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Whether for a special event, or just to wind down after a long week, Americans have always enjoyed their wine and spirits. While there are a lot of details that go into owning a liquor store, many find it to be a very rewarding career. You have an opportunity to interact with customers and sales representatives regularly and ensure you’ve made their day a little brighter.
Who is this business right for?
An individual who enjoys the subtle differences from one beverage to the next and is on a continuous quest for more knowledge makes a great candidate. Due to the competitive nature of the liquor industry, owners must possess a deep understanding of the mechanics of running a business and be prepared to be an integral part of the day-to-day activities of running the establishment.
What happens during a typical day at a liquor store?
As the owner, you’ll want to be a visible part of the establishment at all times. Patrons will look to you for advice on a specific beverage, based on their personal preferences and/or event needs. In addition, you will be creating ongoing relationships with your various vendors and sales reps.
As the face of the business, there are a number of behind-the-scenes tasks you’ll need to accomplish daily. Maintaining accurate inventory, protecting your cash flow, and predicting SKU level/product demand requires careful and constant attention. Privately owned liquor stores typically realize a greater profit when structured as an owner-operator establishment. y
What is the target market?
As a rule, your preferred customer is anyone, over the age of 21, who enjoys a tasty beverage and prefers to do business with smaller, local establishments over the large retailer. Before investing in your retail space, conduct research to determine the competition in the areas you’re considering. What types of products do they sell and how successful is their business? What are the likes and dislikes of consumers in the area? This will help you determine if there’s a specific niche you should be targeting and what to stock the shelves with.
How does a liquor store make money?
Liquor stores make money through the sale of each beverage. Some are sold by the bottle, while others are sold in greater quantity, as determined by the distributors.
What is the growth potential for a liquor store?
There is very little ability to negotiate with distributors over pricing, as they have the monopoly on their alcohol brand. This makes competitive pricing between retailers difficult and results in a fairly low profit margin. The only way to secure significant price cuts is by investing in the purchase of large bulk orders, which presents its own set of challenges. It requires deeper pockets and additional space for storage. It’s also important that you understand consumer demand for bulk items, ensuring a timely return on investment.
To combat some of these issues, owners with a significant amount of cash flow find success by either opening a large, warehouse store, or by investing in more than one location. Franchising opportunities such as Wine & Spirits or BevMax offer entrepreneurs inside knowledge and assistance in helping an owner’s vision become a reality.
What are some skills and experiences that will help you build a successful liquor store?
Strong business acumen is absolutely critical for starting and running a liquor store. Attention to detail, a knowledge of marketing and sales, accounting, operations, customer service, and human resources are all a requirement to ensure your business is even able to open its doors, much less realize long-term success. Since you’ll likely own and operate the establishment yourself, strong interpersonal skills will also prove beneficial.
What are the costs involved in opening a liquor store?
The capital required for start-up costs vary depending upon a number of factors. Location, staffing costs, beginning inventory, and licensing fees are all defining factors in how much you’ll need for your initial investment. BevMax requires that their investors have a minimum of $150,000 in liquid capital to properly open a franchise location. Entrepreneurs have reported start-up costs as high as $1 million for opening larger establishments.
What are the steps to start a liquor store?
Once you're ready to start your liquor store, follow these steps to ensure that your business is legally compliant and avoid wasting time and money as your business grows:
- Plan your business. A clear plan is essential for success as an entrepreneur. A few important topics to consider are your initial costs, your target market, and how long it will take you to break even.
- Form a legal entity. Establishing a legal business entity prevents you from being personally liable if your liquor store is sued.
- Register for taxes. You will need to register for a variety of state and federal taxes before you can open for business.
- Open a business bank account. A dedicated checking account for your liquor store keeps your finances organized and makes your business appear more professional to your customers.
- Set up business accounting. Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
- Obtain necessary permits and licenses. Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
- Get business insurance. Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
- Define your brand. Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
- Establish a web presence. A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers. Save 15% when you create a business website with Weebly.
Select your state below for an in-depth guide on completing each of these steps in your home state.
Where can I find a business mentor?
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
What are some insider tips for jump starting a liquor store?
The following are some insider tips from individuals who have found success in this highly competitive industry:
- Hire a knowledgeable attorney. The laws governing the handling and sale of alcohol can be quite complex. A lawyer can assist you in deciphering the language and ensuring no detail is missed.
- Location, location, location. Your goal should be to open your market in an area that isn’t already saturated with competition. But, the location’s importance goes beyond that. Depending upon where you live, there could be local laws restricting the sale of liquor near churches, schools, libraries, and hospitals.
- Open your liquor store near a grocery store that doesn’t sell liquor. Consumers like the efficiency of running multiple errands at once. If your shop is near the grocery store, they’re more likely to stop in.
