Opening a Liquor Store: A Short SBG Guide

ByDanica Djokic
March 01,2022

If you love beer and wine, the thought of opening a liquor store is one you’ve probably considered on more than one occasion. While many industries have suffered in recent times, the liquor industry is still going very strong.

The global market revenue in 2022 is estimated at $1,810,873 million, while research into recent trends shows that people have shifted towards drinking at home gatherings rather than social occasions due to the COVID-19 pandemic. There has arguably never been a more exciting time to enter this business.

So what do you need to open a liquor store in 2022? Read on for all the answers you need.

Why Owning a Liquor Store Appeals to People

Before starting any business, you must first be sure that it is the right venture for you. Otherwise, you will inevitably struggle to maintain the motivation needed to establish the brand and achieve sustained success.

Aside from the general appeal of becoming your own boss, the following perks are what makes working in the alcohol industry great:

  • Flexibility - you can open a wine store, a convenience liquor shop, or even sell alcohol as a section of a larger grocery store.
  • Ongoing demand - while there is a spike during the festive season, alcohol sales remain high all year long.
  • Product/brand recognition - you can stock brands that consumers are already familiar with. This can subsequently make marketing a lot simpler.
  • Recession-proof - like running a food truck business, this venture won’t suffer as much as other businesses due to broader economic issues.
  • Online selling - in addition to your brick-and-mortar venue, a liquor store business can switch to online sales easily.

In truth, there are many other reasons to start a business of this kind. The products appeal to millions of adults, boast a long shelf life, and don’t require huge storage space. Meanwhile, you probably already have a good understanding of the products and will enjoy learning more about them. The knowledge that you’ve helped enhance social lives is also hugely rewarding.

The Cost of Opening a Liquor Store

Before even looking at the finer details of a business plan, you must first check the financial viability of opening a liquor store. The harsh reality is that it’s not cheap. Moreover, it’s the initial outlay that is most likely to pose a major stumbling block. 

The expenses that you will face during the pre-launch and early phases of running the business will include:

  • Acquiring a liquor license, which will cost several thousand dollars.
  • Finding a store to let, which can again cost thousands of dollars.
  • Renovations to the store, including racking and shelving as well as decor and new POS terminals.
  • Inventory, which is likely to cost anywhere from $20,000 to $50,000.
  • Marketing costs that may cover branding materials, website building, and covering the local marketing channels.

Overall, it is not uncommon for business owners to spend $100,000 on launching the liquor business. Following this, you can expect to keep spending thousands of dollars each month on staffing, marketing, and running the premises. Of course, any stock you sell will need to be replaced, too, so you have to factor in resupply costs as well.

You can reduce some of the costs of opening the business by finding an existing liquor store for sale or an opportunity to open a franchise instead of your own brand.

Steps to Opening a Liquor Store

If you're wondering how to start an alcohol business venture, perhaps the most important tip is to ensure that no stone is left unturned. With the right action plan and strategy in place, you can tap into the multi-billion-dollar industry easily.

Here is a list of the top tips that can help you in the process of opening your alcohol store.

Complete the Necessary Market Research

Before you can open a liquor shop business, you must understand the marketplace you are about to enter. Checking state and national industry statistics will be crucial while you should also take some time to analyze what is already available in your location. 

As well as knowing what’s available, you need to think about the gap in the market you’ll exploit. With this in mind, you need to consider the target market too. Some of the key questions to ask include;

  • Who are the people buying the alcohol?
  • How do they buy alcohol - online, offline, convenience store?
  • How often and what quantities do they buy liquor in?

Understanding the industry will help you set realistic expectations and learn how the profitable business sector can build you a brighter future. 

Write a Business Plan

A business plan is a legal document that will subsequently help you with funding and gaining liquor store permits. Crucially, it is an item you can return to time and time again throughout the planning phases for guidance.

You can find business plan templates online, including solutions specifically for alcohol distributors. It should cover these key aspects:

  • Your mission statement and purpose for the business.
  • Relationship between the target demographic and the product.
  • Details of your operations and management plan.
  • Design plans for products, services, and branding efforts.
  • Financial projections for at least the short and mid-term goals.

A solid business plan will become one of your most valuable assets because it can help establish trust from investors while also giving employees a clear action plan and brand identity.

Find the Right Location

The right location is one of the most important things to consider when opening a liquor store, not least because it will have a huge influence on foot traffic and overall liquor store income levels. Even if you plan to sell online too, a prestigious location and strong reputation in offline circles will aid the cause. 

