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  1. #1

    Liquor Store Profit Margin?

    So I am browsing businessforsale.com and never realised liquor stores had such high opperating expenses! One claims $1.125M in sales and $100k in profit.


    Whats the deal with that?
    Last edited by Mcstiff; July 21st, 2008 at 12:09 PM.
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  2. #2

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    UMMMM. Liquor is spensive?

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    Competition

  4. #4
    licensing is also $$$$.

  5. #5
    Holy crap, that is a 9% profit margin. by god, we better get Congress to investigate and promise some windfall profit taxation!
    Jeff Mason
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  6. #6
    100k in profit after paying all the expenses? Sounds pretty good to me actually.
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  7. #7
    Not saying its bad, I just thought it would/could be better.

  8. #8
    Quote Originally Posted by Big Dave View Post
    100k in profit after paying all the expenses? Sounds pretty good to me actually.
    x2.

    I'd have expected liquor to be even lower margin than that.
    "it all about beer, guns, and trolling for me."

  9. #9
    0x0 Yota's Avatar
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    Quote Originally Posted by Mcstiff View Post
    Not saying its bad, I just thought it would/could be better.
    It can be better - for a while anyway. Businesses are constantly looking for ways to cut cost. And a penny saved is a penny earned as they say.

    But if Business A finds a slick new way to cut costs and thus bumps his margin to, say, 11% then you can bet Business B will do the same once the word gets out. And ultimately the profit margins will stabilize back around 10% most likely. Both businesses are making money.

    Competition is a fact of business in America. There is virtually no such thing as a true monopoly anywhere in America. Even businesses that are popularly thought of as monopolies actually still have serious competition.

    Who benefits from this is the consumer who gets to pay less and less (in real terms) for the same products.

  10. #10
    Quote Originally Posted by Yota View Post
    Competition is a fact of business in America. There is virtually no such thing as a true monopoly anywhere in America. Even businesses that are popularly thought of as monopolies actually still have serious competition.
    I was told (unverified, in other words), Colorado law prohibits ownership of more than one liquor store. Hence something like "Tipsy's." Which is why there aren't chains.

    This makes for an EXTREMELY competitive market.


    I also bet there's a ton of breakage and theft in liquor no matter how careful you are.

  11. #11
    Quote Originally Posted by jnschwie View Post
    I was told (unverified, in other words), Colorado law prohibits ownership of more than one liquor store. Hence something like "Tipsy's." Which is why there aren't chains.
    What you end up with is a family business.

    Brother A owns a store in lakewood.
    Brother B owns a store in Highlands Ranch
    Sister A owns a store in Thornton

    etc...

  12. #12
    Quote Originally Posted by mkbruin View Post
    What you end up with is a family business.

    Brother A owns a store in lakewood.
    Brother B owns a store in Highlands Ranch
    Sister A owns a store in Thornton

    etc...
    Right, or a group ownership where each member has his name on only one registration, but still, this is FAR less efficient than having each grocery store chain own its own liquor depot, or whatever, from the chain POV.

  13. #13
    Captain Radon Steve's Avatar
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    That profit is what they're showing on their books, which if they're smart they minimize for tax purposes. If you're looking at buying a business - any business - it's smart to get a recast earnings statement to get the real story.

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    Quote Originally Posted by Mcstiff View Post
    Not saying its bad, I just thought it would/could be better.
    Its something stupid like $6m in transactions a week for us to make $3m million a year.
    "The two enemies of the people are criminals and the government, so let us tie the second down with the chains of the Constitution so the second will not become the legalized version of the first." - Thomas Jefferson

  15. #15
    Quote Originally Posted by jnschwie View Post
    x2.

    I'd have expected liquor to be even lower margin than that.
    Me too. Given that you can't swing a dead cat without hitting 5 liquor stores in the metro area, and given that liquor stores are pretty much all selling the same things, price is about the only way they can compete.

    I think 9% profit is outstanding and I wonder how representative it is of liquor stores as a whole. My guess is that a lot of smaller liquor stores have a hard time making 3-4%, which is why they were so upset about the liquor-on-Sunday law.

    They probably thought they were faced with an intractable dilemma: Either hire someone to work on Sunday, or stay closed on Sunday and lose a percentage of sales. In essence, the Sunday employee has to generate at least his wages in profit (not sales) or it's not worth it to have him/her there.
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  16. #16
    is awesome! 1BGDOG's Avatar
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    On average a store makes anywhere between 5-15% profit (after expenses). Beer keeps the doors open for the stores. Many stores will price more popular brands (Jack, Cuervo, Capt) at or near cost to get you into their store.

