As you may know, most small businesses fail. Liquor stores are no different. They are rated as having some of the slimmest margins by MarketWatch in 2015. In fact, the average profits on liquor are only around 1%, which means you have to do huge volumes to make very much money. A large majority of liquor stores are run by owner operators, and there is a reason for that. Inventory is expensive, and after payroll expenses there isn’t usually a lot of money left over.
Because of the way that liquor sales are structured, liquor stores don’t have a lot of options of where to buy their products. Prices are regulated, and negotiating deals with suppliers is next to impossible. In order for a liquor store to really be profitable, they have to balance their low margin drinks with high margin products like snacks, pop, and prepared food. It is possible to be very successful with a liquor store, but just don’t expect a cash cow right out the gate. With a good balance of products, you can expect to make around 10% as an owner operator. It enough for a good living, but you probably won’t be making millions off of it.
One of the pros of running a liquor store is that it is fairly consistent income. Unless the demographics in the area change substantially for some reason, there is always going to be a demand for alcohol. Because of this demand, you will have a constant stream of clients walking in the door that you can sell additional products too. Also, there is a limited number of liquor licenses so it helps to encourage stability in the market.
If you are ready to take on the challenge of running a liquor store, you will need to have the capital to purchase or open the store, plus the capital to purchase the inventory. Because of the high price of liquor and the large number of SKU’s needed to have a well-stocked store, you will usually need a substantial amount of money set aside for inventory purchases.
As long as you know what you are getting into, buying a liquor store can be a great decision. Just make sure to do your research and completely understand the industry before jumping in and you could have yourself a very successful business.