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Successful Liquor Store Buyer: Shares His Liquor Store Buying Tips

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Comments & Replies: 2     Views: 6640     Posted By: Peter Siegel MBA  Peter Siegel MBA: BizBen Founder, ProBuy/ProSell Program Director

Buying a liquor store can present some major challenges to business buyers - a recent client on the BizBen ProBuy Program relates to Peter Siegel, MBA what the major challenges may be when searching for and buying a Californa liquor store business. I welcome other Advisors to weigh in on this topic.

Topics: Buying A Business, Due Diligence     Tags: buying a business, due diligence, inventory, liquor license



A past business buyer in my BizBen ProBuy Program for financing pre-qualification and loan placement and evaluation assistance came back with me to share his observations of what he felt were the obstacles and potential hot spots for buying a liquor store business.

The demand for liquor stores is high because the industry is less susceptible to the effects of recessions, which makes it one of the more stable business opportunities out there. While the perception is that liquor stores are good choices for owners who want to be “absentee owners”, the fact is, liquor stores are much more of a “hands-on” business than many think. Owning a liquor store requires strict management and organization, perhaps more than other types of small businesses.

He shared with me these 4 key observations:

It's A Hands-On Job

The owner of a liquor store need to be a full-time employee, or if that is not possible, hire someone that they really, really trust to run the day to day management. A liquor store is not an ideal absentee-run businesses, because proper inventory management is extremely important in running a successful liquor store. Also, because a large percentage of transactions are made with cash, it's incumbent on the owner to keep on top of what is going with his or her business on a daily basis. As an owner, you can expect to work 50-60 hours per week to ensure the business runs smoothly and to minimize any losses.

Licenses

Every city, and county in the state has a different set of laws pertaining to retail liquor licenses. Problems with liquor licenses are the number one reason deals fail. Depending on where the business is located, transferring or getting a new license can be simple. But, sometimes there are areas that have moratoriums on new licenses. The first thing a potential buyer needs to do is thoroughly investigate the laws and current policies regarding liquor licenses in the specific area where the liquor store is located.

Books And Records Must Be In Order

Liquor store owners have a reputation for not only skimming the books but also keeping poor records in general. Because many transactions are made in cash it may be impossible to determine the business’s real profits. The seller may be trying to include unreported income into their asking price, but if the owner is lying to the taxing authorities he or she is probably lying to you as well. When buying a liquor store you need to hire experienced accountants to go over the books thoroughly. I highly suggest that if you buy a liquor store you keep good and honest records. It will not only make the job of selling your business easier, it will also keep you out of trouble with the taxing authorities.

Inventory

Liquor stores are generally priced at the businesses value plus inventory. A successful liquor store will turn over its inventory 8-10 times per year. Make sure the inventory is current and salable, otherwise you will be paying for additional inventory on top of paying for the existing inventory in the purchase of the liquor store.

In Summary

Owning a liquor store can be profitable, but it's not easy. It takes a strong management personality, the willingness to work long hours and the diligence to keep accurate records. You should always do your due diligence when buying any business, but especially a liquor store due to its high percentage of cash sales and it's reputation for shoddy bookkeeping.

If you have other feedback about buying a liquor store besides what my past client has mentioned above please feel free to share your experiences below on this BizBen Discussion. Thanks.


When buying a liquor store, also call the local police department and talk with the watch commander or another official and investigate the crime statistics in the area. I had a listing for a liquor store, and the potential buyer had found out from the police department that "this" particular store had been involved in an armed robbery every 3-4 months over the last two years. The buyer was okay with the risk of robberies, but wanted the seller to put in bullet proof glass at the register counter as a part of the deal. The seller refused to pay for the bullet proof glass, and so the deal fell through.


  Helpful Resources To Assist In Selling And Buying California Businesses
Ryan Clark, Business Broker, Southern California

The Veld Group provides a refreshing approach to Business Brokerage, Mergers & Acquisitions and Business Consulting and Valuations. From Your Street to Wall Street, we cater to Main Street Businesses as well as more complex Strategic Firms and Start-Ups. Phone Ryan at 310-652-8353.

Brad Steinberg, Broker - Laundromat Specialists

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Business Team, San Jose (Campbell) located in the Pruneyard Towers at Bascom and Hamilton. Established in 1981 Business Team with over 6600 sales to date has 1000 business listings to choose from, paid Google advertising. We offer highly trained and experienced professionals.

Matt Sadati, Business Broker, SF Bay Area, Northern CA

I have Engineering and Law, JD degree, with over 30 years of experience in all phases of entrepreneurship. During the past 15 years my concentration has been in business of mergers and consulting. I have owned and operated over 33 businesses each having one to 30 branches.

Hasan Abdullah, Esq. E-2, Immigration Legal Assistance

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Diane Boudreau-Tschetter: Escrow And Bulk Sale Services

California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.

Prabhjot Randhawa, Broker: SF Bay Area, Northern Central Valley

I'm a Business Advisor at Liberty Business Advisors of San Fransisco. I have over 20 years of experience in all phases of entrepreneurship. During the past 15 years my concentration has been in business of mergers and consulting. I have owned and operated over 10 businesses.

Harry Sidhu, CBB, Broker - SF Bay Area, Central Valley, SAC Region

Assisting both sellers and buyers of businesses - dealing mainly with Liquor Stores, Grocery Markets, Gas Stations, Smoke Shops, Restaurant Related, Retail Related, Service Related. Serving SF Bay Area, North Bay, Sacramento area. Call Harry Sidhu, CBB for assistance at 510-366-6130.


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