There are several factors to consider at this time. Ask yourself the following questions for guidance;

  • Is it close to residential areas? Because over 45% of all searches are now local and consumers looking for liquor stores near them will provide a lot of your visitors.
  • Does the venue offer good public transport access and ample parking?
  • Is it in close proximity to other venues that people may visit before or after wanting alcohol? If so, this can have a significant impact on your visitor levels.

The right location may additionally open up drive-thru liquor store options, or at least the potential to provide a curbside pick-up service. Similarly, it may enable you to provide local deliveries directly to your customers without losing too much time or money,

While you won’t confirm the venue just yet, creating a shortlist of ideal locations and anticipated costs will serve you well going forward.

Focus on Funding

The harsh reality is that your business idea won’t go any further if you do not have the funds to get it off the ground. As already stated, you may be looking at a bill of over $100,000 to launch the company before tapping into any potential liquor store profit. 

There are several ways for creative entrepreneurs to raise funds. Some of the most popular include:

  • SBA loans or business loans for bad credit.
  • Private investments from local or national investors.
  • Crowdfunding from friends, family, and other interested parties.
  • Personal loans or selling assets.
  • Federal or state business grants. 

The most important thing is to analyze all of the options. After all, a lack of capital is often the reason why one in two ventures fail within five years, so make sure you are well prepared, and not just for the opening few months.

Forming a legal entity is one of the most important requirements to open a liquor store. It is not possible to start trading until you have completed this step. The main types of entities that you are likely to consider are:

  • A sole proprietorship, where the business is solely owned by you. 
  • A partnership between two or more liquor store owners.
  • A Limited Liability Company (LLC), which works as something of a hybrid between a partnership and a corporation.
  • A corporation, which is a legal entity established to conduct particular types of business.

Entrepreneurs looking to open liquor store businesses will often choose a sole proprietorship or an LLC depending on individual circumstances. Speaking to a dedicated legal advisor or lawyer is the best way to make the right selection for your business needs.

When forming your legal entity, you’ll also want to consider the name of your company. Remember that the name of your liquor store can be the same as the brand name, but it doesn’t have to be.

Get Your Bank Account and Licenses

How much does a liquor store make? It doesn’t matter if your business doesn't have a bank account to conduct transactions or a license to sell alcohol. Securing a bank account with a business credit card will require a visit to the bank with your ID and Employer Identification Number (EIN). As s liquor store, you’ll need a physical address, which shouldn’t be a problem since you’ll need a property anyway, unless you plan on selling online only.

As for licenses, you will need to check state and national regulations. To complete this phase, your state’s Alcohol Beverage Control Board will determine;

  • Who can be served and who can serve alcohol.
  • The times during which your business can operate.
  • The limits on prices on the volume of alcohol sales per customer.

In addition to the liquor store permits, you may need to consider special licenses for online sales.

Organize Your Finances

A liquor store has high start-up costs, and you will encounter a lot of transactions (income and outgoing costs) once your doors open. As such, keeping your finances organized will be vital. To get this right, you’ll want to complete a range of steps. These include:

  • Finding a suitable accountant with experience in supporting liquor store businesses.
  • Putting insurance in place - including Liability and Liquor Liability Insurance, data protection coverage, and Workers’ Compensation Insurance.
  • Managing your invoices, expenses, operational costs, and projected financials.

Just because you have funding doesn’t mean you don’t need to spend your capital wisely. Besides, good organizational skills enable your liquor store business to have a great headstart and enter the market, creating a profit in record time.

Establish Your Marketing Strategy

Branding and marketing are essential features of every business model. An alcohol store isn’t any different. After cementing your brand name and choosing the right color scheme and logo, you must establish the best marketing strategies to help your business thrive in the industry. 

When dealing with Pay-Per-Click (PPC), the cost per click in the alcohol industry is higher than in other industries. Insight like this should help you decide where and how to promote your company. Some of the options you’ll need to consider are:

  • Shop signage to attract foot traffic.
  • A strong website and SEO plan to attract local online traffic.
  • Social media campaigns to raise awareness and show the brand image.
  • Shop layouts and staging of products.
  • Local media placements and ads.
  • Referral marketing and recommendations.

The great news is that many of the products you stock will already be supported by extensive marketing campaigns from their manufacturers. Perfect your branding skills, and you’ll be rolling in cash, too.

Set your Prices

Setting the prices is an essential step for your business. You need to find the sweet spot between healthy profit margins and keeping consumers happy. In most cases, markups will be around the 25-40% mark. However, a convenience store's prices will likely differ from those in a wine store, so bear in mind the type of shop you’re planning to open.

