with cost of inventory tabulated and paid at closing. Best wishes, Justin
I have expressed interest in buying a wine shop. The owner and I haven’t really settled on a price. He originally quoted $90k, I total him the $90k could be doable, but then he changed the price to the 90-110k range. I never said yes I would buy it at the higher price. Since we never settled on an exact price do we have a contract? I’m leaning towards not going by ahead with the purchase. Do I need to get an attorney involved? If you don’t have time to answer can you email your telephone number so we can talk?
Sorry for the slow reply. No, a verbal contract won’t hold up. You should ask him for a written sales contract. And find a lawyer, or in some places a Real Estate Broker will suffice. You need someone to review any contract before you sign, especially since he’s being slippery on price.
This is “the” page for buying a liquor store. A big thank you for helping out the community.
I’m trying to gather some KPIs on liquor stores:
average basket size,
monthly foot traffic,
average consumer visits/month
Would you be able to help me out with what comes to mind (if you have the time).
PS I’m from Buffalo (I noticed you had a post about UB) – are you originally from there?
I was invited to visit the Department of Geography at UB. Had a great time but I’d never been before.
I don’t know any sources for the data you’re looking for. My guess is it wouldn’t be useful except as a ballpark. In my opinion it would depend almost entirely on the store location and surrounding demographics.
thanks anyway. Since you have “THE” page on liquor stores, It thought I’d ask.
We’re working on an app to recommend deals to consumers based on analyzing big data. We’re just getting ready to launch. Was having trouble getting good stats.
Glad you enjoyed Buffalo. It’s a good city, but (at least when I was there) not always easy to find the right places.
Looking to buy a Liquor Store here in Southern Colorado, I looked at their financials and it shows around $44-$48K a month in sales, total expenses $7400 a month and COGS around 35K. In 2016 according to tax returns they did $599K (540k in 2015 and $525K in 2014). The lease is around 2K a month and they are asking $265K. Would like to discuss this in more detail and more than happy to pay you a consulting fee for an hour of your time. If you open to that please let me know otherwise your insightful response would suffice.
425 923 9011
I’m open to a discussion. In the meantime, the numbers sound pretty reasonable. Let me know how you’d like to proceed.
I am meeting with them tomorrow and depending on how it goes will reach back out to set up a time to talk with you.
Will be in touch,
I have decided not move forward with this opportunity, thank you so much for your offer to help.
All the best,
First of all congratulations on your article and your blog, I just got the exclusive rights in the US for a Tequila by mistake, as you would say, and no I was not drunk at the moment, I went on a business trip to Mexico and we crossed paths, this Tequila has won a lot of medals and has been embraced in the Chicago, IL market where we pilot the sales of it, so I’m learning about the business and since Colorado and Illinois are both a 3 tier system your article has been very helpful. One question when you had your liquor store in Pueblo what price range of Tequila people where buying the most?
Feel free to contact me at [email protected]
Thank You again!
Thanks for the note and your kind words. At my store the cheaper the better but various sizes of Cuervo Gold probably sold best. If you can match Cuervo prices while maintaining product quality you’d probably be on to something. We sold some Patron but not much.
Thank you for the excellent blog and the wealth of information which you have presented. I’ve been on the look out for buying a small business, and recently came across this liquor store in the NY area. I wanted to get your insights, feedback on this – and appreciate any thoughts you could relay.
About 5 Year Old Location
Annual Sales Of $6,700,000
Margin is approx. 20%
Traffic count is high
Well laid out store
• Net $750k
Sales $6.7MM (No Sales Tax)
Margin ~ 20%
Gross Profit $1.4MM
Credit Card/Bank Fees 6k
TOTAL EXPENSES 55k x 12 = 660k
CASH FLOW $750k
Asking: $ 2.5MM
Inventory: $ 1.5MM (Additional)
Total: $ 4.0 MM
Looks like a pretty interesting opportunity. I wouldn’t want to pay more than $2M plus wholesale cost of verifiable inventory but if these numbers prove themselves to be accurate your biggest problem will be where to put all your excess cash. 🙂 Good luck!
Great post, and also an exciting topic for me as a young real estate investor and entrepreneur. A few related questions:
1. While you don’t consider it a cash cow as a non-owner operated business, do you use that cash to fuel your RE investing strategies?
