Is owning a liquor store a good idea? How much can you make? And why is this liquor store for sale for only $25,000? Today on Franchise City.
Everyone drinks! So owning a liquor store is a good investment….right? Not that simple.
It’s amazing at how few people do this! Before you buy any business. FIRST ask yourself what are your goals. Do you want to run the business full-time? Do you want to put a lot of effort in and build a business? Are you a good manager? Good at numbers and inventory management? Inventory control is a huge part of owning a liquor store. Do you want a passive business? Liquor store not a great option in most cases. Is lifestyle important? Do you have family members who will be involved? What is your long term exit strategy, your growth strategy? Once you have these answers you can determine if the business fits your goals. That’s the first thing we do at Franchise City is have buyers complete a goals sheet, then we can fit the right business to the buyer. If you buy a business you hate operating, or are not good at operating, you will likely fail.
If a liquor store is an option. There are two ways you can start a liquor store 1. Buying an existing business, or 2. Start on your own. If starting on your own first thing to check is whether your state is allowing additional liquor licenses in your area. Each state is different and some states have limits on the number of licenses. Those states are usually also the most expensive for licenses and can cost tens of thousands of dollars. So for a startup – check that first.
If you have the money to buy an existing liquor store you can find stores as low as $25,000.The cheapest liquor store for sale is in Greenville County SC, cash flow of $13,000. If you think cash flow is profit, you probably shouldn’t be investing in a business!
There are hundreds of liquor stores for sale, on one site alone we see 1086 people trying to sell their stores. This store for sale at only $45K has gross sales of $33,000 a month! Inexperienced buyers think wow – I can make $400k a year and live like a king.
So how much money can you make owning a liquor store? There is no hard and fast rule and your business skill relating to margins will make or break the business. If you are in a high volume, economically challenged area, the margins will be smaller than a fine wine store in Beverly Hills. If you have competition nearby, you will have to adjust your margins accordingly. So there is no set rule to margin. The suggested margin might be 40-50% on wine and 20-30% on the hard stuff. But remember – these numbers will absolutely need to be adjusted to reflect your market conditions. So if you store makes 1 million dollars a year and your average margin is 25%, which is unrealistically high in most cases, after COGS, cost of good sold you will have $250,000. Not bad right? Now take off your rent $70,000 a year you have $180,000, are you working in the store 8 days a week? No you have to hire a cashier that’s $30,000 leaving you $150,000. Need another part time stockperson? you are down to $130,000. utilities, hydro, store supplies, and other expenses – easily $30k a year you are down to $100k or less, which is about a 10% margin in this case of our hypothetical store. Again, affluent stores in good neighborhood – higher margins – but higher rent, and low end stores, lower margins.
So what are the threats in this industry? 1. It is a mature industry so competition is intense including a increase of companies like minibar deliver and Instacart. Several venture capital companies have created e-commerce sites with the ability to purchase online and get it within one hour. These companies will continue to put downward pressure on prices. As a small shop owner you aren’t getting deals so you’ll pay more for your product than the huge corporate shops that are buying 100 cases.
If you do have a dream of owning a liquor store can you turn a struggling store around? Possibly, here are some ideas.
Before you buy monitor your competition. Any outlet selling liquor nearby you need to see what they are selling for. If you are up against a big chain you’ll have a hard time because the only way to negotiate better prices is with volume, and you cant buy 100 cases of one brand at a time. If you drop margins too low you will be losing money. If competition is too intense there may be no way to turn that store around.
Market yourself. Most liquor stores don’t have a website and its a great opportunity to turn a business around. Your website and social media can promote specials to drive business, you can have promotions and wine tastings, new product announcements, and just keep you store top of mind with your customers while finding new ones.
Is an ATM business a good idea , and Alex Flasinski is a liquor store owner in New York with a good YT channel: