Should I Buy a Liquor Store or Build a Liquor Store?

Whether you want to buy a liquor store that already exists or start one entirely from the ground up, the private retail liquor business can be a rewarding investment. Business owners often ask us about the cost differences between buying a liquor store vs building a liquor store. Liquor store start up costs can vary significantly because there are so many factors that contribute to cost. The “buy vs. new build” question can’t be easily answered easily, however, there are pros and cons that can help a prospective liquor store owner decide what’s best for them.

Having worked as liquor consultants for numerous private BC liquor store owners over the years, we’ve observed a number of traits that are common to successful liquor retailers. Whether you buy a liquor store or build one, if you are planning to run the store yourself, you need to know whether you have what it takes to succeed in the retail liquor business.

From our perspective, a successful liquor store owner:

• Provides excellent customer service.
• Is comfortable “wearing many hats” and can handle the many tasks and decisions required of each.
• Is willing to learn all aspects of operations from retail sales, to staff training, to financial analysis.
• Understands the market and monitors changes.
• Knows federal, provincial/state, and municipal rules and regulations with regard to the sale of alcohol.
• Develops procedures and checks to ensure legal and regulatory compliance on an ongoing basis.
• Implements in-house policies and procedures and provides training on an ongoing basis.
• Trains floor and sales register staff in effective sales techniques.
• Reduces staff turnover (and thus hiring and training costs) by providing job security, benefits and other incentives.
• Understands and optimizes in-store promotion and marketing.
• Is constantly seeking a competitive edge.
• Knows their SKUs.
• Knows liquor SKU profitability (winners, losers and loss leaders).
• Is skilled at managing cash flow.
• Seeks external guidance from retail liquor consultants over the lifetime of their store.

Buying a liquor store has obvious benefits:
The store is already built and refrigerators, shelving and displays are in place.

• The liquor store already has an established location and is generating revenue.
• Current financials are known, so your projections can be based on past performance.
• Liquor licensing and municipal licensing are already in place.
• If you’ve done your homework and carefully examined store financials and profitability prior to purchase, your operation will likely be a turnkey money maker.
• Staff are already hired and trained.
• Experienced staff that stay on after the purchase can share knowledge and make a new owner-operator’s learning curve less steep.

• Buying a liquor store costs approximately 7 times more than building a liquor store.
• Existing store configuration may not be to your liking.
• Required improvements and renovations can be costly, time consuming, and would require provincial/state liquor licensing approvals and municipal government approvals.
• Renovations could require closing the store and a loss of revenue until they are completed.
• You inherit issues with staffing and other human resources management issues.
• You inherit all stock, regardless of its profitability.
• You inherit the business’s financial issues (overstock, low value stock, expense overruns, inefficiencies, lack of financial planning).
• The purchase price is directly related to the store’s historical financial performance. You’ll pay a premium for a store with healthy profit and cash flow.
• While you may be able to purchase on the low end of market value, that low price may mean low profits, inherited debt and bad cash flow.

Though liquor store start-up costs are a sizable investment, building a liquor store from scratch does have its advantages:

• Often far less expensive than buying an existing liquor store.
• You can find a suitable location instead of being stuck with sub-par location.
• You do it your way rather than purchasing a store and inheriting operational problems.
• You control the store layout and have the opportunity to get it right the first time.
• You choose the location and configuration of refrigerators, shelving, product displays, cash desks and inventory storage.
• You choose the product SKUs to maximize profitability.
• You control branding, marketing and customer relationships.

• Liquor license and municipal licensing and approvals are expensive and time consuming.
• Building purchase or lease costs are high in prime retail locations.
• Building, renovating or relocating a store can take up to 18 months or more if rezoning is required.
• Income and expense projections are best guesses. While you can project revenue and expenses based on industry benchmarks, you never really know what they’ll be until you’ve been in business for some time.
• You must hire and train staff.
• Your learning curve is steep without the support of existing managers and other key staff that you’d be able to depend on if you bought an existing liquor store.