Several Useful Guidelines 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. 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?

When you buy liquor store business interests, understand that the purchase is composed of many different assets and the entity’s position at any one point in time is dependent on a large variety of 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:

* location.
* whether revenue and profits are stable and sustainable.
* what is the customer database like, and could it be expanded?
* how portable is the lease and what are the terms and conditions associated?
* population and demographics.
* 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. Always be on the lookout for abnormalities and if something really jumps out at you, get to the bottom of it. When all is said and done, is the bottom line of sufficient interest to you to go forward?

Look at the financials and consider the revenue make-up and take out of your calculations any cash sales that are reported by the owner, unless the sales are contained within audited accounts and have been included in tax reports. 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.

Inventory offered must be saleable and not be made up of products that are out of date or unlikely 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 prestigious Diomo Corporation – The Business Buyer Resource Center. His celebrated materials, seminars and consulting have encouraged thousands of aspiring business buyers from around the World to pursue their dream to buy a business.