Several Useful Ideas For Buying A Top Notch Liquor Store

If you’re looking to buy a business of any kind, keep in mind that this involves a complex set of metrics due to the dynamic nature of the purchase. 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. As such, it can be very difficult for a prospective buyer to value a liquor store for sale, especially when he or she looks at what appears to be a similar prospect nearby at a significantly 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. Some of these factors could include efforts already put in by the owner, marketing plans, client demographics, a particular focus on services or products, how well the staff interact 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?
* the customer database and potential for expansion.
* how portable is the lease and what are the terms and conditions associated?
* demographics and population shifts.
* road construction projects.
* employee situation – working for cash or favors, such as may be the case with family members.
* any pending threats or opportunities that could significantly impact revenues.

Bear in mind that the liquor store industry tends to want to focus on industry benchmarks and while this is fine for some outline information, you cannot rely on it. No two businesses may be the same and either may focus on particular areas, such as beer and wine, or cigarettes or premium products, while the other focuses elsewhere. Look for abnormalities or something that really jumps out at you and make sure you understand why this should be. At the end of the road, however, look at the bottom line to determine how much the business is worth to you.

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 President and founder of the Diomo Corporation – The Business Buyer Resource Center. His inspiring materials, seminars and consulting have assisted thousands of business buyers with achieving their life long dream to buy a business.