Tips for Buying a Liquor Store

Are you looking to buy into a stable industry that can survive the inevitable economic storms? Purchasing a liquor store may be the answer for you. 

Unlike some industries, the liquor industry seems to weather tough times. While people buy spirits, wine, and beer during happy times, they also consume them when times are tough. The primary difference between booming economic times and recessions is that people tend to drink alcohol at home in the latter. 

The good news is, since starting a liquor store from scratch can be a difficult endeavor, if you’re in the market to buy an existing liquor store you’ll have fewer hurdles to navigate. Let’s explore some things you’ll want to do or be aware of before becoming the proud owner of a liquor store.

What to Consider Before Purchasing a Liquor Store

1. Know the Law

As you probably know, the alcohol industry is heavily regulated in the U.S. Understanding the law in your jurisdiction is probably your most critical consideration. Each state (and city and county) has its own laws about what can be sold (liquor, wine, and/or beer) and what licenses you need as a store owner.

For example, in North Carolina, you can only buy liquor at state-run stores, but you can buy beer and wine at grocery and convenience stores. State laws may also dictate your hours of operation. In addition to state-specific laws, you’ll also need a permit at the federal level. Visit the Alcohol and Tobacco Tax and Trade Bureau's (TTB) website for more information and links to state-level authorities.

Key tip: When purchasing an existing liquor store, don’t assume that the current owner has the correct licenses or the authority to transfer them to you. Do your own research and find a professional knowledgeable  in the industry who's willing and able to guide you through the laws and challenges — that will be money well spent. And, if there is a license that can be transferred, find out when the current license expires and what the process is to renew it. Sometimes, it’s quite an ordeal, so this is something you need to know before getting too involved.

2. Consider Your Knowledge Level

Sure you might enjoy the occasional glass of bourbon in the evenings, but how much of an expert are you really when it comes to a wide range of spirits? As the owner of a liquor store, you’ll need to be able to recommend products to customers confidently (that might mean some sampling is in order!).

When it comes to other types of expertise, you’ll need to be a savvy manager, as you’ll likely be hiring and training employees as well as overseeing their work.

3. Get a Handle on the Inventory

Before you buy a liquor store, check out its inventory and turnover, as it can tell you a lot about how well the business is being run. Ideally, inventory turns over eight to 10 times a year. Less than that may indicate that the current owner doesn’t have a handle on what his customers want or that the store doesn’t have many customers.

This doesn’t necessarily signify a red flag. It may be an opportunity for you to refresh what the store sells under your ownership or do better marketing.

4. Look at the Books

Once you find a store you’re interested in, do your due diligence, which includes asking for financial statements like profit and loss statements. You’ll also want to ask if the business currently has any debts, and understand how those would be handled in the event of a sale.

Generally, you want to see steady revenues and increasing profit margins. If you don’t see evidence of a healthy bottom line, think twice about buying the business.

5. Consider Profit Margin Potential

One reason you might want to explore liquor stores for sale is that these businesses tend to see healthy profit margins. On average, you can expect a liquor store to generate 20-35% in profit. This may vary, depending on whether the store is high-end with specialty products, or is more affordable and general in its offerings.

6. Speaking of Niches…

If competition is fierce in your town when it comes to liquor stores, you can consider specializing in a particular niche of liquor, wine, or beer. Craft beer is all the rage in the US, and is projected to grow more than 11% by 2030. You might prefer to offer high-end spirits to a clientele with a refined palate. Or wines from interesting regions like Croatia. Let your imagination flow!

7. Think Beyond Liquor

Today, many liquor stores offer more than just drinks. You might also sell snacks, gourmet food, and glassware as a way to generate even more revenue.

And don’t overlook the non-alcoholic market. It provides a growing opportunity for revenues as more people are turning to mocktails and healthier beverages like kombucha.

8. Consider Adding E-Commerce.

Another big change in recent years in the liquor industry is the addition of e-commerce sales. Liquor stores are finding additional revenue by offering online purchases, delivery, and in-store pickup.

If you want to consider this option, look into the delivery laws for alcohol in your state first.

9. Figure Out Your Financing

When shopping for liquor stores for sale, it can be exciting to think about all the changes you’ll make with your new store, but take a beat before you move forward. It’s important to build a budget that includes not only the purchase price but also extra funds to cover any renovations, new hires, or inventory purchases you’ll want to make to relaunch the liquor store under new ownership.

Once you have that budget, consider how you’ll cover it. Do you have money in the bank for this investment, or will you need to take out a loan or find investors? Applying for a bank loan may take time, so start by making sure you meet the requirements to qualify for a low-interest loan.

If you want to go the investor route, you’ll need to decide how much equity you’re willing to give up in exchange for the funds to cover the purchase and additional startup costs.

10. Get Creative with Your Marketing

For some shoppers, all liquor stores are pretty much the same. You can make yours stand out by offering special events, like tasting events. Invite customers and contacts on your email list to attend an event when you add a new product to your inventory. Offer samples accompanied by light snacks, and you’ll see a boost in sales. 

You can also upsell customers by making suggestions for cocktails that can be mixed using liquors they’re already purchasing. For example, if a customer comes to the checkout counter with a bottle of dark rum, you could suggest an Apple Cider Highball. If that sounds good, the customer ends up buying additional ingredients!

You can also implement a loyalty program where customers earn points or get special discounts the more they purchase. You can also create a VIP experience for those who have spent a certain amount by giving them access to special events.

Connect with your customers where they want to find you, whether by social media, ads, text, or email.

Conclusion

Buying a liquor store can provide a nice financial cushion, but be ready to work. Liquor store owners typically handle most of the day-to-day functions, and the hours can be long. If you do bring on a manager, make sure they are someone you can trust. Either way, you’ll need to keep an eye on operations to ensure you’re maximizing your profits and efficiency.