Business plan for a liquor store

Business Plan for Liquor Store

One of the more popular businesses to open is a liquor store. This is because the various products that are being sold are always in demand, as a wide range of customers will seek them out (regardless of the economic conditions). Evidence of this can be seen with a study, which found that 63% of Americans drink some form of alcohol on a regular basis. Out of this number 39% of respondents said they preferred to drink wine, while 36% said that beer was their drink of choice.

In either case, these statistics highlights how the underlying demand for alcohol related products remain steady, regardless of changes in tastes or the underlying economic cycle. However, there are a number of regulatory challenges that must be overcome to open and maintain such a business. This means, that the owner and possible investors must have a solid plan in place, to carefully determine what steps need to be taken, to successfully open and then maintain the operation for years to come. The problem that some liquor stores and other businesses that sell alcohol related products have; is that the high amount of regulation can bring about increased scrutiny from law enforcement. Especially, if there are reports of the store selling alcohol to minors or there are a number of calls to police about possible disturbances. These two factors will cause law enforcement and the Connecticut Liquor Control Commission to become concerned. When this happens, it means that the odds increase dramatically, that viability of the business could be affected by such incidents. A good example of this happened recently with Gag Jr.'s Liquor Store in New Haven. Where, they were caught selling to a minor, for the first time in its thirty years of operation.

This is significant, because it shows the constant challenges that are faced from the point of opening and maintaining the liquor store requires constant vigilance. As a result, prior to opening any kind of liquor store in Connecticut requires: creating a plan that will help address the obvious economic challenges of opening and starting the business. At the same time, you must account for increased amounts of regulation and creating strategies to mitigate these effects as much as possible. To achieve this objective requires looking at: what type of products will be sold in the store, possible locations, the laws for obtaining a liquor license, other issues, start up costs and examining issues that the location will face when it is operational. Once this takes place, a comparison will be conducted by examining the start up costs and regulations to purchasing an established business. Together, these different elements will provide the greatest insights, as to how a liquor store can be created and successfully maintained in Connecticut.

What Types of Products will be sold at the Store?

The process of opening any kind of liquor store will involve a maze of regulations that must be navigated. However, before going over any kind of regulations several different preliminary steps must be completed first to include: writing the business plan. This is important, because this is where you will determine what kind of liquor store that you will be opening. Where, depending upon: the type of products that are going to be sold, the type of license and the location / community are important factors. For example, two different kinds of licenses that an entity may consider would be: package store permit and a grocery store beer permit. This distinction is important, because on the license it will allow a business to sell beer, while another entity is allowed: to sell beer and liquor.

This is because each business has a different liquor license that allows them to sell certain kinds of alcohol. As a result, it is imperative that you decide what kind of products will be sold at the store. This will take place, when you are creating the business plan. During this process, you want to determine: how to market the store, estimated annual costs, possible strategies to ensure compliance with regulatory issues, estimate the total start up costs, additional working capital during the first year and determine how you can be able to turn a profit during the first six months of operation. This is significant, because this is foundation of the business that will help to focus: on how the store will be organized, what possible challenges could be faced in the future and how they can be mitigated. Once this is complete, you will be able to focus the business on achieving the specific goals, stated in the business plan.

Possible Locations

Next, you want to determine possible locations for the business. During this process you would need to consider a number of different factors to include: possible cliental, the proximity to high traffic areas and convenience. When examining possible cliental, you would need to look at what products are being sold and then compare it with the community that you are thinking about opening the store in. This is important, because depending upon the community various products may or may not be a big success.

For example, in some communities, those liquor stores that offer a wide variety of expensive beers and wines could be more popular with higher income cliental. As these are considered to be more expensive products, that are being purchased by those who have more culture and want an alcohol beverage to reflect these tastes. While in other communities, such as the lower income areas, a liquor store would not need to carry a wide assortment of expensive beers and wines. Instead, there would be more of an emphasis on selling cheap beer, wine and liquor to the community. Obviously, this is because the income levels are lower, which would require a different focus, on the overall product mix sold at the location. This is important, because depending upon the location of the business; the product mix will depend upon the tastes of consumers and income of the community.

Next, you want to examine how close a location will be to high traffic areas. In general, the closer the location is to areas where there is high visibility, means that the overall popularity of the business will increase.

This is because, those locations that are on busy streets or major arteries through the city, will receive additional exposure from being located in these areas. Over the course of time, this will cause the total amount of walk in traffic to increase and it will help the business to more quickly establish loyal cliental.

A third area to consider when looking for a location is convenience. This is an important factor, because most people are willing to pay more, to purchase what they are looking for close by. In the case of a liquor store, this means that you must consider those locations that would be considered to be convenient.

