The old saying goes that no matter what the economy is doing, people still have to eat and drink – and judging by forecast liquor sales of billions in 2024, drinking alcoholic beverages is also a necessity.
With sales of liquor expected to grow every year for the rest of this decade, opening a liquor store may seem like a slam dunk – and if you do your homework right it can be. However, liquor stores are among the most regulated retail businesses in Canada, with laws covering every aspect of the operation. Add in expensive inventory, strong competition, high licensing costs and increasingly savvy customers and it doesn’t take much imagination to see that operating a liquor store can also be hard work.
But let’s suppose your business dream is to own your own liquor store no matter what. How do you get there, what hurdles must you cross and most importantly, what will it cost? Let’s find out. Read on to discover all you need to know about opening a liquor store.
Opening a small liquor store comes with the same fundamentals as opening any kind of store, you can either start from scratch with a brand-new business, or you can buy an existing liquor store with an established customer base. However, that’s about as far as the similarities go, because opening a new liquor store or taking over an existing store can be one of the most challenging of retail ventures.
Why is this?
However, despite these issues, there is plenty of good news for budding liquor store owners: Firstly, if you get the basics right, running a small liquor store can deliver good income – typically delivering a profit margin of 15% to 20% and annual profits of $300,000 to $1million. Secondly, liquor stores can be a good bet for a number of other compelling reasons:
Key steps to open a liquor store include:
If you’re seeking external investment or a commercial business loan to open your store, you will need a detailed business plan to support your pitch or application. Investors and lenders will want to know why you need their funds and what the money will do for your new store. Business plans should do more than paint a rosy picture – explain the risks involved, what the downsides could be – and how you intend to overcome them.
Even if you don’t need investment or a loan, a business plan can still be a very useful vital tool. Use it as your business manual, referring to the contents to guide your strategy and manage your financials.
Find out more about creating your business plan here.
Where your store is located can have a major impact on the success of your business. Take the time to research different locations, measuring the competition and the size of the local population. You want a store in an area where foot traffic is high and local incomes can support your store and the kind of drinks you sell. Once you have a target area, you can either look for vacant store units to lease, or you can look for an existing liquor store that is up for sale.
Starting in a vacant unit will cost less than buying an established business, but you will have to build your customer base from scratch – that will take time and more cash for marketing. Also, will your working capital be able to cover the time lag until your sales reach breakeven? If you choose to buy an existing liquor store, make sure you ask all the right questions and inspect the books carefully. Critically, you need to know why the owner is selling. Are they retiring or is the business struggling – if the latter, find out why.
If you don’t have enough cash on hand to launch your new business on your own, you’ll need funds from investors or lenders. Many new businesses get started using financial support from friends and family, but if that’s not an option, there are networks of venture capitalists and angel investors readily available online. Bringing in external investment can give you the cash you need to get your liquor store off the ground but be aware that investors will usually want a piece of the action in exchange for their money. This means you will need to give up a share of your ownership and you may lose overall control of the business.
With a business loan you don’t have to surrender a share of your store to get the funds. Although it’s never easy for new businesses to borrow money, some lenders have special products and programs for startups and entrepreneurs. These types of financing include:
To get these types of loan you can approach banks, credit unions and online lenders one by one, or you can use the services of a loan marketplace that will immediately introduce you to a choice of startup loans from different lenders. Some marketplace platforms can also give you advice and help you with the application process. This can be especially useful for borrowers who have never taken out a startup loan before.
You’ll need to register your liquor store with local, state and federal authorities. But before you do that, you’ll need a name for the business. You’ll want a name that is not taken by another organisation, as infringing on someone else’s brand name and copyright could end up in a costly lawsuit.
You will also want a website and branded email addresses for your store. Check to see if your preferred company name is also available as a domain name. If your domain name is available, you should be able to buy it via any of the advertised web hosting services.
Once you’ve settled on a name, you must decide if you want to run the business as a sole proprietorship, an LLC or a corporation. Although it involves more paperwork, operating as a corporation can protect you if the business does not succeed, as you are not personally responsible for the company’s debts. If you choose this route, you must submit your articles of incorporation to the secretary of state’s office in the state where you register. You can do this in-person, online, or by mail. You will have to pay a registration fee at the time of filing – typically $100.
Liquor stores are governed by a host of laws, and you will need to get the necessary licenses and permits. Don’t be tempted to start trading without the proper licensing as that can lead to large financial penalties or even prosecution.
Opening a liquor store is not cheap. Even if you choose to start with a brand-new store instead of buying an existing business, licensing and permits can cost $10,000 or more. Then you have the physical expenses such as store leasing, fit-out costs, utilities, equipment and initial inventory. On top of this are employee wages, training costs and marketing and advertising. Legal expenses and insurance can also cost several $thousand. Add it all up and starting a new liquor store will typically cost at least $100,000. If you choose to open your business in a major city, or you opt to buy an existing and successful liquor store, the upfront costs can be many hundreds of thousands or even a few million dollars.
Liquor stores can carry expensive stock, with some rare or specialist brands or vintages costing several hundred dollars per bottle. Even if you choose to focus on cheaper drinks, such as craft beers, you will still need a good selection of brands and plenty of inventory.
At the end of the day, how much you spend stocking your new store will depend on who your target market is, what your main products are (wine, beer, spirits, etc.), and what your average price point is. The more high-end you are, the more your stock will cost. On average, new liquor store owners aiming for mid-market customers can expect to spend at least $35,000 on initial inventory.
Running your own liquor store can be lucrative and a lot of fun, but you’ll need a lot of liquid cash to get you there. Funding is where Swoop can really help. No matter if you’re launching a brand-new liquor store, or you’re buying an established business, chances are you’ll need finance to make the operation grow. Many types of business loans are suitable for liquor stores, but working with finance experts can make all the difference when applying for funding. Contact us to discuss your borrowing needs, get help with loan applications and to compare high-quality business loans from a choice of lenders. Make your liquor store the toast of the town. Register with Swoop today.
Swoop was amazing! I was looking for refinancing and they were straight onto finding me the best possible option. I would highly recommend them.
Owner, F45 Cambridge
Written by
Chris is a freelance copywriter and content creator. He has been active in the marketing, advertising, and publishing industries for more than twenty-five years. Writing for Barclays Bank, Metro Bank, Wells Fargo, ABN Amro, Quidco, Legal and General, Inshur Zego, AIG, Met Life, State Farm, Direct Line, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of consumer and business finance and insurance.
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