Crucially, you’ll need to divide all beverages sold into four categories:

  • House beverages. 
  • Standard branded liquors.
  • Premium liquor brands.
  • Super-premium brands.

Your liquor shop business will probably run special promotions on a regular basis, but knowing your general pricing before opening the doors will be key to having a strong start.

Build Your Team

When opening your alcohol store business, a lot of the success will depend on having the right around you. In fact, you’ll have already embraced the support of experts like accountants, lawyers, market researchers, bank managers, license vendors, and web designers by this stage. However, you’ll still need the most crucial aspect for the success of ongoing daily operations - the employees.

Workers may include floor workers, cashiers, customer care experts, in-house marketers, drivers, and more. You will want to keep the numbers as low as possible due to their salaries and bonus costs like healthcare and 401K contributions. When hiring employees, be sure to test their;

  • Knowledge of the alcoholic beverages industry as a whole.
  • Knowledge of their specific job role and the tasks within it.
  • Personality traits and alignment with your business philosophy and goals.

A winning team won’t only represent your alcohol store in an effective way but will help your business grow and prosper.

Stock Your Inventory

As mentioned above, stocking your inventory could account for up to $50,000 right at the start of your business journey. Therefore, managing it well is one of the most important steps to opening a liquor store, and for that, you’ll need a good Point of Sale system. It should be able to:

  • Track all stock in real-time,
  • Compile reports of all sales and automate purchases.
  • Give clear info for managing order fulfillment. 

In addition to the right stock management system, you should ensure that the liquor store is protected by insurance. This will help prevent losses caused by bottles dropping off the shelves or shoplifting. Naturally, a sound security system should be installed for further peace of mind.

Prepare for the Opening

By now, you will have:

  • Satisfied all legal requirements.
  • Built a winning brand and designed your store logo, layout, etc.
  • Financed the liquor shop business.
  • Found a winning team of employees.
  • Stocked your business with the right products.

All that’s left is to arrange your big opening. Use this as an opportunity to build excitement for your new company, and local drinkers will quickly check out what your business has to offer. We’ll raise a glass to that!

Final Words

Opening a liquor store business does require hard work and a significant investment. When done well, though, it is one of the most stable industries to be involved in. Crucially, a combination of online and offline sales will enable you to achieve significant profits for immediate and long-term success. 

If you are passionate about alcohol and running a business, there has never been a better time to start.

Frequently Asked Questions
How profitable is owning a liquor store?

It can be a well-earning business, yielding overall annual profits of around 20-30% on average. That said, the actual profit margin is not very high, as most profits have to be reinvested in restocking inventory and paying all of the running expenses such as employee salaries, power bills, etc. Furthermore, this figure will be influenced by many factors and may be much lower in the first year of founding your business. 

Is buying a liquor store a good investment?

Liquor stores are considered a good investment as the demand for alcohol is solid throughout the year because even pandemics and financial market crashes won’t stop consumers from buying alcohol. For stability and earning potential, it is a great business solution.

How much does a liquor store owner make a year in the USA?

Factors such as location and whether the store is a part of a grocery store can impact this figure. However, the average small American liquor store can expect to yield a yearly revenue for the owner of around $50k. 

What is the markup on liquor in a liquor store?

Liquor markups at a liquor store aren’t as high as those in restaurants or nightclubs. However, a significant markup of 25-40% can be expected on most products and even higher for specialty beverages. Make sure to research prices in the neighborhood well before opening a liquor store.

 