2. Are you still invested in the Colorado RE market?
3. Would you buy another retail liquor operation?
Thanks for the comment. Answers to your questions follow:
1. Since it’s not a cash cow it doesn’t generate cash to fuel anything, especially not real estate investments.
2. Yes, more heavily invested in Colorado RE than ever.
3. Under the right circumstances, yes I’d buy another retail liquor operation.
Great information here.
Store: asking $525K, + $175K inventory (need to count inventory). Cash flow is $240K with $1.8M gross. Seller went down 500K.
Broker commision and other business buying expenses not included.
1) I counter $475K is that too low?
2) I have 200K cash on hand to invest. how much would SBA require down? Is it true to acquiring existing they require 25%?
3) Can I finance the inventory and pay in 12-18 months?
Seller needs to sell quickly he needs money for other business.
The price is reasonable if the revenue can be verified, if it’s not declining and/or if there are no major competitive threats moving in to the immediate trade area.
1. Not to me, but the price is already fair (assuming above) so I wouldn’t push too hard if you want this deal.
2. I don’t know about SBA loans. I think you’re better off trying to arrange owner financing. Maybe tell the seller you’re willing to pay $525k + inventory (wholesale cost) if he will accept $200k down and provide owner financing for the balance.
3. No one, other than the owner, will be likely to finance inventory. In fact, in Colorado at least, it’s not permitted.
Sellers are always in a hurry once they decide to sell. Don’t rush into the deal. There’s an old saying that I’ve been repeating to myself for the past 20 years: “you’ll always run out of money before you run out of good deals”
I have a liquor store and need your help to get the price to sell.
sales 180k monthly margin 25%
20 years lease $2500.00 2% increase annually
Payroll 10k utilities 2k misc 2k
If revenue is $180k monthly x 12 months = $2.16 Million per year and assuming revenue is steady/stable and no new legal or competitive threats, then I would probably ask $695k + inventory cost. But I would also probably take any decent offer over $600k. Want me to list it for sale here? Good luck!
Thanks for the blog, it is very insightful. I have been looking at liquor businesses around me. Many of them have sale price +huge inventory cost.
How do you determine the inventory cost? do they have a invoice price list then X by their quantity? Thanks.
Yes, they should be able to provide documentation for purchases showing actual cost. Don’t pay retail prices for the inventory! Pay only what the owner paid as reimbursement. And, you’ll want to verify inventory figures, which may be painfully tedious. At the very least spot check a few different categories to confirm consistency with POS data.
Anyone here can share real life liquor store business plan with specific examples with a marketing plan? How did you demonstrate that you will grow the business X% in running 2017 vs 2016 and so on? I’m writing a plan to acquiring a business that is around for 15 years. I’m seeking a 400K loan.
I started search to purchase a liquor store or beer and wine store. Previously I have 5 years retail experience and also having 8 years business analyst experience in Information technology. I received a listing from a broker for Beer and Wine store in Maryland.
Gross Revenue:$693,700 Current lease $9979 with 2 years Plus 5 year option. Established:2003
Building SF:2,000 FF&E:$100,000 Estab Date/Current Owner Date: 2008
2012 – $1,084,000 and 2013 – $1,011,000
2014 – $728,00 and 2015 – $693,700 ( After Closed deli as owner absentee)
Monthly Payroll: $9,572
Currently the store is running as absentee owner and I like to run my self with some part time employees.
The agent is telling if i restart the Deli then the sales will go back to $Million
The store location is at busy mall with Walmart, Target and Home Depot etc..
Is Walmart or Target will heart the sales of this Beer and Wine Store?
Please advice me what to offer as a final and If I work full time to make sales increase.
Thanks Justin for your great Blog to guide new to business .
God Bless You,
I am new to purchase a Beer and Wine Store in Maryland with good retail management experience of 5 years and 9 years of Business Analyst experience in Information Technology. I have M.S degree in Management Information Systems and like to make additional revenue for my Kids education who want pursue a degree in Medical Field. Broker given fallowing store sales details with Deli sales and with out Deli Sales.
1. Asking Price:$200,000 2. Gross Revenue:$693,700 3. Cash Flow:$80,000
4. FF&E:$25,000 5. Established:2003 6. FF&E:$100,000
7.Inventory:$100,000*( Not Included) 8. Lease Rate:$59.87 /SF/Year ( Building SF:2,000) = $12,000 Rent Per Month
2012 – $1,084,000 and 2013 – $1,011,000
( With Out Deli): Sales Down around $280,000
Then Closed deli owner absentee: 2014 – $728,00 and 2015 – $693,700
Monthly Payroll: $9,572 Utility Costs: $1,370.00 month.
