Entrepreneurs who don’t want to go through the rigors of starting their own liquor store business from the scratch find solace in the fact that they can buy a liquor store business that is put up for sale or the franchise of an already established liquor store brand.
Buying the franchise of an already established liquor store business gives you leverage if you want to own a liquor store business of your own.
So, if you intend buying a liquor store business in the United States of America, then it will be to your advantage to ask the right questions or else you will buy a business that is dead and can hardly be resurrected. You may not have all the exposure to ask the right questions, questions that will position you to be at an advantage especially if it is your first time of buying a business.
Of course, there are business experts that can help you make the right decisions, but in case you don’t have a budget for that, then you might find this article highly resourceful.
30 Questions to Ask When Buying a Liquor Store
Table of Content
- The Track Record of the Company Selling the Liquor Store
- Why Are They Selling the Business
- How Did the Business Fare in the Last Five Years
- Ask About the Profitability of the Business During Peak Periods
- What is the Average Running Cost of the Liquor Store Business
- The Terms and Conditions Attached To Buying The Business
- Ask if There Are Any Additional Support Available to You If You Buy The Liquor Store
- The Number of Liquor Stores (Competitors) in the Location
- Ask About The Mode of Payment
- Ask About The Company’s Profile
- Ask to Know The Business Tax Status
- How Often Do They Renew Their Permits and Operational License
- How Long Has The Business Been Put Up for Sale
- What Are The Liabilities and Assets of The Business
- Debt Payment Options if Any
- Are They Willing to Leave Key Staff With You
- The Profile of The Owner, Board Members and Directors
- The Business Model and Philosophy of the Liquor Store Business
- The Position the Liquor Store Company Occupies Amongst Top Liquor Stores in Your Country
- The Benefits You Stand To Gain When You Buy The Business
- Ask to Know The Inventory Cost of Running the Liquor Store
- Ask to Know the Rate at Which Cost Varies in the Location
- Ask to Know the Trading Restrictions
- Ask to Know the Mode of Advertising Adopted by the Owner of the Liquor Store
- Documents Available for Examination
- What Documents Will Be Made Available To You At the Closing of Purchase of the Liquor Store?
- Will the owner sign a non-compete Agreement to Prevent Interference with the Business?
- What is the Goodwill Value of the Liquor Store Business?
- Ask to Know How the Business’ Purchase Price Determined?
- Why do You Want to Buy this Business?
The Track Record of the Company Selling the Liquor Store
The first thing you should look out for is to ask about their track record. If you can’t really place a finger on any first that the company has achieved or anything significant that they have achieved over the years, then you should reconsider your decision of buying the liquor store business except you are dealing directly with the owner of the business.
Why Are They Selling the Business
Of course, there are many reasons why a business owner would want to sell his or her business and some reasons might not be what a new owner would want to deal with. For example, if the owner is selling the business because year in year out they have not been able to make profits, you might want to reconsider buying such business.
But if the owner is selling the liquor store because of reasons such as relocation, retirement or no longer interested in the business, then it makes sense. But over and above, you don’t have to take whatever answer the seller gives to you hook, line and sinker hence the need to carry out your own investigation. You can do this by asking neighbors or customers about the business.
How Did the Business Fare in the Last Five Years
Another key question that you should ask before buying a liquor store business is the success story of the business, what are the wins and testimonies of the business that they are proud of and will be willing to share with the whole world. If they don’t have any, then you may want reconsider the decision of buying the business.
Ask About the Profitability of the Business During Peak Periods
The truth is that no one would want to buy a business that is not profitable and one of the easiest ways of knowing how profitable a business can be is to see the profitability of the business during peak periods. If the seller will be willing to let you into the company’s books, it will help you make informed business decision. You might want to also check to see the highest loss they have recorded during their lowest period.
What is the Average Running Cost of the Liquor Store Business
Another good question that you should ask if you want to buy a liquor store business is the average running cost of the liquor store. The truth is that some businesses aren’t as profitable as they ought to be because of the over the board running cost of the business.
