How to Open a Liquor Store
Opening a liquor store is similar to starting any other business — but with more legal intricacies. The process involves writing a business plan, getting liquor licenses, finding a space and securing the funding to get it all done. It’ll typically cost around $50,000 to $250,000, and the timeline will depend on whether you’re buying an existing business or starting one from scratch.
1. Choose your business structure
The business entity you choose will determine the structure of your business. That can affect ownership, liability and taxes in different ways. Common business entities for liquor stores include:
- Limited liability company (LLC): This structure limits your personal liability. That means your personal assets won’t be at risk if the company declares bankruptcy or is involved in a lawsuit.
- S corporation: This type of business entity provides protection from personal liability and allows owners to avoid the double taxation that comes with having a C-corp.
- C corporation: This is similar to an S-corp, but you’ll be responsible for paying both corporate tax and personal tax on dividends.
Though you can open a liquor store as a sole proprietorship or general partnership, these types of business entities won’t protect you if your store runs into legal trouble, so it’s usually a better idea to establish an LLC or a corporation. Consult with a business attorney or tax professional to choose the best structure for your business.
No matter what structure you choose, opening a business bank account can help you keep your personal and business expenses separate, which is an essential part of maintaining accurate financial records and preventing potential tax issues.
2. Write a business plan
The next step to getting your business off the ground is writing a business plan, which outlines the most important aspects of your business, including the products you plan to sell and the companies you’ll need to compete with for customers.
Most business plans include the following sections:
- Executive summary: Introduce your business with a brief overview, including your mission statement, financial information and potential growth plans.
- Company description: Highlight what you plan to offer, who you plan to serve and what will make your liquor store unique.
- Market analysis: Discuss your market research, including information on your target customer base and main competitors.
- Organization and management: Clarify your business structure and job descriptions, as well as how your products will be sourced and distributed.
- Products and services: Provide an overview of your products and why they’re relevant to customers. Include pricing information.
- Marketing and sales: Outline your marketing and sales strategies. How will you attract customers to your new store?
- Funding request: This is an important part of your business plan if you’re seeking funding from lenders or investors. Specify how much money your business needs and what you plan to do with the funds.
- Financial projections: Provide a financial outlook that includes projected balance sheets, income statements and budgets for your business.
Your business plan should include details on your target market. As you get into the fine details of your strategy, you’ll need to consider the liquor market you’re most focused on attracting. There are generally three market segments:
- A discount liquor store is the most affordable option. This type of liquor store focuses on attracting customers who value convenience and affordability. As such, these stores tend to stock budget-friendly products for casual drinkers, and the store ambiance is primarily focused on functionality.
- A midmarket liquor store aims to serve middle-income customers with a balance between quality and affordability. Midmarket stores usually stock a wider range of products, including low- and high-end options, and more time and energy is spent on creating an enjoyable shopping environment.
- A premium market liquor store aims to provide elegant, exclusive products to attract more affluent customers. These stores generally have higher operational costs, with upscale decor and premium products like high-end wines, craft beers and specialty spirits.
To choose a market segment to focus on, consider your budget, your competitors and your location. For example, what type of alcoholic beverages do people in your area frequently drink? Does it vary by season? Where will you be sourcing your supply from to meet these needs? You may also want to consider the median income in the area you plan to target.
3. Build a budget
To create a business budget, you’ll need to understand the types of costs involved with opening a liquor store. From upfront expenses like licensing fees to ongoing costs like inventory, rent and payroll, you’ll need consistent capital to stay in business.
Though costs can vary, it generally takes between $50,000 and $250,000 to start a liquor store, with most liquor store owners paying around $100 per square foot of space. Startup costs include:
- License fees: The cost of an annual liquor license depends largely on where you’re opening your store. For example, a liquor license in California costs between $3,000 and $13,000, while New York’s off-premise liquor license costs between $330 and $4,098 for a three-year license.
- Inventory: Buying in bulk can help you cut costs, but buying too much could lead to a surplus in inventory. Customer buying trends and surveys can help you better understand how much you need. The total cost will depend on your product lineup and the size of your store.
- Payroll: Employee payroll is an ongoing expense when owning a liquor store. Finding the right payroll software can help you monitor and manage these costs.
- Location costs: Factor in monthly rent or mortgage payments as part of your ongoing expenses. Though buying a store could save you money in the long run, many small business owners start out leasing a space.
Regular monthly expenses might make it hard to turn a profit initially, so it’s a good idea to have either a backup income stream or enough money saved to survive on while your business gains steam.
4. Secure funding
Between startup expenses, licensing, insurance and inventory, the cost to open a liquor store can be steep. When looking for financing, you’ve got a few options, including:
- Bootstrapping: This is another word for self-funding, which you might do through a mix of personal savings or home equity. Bootstrapping allows you to retain full ownership of your company while avoiding debt, but it could deplete your net worth.
- Small business loans: This can include term loans and lines of credit. It involves taking on debt, but you won’t sacrifice equity in your business.
- Investors: Friends, family and outside investors might be interested in funding your business in exchange for equity. That means they’ll own a portion of your liquor store.
Be sure to have your business plan ready when you apply for funding or talk to investors. It can show them how you plan on using the money to grow your business.