For example, a convenient location for many college students would be: a liquor store that is located within close proximity to the campus. The reason why this is important is: those owners who can place their stores at locations close to major areas of interest (such as colleges) will make shopping more convenient for these people. As a result, the overall long-term profits will be higher, because of the convince of purchasing from the location will instinctively cause someone to become lazy. At which point, they will purchase what they need form the closest location, even though it may be more expensive.

What all of this shows, is that some kind of common sense must be applied when searching for a location. Where, you want to have the store in a place that it can easily be seen, while at the same time making sure that it addressing specific tastes of the community and it offers convenience. If these three criteria can be met when selecting a location, the odd increase dramatically that the business will be able to experience high demand for its products. This will cause the overall profitability of the business, to increase over the short- and long-term.

Laws for Obtaining a Liquor License

In Connecticut, the state maintains strict control over the sale of alcohol. This means that prior to opening for the business; a liquor license must be obtained through the state. Where, licensing and enforcement fall under the authority the Department of Consumer Protection. However, various investigations and enforcement actions are conducted by: the Connecticut Liquor Control Commission.

This means that all applicants who are planning on opening any kind of establishment must follow certain procedures. To include: obtaining a location, providing photographs of the location, provide a layout of the establishment, file the application, wait for public comment, undergo a criminal background investigation and file the license with the city clerk's office.

The first thing that you must have before applying for a liquor license is: the location for the business itself. This is because the Department of Consumer Affairs will look at both the applicant and the location of the business. The reason why they look at the location is to ensure, that the property is properly zoned for such a business and to see if there were any other problems, with the liquor license at this location.

Next, you want to take photographs of the locations itself. This will be included with the application that you are submitting to the Department of Consumer Affairs. In general, the more pictures that you can supply of the interior and exterior of the property, the more it will help to provide a complete picture. This is important, because it will show that you are trying to be as transparent as possible, increasing your chance of being approved.

Once this is complete, you want to create a layout of what the location will look like, once it is open for business. This means that you must include details and sketches, showing areas where alcohol will be served as well as stored. The more detailed of picture you can provide, the quicker the application process will be, as this will provide a clear picture of what the business will look like once it is open.

The fourth step is to file the application. This means that you must know what kind of liquor license you will be applying for, as there are different licenses depending upon the business and what kind of products you will be selling. The most logical license for the liquor store would be: the package store permit. This will allow the business to be able, to sell a variety of beers and liquors.

The fifth step is the period of public comment. This is when various notices will be posted in the community and in the newspaper, announcing that a business has applied for a liquor license. There will be a period of public debate and comment. If there are any kinds of objections that are received, this will be taken into account during the application process.

The sixth step is to submit to a criminal background check. This where there will be a thorough investigation of all names listed on the application. During this part of the process, it is important to disclose any kind of convictions or tickets (no matter how small). The reason why is because any kind of ticket, including parking tickets, are considered to be a conviction. Therefore, anything that was not disclosed could slow the application or may result in an outright denial.

Once the license has been approved, you must go to the city government where the business will be located and file your applications with the city clerk's office. Once this is complete, the business will be able to begin selling alcohol directly to the general public.

What the above steps highlight is: the overall formalities and regulations surrounding the application process can be stringent. Despite this fact, the best way to ensure that everything runs smoothly is to provide more than enough information to the Department of Consumer Affairs. This will ensure that you are being open and transparent with them, which help to speed up the approval process. However, it is also important to note that any kind of information that is not included on the application, which could be relevant, will slow the process down considerably. This is why it is so important to be as transparent as possible.

Other Issues

Aside from: the regulatory issues, the location and the business plan, there are whole host of other factors that must be considered. Some of the most notable would include: the financials, equipment, vendors, employees and operations. There are a number of different financial aspects of the liquor store that must be considered such as: gross profit margins of between 24% to 28%, the total expenses for rent should be no more than 7% of the revenues, the products mix should have 70% liquor with 40% wine, labor cost should be 5% to 7% of the total revenues, the net profit should be from 8% to 12% a year and the total inventory in the store should turn over about ten times per year.

This is significant, because these are industry standards that can be applied to the liquor store. Where, this information helps to provide, basic guidelines for: determining what are normal rates of growth for the average store.

