In the United States, there’s a retail shop that sells prepackaged alcoholic beverages, typically in bottles. They are called liquor stores. Sometimes, though, you can call it bottle store or even party store (especially in Michigan).
Everyone has been to a liquor store at least once in a lifetime, so here’s the very first thing you must know: you own a particularly popular business. Almost everyone drinks alcohol, so that means everyone will go to a liquor store someday.
But running a liquor store business isn’t easy. Running a small liquor store for instance requires business acumen, as the owner and his few employees must take care of accounting, operations, human resources, customer services, marketing strategies, sales, and so on.
The quantities of categories, brands, flavors, price points and size variations are unbelievable. Also liquor distribution is heavily regulated and the owner must always be in contact with lots of retailers, manufacturers and distributors.
You have to keep all of that in mind before setting your price, because that’s how you’ll sell your liquor store for maximum value. Take a look at the tips below and learn exactly how to do it.
What is your Liquor Store Business Worth?
First compile every finance report you’ve got. Make sure you get at least the last three to five years reports. After all you’ll have to provide potential buyers with as much finance information as you can.
Then, explain to them where your business is located and how the competition works. Are there a lot of liquor stores nearby the one you’re selling? Is the competition harming your business profit?
It’s very important for you to show potential buyers exactly what improvements you’ve done in the store. Use of technology for instance is well valued in the market.
Make sure you have all the information to answer the following questions:
- What are the sales?
- What is the profit?
- What are the growth trends?
- What is driving new sales and is that sustainable?
- What channels do new customers come from and what is the breakdown of each channel?
- What is your market position?
- Is your Location favorable?
- How reliant is the business on the owner?
- What systems and processes are in place to run the business?
What makes a liquor store business worth more?
Reputation is definitely a key driver which makes your business worth more. Are there any repeat visitors? Are your sales getting better or is the traffic stable? Where does your business traffic come from? Here are some other important information:
- Predictable key drivers of new sales
- Stable or growing traffic from diversified sources
- Established suppliers of inventory with backup suppliers in place
- Traffic stats
- High percentage of repeat visitors and repeat sales
- Clean legal history
- Brand with trademark, copyright or legal concerns
- Documented systems and processes
What is your Liquor Store Business Worth?
As you can see, in the past 10 years a lot of liquor stores have been sold, and the total transaction value is huge: almost $600 million.
Maybe that’s why the average multiple is very good: about than 2.50. It means that average asking price is more than two times higher than the total gross income, which means you will get a lot of profit from the store’s sale. But it’s always possible to profit more from it, especially if you show why your business is worth more than the average sale price ($370.265) and, more importantly, why it’s not worth $250.000 — the most frequent liquor store’s valuation.
What Is The Most Frequent Deal Size?
Speaking on that, the most frequent deal size is nothing more than it seems: it’s the average price liquor stores are usually sold for.
In the case of liquor stores, this value is actually very good: $250.000. It happens because most of liquor stores are small businesses and it’s hardly sold for more than $500k. Actually most of deal sizes are less than $250k, as you can see in the chart.
As our research can demonstrate, every time since 2010 that was the movement: deals less than $250k first, then $250-500k deals, then $500k-1 million and so on.
Only huge liquor stores are sold for more than 1 million, especially if they are franchises, or store chains, with more than one store being negotiated.
Is the Liquor Store market getting bigger?
Yes and no. As almost every business industry, liquor store business has its ups and downs, and good and bad years.
2015 for instance was particularly good, with more than $2,4 million in sales. So liquor stores were definitely worth more than 2014, where total transaction value closed at a little bit more than $700k only.
In the last 10 years, 2011 was the best by far, but we have to check how the country’s economical situation is right now to calculate if there’s going to be an increase for last year to this one.
Are bigger businesses worth more?
Usually the answer for that question is yes. Not always, of course, but normally it is what happens. Take a look at 2015 numbers. The higher the sale price, the higher the multiple, with the exception of $1-2 million deal size, which was bigger than $2-10 million category: 10,95 for the first one and 6,71 for the second.
The same did not happen in the past three years. Only in 2011 and 2010 $500k-1 million deals were better than in the $1-2 million range.
What states have the most business deals?
As we can see in the map, the best state to make a good deal for a liquor store business is California. Then we have Colorado, New York, Connecticut, Maryland, Massachusetts and Georgia.
You definitely don’t want to sell your business in states such as Alabama, Iowa and North Dakota, which registered low numbers of sales. But it could be worse. Montana, Oregon, Utah and Vermont didn’t registered sales at all for instance.
Why would you sell in the first place?
The reason to sell always varies from each person. Maybe you are looking for new challenges, businesses and opportunities, or you just want to enjoy your family and retire. Although it can seem tempting to get your hard worked cash, make sure that you are clear on the motives so you don’t regret afterwards.
How long will it take to sell your business?
If you have read all the necessary steps to understand your valuation, and think you have focused on all the topics that make your company worth more, it is maybe time to start the process. Selling your business is a long-term process, and doesn’t happen overnight. Usually companies sell in 12 months, but you can also see deals getting closed in 6 to 9 months depending on the opportunity.
What is the process of selling your business?
This step by step process will help you get less confused when you make sure you are ready and confident to let go of your business, and perform a nice and positive sell. Many entrepreneurs forget about a step, or just don’t have the right guidance to know all the stages necessary and get lost through the process. Don’t forget to go through all of these, and if you have any questions, comment at the end of the article or contact us for more help.
Who will buy your business?
If you are wondering about the buyers that can be interested in your Liquor store, don’t worry, there are many options and possibilities. From First Time entrepreneurs, to businessmen interested in new opportunities, the chances are that in the beverage industry it may likely be a person who already had a store in the field.
If you want to sell your liquor store business you should be aware it’s not an easy business to run and, despite the big number of deals made in the last 10 years, liquor stores are not usually worth more than its gross incomes. But if you know how to sell it, if you know how to value your business and ask a fair and reasonable price for it, you can profit more than the average does.
If you want to start accelerating your buyout process, fill out our free valuation form and get your business valued today! Leave your comments on any doubts or feedback, we are glad to hear your thoughts!