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How to Open a Successful Liquor Store in 2020 (+Cost)

Breweries

How to Open a Successful Liquor Store in 2020 (+Cost)

July 13, 2020

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Alcohol sales in the United States is a multi-billion dollar a year industry. These types of businesses are highly regulated however. If you have a dream to open your own liquor store, this guide will walk you through every step of the process to ensure that your business is successful and compliant with all laws and regulations.

While this guide is thorough, it still may be helpful to enlist a business advisor or consultant to assist even further.

How to Open a New Liquor Store in 2020

Follow these eleven comprehensive steps to opening & owning your brand new liquor store.

1. Create a Liquor Store Business Plan

Before diving into the actions, the best way to start the process of opening your liquor store is to create a sound business plan. This is the researching portion of starting your business. This includes important details about where you’ll be sourcing your products, where you’ll get funding, when you plan to profit, a marketing/sales plan, the overall organization, and any plans you have to expand in the future.

Business plans can seem daunting, but drafting one will make it much easier to open your liquor store and show investors or bank lenders just how much thought you’ve put into making your business successful

Feel free to use this business plan template to help create a sound strategy for your new liquor store.

Download our free liquor store business plan and start planning your new business.

2. Find a Location

Location is everything. A liquor store, like many retail businesses today, will need a physical location in order for you to sell or distribute products from. You will need to either build, purchase, or lease a storefront that has the adequate zoning and space requirements for your store. 

Hire a commercial real estate agent or use a commercial listing website such as LoopNet in order to find the location that fits your budget and will help bring in the customers you’re looking for. 

When choosing a physical location, consider elements such as neighborhood, street traffic, sidewalk traffic, and accessibility. You will also need to ensure that the rent and utility costs are within range to ensure you still have enough money to pay for your employees and supply.

3. Form a Legal Entity

In order to be recognized as a legitimate business, you’ll need to establish your liquor store as a legal business entity. This will protect both you and the store in the event there are legal issues. This stage of the process is also where you get to decide on a name for your store. Whatever name you decide on is what the business will be legally known as moving forward.

You will likely be establishing your business as either a sole-proprietorship (owned by one person) or general partnership (owned by two people). In order to protect yourself if your store runs into legal issues, you’ll want to establish the business as a limited liability company (LLC). Consult your business attorney or tax professional to determine which type of business entity is right for you. 

Once you decide, register your entity with the secretary of state and chamber of commerce offices in your state/city.

4. Set Up Business Accounting & Banking

An important step to opening your liquor store is to ensure that all of your finances are in order. You’ll want to choose a bank and open business accounts to run your business from. You may also consider opening a line of credit for your business. 

Hiring a business accountant to consult with is a smart move here, especially if the finances of running a business are completely new to you. It’s much better to go in the right way rather than making a mistake that could cost you.

5. Acquire Permits & Licenses for Selling Alcohol

Permits and licenses are especially important for businesses involving alcohol. Prepare for this step to take a significant amount of time, research, and paperwork.

Your business will require a liquor license, which could cost thousands of dollars depending on different factors. Each city, county, and state has different rules and laws you will have to keep in mind when starting your business. These rules may restrict when your license is valid, prohibiting you from selling alcohol on Sundays or before certain times of days for example. 

Another important permit is through the Alcohol and Tobacco Tax and Trade Bureau (TTB). This is the office directly responsible for enforcing the laws most affecting your new store. You must register with the TTB and stay up to date in order to follow the industry rules and regulations. 

Your business attorney should be able to help you further through this step of the process to ensure your store is compliant with all necessary permits, laws, regulations.

6. Get Your Liquor Store Insured

Obtaining business insurance for your liquor store is very important. Anything could happen to your store, merchandise, or employees and you need to be properly prepared. 

Insurance plans including commercial property, general liability, workers compensation, and liquor liability insurance are important and usually necessary for liquor store owners. This is another area that it would be wise to enlist the help of a business attorney and accountant for.

7. Create Your Liquor Store's Brand

Now it’s time to have a bit of fun with your liquor store. The nature of alcohol sales is generally a little more carefree and relaxed when it comes to branding. A name and visual identity will help customers remember your store next time they wish to make a purchase. Your brand is how people will perceive your store, so create something memorable and fun.