Established Date/Current Owner Date: 2008 Reason for Sale: Owner has other business interest,
If I run this business as owner operated with 1 or 2 part time employees will give any decent money?
Tax returns showing Profit after employees salary ( between $85, 000 to $114, 000) for 2012 is $56, 158, 2013 is Loss of -$3,096, 2014 Loss of -$123,545, 2015 Loss of `$45,500
Please give your opinion if I add Deli and working myself can make this successful.
I think the most important number is the monthly payroll of $9,572. Let’s say you have to pay ~$3,000 per month for part-time help and can pay yourself $6,500 per month or $78k per year. Is that enough (and is the $3k enough for part-time help)? If yes, it’s probably a worthwhile business investment. If not, I’d keep looking. If the business is successful of course there will be opportunity to make more money, and an extra chunk when you sell. But the annual salary is the main return so you should be okay working hard for this type of income.
Appreciate your kind reply with great advice. I am still analyzing the business sales volume due to Govt. Maryland Liquor store is in 5 minutes.
I am also thinking to go for liquor store around $300K budget in Washington DC with decent sales volume by using your rule of thumb purchase offering 33% to 35% of sales.
You are really great sharing your experience and guiding people and god bless your family.
Try not to pay over 30% of revenue unless the profit margins or growth trajectory justify paying a premium. Best wishes, Justin
I consistently come across your blog post whenever I am doing research for new blog posts! I work for a liquor retail point of sale system and I am always looking for new ideas to present and write about. I read that you are no longer in the business, is there anything that you would have done differently looking back on your adventure?
mPower Beverage Software
I’ll write a whole blog post about it if mPower Beverage would like to sponsor. By sponsor I mean direct funds to a local charity I want to support. Google “Nancy Crafton Avondale” and you’ll find the charity. Let me know if you’re game.
Season greetings! I read all above question and answer and realized that location of venture is important be it retail shop like 7/11 or wholesale distributor. I am located in New Jersey and to be honest i have zero knowledge of liquor business. I would like to understand tricks of trade before investing my money into this. Could you advise how do i go about it or what do i start with.
My recommendation is to get a job working in a liquor store or for a liquor distributor. Spend time learning the business before you invest your own money. Good luck!
Actually we need big boys to crumble small liquor stores these eye sores detrimental businesses like yours killing our people making dibetics. Why don’t you try something healthy for people instead of getting g them drunk and dumb.
Thanks for stopping by. Why would it be better for large corporations to be the ones making people “drunk and dumb” (apparently it’s too late for you).
Justin have you know shame. It is the greed from the class of you real estate people and investors and crap business to offer residents that is what killing our communities making everything a vapor shop, liquor store, gas station,storage center. Most of it ponzi schemes fake business
Hi again Troy. It’s “no shame” and a liquor store is most certainly a real business. Check the financial services industry for ponzi schemes.
Holy Hell, stumbled upon this and it’s basically my story. Kind of accidentally purchased a store 17 months ago with an earnout from the sale of a software business apparently burning a hole in my pocket. Probably overpaid, have the exact same perspective shared here after that 17 months (I’m in Georgia, rules/system are identical). The positive in it is with solid business and marketing acumen I increased top line revenue 17.5% year over year from prior owner, with some capitalization for redesign of the store and larger volume purchases. However, just as Justin says here, I’m not an owner operator and the vast majority of the profits go back into salaries and running the business. I am a software entrepreneur in my ‘day job’, and I know realize the time I spend on the store costs me very valuable time in my other businesses, hence I’m entertaining offers as we speak.
But the liquor store business can be fun, especially if you like to engage with your fellow citizens, and it is very much a black & white business, i.e. customer walks in, picks product, pays and you are done with that transaction (simplified). My day job never seems to have a start or a finish, so this aspect of liquor is refreshing.
Best wishes to anyone considering entry into the business. I do believe it’s virtually recession proof and provides stability for owner operators for life.
Thanks for sharing your story David! Good to know I’m not the only one crazy enough to stumble into the liquor business. Cheers, Justin
Hi Justin – is there an industry average around the amount of inventory dollars per square foot? Thanks, Miles
Sorry but I’m not familiar with any inventory $ per sqft industry averages.