There will be the obvious expenses of purchasing equipment such as: refrigerators, furniture, computers, closed circuit televisions, surveillance cameras and alarms / monitoring systems. Any kind of equipment that is purchased would need to have a receipt and be evaluated for any kind of possible defects. . Another aspect that must be considered is if the equipment will be purchased or leased. Where, leased equipment will involve less upfront expense, but will have a consistent monthly cost. While purchased equipment could require a large upfront capital investment. This cost can be defrayed by purchasing used or rebuilt equipment. This is important, because how the equipment will be paid for and what kinds of equipment are selected, will determine how successful a business will be. This is because refrigerators and technology will help to ensure that the business will provide a superior product, quicker to customers. While the options to purchase or lease the equipment, will have an impact on the monthly expense and the upfront costs for starting the business.

The vendors and whole sellers will determine how successful the business will be over the short- and long-term. This is because the discounts and availability of different products will determine, if a business will be able to build a unique rapport with customers. One area you want to pay particular attention to is: if vending agreements can be easily transferable and the reputation of the vendor.

This is important, because the overall pricing structure that is negotiated and how quickly you can be resupplied; will ensure that you are always able to bring customers the products they demand.

Employees are major factor that can have an effect upon the financials of the business. This is because they play a key role in helping to maintain control of the inventory and cash that is received for many purchases. Evidence of this can be seen with a report from the U.S. Department of Commerce, which found 75% of employees will steal from their employer at least once.

In the case of a liquor store, the different products and large amounts of cash, highlight how some kind of procedures must be in place to prevent these kinds of incidents. One way to account for this is to have increased amounts of surveillance cameras, at area in the store where employee theft would be at its highest such as: behind the counter or in the storage room.

The operations of the business, is when you are figuring out how the store will function smoothly. This would include everything from selecting a credit card processing company to determine the hours of operation. This is significant, because once the business is open; a workable plan will help to ensure that confusion is avoided as much as possible. Once this take place, it will help to establish an effective procedure for running the operation, ensuring that it generates a continuous profit.

What all of this shows, is at the time you are working on the license you must be considering the factors of: the financials, equipment, vendors, employees and operations. These are important, because they will create a foundation as to how the business will: operate, identify benchmarks as far as profitability is concerned, help to determine what equipment is necessary, establish employee policies / procedures and negotiate with vendors. These different elements are important, because they establish how the business will address customer needs and maintain profitability, two elements that are necessary for achieving profitability goals.

Start Up Costs

The start up costs for opening a liquor store will vary. However, there will be a considerable investment in upfront capital to open the business. In general, the start up costs for a liquor store can range from: $150,000.00 to $500,000.00. The biggest costs that must be accounted for would be inventory, purchasing equipment such as cash registers / refrigerators and employee salaries. Inventory would be the biggest costs, accounting for at least a $100,000.00 up front investment. The equipment could costs could average in the range of: $6,000.00 to $10,000.00. Employee salaries would be between: $30,000.00 to $80,000.00 per year. It is also important to note, it is advisable to have large portion of cash liquid.

This will help the business to be able to resupply and make adjustments to changes in customer demographics or external factors that could affect the business. Over the course of time, this will help to improve the financial viability of business, by providing a margin of safety against unexpected events or challenges that may occur.

Issues the Location will face once it is Operational

Once the liquor store is open and operational, there are a number of different issues that will consistently be wrestled with on a regular basis to include: regulations, record keeping, employee related issues and crime.

Regulations are a major part of the different challenges that a liquor store will face on regular basis. This is because a variety of different laws apply such as: different laws regulating the hours the store can be open, the storage of alcohol, the sale of certain kinds of alcohol and how a business shows where they are purchasing the alcohol from.

For example, one regulation that a liquor store will constantly face is the possibility of selling alcohol to minors under 21 years old. In this situation, many of those who are considered minors will use fake I.D.s to purchase alcohol for themselves and their friends. For the liquor store owner this is problematic, because the state Liquor Control Commission will often send underage operative into various locations to purchase alcohol. If anyone sells to someone under the age of 21, the business could face the possibility of being fined or having its liquor license revoked.

As a result, all liquor stores will have to train the staff and create various policies / procedures to ensure that they are in compliance with all regulations.

One area where the strict regulations apply would be in the way all records are stored and retrieved. In Connecticut, the manager, must have all records showing where the store purchased alcohol from, how much is currently in stock and how much was sold. This must be available at all times and will be looked at during unannounced visits, by the Liquor Control Commission. If at any point, these records are inaccurate or the manager cannot show where the alcohol was purchased, the business risks the possibility of having its license suspended. This is significant, because it shows how a detailed record keeping system must be in place, to ensure that everything ordered and sold by the store is accounted for.

As a result, an effective procedure must be implemented that will allow the business to account for the entire inventory. One way to do this is: to have an inventory accounting system that will store the real time information on the computer.