When a business owner fails to eliminate some not too necessary expenditure, they will always fall short of their profit margin or even struggle to make the business profitable. This question is important especially if the owner is selling the business because the business is not making profits.
The Terms and Conditions Attached To Buying The Business
Please note that when you are buying any business or signing any contract, there are always terms and conditions attached to the contract. Some investors fall prey to dubious business owners selling their business with hidden terms and conditions that will trap them.
For example, if you are buying a liquor store from Mr. Trump and Mr. Trump has hidden debt that you are not aware of, if you buy the business and the debtor shows up to claim his debt, you will be held liable as the new owner of the business.
This is why it is very important to ask for the terms and conditions attached to the liquor store company. If need be, ask the seller to sign an indemnity that will protect you from any debt that has been incurred before you bought the business over.
Ask if There Are Any Additional Support Available to You If You Buy The Liquor Store
Aside from asking for the terms and conditions of buying the liquor store, another critical question you should ask is to know if there will be any additional support you stand to get if you buy the business. There are some companies that will provide free consultancy service and support for a period of time.
Some can mentor you, recommend some key staff member and even introduce you to their customers and suppliers and do the proper handing over before finally exiting the business.
The Number of Liquor Stores (Competitors) in the Location
Another key question you should ask before buying a liquor store business is the number of liquor stores that operate within same location, that is the likely competitors you will face in the location.
Of course, you can carry out your own due diligence to ascertain the true figure and intensity of competition, but it won’t be out of place to ask the seller of the business. With that, you will be able to know if you should go ahead or if you should call it quits.
Ask About The Mode of Payment
Most businesses that are put up for sale usually make flexible payment plans that will make it easier for buyers to buy the business. However, some sellers would need nothing less than an outright payment anything short of that is a no deal.
So, in case you don’t have all the money saved up somewhere for the purchase, then you should ask to know the mode of payment. Interestingly some sellers may give you the option of paying by installment over a period of time or writing out postdated checks or even paying in kind, et al.
Ask About The Company’s Profile
It will be out place for you to buy a liquor store business without going through the company’s profile. If it is not available online, demand it from them.
The truth is that a company’s profile is needed when accessing the business. It will give you a pointer to why the business is running at a loss or why the business is not maximizing profits or getting a fair share of the available market shares within the location.
Ask to Know The Business Tax Status
Another critical question that you must not fail to ask if you are buying a liquor store business is the tax status of the business. If you are buying a business in the United States, you do not want to fall victim of buying a liquor store that is defaulting in the payment of tax.
Even if you get an answer from the seller of the liquor store and you see the tax certificates, you should still go ahead to do your due diligence to know the tax status of the business from the Tax Board Office.
How Often Do They Renew Their Permits and Operational License
Businesses in the United States of America are mandated to renew their permits and operational license from time to time. So, it will not be out of place to know how frequently the owner of the liquor store business renews his or her permits and operational license.
As a matter of fact, you may want know if the current permits and operational license is still up to date. You just have to know what you are going into before buying any business that is put up for sale.
How Long Has The Business Been Put Up for Sale
Another important question that you should ask the seller of the liquor store business is the duration the business has been up for sale. The essence of this question is to know if the business is attractive or overly priced.
The bottom line is that if the business has stayed longer in the market, it could be that the business is not worth the hype and that will help you price the business below the listed price. A liquor store business that is attractive or rightly positioned will not last in the market.
What Are The Liabilities and Assets of The Business
When it comes to valuing a business that is but up for sale, you should be able to have a clear picture of the liabilities and assets of the business. No doubt, no investor will embark on the journey of buying a business without having a true picture of the assets and liabilities.
So, if you have plans of buying a liquor store business then you must make it a point of duty to ask about the liabilities and assets of the business and what you will be inheriting.
Debt Payment Options if Any
It is important to ask to know if the liquor store business has active debts and the payment options available as regards paying up the debt.