Thanks for the detailed post. In your several comments I noticed that you mention PILE of Cash ready. If we are looking to start 2000 sqft store how much cash should we have to build the better inventory! The store is going to be in a upscale neighborhood.
Thanks for your help.
More is better. Ideally, you’d pay for a fully stocked inventory and still have, let’s say ~3 months worth of expenses in ready-cash so you can ride through the dips confidently. Hope this helps. Difficult to specify an actual dollar amount.
Thank you for the excellent content on your site! Very useful and informative! I’m considering acquiring a large liquor store in Colorado along with a business partner and some investors. In order to repay loans in a reasonable amount of time, we are hopeful we can improve gross profit margin % from 23% to 25% or so within a few years. The store currently does approx. $5M annual revenue. Do you think this is a reasonable goal? Also, are you available for a consult if we have additional questions for you?
Sorry for the slow reply … summer schedule. Yes, I think it’s feasible. A lot depends on the mix of beer/liquor/wine. It would also be important to have someone with skin in the game keeping a close eye on the day-to-day operations. I would want a managing partner in the store 5-6 days per week.
Also, yes, I’m available for a consult. Let me know if you’d like me to get in touch via email.
Have you gotten to the point where you have looked at upgrading your inventory system? I’m trying to help a recent (last year) owner of a liquor store. She has old Honeywell batch scanning devices to do inventory … she scans inventory and then puts the device in a cradle to upload a CSV file to the Dos PC attached. I can get her the next generation of Honeywell Windows CE batch scanning devices to keep doing what she is doing .. but I understand Microsoft Windows CE support ends in 2020 … there has got to be a better way, have you found anything android or IOS to meet your inventory needs?
I no longer own the store so I’m not really up on the latest inventory/POS systems. Sorry.
Thanks for writing and posting this great blog. Very useful and informative!
Justin – Thanks for the very insightful article and I am in awe of the time and effort you have put in to help other people on this portal. I am looking to invest in a few liquor stores and potentially also in medical marijuana dispensaries. It would be great to have you as an advisor. What is the best way to get in touch with you? My email is [email protected]. Thanks
Hi Justin, Great blog, and looks like you’ve had it for many years. I am looking to purchase a store in Atlanta, GA. As a first time buyer I was just wondering if you could shed some light on how to negotiate the inventory purchase. They are valuing the inventory at 500K which seems high to me. I also would not want to pay full price for bottles that he hasn’t turned over, or been sitting on the shelf for years. Hes also valued the biz at 390k, and estimates a 200k cashflow..
I know you don’t own your current store, i’m hoping being on both the buying and selling side, you might be able to give me some insight on how to handle this.
My advice would be to “divide and conquer” on this. So I would sort of set the inventory aside initially. You want to first find out what sort of annual revenue he’s getting. If he thinks the store is worth $390k that would imply, at least to me, that he’s bringing in ~$1.2M in annual gross revenue. Ask him to provide documentation to verify revenue. He should be willing to provide a few years of tax returns – though he may reasonably ask you to sign an NDA before handing them over. Once you confirm revenue is stable or growing then you can more easily arrive at a fair price for the business. For inventory I would tell him you’re willing to pay the wholesale cost. In other words, you’ll pay what he can demonstrate that he paid for the inventory. If he can’t provide appropriate documentation to confirm inventory value I would consider that a red flag. If you want this deal I might be willing to live with the “dead inventory” depending on how much of the total it represents. Perhaps you could negotiate a discounted price for the portion of inventory you consider dead weight. Hope this helps. Good luck!
I am thinking of opening a Liquor Store here in Pueblo on Northside of town close to Walmart, Sams, Home Depot and the local shopping Scenario… I want to get your thoughts on it…
You want to start a new store? It will take some effort to get approval for a new liquor license. It’s easier to buy a store with an existing license. Let me know how I can help.
Good day Justin,
I am really impressed with how you have simplified some dense information here and the generosity by which you provide it.
I have both operated restaurants and taught (and authored curriculum) in a culinary school, so I am familar ith the margins you have described and with the absolute control vendors have over the store where product is concerned. Adding to this problem is the fact that (here in Cali), certain purveyors have contracts with certain particular brands. While assembling orders for your store, did you ever run into “minimum order” problems with products of high velocity resulting in 86s? Too, I have negotiated many times with these distributors to advance their “family pricing” often reserved for the large box stores and preferred clients (very high end/profile restaurants) to start ups. I have had both success and failures at this, but I found that my “well” provided significant leverage. Is there anything in your experience with a liquor store that would be it’s equivalent?
