Opening a Liquor Store: A Short SBG Guide
By Danica Djokic
June 19, 2023
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.
Form a Legal Entity
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!
Further Reading
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.