Several Useful Suggestions For Buying A Top Notch Liquor Store

Whenever you buy a business, you will have to refer to a complex set of dynamics and will certainly do some work. Many tangible and intangible elements will have to be taken into account and while you may come across benchmarks in the industry, often quoted by those who are looking for a good price, every situation must be looked at differently. This can make it quite difficult when you are thinking about how to value a liquor store for sale, especially if you find a similar proposal nearby at a very different price. On the face of it, each appears to be somewhat similar in style, size and type of location, so why the difference?

Whenever you buy liquor store business interests, the purchase will be represented by many different assets and the seller’s position at that time will be dependent on a variety of different factors. These include the effort put into the business by the owner, marketing plans, the demographic make-up of the clients in its catchment area, focus on particular products or services, the competence and skills of the staff and so on. With this in mind, you will need to get as much information as you can, research comprehensively and ensure that your process of due diligence is in place.

All of the following issues must be considered when you are contemplating the purchase of a liquor store:

* its location.
* are revenues and profits sustainable?
* what is the customer database like, and could it be expanded?
* the terms and condition, portability of the lease.
* demographics and population shifts.
* any pending road construction.
* look at the employees, do any work for cash or favors and are many family members involved?
* any pending threats or opportunities that could significantly impact revenues.

For some reason, people in the liquor store industry often want to focus on benchmarks and while you can certainly refer to these for information, never rely on them. It’s certainly true to say that no two businesses are the same and a variety of focus areas are possible - premium products, beer, wine and cigarettes. Look for abnormalities or something that really jumps out at you and make sure you understand why this should be. When all is said and done, is the bottom line of sufficient interest to you to go forward?

When you are assessing the business financials and particularly the revenues, you must dismiss any cash sales reported by the owner unless these sales are backed up by audited accounts and are included in tax returns. It is not fair for the outgoing owner to expect to receive value for these sales if he or she has treated them as “under the counter,” especially if they have not been reported for tax purposes.

The inventory must be relatively fresh and saleable and not be mainly composed of products that are not popular any longer or likely to sell. This would certainly be the case if you were presented with a stock of winter ales in the summer months.

To establish a base upon which to value and then decide to buy a business, look at net income, add owner salary, any perks, received depreciation and interest and then deduct any allocation for capital expenses. This latter item refers to any perceived payments you may have to make in the short to mid-term in relation to improvements, upgrades or necessary investments.

Richard Parker is the author of the How to Buy a Good Business at a Great Price series. As President and founder of Diomo Corporation - The Business Buyer Resource Center, his materials, seminars and consulting have helped thousands of business buyers realize their dream to buy a business.