I am presently looking for either a restaurant or liquor store property here in Los Angeles.
I don’t think we had a sufficient “well” for leverage. Never saw friendly prices. But, I was an absentee owner so maybe someone took pity on us once or twice. Good luck with the new venture!
Yes, thanks for the prompt reply. By well, I meant to say the Well….the default liquor poured for most mixed drinks and when a client didn’t specify a call/top shelf liquor. Simply by committing to a brand I could negotiate better pricing with the balance of their portfolio. I suppose prominent staging as some sort of serviceable art might be the equivalent. As an absentee owner, the minimum order issue likely fell to your managers, but if you recall I’d be interested in any 86s. Again, great info in your blog!
Hmm…not sure if my original q came though; I hope so as it took a minute.
Additional questions: What is a reasonable expectation for a net margin after all fixed and non fixed costs are paid? And what were your potentials on liquor, beer, and wine? Did they mirror restaurants where liquor runs appx a 17%, wine-30%, and beer-5-20% (depending upon mass produced domestic v craft)?
Hi again, Sean.
Yes, those numbers sound about right, maybe higher on liquor. As I recall liquor margins varied quite a bit by size of container, e.g., better margins on half/pints vs fifths/handles. Net margin for me was close to zero and probably a bit negative as I paid for a manager and cashiers/counter staff. I think I could have made ~10% net margin on $1.2M+ sales but our little store was doing less than half that amount.
Thank you for the tips. Really helpful for new users.
Hello Sales ,
Many greetings from Hikmaresources Ltd ,We would like to purchase some items from your facility to Belize .
I will like to know the type of credit card you receive for payment and would also like to know if you allow a private freight forwarder pick-up the items i intend to purchase ?
I will like you to return my email with your attached price sheets or current website.
I no longer own the liquor store. Even if I did I’m guessing that exporting liquor to Belize would be a violation of Colorado Liquor law.
I see you’re no longer in the business, but definitely respect your opinion and see you know your stuff. I am thinking of buying a liquor store and the below is what they are reporting. Please let me know your thoughts as to their figures and asking price below. Thanks!
Gross revenue- 660k
Inventory- 25k, not included in the asking price.
The owner states he runs mostly absentee and the business could be grown with an interested owner focused on this store, I guess he has multiple liquor-convenience stores. The location is good and the rent for a stand alone corner store is only $1900 monthly. Please let me know what you think and what else I should be asking or looking for from the owner. Thanks again.
The asking price is reasonable assuming gross revenue can be verified and is stable or growing. Inventory cost seems low for a store doing $660k annually. You should check the existing lease agreement and find out about renewal options. I prefer to own the real estate. You might ask if that’s a possibility.
I’m looking at a business for sale. The owner is making $30-$35K monthly, Rent is 2600, 10 yr lease left. Liquor and beer. Owner said liquor sale was permitted in July and sales are going up.
The owner is asking $98K for business and $130K for inventory. Total $228,000 give it take.
Owner will show the income statement, sales data after an offer is made. I want to make $215K is that reasonable?
I would keep the business price and inventory costs separate. If you verify annual revenue of $400k or better then $98k is a reasonable asking price. For inventory, I would agree to pay actual/verifiable cost of “working” inventory. Try to avoid purchasing inventory that isn’t moving. Good luck!
How do you calculate rent into the picture. If I have a high volume store with 1.5K revenue but the rent is 100k per year, does that effect the valuation?
Great question but I don’t have a good answer. To me, if real estate ownership isn’t part of the deal I prefer to look elsewhere. That said, you could have a very nice business in a leased space. I think the amount of rent is only one factor, lease provisions including tenure length and renewal terms are also pretty important. On balance, I don’t think it impacts valuation significantly unless the rent is simply too high given the revenue. I’m assuming you meant to write $1.5 Million for annual revenue and $100k annual rent. At that rate you’re averaging $125k/month and paying $8,333/month in rent, representing a 6.7% expense against revenue. I’ve read that staying below 10% of gross receipts in restaurants/retail is a good rule of thumb. I suspect the same goes in the liquor business.