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Finally, focusing on transparency (e.g., disclosing your business practices, the manufacturing process, etc.) and building a strong social media presence can also help any business in the eCommerce industry build trust with potential customers. Big Data is a Game Changer Big data is a term used to describe the large volume of data that businesses now have access to. This data can come from a variety of sources, such as social media, website analytics, CRM systems, and more. Big data can be used to improve the customer experience in a number of ways, such as by personalizing the experience, identifying customer pain points, and improving customer service. We've all experienced seeing suggestions on shopping platforms or search engines, and most of us have found them to be pretty accurate. The more data a company has, the better it can cater to its customer's needs, and this will become increasingly important in future eCommerce trends. However, big data carries big challenges as customers are more and more concerned about data privacy. So, businesses need to make sure they are handling customer data responsibly and transparently if they want to keep using it to boost profits. Mobile Commerce Will Continue To Grow Mobile commerce is expected to continue growing in the coming years. According to statistics, mobile devices are used for over 40% of online transactions, their rising popularity indicates that this is one of the trends in online shopping that’s here to stay. Mobile commerce offers a number of advantages for businesses, such as increased reach, shorter buying cycles, and improved conversion rates. It also offers many advantages for customers, including the ability to shop anywhere at any time. If you want to stay ahead of the competition, it’s important to make sure your eCommerce platform is mobile-friendly. This means having a responsive design that looks good on all devices, as well as providing a smooth and easy-to-use mobile shopping experience. Omnichannel Selling Will Become the Norm Omnichannel selling is a term used to describe the practice of selling products through multiple channels, such as brick-and-mortar stores, online stores, mobile apps, and more. This eCommerce trend and approach allows businesses to reach more potential customers and provides a more seamless shopping experience. In the past, businesses have often treated each selling channel as a separate entity. However, this is changing as more and more businesses are adopting an omnichannel approach. This shift is driven by the increasing popularity of online shopping and the need for businesses to provide a more cohesive customer experience. As omnichannel selling becomes more common, it’s important for businesses to make sure they’re building eCommerce websites that can support it. This means having a platform that is integrated with all of your other selling channels and that provides a consistent experience for customers regardless of how they shop.  Environmental Sustainability Will Play a Big Role As we become more and more aware of the impact our consumption has on the environment, sustainability is becoming an important factor in purchasing decisions. Customers that follow new online shopping trends want to know if the products they’re buying have been ethically sourced and if the company they are buying from is taking steps to reduce its carbon footprint. In order to stay ahead of the competition, businesses need to make sure they’re considering environmental sustainability in all aspects of their operations. This includes everything from the sourcing of materials to the packaging and shipping of products. Customers are now more willing to pay extra for sustainable products, so there is a big opportunity for businesses that are able to meet this demand. How To Make the Best Use of ECommerce Trends ECommerce is constantly evolving, and it can be difficult to keep up. However, by staying informed and making sure your eCommerce platform is up to date, you can ensure that your business is able to stay ahead of the competition. To make the most of the latest eCommerce developments, consider the following: 1. Keep Up With the Latest Trends To stay on top of your game, you must be proactive and regularly seek out new information. There is a number of ways to do this, such as reading industry news, following relevant blogs and industry influencers, and attending eCommerce conferences. You can get to know what’s going on in the industry and find inspiration for your own business.  Read up on the research data and statistics that are available on eCommerce growth trends. This can help you understand the current landscape and make informed decisions about where to focus your efforts.  2. Take Advantage of Digital Tools There are a number of digital tools that can help you improve your eCommerce business. From marketing automation software to customer relationship management systems, there’s a variety of features that can make it easier to run your business and provide a better experience for your customers. Check the data and sales figures, and invest in analytical tools so you can understand where your customers are coming from and what they are looking for. 3. Learn From Your Competitors It’s important to keep an eye on your competitors to see what they are doing and how they are reacting to the latest eCommerce retail trends. You can learn a lot from observing their strategies and understanding their strengths and weaknesses. Should they fail, you can learn from their mistakes. If they succeed, you can try to replicate their success. Final Words As the global eCommerce ecosystem continues to grow and evolve, it's important to stay on top of the latest trends. Instead of leaning on traditional shopping methods, more and more consumers are turning to the internet to purchase items. Mobile phones play a big role here, as they provide a convenient way to shop on the go. What's more, consumers are getting more comfortable with new technologies such as AI, AR, chatbots, and voice search. These eCommerce trends in technology are changing the way we interact with eCommerce platforms and retailers. With all that said, we're confident that you now have a solid understanding of the current eCommerce landscape. Just remember to keep your eyes peeled for new trends so you can stay ahead of the curve.
By Danica Djokic · September 15,2022
