Valuing a Liquor Store
Profitable liquor stores are always in high demand. Specifically, during the COVID-19 pandemic, liquor stores have fared well and have continued with strong growth. With the strong growth, it is a great time to buy or sell a liquor store. The first step of that process is learning about valuing a liquor store.
When valuing a liquor store there are many factors that will impact the value. Peak Business Valuation, business appraiser California, has worked with many individuals who are buying or selling a liquor store who seek a business valuation. To give you an idea of these engagements, we discuss some of the key factors used in valuing a liquor store. Keep in mind the below factors are only a guide. For more specific information about a liquor store you are looking to buy or sell, schedule your free consultation with Peak Business Valuation.
Market Multiples for a Liquor Store:
- SDE Multiple: 2.90x -3.68x
- EBITDA Multiple: 3.85x – 4.78x
- REV Multiple: 0.34x – 0.54x
A liquor store most often transacts using cash flow multiples such as EBITDA and SDE multiples.
With a clearer understanding of what your liquor store is worth, you can begin taking steps to increase the value of your liquor store before selling. While there are many factors to consider, here are just a few ideas to help increase your company’s value. If you are searching for a more extensive valuation, schedule your free consultation with Peak Business Valuation, business appraiser California, today!
Key Success Factors
There are several success factors that can help distinguish a liquor store and increase the value of the liquor store. Below we discuss just a few of these. For more information see Value Drivers for a Liquor Store.
The location of the liquor store can greatly impact the value. For instance, each state may have specific laws and license requirements to own and operate a liquor store. In states where a license is required, the market value of the license can add significant value and hence command a larger multiple. Whereas in states without specific quotas for a license, it may not be as valuable but still a requirement to operate.
The physical location and real estate can also matter. Liquor stores in high traffic areas with ease of access can all help increase customers and increase revenue. Bright and obvious signage is helpful. And being near other shopping can help increase the volume of customers.
Next, the size of the company may impact the value. Large companies may offer discount pricing which can lead to lower margins. The lower margins your company has the lower the value of the business may be. Whereas small companies may focus on a specific type of alcohol with higher margins.
The level of owner involvement will always impact the value of a company. The less dependent on the owner the business is the more sellable it becomes. Read Reducing Owner Dependence for keys to focus on to reduce the involvement an owner has.
The product mix of the liquor store can impact the margins and hence the value of the liquor store. Stores whose product mix is heavily concentrated with wine are more valuable than businesses whose sales are mostly liquor or beer. Despite the product mix, businesses with strong overall margins typically receive higher valuation multiples.
Whether you are looking to buy, sell, or grow a liquor store you will want to analyze the financial health of the company. A valuation expert can help you do this by analyzing the last 3 to 5 years of financial statements. A few items they will consider include growth of the company, cash flows, and debt management. Clean financials are key whether you are looking to buy or sell a liquor store. A valuation expert will also analyze how the company is operating and performing compared to its peers. A valuation report will detail the strengths, weaknesses, and areas of risk for the subject liquor store.
Understanding the value of a liquor store is important, regardless of any near future transactions. Even if you have not started thinking about selling your business, it is never too early to start planning. The first step in that process is obtaining a business valuation. Obtaining a business valuation from Peak Business Valuation, business appraiser California, can help identify ways to grow your business and maximize the value when it comes time to sell.
Peak Business Valuation, business appraiser California, has valued liquor stores across the country. We are happy to answer any questions you may have about understanding the value of your liquor store. You can reach out via email or by scheduling your free consultation below!
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