There’s loads of cheap land out there. It’s not too soon to start a homestead in northern Manitoba for your kids. Start prepping now and your kids might be one of the Fallout-esque survivors of the collapse! you can try to check out on sites that give great offers like brandonbuysdallas.com
Happy NY Justin! I have to say that I haven’t (yet) encountered anyone with your courtesy of giving free valuable advise on business, from experience! Great guy 🙂
Currently working in Dubai, and considering moving to Florida as kids about to go to college. I have a passion for wine, and had some experience ( few months) in running a restaurant that I owned with a partner ( he had the experience, i put in the money, then he disappeared) . I did not enjoy the long hours working in my restaurant (up until 1am on most days), but i loved the interaction with people and was able to have top relations with clients, who kept on coming back. I am thinking of buying a liquor store (mostly to sell wine which i am familiar with–French, Spanish, US, etc).
I was checking on the web to see that Florida seems on the cusp of allowing liquor sales in groceries ( any knowledge of that?)
I figure we need to make a salary of 140k a year, as we will have to put 2 kids in college!
Would you recommend for someone like me (MBA-finance, experience in real estate and banking–lived all over the world, (Europe and N-America) with limited retail experience but people friendly– ( 6-7 months running a restaurant in Spain) to go for that business?
And finally, what budget should I set for the purchase of a liquor store (including inventory and working capital) be able to make an income of 140k, assuming a good location..
Of course buying a liquor store in FL becomes a no go in case there is state approval for sale of liquor in grocery stores.
Appreciate your time and have a great 2019
I think you’ll probably have better odds making $140k+ in finance or real estate with your MBA. But, you could probably do it with a liquor store as well, especially if you can put a lot of equity into the deal up front. You’ll need a store doing $1M+ in annual revenue and you’ll need to plan to spend 6+ days a week at the store. You may end up feeling like a high-paid cashier. Coming from a restaurant situation you’ll probably be surprised by the low margins. You’ll have regulars but interactions will be less extensive and perhaps less satisfying. The biggest challenge will be inventory management so you might try to learn on someone else’s dime, at least for a few months, before you dive in with your own cash. Cost of a store that would do the trick for you will probably cost in the $250k-$350k range plus inventory and real estate (unless you lease). Inventory for a high volume store will be in the ~$200k range or thereabouts. It depends on the store layout and trade area demographics. Hope this helps. Good luck!
For sure your advice has helped. Many thanks!
I am interested in purchasing a store in Maryland. Store does 1.3m a year in sales and is being offered for $275k. Inventory is roughly 120k. Seller is offering me financing for 3 years with 150k down. Rent is high at 12k a moth. Abstentee owner with high payroll, the store is not making money. The store is located in an area where it is very hard to obtain a new license. Location is not great, kind of hidden in a strip mall that has other high end tenents. I do have extensive experience running a high volume store for someone else so I want to start my own. Thoughts?
The price tag, $275k, is reasonable for a store doing $1.3M and inventory sounds about right too. But, $12k per month for rent in a lousy strip mall location? That’s nuts. No wonder the store isn’t making money. Unless you can renegotiate the lease or move to a new, better and less expensive location I would probably pass on the deal.
Maintaining a liquor business is not an easy task. It needs all.. Thank you for sharing your experience. All the 3 points are looking important and help new users to check it once.
we are recently opened a liquor store in Boston can you suggest good POS and Backoffice system which can give a decision making reports ? as every week distributor guys dumping goods based on their analytics.
I’m no longer in the business so I can’t make a useful suggestion.
Asking : 350K
Gross : 1M
Net : 100K
Inventory : 170K
Your thoughts on this please.
I wouldn’t pay more than $300k + verifiable inventory cost (wholesale, not retail prices). That’s probably what they’re shooting for given the asking price. Also, be sure revenue is stable or trending higher over the past few years. If the revenue isn’t sufficiently stable, I’d offer $250k. Good luck. Best wishes, Justin
Great to have this informative post on the web. Thanks for sharing this.
You nailed it! thank you
I want to buy one liquor store but they rundown the store very low inventory no walk in cooler
It possible if I put all products Get business back
Your advice will helpful
I don’t see this as a problem as long as you’re getting a bargain price and you have sufficient cash to rebuild inventory quickly. Good luck!
What a great blog?!? I stumbled onto this thread after an internet search, and I am considering getting into the new industry of “Spirit Delivery” here in Texas. Are you open to a discussion over the phone as I could use the advice, and would prefer to communicate privately? I am willing to pay a consulting fee for the commensurate information of an industry expert. Please let me know if you are open to such a discussion by emailing me at the email address I submitted in the blog post.
Thank you and best regards,
Thanks, I sent an email to you.
