A liquor shop is one of the most profitable retail businesses across the world. Liquor has a steady demand both for personal consumption as well as for parties and social gatherings. However, you have to do good research on several things like the location, the demand of a particular type, target customers, and legal formalities. In this article, our industry experts have listed down all the important steps one must follow to start and run a successful liquor store business.
Why Start a Liquor Store Business?
Let’s cover why a liquor store is a great business idea before we get into the nitty-gritty. Liquor is an item that will always be wanted. Folks buy it for holidays, parties, or to unwind after work. Liquor stores also tend to have fair profit margins, especially on higher-end items.
If you give good service and a fair amount of selection, customers will be back. And, also, you can tailor your store to your people’s needs, whether it is highlighting craft brew, fine wines, or affordable options. Wonderful, right? Now, let’s go through the steps in starting.
12 Steps to Start a Liquor Store Business
1. Understand the Market
All good businesses begin with a good plan. First, start by learning about your neighborhood. Are there a lot of liquor stores already out there, or is there a need in the market? Second, determine your target consumer. Are they young professionals, wine drinkers, or tightwads? Also, take a look at your competition. What are they doing well, and what are they lacking?
2. Create a Liquor Store Business Plan
The first thing to do after you decide to start a liquor shop is to craft a well-researched business plan. It is better to write down the business plan thoroughly so that everything is clear in front of you.
Your business plan should contain the necessary points for starting your liquor shop, like the source of funding, amount to be invested, inventory, accounting method, target customers, pricing, break-even period, and profit.
Your business plan will also have the details of the number of persons you wish to hire for your liquor shop and the specific role they are going to play. Focus on your role and responsibilities also. You can also take the help of experts for a proper business plan.
Some of the basic topics that must be addressed in your liquor business plan document are as follows:
- Initial and recurring costs
- Target customers
- Pricing strategy
- How do you plan to sell liquor to prospective customers?
3. Choosing the location of the Liquor Shop
Before you go ahead with the plan or invest money, you have to select a location for your liquor shop. Remember, a lot depends on the location of your shop.
Try to find a populated place where there are not many liquor shops nearby. It will be easy for you to develop your business in such an area. Do good research on the drinking habits of the people of the area, so that you can stock up your liquor shop accordingly.
Do not go to a very large place or an expensive place at the beginning. Start with a small shop and grow your goodwill.
4. Choosing the Name of your Liquor Shop
Find a suitable and well-thought-out name for your liquor shop. Remember, people will recognize your shop by name. So, think carefully and find an attractive and easy-to-remember name.
Do not forget to check the availability of a similar domain. Make a list of a few names so that, in case of unavailability, you can continue with the other name.
Check: How to Name Your Business
5. Legal Formalities for a Liquor Store Business
After you finalize the name of your business, you have to register your liquor shop as a business entity. You can choose from different types of business organizations as provided by your respective state or country.
For example, if you are from the United States, forming an LLC is a good option as helps in protecting your assets and makes the annual filing of taxes easier.
The next step is to obtain the necessary permits and licenses for your liquor shop as per the Government and local administration norms. You have to register for taxes. Another important formality is to buy proper insurance for your business.
It is highly recommended to hire a competent lawyer as liquor shop businesses generally face a lot of restrictions from local authorities in most parts of the world.
6. Opening a Business Bank Account
It is extremely important to open a bank account in the name of your business. This will help you to keep track of the capital, fixed and variable expenses, and profits of your liquor shop.
7. Set Up Your Liquor Store
To run a successful liquor shop, it is critical to create a welcoming and effective space for your customers. Arrange your products in a well-ordered manner. For example, arrange wines by type like red, white, and sparkling, and spirits by category like vodka, whiskey, and rum. The aisle space should be wide enough for individuals to move without interruption. Use signage to signal specials or new products.
Stock the shelves with a mix of name brands and specialty products to be unique. Stock a range of price points to appeal to a range of people. Don’t neglect the add-ons like mixers, snacks, and glasses. Invest in sturdy shelves and display cases, a decent point-of-sale (POS) system to scan sales and track inventory, and fridges for beer and wine.
8. Create a Marketing Plan
Creating an effective marketing plan is one of the most important factors for the success of a liquor shop business. You have to chalk out effective marketing strategies suitable for your liquor shop. Do good research on the choices of the people near your liquor shop. Try to make your inventory according to that.
Try to remember individual clients and their preferences as much as you can. This gives a personal touch to the business, which brings back the customer again.
Try to offer some discounts or gifts with the purchase of a particular volume. Also, try to keep some accompaniments with drinks like dry snacks or juices, etc.