It is rare to see businesses that are put up for sale without having backlog of debts they have to pay. In case the seller of the liquor store don’t have a plan to pay the debt, then you must negotiate to your advantage if you are going to be inheriting the debt of the business
Are They Willing to Leave Key Staff With You
If the reason they are selling the liquor store business is to move on to other related retail and alcohol sales business that will demand that they migrate all their staff members, then you would need to recruit new staff and that will not may not put the business at an advantage position.
This is the main reason why you must ask to know if you are going to be inheriting some of the key staff members of the liquor store business when you eventually buy over the business. It will help you to continue the flow of the business without starting with new staff members who may not know the terrain of the organization’s corporate culture.
The Profile of The Owner, Board Members and Directors
The profile of the owner of the liquor store business, the board members and directors is also another info that you should know before buying a liquor store business. No doubt, you can only request for this information only if the liquor store business is a standard one with a well-established business structure.
The reason why you should ask this question is to be able to establish the pedigree of the owner, the board members and directors of the business especially as it relates to their integrity and if you should trust all the answers they give to you.
The Business Model and Philosophy of the Liquor Store Business
Another important question that you must not fail to ask especially if you can’t find it in any available document if to know the business model and philosophy of the liquor store business. The business model and philosophy of the liquor store company is also a part of what you need to know before making your buying decision.
If the business model and philosophy of the liquor store business does not conform to your style, it means you would have to put in work to create a new business model and philosophy. Although this is not enough to deter you from buying any business, but it will help you have a proper perspective of what you are signing up for.
The Position the Liquor Store Company Occupies Amongst Top Liquor Stores in Your Country
Although it is difficult to find a liquor store business owner putting up his or her business for sale if the business is amongst the top performers in the industry but the truth is that no one wants to buy a liquor store business that is at the bottom of the industry.
This is the reason why you must make sure you know the position the liquor store is occupying before going ahead to buy the business.
No doubt, there are business experts that can buy a business that is at the bottom rung of the industry and in no distant time, push the business up the ladder. If you don’t have such expertise at your disposal, then it is not advisable to buy such business.
The Benefits You Stand To Gain When You Buy The Business
For every seller that has a product or service that is put up for sale, there are selling points they can readily showcase to a potential buyer and that is what is known has the benefits of buying the business.
So, if you want to buy any liquor store business that is put up for sale, then you should ask the seller to list out the benefits that you stand to gain when you buy the liquor store. Who knows, by listing the benefits you stand to gain for buying the liquor store business might just be the extra push you need that will help you make a good business decision.
Ask to Know The Inventory Cost of Running the Liquor Store
It is important to point out that liquor stores are priced at business value plus inventory, so a potential buyer must know this and confirm that the total price fits the intended investment parameters.
Studies show that a successful liquor store will turn its inventory 8 to 10 times per year, so the inventory being offered in the sale should be current and readily sellable; otherwise, you will eventually be paying for another order of inventory on top of paying for the existing inventory in the purchase of the business. As the new owner, you will also need to establish credit with the vendors.
Ask to Know the Rate at Which Cost Varies in the Location
In the United States, the location of the liquor store will affect its sale price, not just because of its desirability, but because of state regulations and licenses. For example, most towns in Massachusetts do not have licenses available, so the cost of a liquor store could conceivably be 50 percent of the store’s sales or 3 to 4 times the seller’s income.
Retail business is typically driven by location. Location is still very important for a liquor store, but as long as the store carries a wide selection of products (e.g. tobacco, cheese, snacks, etc.) and is conveniently located, business will be sustainable.
On the other hand, if price is the store’s sole competition point, location will be paramount. If the liquor store is located on a busy main road, it is highly desirable to be on the right hand side of the road when heading home from work to allow easier access during high traffic times.
Ask to Know the Trading Restrictions
Another very important question you must not fail to ask before buying a liquor store is the trading restrictions in the city or county that the liquor store is located. This is very important because in the United States, under the Liquor Act and the Retail Trading Act, liquor stores are subject to trading restrictions.
For example, liquor stores cannot trade on the following days: Good Friday; Easter Sunday; Before 1pm on ANZAC Day; Christmas Day; and Boxing Day.
