Are you interested in selling your beer and wine store? This guide discusses the valuation and sales process for beer and wine store owners who are planning their exit strategy.
About The Liquor Industry
This industry primarily sells retailed packaged alcoholic beverages, including but not limited to ale, beer, wine, and liquor. This requires a license to sell alcohol. There are some risks involved, such as fines and penalties for selling to minors (knowingly or unknowingly). Beer and wine stores may also be at a higher risk of crime as well, so heightened security may be in order. However, the recession is stable and relatively recession-proof. Consequently, there is a relatively high demand for beer and wine stores across the U.S.
How to Value a Liquor Store
We strongly recommend a market approach for your business valuation. This is a professional valuation method that takes a close look at recent sales data and acquisition multiples (rule of thumb data) to determine how much you can expect potential buyers to offer for your beer and wine store. Notably, here are the beer and wine liquor store industry numbers:
- Beer and wine stores sold between 3.33 and 3.76 times the Seller’s Discretionary Earnings (SDE)
- Beer and wine stores sold between 4.64 and 7.85 times the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
- Beer and wine stores sold between 0.31 and 0.43 times the annual net sales
For your valuation, you will need your tax returns (three years minimum), profit and loss (P&L) statements, balance sheets, an average value of inventory at any given time, equipment list, lease information, and a copy of your real estate approval (if included in the sale). Your broker will calculate your seller’s discretionary earnings (SDE) as well as look at the non-financial aspects of your store (i.e. your unique competitive advantage).
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How to Sell a Liquor Store
A lack of planning often leads to an inability to sell or sales that occur below fair market value. We recommend developing a professional and personalized exit strategy for your liquor store. Here are the notable steps to include in your sales strategy:
- Market your store
- Due diligence
As mentioned, you should customize your strategy, which your broker can help with. However, to help you prepare and know what to expect, we have provided a general description of each phase of the sale process for beer and wine stores.
The preparation phase helps ensure a smooth sale of your beer and wine store. Otherwise, you could face complications and setbacks when marketing, negotiating, completing due diligence, and closing the sale. There are several tasks you should seek to accomplish during the planning phase, including:
- Determine your exit strategy goals – Your goals likely go far beyond maximizing the sale price, and you may have non-financial goals as well. For instance, you may find it important to sell to someone with a solid vision for your company’s future.
- Establish your sales timeline – You want to sell at a time when the market is favorable and allows you to maximize the sale amount. Your broker can help you plan when (and for how much) you market your business and find a buyer.
- Prepare your legal and financial documents – Last but not least, you should collect any documents you may need for negotiations, due diligence, and closing.
Market Your Store
Once you are fully prepared, your broker will officially market and advertise your beer and wine liquor store. However, this process is far different than you may expect. Unlike other sales where you want to maximize exposure and knowledge of your sale, a business sale requires confidentiality. This means you will sell your beer and wine store in a private manner, only leveraging private connections, networks, and databases. In some cases, a blind listing, the use of NDAs, and other measures may be used to ensure confidentiality throughout the sales process.
Your broker ensures this is the case, and they have various methods for getting your sales memo in front of hundreds of potential buyers that are in a position to make a fair offer for your store. Your broker also reviews all offers as they arrive, screens all potential buyers who make an offer (to ensure they have the means and desire to purchase), negotiates on your behalf (and along with your input), handles contingency planning, and ensures the buyer you ultimately select signs a letter of intent (LOI) to lock-in the details of the purchase agreement and initiate the due diligence stage (see below).
Due diligence is the final stage before closing when the buyer has an opportunity to verify details about your beer and wine store and gain a full understanding of what they are purchasing. They also check for inconsistencies and ambiguities that may not be exactly as was presented during negotiations, in which case they may try and renegotiate. Your broker (along with your CPA and attorney) can ensure the process goes well. During due diligence, you will need to provide the buyer with certain documents, such as:
- Tax returns (and other financial statements)
- Business license
- Inventory list
- Employee lists
- Compliance documents
The buyer may also request a walk-through of your liquor store and meetings with your key employees and/or business partners. You can also expect a list of questions to answer for clarification and informative purposes.
Last but not least, you will close the sale. Ideally, this is a smooth and simple process. However, the closing table is all too often intense and riddled with legalities and financial concerns. Consequently, your attorney will attend to help ensure everything goes as smoothly as possible. You can also expect to transfer ownership of your beer and wine store during closing.
Are You Ready to Sell Your Liquor Store?
Sigma Mergers and Acquisitions has helped hundreds of business owners sell for fair market value or higher. We encourage you to schedule a consultation today. During the call, we can provide a free business valuation and answer any questions you may have.
Scot Cockroft is the Owner & President of the #1 ranked Business Brokerage, Business sales and M&A firm in Texas. Scot has been named Named Deal Maker of the Year by Dallas Business Journal.
He is committed to a “different” type of business brokerage firm, one that is NOT about a sales pitch but, rather, results! In short, a business brokerage firm that is committed to performance-based compensation. Scot believes in these principles as well as a candid honesty with clients. His candid style often takes buyers and sellers by surprise, but is often what assures successful connections between the two.
Feel free to reach out!