5. Find a location
Depending on your area, you may choose to buy or rent a space. The right location will depend on your budget and vision. Do you want a large liquor store that has a little bit of everything or are you creating a small, boutique shop? Either way, you’ll need sufficient storage space to hold inventory and the ability to accept deliveries.
Again, you’ll want to factor in your target market. A location that’s easy to access, gets good foot traffic and offers proximity to your target demographic is ideal. A less expensive location might not be worth it if it’s tucked away from potential customers.
Another option is purchasing an existing liquor store that’s for sale. If you’re looking to buy an existing business, do some research to understand why the business is being sold and how it is valued before you make an offer.
Opening a liquor store involves quite a bit of research because rules and regulations vary drastically between locations. Both state and local laws can impact where you can open your liquor store, and location also impacts the specific licenses and permits you’ll need to operate legally.
For example, some cities enforce a minimum distance between liquor stores and schools, churches and residential homes. Others require there to be a certain amount of space between alcohol retailers, so if there’s another liquor store just up the road, you might need to choose a different location for your business.
To learn about liquor laws in your area, you’ll need to check sources at the federal, state and local level. If you need assistance, a business attorney can help you get your legal ducks in a row.
6. Obtain a liquor license
Start by learning how to get a liquor license in your state. You’ll need a license that allows you to sell alcohol in corked or sealed containers, as you’ll be selling alcohol for people to drink elsewhere. You’ll also need to get a permit from the Alcohol and Tobacco Tax and Trade Bureau.
In 17 states and certain jurisdictions, alcohol sales are controlled by state government agencies, sometimes referred to as alcohol beverage control (ABC) states. 13 of these ABC states regulate the sale of off-premises liquor, which means you’ll have to apply to the state ABC agency for a license to open a liquor store.
In non-ABC states, the government isn’t involved in wholesale alcohol sales. These states allow individuals to operate and sell liquor independent of the government, but you’ll still need to apply to a state agency for a liquor license.
Depending on the jurisdiction, the licensing process can take anywhere from 40 days to six months, so it’s important to apply for licenses and permits several months before you plan to open your store.
7. Get insurance
Business insurance can help protect your investment and mitigate the risk that comes with owning a liquor store. You may opt for:
- General liability insurance protects against property damage and bodily injury claims, plus certain medical expenses. Legal costs may also be covered if your business is involved in a lawsuit.
- Commercial property insurance is important if your business owns or leases a building. This type of policy protects the property, inventory, equipment and furniture.
- Business income insurance protects your assets if operations are impacted by a covered event like a fire or theft.
- Liquor liability insurance typically covers property damage and bodily injuries caused by an intoxicated person. If the person bought liquor from your store, this type of insurance can protect your business and even cover legal fees if you’re sued.
8. Hire and train employees
It’s unlikely that you’ll be able to run your liquor store business alone. In most cases, you’ll need to hire and train at least a handful of employees. This might include stockers, cashiers and managers, depending on how involved you plan to be in the day-to-day operations.
You might hire a smaller team that can flex to cover multiple responsibilities, including organizing inventory, backfilling shelves and handling cash transactions. Regardless of the number of employees, take the time to train them on the most important parts of your business.
Depending on the market you’re planning to serve, you might want to prioritize hiring individuals with knowledge and experience in the industry. For example, if you’re opening a premium market liquor store, your employees will need to be knowledgeable enough to answer customer questions and recommend products. If you’re opening a smaller discount or mid-market store, past experience may be less important and roles may overlap.
9. Market your business
Marketing your business is important both before you launch and after your liquor store is up and running. Below are some key elements of a strong marketing strategy:
- A clean, easy-to-navigate website that’s optimized for Google and AI
- A strong social media presence that showcases your brand
- Digital and print ads
- Keeping your Google Business Profile updated
- Cross-promoting with local businesses
- Running regular deals and promotions
- Hosting in-store events like tastings and educational events
10. Prepare for your grand opening
Once you’ve secured funding, stocked your shelves and trained your team, it’s time to prepare to open your liquor store. As you advertise your grand opening, keep in mind that coupons (where allowed by state law) and promotions can be a great way to attract customers — and an effective loyalty program can be a great way to keep them coming back for more.
If you haven’t already, invest in a point-of-sale (POS) system to make your daily operations easier. Over time, a POS system can also help you track which of your products are most popular.
Taking the following steps can also help set the stage for a smooth launch:
- Fine-tune your website and social media accounts
- Invest in anti-theft devices like alarms, security cameras and locking display cases
- Purchase supplementary inventory, which might include glassware, bottle openers, snacks and non-alcoholic beverages
- Set up in-store signage and displays to highlight promotions and featured products
11. Open your liquor store
If things go well, your liquor store’s opening day will be busy — especially if you’ve effectively marketed the launch. That might involve running print and digital ads, posting on local social media groups and partnering with other small businesses to cross-promote.
If things are slower than you expected, you might need to rethink your marketing plan. Opening day can also highlight challenges you didn’t anticipate, like running low on in-demand alcohol or being undercut by competitors. Use the experience as an opportunity to retool and set your business up for long-term success.
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