A liquor store business is a fairly common sight around a retail landscape, and in most instances they’re a valued part of your local strip mall as well. Most believe that a liquor store represents a solid business and is less prone to recession. Keep in mind that there are a great deal of factors to really think about when purchasing a liquor store, and you also have to remember that in most instances this kind of business doesn’t make a good “hands-off” enterprise.

One of the most significant issues to take into account and perhaps even more important than a location, is the acquisition of a license. The procedures required to get the necessary license to operate a retail liquor store can be very complex, so much so that the issue can often force a potential sale to fall apart.

Make sure that you understand the forces that will affect your chances of getting the necessary licenses to operate a liquor store:

• Generally, every authority – city, county or state – operates a different set of rules and guidelines.

• Some areas will allow you to transfer a license without any problem, while others dictate that you need only apply for a new one.

• On the opposite end of the spectrum, some municipalities specify a moratorium on new licenses, meaning that the store cannot even be sold!

• Retail liquor store licenses can be held in such high demand in other locations that they are treated just like stocks on the open market.

If demand is high, costs can be over $1 million, representing more than the actual price of the business.

Make sure that you thoroughly understand the specifics relating to licensing in your particular location. Perform this research yourself with the applicable government agencies, and don’t ever take someone else’s word for it.

Generally speaking inventory is turned over, in a good liquor store, between eight and 10 times per year. While there might be quite a bit of inventory included as part your deal, don’t forget to ensure that it’s fairly recent stock which is still readily saleable. In most instances, liquor stores are priced at business value with inventory value added on top of this number, but make a note that this complete price can be split up to fit within your own investment limits.

In this kind of business, you shouldn’t even consider the idea of becoming an absentee owner. When it comes to liquor stores, they really do demand a hands-on approach. Take a moment and think about the situation - there are lots of cash sales, valuable merchandise is filling the shelves, there are regular late night operational hours and the business is susceptible to all kinds of crime. You will have to do your best to ensure that you hire really competent and trustworthy employees, as the working hours can be quite long.

Make sure that you select a store that has a good product mix. No longer is it okay to operate with a store full of booze in a decent location. People’s preferences are evolving as they’re becoming more cultured, with new wine boutiques and megastores appearing daily. A wide variety of specialized products and flavors are now highly in demand by the masses.

If you are interested in buying a liquor store which has a great reputation based on knowledge and selection, do make sure that you have, or can hire people who possess, the same degree of product knowledge as the seller.

A good liquor store may work well in any environment and location may not be the most critical element here. If you provide a fantastic selection of products (a good mix between wine, liquor and beer) plus in demand items like lottery tickets and a complete tobacco selection, you could easily be onto cash machine. If you’re going to have to compete on price alone, however, then you need to choose the best location possible. Negotiate the best lease contract with the most favorable terms.

Remember, that if the seller cannot prove it then you can’t pay for it! Liquor store owners can be notorious for keeping poor records or skimming off cash. This is very negative for a number of reasons:

• It may well be almost impossible to determine the real profits.

• The seller will want to factor in unreported income to his asking price but this can be completely unreasonable.

• If the seller is stealing cash, other staff may be as well.

Don’t take them at their word when they say that there will be “a lot of cash” that never shows up on the books, unless they are just telling you that and not including this consideration in the asking price. They cannot have it both ways; if they avoided taxes on the income, they cannot get paid again by building in some mystery revenue to the sale price.

Richard Parker is the President and founder of the Diomo Corporation - The Business Buyer Resource Center. His inspiring materials, seminars and consulting have assisted thousands of business buyers with achieving their life long dream of buying a business.