    Since Sunday sales have been in effect sales have been mixed, for stores of various sizes. In general a good thing, but 3.2% sales have been hurt for grocery/C stores.

    Liquor licenses one per person, so as already stated I can own one and my wife could own one. You would be surprised how many families are in this industry.

    PS Get to know your stores, discount are out there.
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    Banned Leon Phelps's Avatar
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    Quote Originally Posted by 1BGDOG View Post
    On average a store makes anywhere between 5-15% profit (after expenses). Beer keeps the doors open for the stores. Many stores will price more popular brands (Jack, Cuervo, Capt) at or near cost to get you into their store.

    Since Sunday sales have been in effect sales have been mixed, for stores of various sizes. In general a good thing, but 3.2% sales have been hurt for grocery/C stores.

    Liquor licenses one per person, so as already stated I can own one and my wife could own one. You would be surprised how many families are in this industry.

    PS Get to know your stores, discount are out there.
    Could not have said it better....

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    is awesome! 1BGDOG's Avatar
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    Quote Originally Posted by Leon Phelps View Post
    Could not have said it better....
    Between you and I, I think we know both bars and liquor stores pretty well.

    If I were to own one, it would be a tough choice. But a bar that has no kitchen, a manager that I can trust,along with a solid staff (tough but doable) maybe the way to go.

    That being said finding either a liquor/bar for sale. It is going to cost you, because the owner knows what the value of their business is.

  19. #19
    Yes, Need business for you store have Leon and 1BG stop by...ROFL!
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  20. #20
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    They have to stock the store and the overhead thye have could be high. That all cost money\ and takes from the bottom line, but 100K is a good living.

  21. #21
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    I bet insurance kills them also.
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  22. #22
    They also may have been paying themselves salaries and draws out of operating expenses to show a true operating cost and showing the 100k as business profit. IMO You should try make the company look profitable, not just the owner/owners, much eaiser to sell.

  23. #23
    Quote Originally Posted by The Green Squirrel View Post
    They also may have been paying themselves salaries and draws out of operating expenses to show a true operating cost and showing the 100k as business profit. IMO You should try make the company look profitable, not just the owner/owners, much eaiser to sell.
    That's kind of what Steve was getting at, but it would be curious to know how they structured that (if they did) specifically for a "sell my business" website.

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    Banned Leon Phelps's Avatar
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    Quote Originally Posted by 1BGDOG View Post
    Between you and I, I think we know both bars and liquor stores pretty well.

    If I were to own one, it would be a tough choice. But a bar that has no kitchen, a manager that I can trust,along with a solid staff (tough but doable) maybe the way to go.

    That being said finding either a liquor/bar for sale. It is going to cost you, because the owner knows what the value of their business is.
    From both sides, between pouring drinks behind the bar and being the patron at several of Denver's fine establishments.

    I've considered buying a established bar (mainly for the liquor license). But from what I've seen it's the biggest PITA to get a good bar manager/head bartender and someone to keep fairly legit with the books, it's kinda sad actually.

    X2 on NO kitchen. Where I currently pour has NO kitchen. We serve salsa & chips & fried tater chips. Thats it. SO much easyier. The kitchen is a drain on profits and work load, IMHO.

  25. #25
    The numbers are pretty vague but since they are selling a business I would think they would try and be accurate (knowing that people are going to want to see the accounting).

    A kitchen kills you. To much ish to go wrong.

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    The killer these days is rent in these strip malls. My parents rent a 1500 square foot store in lone tree that started 9 years ago at $2 a square foot and its now $5. Now consider a liquor store is 3-4 times bigger your looking at $12-15,000 a month just for a strip mall liquor store. Add on top of that CAM fees which are maintenence related fees such as garbage, snow removal, painting, etc. which are $8,000 a year and that is why there are very little profits to be made.
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    Banned Leon Phelps's Avatar
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    Quote Originally Posted by Mcstiff View Post
    The numbers are pretty vague but since they are selling a business I would think they would try and be accurate (knowing that people are going to want to see the accounting).
    I figure the books in terms of the business overall are solid. Most bars have solid accountants. Trust me, most bar owners are more of a meiser than most think. I'd be more concerned w/ operating expenses/inventory (numbers on a smaller scale)

    I just got home from work (at the bar) literally. I go in for about 3 hours, every monday to do inventory since apparently no one else is to be trusted; per the owner(s). Since our liquor cost has skyrocketed in the past 4 months.....