But you may be able to trade on restricted trading days, other than Good Friday and Christmas Day, if your bottle shop is: located in a nominated tourist zone; or has less than four regular employees and less than two owners. Please note that exemptions to trade on restricted trading days can also be granted if it is in the public’s best interest for your store to trade on that day.
Ask to Know the Mode of Advertising Adopted by the Owner of the Liquor Store
There is hardly any business that doesn’t adopt one form of advertising and in most cases, there are unique advertising strategies that work in a location hence the need to ask the seller of the liquor store the type of advertising that they settled for.
The truth is that in order to establish a customer base, it is a good idea to advertise your liquor store. However, you should be aware that strict regulations apply to advertisements relating to the consumption of alcohol. It is important that you become familiar with these restrictions before advertising your liquor store.
Documents Available for Examination
It will not be out of place for you to know the types of documents that the seller will make available to you when you eventually buy the liquor store. Here are some documents you should ask for when buying a liquor store:
- Organizational documents for the business (e.g. incorporation docs, certificates of good standing, business licenses, etc.)
- Previous 3 years of business tax returns
- Current year income statements, balance sheets, and cash flow statements
- Revenue broken out by customer for the last 3 years
- Information on existing business liabilities
- Customer lists with proprietary information blocked out as necessary
- Existing contracts – can these be assigned to the new owner?
- Commercial lease or other property documents
- Rent rolls if the property has tenants
- Uniform franchise disclosure document (if the business is a franchise)
- Employee and manager information
- Marketing and advertising materials
- Legal records for pending litigation, if any
What Documents Will Be Made Available To You At the Closing of Purchase of the Liquor Store?
The closing of a business deal in my opinion is more important that the opening of the business deal hence it will not be out of place for you to ask to know the types of documents that the seller will make available to you when you eventually buy the liquor store i.e. in closing the business deal.
Here are some examples of the documents you should ask for when closing the purchase of a liquor store:
- Purchase Agreement
- Promissory notes and collateral agreements for any financing that you’ll be using.
- Commercial lease (if applicable)
- Transfer documents for any vehicles that may be part of the purchase
- Bill of sale – transfers ownership of tangible business assets
- Non-compete agreement from the seller (if applicable)
- Bulk sale documents – these govern the sale of inventory
- IRS Form 8594 – shows how assets are allocated during the purchase
- Consultation/employment agreement – this is necessary if the owner will be staying on for some time to aid in the transition of the business
Will the owner sign a non-compete Agreement to Prevent Interference with the Business?
Trust me, you would not want to buy a business that the seller will from time to time be interfering with the business. It will sure affect your running of the business which is why in order to avoid such, you should make sure that the seller (owner of the business) sign a non – compete agreement to prevent interference with the business.
What is the Goodwill Value of the Liquor Store Business?
The market value of a business should not just be enough when purchasing a business, you should be able to go further to know the goodwill value that the liquor store enjoys in the community before going ahead to buy the store. The truth is that, if you buy a business that has tremendous goodwill in a community, it will be easy for you to blend with people and that of course will translate to steady flow of sales for the business.
Ask to Know How the Business’ Purchase Price Determined?
It is one thing for a seller of a business to put a price for a business and it is a different kettle of fish to professionally place a price on the business. So also, you should ask to know if there was an appraisal done and if the seller can freely share it with you.
Which is why it is important to ask to know if the valuation of the business is based on internal calculations or an independent appraisal? This will guide you in making an informed buying decision.
Why do You Want to Buy this Business?
Aside from asking the seller of the liquor store key questions, you should also ask yourself key questions and first of, you should ask if you have the interest and experience necessary to make this business successful.
It is very important that before you move forward with any official negotiations or data gathering, you should first determine your initial interest in the business. This is where you should discover important details like how the business was started and what expertise is needed to operate the business going forward.
Knowing which questions to ask when buying a business will no doubt help you pay the right price for the business, and of course help you prepare to run the business after you close on the transaction.