At the end of the day, a backup of the system would take place. Then, you would have a paper-based system that will store all the paper documents, mirroring the computer system. Once this takes place, is when you will have a system that will provide multiple ways of being able to retrieve and store the records easily.

Employee related issues are everything ranging from: the training of employees to dealing with issues of employee theft. This is important, because employees play a major role in helping to ensure that a liquor store is in compliance with the law. This means that there must be a rigorous training program that teaches the staff how to: identify false identification, the proper invoicing procedures and store safety procedure. Then, you must have an effective set of procedures in place, to ensure that everyone understands and follows the various policies. At the same time, the business will have to have an effective procedure in place to monitor for employee theft. This is a major factor that can affect all liquor stores, as the large inventory of alcohol related products and the cash turnover, make this an issue.

One tool that could help to monitor for employee theft is: a video / audio surveillance system. This would be strategically located in areas where high amounts of employee theft would take place. This can be used in conjunction with the record keeping system, which would provide an initial way of spotting any kind of missing products. While the audio / video surveillance system, would be a way of confirming what is taking place.

Another factor that must always be accounted for as the part of the daily operation of liquor stores is: crime. This is because, liquor stores are the target for a wide variety of violent / non-violent crimes including: armed robbery, vandalism, check / credit card fraud and assault. Then, liquor stores are frequently the target of repeated criminal activity. As a result, this means that the manager and employees of these businesses have an increased chance of being assaulted, as a part of their job. Evidence of this can be seen by looking no further than the fact that nearly 20% of liquor store owners and staff are assaulted.

This is significant, because it shows the real dangers that will be faced by the business from criminals. Therefore, an effective strategy must be implemented to discourage criminal activity as much as possible. One way to do this is to have a series of alarm system, surveillance cameras and computers; to monitor the location at all times.

This will make it harder for criminals, to be successful in targeting a location. Once this takes place, is when you have a way of limiting the overall impact of criminal activity on the business as much as possible.

What all of this shows, is that once the liquor store is open, the manger and owner must have effective policies / procedures in place, to mitigate the overall negative effects as much as possible. This is because of the high amount of regulations that the business will face and its vulnerability to criminal activity. These are the biggest factors that can have a dramatic impact upon the economic viability of the business over the long-term. Therefore, the investment that is made over the short-term will pay dividends in long-term, by helping to mitigate these risks as much as possible. This is significant, because if you can reduce the underlying amounts or risk as much as possible in any business, you are increasing the chances of success and the overall profits.

Obviously, starting a liquor store will require a significant amount of investment, time and energy. This is because the process of: establishing a business plan, securing the liquor license, dealing with other issues and the constant daily operational issues can be challenging. As a result, the upfront costs of opening a liquor store would be between, $150.00 and $500,000.00. Then, you have the various regulations with running the business and possible criminal activity to contend with, once the store is operational. This means that careful attention must be paid to the possible risks and you must identify ways that this can be eliminated. If the underlying amounts of risk can be reduced as much as possible, then the odds are high that the liquor store will be an immediate success.

Start Up Cost / Regulations of Purchasing an Established Liquor Store

An option that some investors prefer is purchasing an existing liquor store. This is because they can look at the records, to see the profitability of the business. Where, they will examine: the product mix, how frequently the inventory turns over and if there are any regulatory issues. In many cases, this makes purchasing an established business, as the ideal way to safely invest, while reducing the risks. However, when you look beneath the surface, it is clear, that there a number of issues that must be addressed before someone can purchase a liquor store. The most notable include: obtaining a liquor license, conducting an independent background check and transferring contracts from wholesale suppliers. Prior to the sale of the store, the new owner is required to obtain a liquor license for the business, as the license from the previous owner is no transferable. This means that you must follow the same process as someone that is seeking a liquor license for the first time.

An expedited way to receive the license is to hire an attorney. They can help to streamline the process, which is useful to those individual who are seeking to take over the operation right away.

During the process of applying for the liquor license, you want to conduct an independent background check on the business. What you want to look for is any kind of complaints, outstanding legal claims or anything else that could become an expense. The reason why is because state law requires: that the sale of a liquor store involves: what is known as a buyer affidavit. This is when you are affirming that as the new owner of business, you have checked to ensure that they have paid all their unpaid bills. As a result, it is imperative to ensure that the liquor store is in good standing with all of their suppliers and financially speaking. Otherwise, you could be responsible for the previous owner's unpaid bills.

One way to check on this is to conduct a credit check on the business and the owners or the business prior to the sale. You could then, contact the Liquor Control Commission, to see if there are any kind of outstanding complaints or litigation pending against them. Another option is to have the lawyer that is working on the license, to conduct a background check of the business and the owners.