    Quote Originally Posted by Mcstiff View Post
    A kitchen kills you. To much ish to go wrong.
    Gospel.
    Last edited by Leon Phelps; July 21st, 2008 at 11:39 PM.

  28. #28
    Banned Leon Phelps's Avatar
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    Quote Originally Posted by HollywoodCTS View Post
    The killer these days is rent in these strip malls. My parents rent a 1500 square foot store in lone tree that started 9 years ago at $2 a square foot and its now $5. Now consider a liquor store is 3-4 times bigger your looking at $12-15,000 a month just for a strip mall liquor store. Add on top of that CAM fees which are maintenence related fees such as garbage, snow removal, painting, etc. which are $8,000 a year and that is why there are very little profits to be made.
    I've never poured in a bar thats part of a strip mall. Call me old school, I just think it's a bit.... ghetto, IMHO. I do drink in them, but I tend to stick to more established, older bars w/ the clientel to support me going in to pour drinks.

  29. #29

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    I actually was talking about liquor stores not bars. I agree a bar in a strip mall is a bit ghey......they have no identity when its in a strip mall

  30. #30
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    Quote Originally Posted by Steve View Post
    That profit is what they're showing on their books, which if they're smart they minimize for tax purposes. If you're looking at buying a business - any business - it's smart to get a recast earnings statement to get the real story.
    Yup. The goal is to make little to no money on your taxes.

  31. #31
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    Quote Originally Posted by Budman View Post
    Yup. The goal is to make little to no money on your taxes.
    And thats what I do without even trying lol

  32. #32

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    We owned a liquor store in the late 60's. At the time we had a 30-35% markup. That does not mean profit. Back then the liquor license cost us $40k. To put things in perspective, an engineer made about $10k per year. Rent, lights, and labor ate a large portion of the profits, not to even mention advertising. That was before the large stores became common. As was said, the margins have gone in the dumper. Most stores are hard pressed to make a good living for a family unless they are huge.

    In the late 60's we formed a buying COOP with about 50 other stores and started purchasing liquor by the truck load straight from the sources. It helped the bottom line, but was a political nightmare.
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  33. #33
    Did the Snowman drive the truck? J/K

    Like I said above, compaired to other businesses I was expecting better numbers. You cannot assume that sombody is savy and hiding true profit to avoid the tax man.

  34. #34
    Captain Radon Steve's Avatar
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    Quote Originally Posted by Mcstiff View Post
    Like I said above, compaired to other businesses I was expecting better numbers. You cannot assume that sombody is savy and hiding true profit to avoid the tax man.
    Here's what I meant with my earlier post. (I've owned a business and looked at buying a couple of others.) Let's say it's family owned, as many liquor stores are. If the owner pays himself, say, $100k/year as a salary, that comes off the bottom line as an operating expense and doesn't show as profit. If he pays his wife a salary, same thing.

    A recast earnings statement looks at those things and gives you a much better idea of what the real bottom line would be if you bought that business. So, for example, if the owners get $100k in salary and the business makes $100k in profit, you as a buyer could actually make $200k/year, not the advertised $100k margin.

    Any business owner that doesn't pay themselves a salary, and just takes end-of-year profit as a salary, is a complete dumbass and shouldn't be running a business.

  35. #35
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    Winnar. You need to see this guy's detailed records to know what is really up as far as income potential. If you get serious, I have a friend who owns a liquor store, and I'd be glad to make an introduction, Mcstiff.

    It's out near where you work, I think- if you're in Longmont.

  36. #36
    Thanks for the offer! I work in Thornton (The compitition is in Longmont).

    I am pretty serious but in a longterm sort of way. This could not happen for a few years. SWMBO and I have been looking for something.

  37. #37

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    Just a little FYI being in business for yourself is tough. Say goodbye to weekends, most holidays, nights off. People you hire are very unreliable, and sometimes steal from you. My familys store has been open for 9 years now and it has been 9 years since we have had a vacation. We work 6-7 days a week and anywhere from 8-12 hours a day. Especially in the summer being an ice cream store we work so hard just to make enough money to keep the doors open. Fortunately business is up, but unfortunetly so are costs like rent, milk, and even stupid ass delivery fees. Coke syrup has even gone up 3 bucks a box because of high oil prices. I know i dont get it either. Its all very rewarding to see a business succeed but say goodbye to M-F 8-5.

  38. #38
    Yeah, that is a big risk.

    Not large enough to dissuade me from looking into it.

  39. #39
    is awesome! 1BGDOG's Avatar
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  40. #40
    LOL, ok.

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