Buying a Top Quality Liquor Store

There are so many different dynamics involved and a complex set of metrics to take into account when buying a business. So many tangible and intangible elements are involved and remember that each situation is very different, even though those who may be seeking a favorable price when selling may try and refer to benchmarks. The prospective buyer can find it difficult when valuing a liquor store for sale and can be especially confused when looking at a similar prospect nearby. As they appear be so similar in style, type and size, why such a 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 makeup of the clients in its catchment area, focus on particular products or services, the competence and skills of the staff and so on. It is therefore particularly important that you glean as much information as you possibly can, conduct comprehensive research and be especially diligent before you begin to decide whether it is right for you.

All of the following issues must be considered when you are contemplating the purchase of a liquor store:

* its location.

* whether revenue and profits are stable and sustainable.

* customer database and expansion potential.

* the terms and condition, portability of the lease.

* demographics and population shifts.

* any pending road construction.

* employee situation - working for favors or Cash in hand, such as with members of the family.

* whether there any opportunities or threats that could considerably impact future revenues.

Bear in mind that the liquor store industry tends to want to focus on industry benchmarks and while this is fine for some outline information, you cannot rely on it. You will find that no two businesses are the same and each may look at different areas, for example cigarettes or premium items, beer or wine, while the other looks elsewhere. Look for abnormalities or something that really jumps out at you and make sure you understand why this should be. At the end of the road, however, look at the bottom line to determine how much the business is worth to you.

When you are assessing the business financials and particularly the revenues, you must dismiss any cash sales reported by the owner unless these sales are backed up by audited accounts and are included in tax returns. The outgoing owner cannot expect to receive the value for these "under the counter" sales, as he or she may well have not reported them for tax purposes in the first place.

The inventory must be relatively fresh and saleable and not be mainly composed of products that are not popular anymore or likely to sell. As an example, a large stock of winter ales will not go down very well during the summer.

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 midterm in relation to improvements, upgrades or necessary investments.