Your blog is a treasure trove for anyone looking to invest in a liquor store. My family and I are thinking of relocating to a mountain community in Western Colorado and are currently analyzing the potential purchase of a liquor store. We are in our 40s and I will continue to work mostly as a financial advisor on mid to large size international M&A deals. However, our goal is to settle down and semi-retire in the mountains and having a local business is something we’ve always thought about. We are currently analyzing a liquor store which had approximately $1.2 million in sales as recently as 2017 but this figure has declined by about 10% per year in the last couple of years.. The location is good and convenient in an area which benefits both from tourists and local resident traffic. The current owners are ready to retire and relocate. I would love to pick your brain as part of our evaluation. I would be happy to pay a consulting fee for your time. Please let me know if this is something you might be interested in by replying to me via e-mail.
Thank you and warm regards,
discovered your blog after stumbling into opening a liquor store with my son in 2013. I was able to negotiate a very attractive lease in a growing
location on a major highway in AL. We grossed 650K 1st year and have grown a little, but we can run the store with 1 employee and continues to cash flow.
We opened 2nd location in very upscale area and focused on increasing wine sales. 2nd location opened in 2017 has taken off after slow start and will
gross 1M in 2020 in addition to 1st location grossing 800,000, the inventory and equipment value is approximately 250K to 300K and cash on hand is 250K.
There is no debt.
My son would like to buy my 50% , I would like to be generous but fair to my other children as well.
Congrats on your success! Impressive. If I were going to list both businesses for sale with the numbers you’re providing I would probably ask $975k and accept $900k or better. This includes the inventory and cash. If you were to list with a broker you’d pay plenty in transaction costs so I think $900k is reasonable making your 50% stake worth $450k. I’m assuming your son isn’t in position to write that sort of huge check so you’ll have to provide financing. To make payments affordable I would offer to amortize over 20 years. I think you have to charge some interest but keep it reasonable, let’s say 5%. This would translate into 240 monthly payments of $2,970. If you finance 100% of the deal (no down payment up front) then I think you’re being fair to both your son and to your other children. It’s a *very* good deal for your son – no one else would finance 100% of the deal – but he’ll be paying you off for a long time. I don’t think it would be too complicated to structure your will so all kids get an equal share of the balance remaining on the note if you pass on unexpectedly. Maybe this is obvious but you would *not* penalize him for any prepayment and you *would* require he cash you out upon sale to a 3rd party. This isn’t a bad deal for you either because 5% interest amortized over 20 years adds up. Not a bad little pension payment really. Only downside for you is the opportunity cost of the cash balance on the promissory note. You could limit that downside by adding a 5-year (or similar) balloon payment meaning he’d have to pay down the debt or refinance in that time frame. That’s what I’d do. Hope this helps.
Justin, thanks for the prompt and thoughtful response!
I greatly appreciate your input.
I am 65 and probably looking to realize more cash right away, 200K or so and offer lower price with that in mind, any more
advice with that in mind?
I think I’d stick with the same approach. Instead of financing the entire amount you’d finance the balance. So, if you took $200k up front you’d be looking at a $1,649.89 monthly payment on the $250k balance under the same terms. I’d be careful not to take away too much of a cash cushion. Your son may need a little room for error, especially if you’ve been the one making inventory/purchasing decisions.
Justin, that helps so much!
I am extremely grateful for your suggestions!
I created a new product and i’m trying to figure out how to get it into individual liquor stores. This is the product: http://www.covidice.com Can you tell me what sort of margin liquor stores typically make net and would a liquor store owner be interested in keeping a novelty item such as this on the counter? What sort of return would an owner need to keep it on the counter at the check out? I’m trying to figure out how to get it into all 45K liquor stores in the US; new company; this is no small endeavor and i do not know anything about the liquor store industry. Are there any resources you recommend (your blog was excellent). I grew up in colorado springs, was in your store in July, its great!
You might try contacting the liquor store industry associations, should be one in each state. Typical margins in retail liquor vary from 10-20% for beer up to 30-50% for wine and liquor, with plenty of variability. For a novelty item like this I’d make it easy, split revenue 50/50. I see you have a 19.99 price point on Amazon. At that price I don’t think you’ll sell many at bargain liquor stores. You’ll have to target high end neighborhood locations and big box stores. Good luck!
