Avoid Common Pitfalls When Buying or Selling a BC Liquor License

If you’re considering buying or selling a BC liquor license and business, there are many potential pitfalls that can slow down the sale or have it skid to a screeching halt. Selling a liquor license is a fairly common practice, though doing so without the expertise of a liquor business advisor is daunting. It’s easy to neglect or overlook BC liquor licensing requirements, which can jeopardize the sale.

In this post, we’ll explore elements of liquor license sale that cause the most problems for sellers and buyers.

Get Your BC Liquor Business in Order First

You wouldn’t sell a vehicle without first cleaning the interior and exterior and fixing obvious mechanical problems, and so it goes for selling a BC liquor business. There are many things a liquor licensing consultant can do to ensure that your business is seen in the best light.

• Let the real market guide your valuation
  When considering a price, it’s best to let actual sales in the market be your guide. A BC liquor licensing consultant (such as Thrive Liquor & Cannabis Advisors) with experience guiding liquor business sales, can help you determine a reasonable price by investigating the sales market for similar businesses over the past year.
• Know your numbers
  Make sure financial statements are up to date and know the numbers! These include an income statement, balance sheet, and cash flow report. Complete financial statements demonstrate competence and increase a potential buyer’s confidence in your business.
• Optimize inventory
  Optimizing inventory is necessary “numbers housekeeping”. If your inventory is full of old or unsold stock, it looks bad. Inventory optimization is also a chance to identify what is working, so you highlight sales figures during negotiations.
• Clean it up. Fix it
  A potential buyer (or their proxy) will likely walk through your business. Take a page from a real estate agent’s book of tips and “stage” your BC liquor business before putting it up for sale. Clean, repair, replace and paint if needed! Make sure you clean up the storeroom and staff area, too.
• Don’t forget manuals
  Make sure policy and procedures manuals and operations manuals for equipment are available and up to date.

Valid Interest in BC Liquor License

A “valid interest” is a term that describes whether a would-be licensee is a valid owner of the business. A BC liquor license cannot be transferred unless specific ownership criteria is met. BC Liquor & Cannabis Regulation Branch (BCLCRB) will want evidence that the business is being transferred to a valid owner. BCLCRB will require proof of that ownership, lease agreement or sub-lease agreement.

BC Liquor License Transfers to Corporations

BCLCRB requires all corporate documents name licensees. Licensees may be partners and shareholders. Documents requested may include:

• Central Securities Register (a.k.a. “shareholder register) listing of all shareholders, class of shares, date of issue, transfer or cancellation of shares.
• Register of directors and officers with full legal name and position.
• Full legal name and date of birth of shareholders with less than 10% voting share.
• Completed personal disclosure documents including legal name and date of birth, for each shareholder with more than 10% voting share. Criminal record checks will also be required of each shareholder.

Note: if the business is part of holding company or family trust, or if business owners or shareholders reside outside Canada, it’s important to make requests for personal disclosure documents from owners early in the process to avoid unnecessary delays.

Third-Party Operator Agreements

Occasionally, a liquor business owner sells rights to a third-party to operate the business (in addition to assets) but does not transfer ownership of the BC liquor license. This is a cost-effective way for a buyer to get into business because the purchase price is much lower than when the business and liquor license are sold. Third-party operator agreements should stipulate how long the third-party can operate the business, and under what conditions the owner may sell the liquor license.

Review BC Liquor Business Floor Plans

When buying a BC liquor business, whether a private liquor store (Licensee Retail Store), brew pub, wine store or manufacturing facility, always review the floor plans that were submitted to and approved by the BCLCRB. The real-world floor plan should match exactly with the floor plan that was filed when the BC liquor license application was approved or amendments were made.

Buy or Sell a BC Liquor License

Whether you’d like to sell or buy a BC liquor license (or retail cannabis license), Thrive Liquor & Cannabis Advisors can help! We work with sellers to optimize their business prior to a sale and act as liaison between parties to facilitate a smooth sale. We make buying or selling easy because we know the BC liquor licensing landscape. We do the hard work (and confusing work) for you, so you can sit back, relax, and reap the rewards. We work with liquor businesses from start to finish! From helping you submit a winning BC liquor license application to selling your BC liquor business, we work with clients every step of the way.