- Set your business up as an owner-operator establishment. Due to high payroll and inventory costs, this is the most effective way to ensure a profit.
- Before signing on the dotted line on a building, consider contacting your local chamber of commerce. They can offer valuable insight into the demographic you’ll be serving and, in turn, how your business should be structured.
- Maintain a balanced inventory at all times.
How to promote & market a liquor store
When you’re ready to open your doors, advertise your grand opening in local newspapers, television, and radio ads. For opening night, offer taste-testing of various items and specials on select items. Just make sure your offerings are small to ensure no one leaves the establishment tipsy. Make sure you and your staff are knowledgeable on the items you offer and be ready to answer questions from your customers.
For many, alcohol is an integral part of every holiday. Hold regular, exclusive events to lure customers in. Teach them how to make a signature cocktail, related to the holiday theme, and offer discounts on items featured in the event.
An online presence is critical to the success of every business nowadays. Maintain an informative and user-friendly website that offers answers to your patron’s most burning questions. Post about the newest specials on social media accounts such as Facebook, Google +, and Twitter and ask patrons to sign up for your email newsletter and blog. This is a great way to keep your customers informed, as well as to educate them on the intricacies of beer, wine, and spirits. By doing so, you establish yourself as a leader in the industry - someone your customers look to for guidance and support. Additionally, be sure your business is listed on Yelp and all directories specific to your area.
Who doesn’t love free stuff? Offering free t-shirts and cozies to customers who spend over a certain amount is also a great marketing tool. The patron walks away satisfied over their newest acquisition and you gain the advantage of free marketing wherever they go.
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How to keep customers coming back
It will be difficult for you to compete in price with the larger establishments. If you can keep your pricing relatively close to your competitors, however, many customers won’t mind paying a little more to support a local business. The key will be how they’re treated when there. Provide exceptional customer service at all times and ensure your staff is up-to-date on the latest news and trends.
If you’re able to accurately identify your patron’s needs, you’ll develop a loyal following and ensure you invest in the most desired inventory. Have a suggestion box and ask customers for their input. While you cannot offer incentive for doing so, it’s no uncommon for companies to ask their customers to write a review on one of the online directories and social media platforms.
How and when to build a team
Per our insider tips, you’ll likely want to manage your liquor store yourself. The hours are long and the work is hard, however, so you will want to build a quality staff to assist you during the busy times. Due to the nature of the business, your team should consist of individuals over the age of 21. The more knowledgeable staff you have, the better customer service your store will provide. Many liquor store owners hire employees who have been of legal age for some time and had the opportunity to build knowledge on your store’s various offerings.
State & Local Business Licensing Requirements
You will need to obtain a liquor license from the appropriate state agency. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most states also require retail businesses to obtain a seller’s permit. A seller’s permit enables states to record and collect taxes from goods (and sometimes service) sales.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
In addition, certain local licensing or regulatory requirements may apply. For more information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
Maintain Personal Asset Protection
Don’t think that just forming an LLC, or any other type of business, will save your personal assets in case of a lawsuit or other matter by itself.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your LLC is sued. In business law, this is referred to as piercing your corporate veil.
Two of the simplest steps that will protect your business, and yourself, are to:
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
How much can you charge customers?
Pricing varies from product to product and is defined by the size, type of alcohol, and distributor prices.
What are the ongoing expenses for a liquor store?
A majority of your earnings will go back into re-stocking the store’s shelves. Investing in accounting software from the get-go will assist you in developing an efficient system for keeping up with your inventory.
Your second largest ongoing expense is payroll costs. You’ll also have annual licenses to renew, as well as insurance costs, which can be high in this line of work. A good portion of your monthly budget should go towards ongoing marketing campaigns, hopefully ensuring a steady flow of patrons.
How much profit can a liquor store make?
According to a recent Forbes study, liquor stores are among the top five least profitable businesses, taking home a profit of 1.7%. Owners who are able to run their own business take home an average salary of $21,000 - $51,000, depending upon size, location, and sales. At 1.7%, a store that has total sales of $500,000 realizes an annual profit of $8,500.
How can you make your business more profitable?
The following are a few strategies you can implement to ensure a more profitable liquor store business:
- Offer classes, where you teach customers about specific products. Mixology classes are also a great way to pass your knowledge on to your customers.
- Weekend cocktail samples give customers an opportunity to try something they might not otherwise consider. By offering these tastings on a weekend, you increase your chances of selling the product you’re promoting. Speak with the liquor distributors about these events. They can offer drink recipe suggestions and many will send out a representative to help with the tasting.
- Start a wine or beer club.
- Sell additional items that pair well with the products you sell. If wine is a speciality item, offer various cheese, crackers, wine glasses, etc.
- Smaller liquor stores who have an attached bar and/or restaurant have also realized greater profits.