And for everyone recoiling in horror all proceeds are for charity; this is strictly a proof of concept that people will not donate directly but will buy products as a means to fund a charitable organization
I wanted to see if you have availability for a consult on a large liquor store I’m considering buying in Colorado. I’m definitely willing to pay a consulting fee. Please let me know-you can email me to discuss details. Thank You!
I’ll be happy to answer questions here for you but I’m not interested in a consulting engagement. I’ve received lots of offers like yours but they never go anywhere.
I am curious with all the liquor owners…I have a prime location that I am one step away from signing and starting a store of my own. It is 2400 sq ft, more long than wide with a lot of space for inventory in basement. How small is too small or should I be ok? Also, is there any design firms out there that can help me design the most efficient and effective layout not to mention the design itself?
I don’t know much about this aspect of the business. If you’re not too limited in terms of inventory on hand and on display I don’t think it’s a major issue. I’m sure professional design would help but probably depends on your customer base. Some only care about the price of cheap beer/vodka/bourbon while others want to see an extensive selection of craft beer/spirits and wine.
Hello Justin. I just encountered your blog and having owned and sold PACKAGE STORES, which is the term used for liquor stores licensed to operate in Texas by the TEXAS ALCOLOLIC BEVERAGE COMMISSION. I find your comments to be extremely insightful and relevant to my experiences in this industry, which utilizes the same 3-tier system as Colorado, during the past 4 decades. Today, my wife and I retain one store which will probably be our last, and we’re happy to have returned to exactly the same “MOM-N-POP” status, after so many years and stores, that was our beginning. Believe it or not, our operating methods were very efficient and we were able to keep our shelves fully stocked and competitively priced without the benefit of a Point-Of-Sale cash register system. Recently, radical changes in the rules and regulations applied to our industry by the state of Texas have allowed our distributors to all but eliminate our interaction with a live salesperson and, slowly but surely, all orders for inventory purchases will have to be placed electronically through the distributors’ websites. We need to make a quantum leap in this direction and are actively seeking a P.O.S. system that allows us to capture information on our own INHOUSE computer without using the “cloud”. We’ve researched the pros and cons of both models and are convinced that “INHOUSE” is the only method we will accept. We’re wondering if there is an option or provider out there offering a data base that already has “bar-codes” assigned to product names and descriptions that would allow us to simply scan the bar-code, and add the price and quantity of each SKU in our inventory? Later on, as time permitted, any item in the list showing a zero quantity could just be deleted, and soon we could have an accurate count and value of our entire product lines. We would most appreciate any suggestions you or others might have concerning this matter. Sincerely, W. D. (Bill) Miller
Glad to hear my post seemed relevant given your extensive experience. I’ve been out of the game for a few years now so I’m afraid I don’t have any helpful suggestions or leads on a POS system. Sorry about that. Hopefully someone else will chime in here?
Hi Justin! Great article. Do you have any idea what the average revenue per square foot is in the liquor / alcohol store industry? Really appreciate it!
No idea really. I’m certain it’s a positive correlation (as sqft goes up so does sales) but I doubt it’s a straight diagonal line. Variations between locations and their surrounding trade area are too critical to omit the equation.
Hi Justin, For somebody wanting to open a Bar &Grill let’s say or another Los Angeles area eatery that sells hard liquor beverages has quite a wait ahead of him. Hard liquor licenses are actually sought thru a business broker who looks for derelict and run down older mom and pop places and make cash offers for the entire operation, Real property and liquor license included. I’ve heard of a liquor license bought from a beat up Burbank, California restaurant and bar that sold in it’s entirety for nearly the real property value. Apparently the broker caught the people at an inopportune time with the health department requiring THOUSANDS of dollars in new refrigeration equipment. (I suspect the broker has in place a set up where he sicks the health department on business owners right before he comes in to offer lowball buyout.)
Well, that Burbank liquor license resold to a Long Beach, California trendy sushi restaurant for nearly half a million dollars! I had patronized the business often enough to realize the sushi restaurant owner knew exactly what he was doing and must have regained his half million within a year with his cocktail prices!
I wish I was business savy enough to pull off what this broker does.
My question is:
Is it ethical and effective to not sell malt liquor, candy flavored $2.00 wine and single bottles out of a 6 pack container to customers when your intentis to discourage the homeless, panhandler type of patrons? I see this happening with Korean store owners and it seems somewhat racist….?
Nice blog…Thanks for sharing this post!!
Amazing discussion and still trending after 7 years. Very informative
Anyone here from CA looking to buy or sell Liquor Store?