8. Launch a Website

There’s not a business out there today that shouldn’t have a website. Establish a web presence for your liquor store by purchasing a domain. Use the website to share important details such as the location and open hours of your store. Include details about your inventory for customers to search for what they like. Have a page dedicated to your personal story and what your store means to you. 

Providing convenience and a story for people to relate to can ensure that your customers stay loyal for a long time.

9. Build a Marketing Strategy

Further expanding on your store’s brand, you’ll want to create a sound marketing plan to get your business up and running. Build upon your web presence by creating a Yelp, Facebook, and Instagram page to advertise sales and new products. 

What kind of signage will you have in and around your store? Will you send out mailers to homes in your neighborhood? Will your store host events such as wine tastings or cocktail mixing lessons? These are the types of questions you should answer with a solid marketing plan.

10. Stock Your Liquor Inventory

Your inventory is possibly the most important element of your liquor store. It may shock you at first just how much you may have to spend on inventory. Purchase liquor in bulk to keep costs down. Research local breweries, wineries, and distilleries and consider a partnership. 

Understand what alcohol items are popular in your area and keep those in stock, as well as staple products. Many liquor stores also offer other items such as tobacco products, cocktail mixers, ice, and snacks. 

Alcohol distribution in the U.S. occurs within a three-tier system. Alcohol producers represent the first tier, distributors the second and retailers are third. Neighboring liquor stores usually work with the same distributors. The distributors can assist new store owners with product selection and store displays.

11. Hire a Staff for Your Liquor Store

Overworking yourself will quickly lead to burnout and poor performance. Accept that you cannot do everything and hire some employees to help you out. Put out an ad in your local newspaper or job board for hourly employees. 

Keep in mind that having a staff will come with its own rules and regulations as well as new challenges in scheduling and payroll.

How Much Does It Cost to Start a Liquor Store?

Starting any business, let alone a liquor store, is going to be quite costly up front. Upfront costs such as securing a location, inventory, renovations, employees, and marketing will be the most expensive, sometimes totally $100,000 at minimum

Additionally, licensure and business registration can run upwards of $10,000 on their own.Be very prepared to use lots of your own money, or secure a bank loan, in order to open a successful liquor store.

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How Profitable Is Owning a Liquor Store?

According to a study published on Forbes, liquor stores are one of the 15 least profitable business industries with a profit margin of less than 2 percent.

5 Challenges of Owning a Liquor Store

Now that your new liquor store is open, the work has really just begun. Here are five common challenges you are likely to encounter and how to prepare for them.

1. Laws & Compliance

The sale of alcohol in the United States has a complex history. Prohibition in the early 20th Century has led to a variety of different local and state regulations across the country. These laws are also constantly changing and it’s up to you as a business owner to stay up to date on what is and isn’t allowed where you’re located.

2. Inventory Cost

As mentioned earlier, keeping a steady inventory for a liquor store can be costly. Because alcohol is created using agricultural commodities, the price for alcohol products can shift regularly. Work closely with your distributor to ensure you’re getting a fare price for your stock.

3. Managing Cash Flow

Keeping the books of your business balanced is an important task. There may be times where money is extremely tight and you’re not sure if you’re going to make ends meet. This cash flow is the lifeblood of your store, so make sure that there are always funds to pay bills, payroll, and other expenses when necessary.

4. Keeping Prices Competitive

Customers are savvy and will always chase after a good deal. Have a clear understanding of your price points for different products and keep these prices competitive with other retailers in your area. Make sure your prices are high enough to pay bills and profit, but low enough to keep customers buying.

5. All the Normal Challenges of Starting and Operating a New Business

On top of everything, a liquor store is still a small business. You’ll encounter day-to-day challenges faced by all small business owners as you learn what it takes to run your own liquor store. The road ahead will not be easy, but you knew that. Keep your head up and press on as you grow your new business into your crown jewel.

Free Liquor Store Business Plan Template

To help you with your dream of opening and operating a new liquor store, here is a free liquor store business plan template to help you open your first business:

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FREE TEMPLATE:
Liquor Store Business Plan Template
From the executive summary, SWOT, financials, forecasts, & more.
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