As a business owner, you are likely responsible for overseeing all aspects of your company’s operations. This includes setting your own salary. This decision can be difficult to make, especially if you’re not sure what’s standard or how to determine what’s appropriate for your situation. In this article, we’ll discuss some factors you should consider when deciding how much to pay yourself as a small business owner. What To Consider When Setting Your Salary Setting your own salary can be daunting, especially if you’re a freelancer or small-business owner. After all, you need to make enough money to cover your expenses and earn a profit, but you don’t want to price yourself out of the market. So, what factors should you consider when paying yourself from your business? Business Structure One of the first things you should consider is your company’s business structure. Are you a sole proprietor? Do you have a business partner? Are you an S corp? Your company’s business structure will affect how much money you take home and how much in taxes you need to pay. For example, if you’re a sole proprietor, you’ll likely take home less money than if you’re running a corporation because you’ll be paying taxes on both your business income and personal income. On the other hand, if you’re running a corporation, you’ll only be taxed for your corporate income. This means that more of your business profits will stay within the company, which can be reinvested or distributed to shareholders. Business Expenses Another factor to consider when paying yourself as a small business owner is your business expenses. How much does it cost to run your small business? You should consider expenses like rent, utilities, payroll, and marketing. You’ll need to make enough money to cover these costs, plus your personal living expenses. One common mistake small business owners make is not accounting for all of their business-related expenses. Make sure you have a clear understanding of all the costs associated with running your business before you start setting your salary. Personal Living Expenses In addition to business-related expenses, you also need to account for your personal expenses, such as housing, food, transportation, and health care. Again, one common mistake people make is not accounting for all their personal expenses when calculating the business owner’s salary. Industry Standards Another factor to consider is industry standards. What do other businesses in your industry pay their employees? This will help you determine a reasonable salary for yourself as the business owner. Of course, you don’t want to undervalue your services.  Ultimately, setting your salary comes down to determining what you need to earn to cover your costs and make a profit and then finding the right balance between pricing yourself too high and too low. By taking the time to consider all the relevant factors, you can ensure that you set a fair and competitive price for your services. How to Calculate Your Owner’s Pay You should consider a few balance sheet items when calculating your salary as a small-business owner. These include your monthly net income, all business-related taxes and fees, and business expenses.  According to some small business revenue statistics, 86.3% of small business owners earn less than $100,000 a year. However, this does not mean you must stay within this bracket. Below are some steps you can take to get a clear picture of a small business owner’s salary and how to calculate it yourself. Calculate Your Monthly Net Income Your monthly net income is the total revenue your business brings in minus any taxes or fees. This number can fluctuate from month to month, so it’s important to take an average over a period of time to get an accurate number.  Next, you’ll need to subtract all business-related taxes and fees. This includes income taxes, self-employment tax, and any other business-related expenses. Once you have your monthly net income minus taxes and fees, you’ll be left with your profit.  Calculate Your Tax Savings The next step in calculating owner pay is determining your tax savings. This includes any deductions you can take for business expenses, home office expenses, and health insurance premiums. You can consult with a tax professional or use a tax calculator to get an accurate number. Once you have your tax savings figured out, you can add this amount to your monthly net income to get your total monthly compensation. Calculate Your Business Expenses The final thing you’ll need to consider when setting your salary is your business expenses, including office rent, utilities, supplies, and employee salaries. Once you know how much it costs to run your business each month, it will be easier to calculate how much to pay yourself as a small business owner. One mistake many small business owners make is not accounting for their salary when calculating their business expenses. This can lead to severe financial problems down the road, so be sure to include yourself in the equation. By following these steps, you should be able to come up with fair and reasonable compensation for yourself as a small business owner. Remember to avoid common mistakes, and you’ll be on your way to success.  Ways To Pay Yourself As a business owner, you have two options: Either pay yourself a salary or take distributions from your small business. Here are the pros and cons of an owner’s draw vs. a salary.  Paying Yourself a Regular Salary To pay yourself a regular wage, just like you would an employee, you’ll need to set up payroll for your business and withhold taxes from your paycheck. One advantage of this method is that it can help you separate your personal and business expenses and make it easier to track your business expenses come tax time. The downside of drawing a salary is that it’s subject to payroll taxes, which can eat into your earnings. Additionally, if you have a slow month or two, you may find yourself struggling to cover your personal expenses if you’re relying solely on your business income. An Owner’s Draw If you are self-employed and paying yourself a salary, an owner’s draw is another method you can use. This method is often used by small business owners with irregular or variable income. With an owner’s draw, you simply draw money out of your business bank account as needed to cover your personal expenses. One advantage of this method is that you don’t have to worry about payroll taxes. Additionally, it can give you more flexibility regarding how much money you take out of your business each month. However, one downside is that it can be challenging to track your small business expenses come tax time. So, which method is right for you? How to pay yourself as a sole proprietor? Ultimately, it depends on your circumstances and the needs of your business. If you have a stable and predictable income, having a regular salary may be the best option. However, if your income is variable or unpredictable, an owner’s draw may be a better option. Final Thoughts Paying yourself as a business owner can be a tricky task. And there’s no universal rule on how much business owners should pay themselves. However, by following some simple guidelines, you can ensure that you are fairly compensated for your work without putting your business finances at risk.  What’s most important is to find a method that works for you and your business. And, of course, to avoid any common pitfalls.
By Nikolina Cveticanin · September 14,2022

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