9. Create a Website
Having a website is essential in today’s business. This is also true about your liquor store. Make a website in the name of your store and keep it updated with your stock, new additions, discount schemes, and special events.
Make your website equipped with your inventory and also arrange for online sales through the website. Also, make arrangements to receive online payments.
10. Advertising and Publicity
Advertising and publicity of your liquor shop are very important for the growth and revenue of your business. Share the link to your website on social media accounts.
You can also open social media accounts in the name of your liquor store and keep them updated. Carry interviews of your satisfied customers on those pages which add to the publicity and credibility of your business.
You can advertise your liquor shop through flyers and posters in the area of your shop. Flex and glow signs are also effective tools for advertisement and publicity. Tie-ups with local bars and restaurants also boost your sales.
Go for some sponsorship in local events like sports competitions or corporate parties and events. This will help to spread the name of your liquor shop.
11. Setup Accounting Processes
From the very beginning of your business, you have to keep a good and effective accounting system. This will enable you to understand the flow of funds, expenses, profits, daily sales figures, and the shortfalls if any.
You need the service of an expert in this regard. A close watch on the cash transactions and the inventory is also to be maintained for the smooth running of your business.
12. Profit and Growth
There is a good scope of profit in the liquor shop business as people always need drinks, no matter what the season, condition, or occasion. You just need to slot your liquor shop in the right place and make people aware.
Normally, the approximate margin of profit is more than 25%.
As the prices are fixed, your margin is also more or less fixed. Moreover, there is a good difference between the price you pay to buy the drinks and the price at which you sell them.
The liquor shop does not need many employees. You need only a handful of employees. So, there is not much expense needed for the salaries of staff.
After your liquor shop has a steady client base and several satisfied and captive customers, you can plan on the expansion of your business by adding more expensive and premium drinks to your inventory. You can also open more branches of your liquor shop establish your growth and maximize your profit.
Effective Tips to Start a Liquor Shop
a) Gain Some knowledge about Liquor
Before you open your liquor shop, do some serious research on liquor: its types, brands, composition, and demands. These impress your customers and often help first-time buyers with proper guidance.
b) Research about the Local People
After you choose the location of your liquor shop, find out the profile of the majority of people in that area. That will help you decide on your inventory as per the choice of your prospective clients.
c) Make your Liquor Shop Different
Opening a liquor shop and selling popular brands will not fully serve the purpose of standing apart. Try to do something unique to build up your USP. You can hold discussions on the history and heritage of different kinds of drinks or hold special weekend sessions on some drinks etc.
d) Seek Suggestions
Give the Utmost value to the opinions of your customers. Ask for their opinions about your liquor shop and seek their suggestions regarding the steps you should take to improve the quality of service or the inventory of your liquor store.
Frequently Asked Questions
How much investment is needed for a Liquor Store in the US?
Depending on the location of the liquor shop, the cost may be a little higher or lower. However, to start a liquor shop in the US, you need approximately $100,000.
How to Get a Liquor License?
In the United States, each state issues liquor licenses separately. Most of the licenses are under the jurisdiction of the laws of that particular state or area. So, you will need a liquor license from the authorities of the state where you want to set up your liquor shop.
What is the cost of a Liquor License?
It varies from state to state. Approximately, full liquor licenses can vary from $12,000 to $400,000, while beer and wine liquor licenses can be just $3,000. You have to renew the license for between 1 to 3 years.
Is the Business of Liquor Store Profitable?
It is a very profitable business. After deducting the expenses, it gives you a comfortable margin of profit.
What is the Profit Margin of a Liquor Store?
The profit margin of your liquor store may vary between approximately 25-27%.
How to Get Funds for the Liquor Store Business?
First of all, you need a very good business plan. You can sell or keep your assets as collateral. If you have a good credit record and can give 10% of the estimated cost, you can apply for a business loan.
How to Procure Inventory of the Liquor Shop
Inventory is the biggest expense head, but you should spend judiciously. Start your inventory by stocking up on quick-selling items. After the sales increase, try to make it bigger with more varieties and expensive items.
How to Control the Inventory of the Liquor Shop?
Controlling inventory is very important for taking stock, analyzing sales, deciding on restocking, and most importantly, checking misuse or theft. You can do it manually, by counting the stock after closing the shop, by using several people to count and count according to the varieties. Otherwise, you can take the help of software for inventory count.
This is all about starting a liquor shop. With some research and knowledge and of course proper funding and planning, you can succeed in this business.
Editorial Team at 99BusinessIdeas is a team of experts led by Rupak Chakrabarty with over 25 years of experience in starting and running small businesses. Started in 2010, 99BusinessIdeas is now one of the largest free small business resources in the industry.