Host: Welcome to Acquiring Minds, a podcast about buying businesses. My name is Will Smith. Acquiring an existing business is an awesome opportunity for many entrepreneurs. And on this podcast I talk to the people who do it. In today's conversation, we dive into the liquor store business. Devin Wanzer acquired a liquor store earlier this year and it's going really well. Make sure to pay attention to why it is that Devon Store has advantages that many of the ones I see on bizbuysell do not. As I speak, there are seven liquor stores for sale in my city alone. But crucially, none are as large or as nice as what Devin acquired. So that and lots more to learn from Devin Wanzer about successfully buying a liquor store. Devin Wanzer, thank you for joining me today on Acquiring Minds.

Guest: Yes, sir, thanks for having me. Appreciate it.

Host: I am excited to have you here. You are the relatively recent owner of a liquor store in Stillwater, Oklahoma.

Guest: Yeah, since January 11th, officially.

Host: Yeah, that's right, January 11th. So tomorrow will be your 10 month anniversary. I've been following along for many of those 10 months on Twitter and it seems like it's going well. You tweet quite a bit about being on the golf course, so I take that as a positive sign to understand. I want to hear your story and I want to understand what it is you saw in this liquor store that was such a good opportunity and sure enough has turned out to be such a good opportunity. There are so many liquor stores on biz. Buy Sell. I'm in San Francisco. Just before we hopped on on the phone here, I did a quick search. There are seven liquor stores for sale in the city proper right now. So these are businesses that transact a lot and you know a lot about it. So I'm really looking for an educate. Looking forward to the education here.

Guest: Oh, I knew. I know a little bit. So well, you did something right your

Host: first try, so it's probably more than a little bit. Start us off with some of your background, Devin. So take us through kind of your professional background up to the decision to buy this. Buy this liquor store.

Guest: Yeah, absolutely. So I've lived in Oklahoma my entire life. Graduated from Oklahoma State University and then since that time, kind of I had three distinct separate careers really. I spent seven years as a commercial banker. I started out in a training program and then ended up as a VP of a bank that I owned a small piece of and primarily specialized in lending to small and medium sized businesses like many people on Twitter talk about and are involved in. And then also carved out a little specialty in Oil and gas. Being in Oklahoma, really enjoyed banking. But the reason that I got out of that was I went through a couple instances of being acquired, and it just seemed like due to regulation and consolidation, it was really a big business game. And I'm not really wired to operate within a big business and committees and having people, you know, needing to sign off on every decision because I feel like I'm a good decision maker. So I was actually looking for a company to acquire at that time that was back in like 2013, I would say. And then I was presented an opportunity, actually, from one of my customers that was a guy that had sold a big company and was essentially at retirement age, but still invested in small companies and partnered with people to run them. And we bought a really kind of a failing sign manufacturing business and then ran that for seven years. We made five or six acquisitions. We grew at about 20x from where we started. And then for really a variety of reasons. One, I moved from Tulsa over here to Stillwater kind of at the beginning of the whole Covid crisis in early 2020. And then, you know, just the size that it got into and the. The size of the team just wasn't a great fit for the way I wanted to be spending my days at that point. And had a. Had a relationship with a broker. And I think it was like September, October of 2020 threw this liquor store thing at me. And it was like a mile from my house that I had just bought in Stillwater. So frankly, that was a big driving factor because I was commuting three hours round trip three or four days a week, and now I might drive 15 miles in a week. I probably put more miles on my golf cart now than my truck. So that was a big driving factor. The store had obviously performed well, and I thought that it was. Had the potential to continue to do well, and I was interested in that. But, you know, Stillwater's a town of like 40, 50,000 people, so it's. I knew I couldn't be incredibly picky and own a business here, so.

[5:06] Host: So had you given this broker criteria for purchase price and profitability? I mean, why did he bring you this particular business?

Guest: No, the only criteria I gave him was I'm looking for something Stillwater. And that was really it.

Host: And had he brought you other businesses, or was this the first thing he brought you?

Guest: No, I mean, I think the first time I'd met him was probably in maybe June of that year. And then two or three months later got an email of, hey, this looks kind of Interesting. And it's in Stillwater. What do you think? Spent a day or two looking through it, and I was like, that's pretty interesting. And I think I had it under loi probably two weeks later, before it ever really hit the open market. It was priced right. They had already had a valuation done on the business, and they really weren't asking. You know, most of these deals start out asking prices that really aren't reasonable, but they started out asking a really pretty reasonable number, and we were able to put it together pretty quickly. And I think it was one of those things that. We'll probably talk more about this a little bit later. But I'd done enough deals. So, like, digging into the numbers and all that, that goes pretty quickly for me. I mean, the liquor store industry, specifically in Oklahoma, there's like, one giant risk. And so we're a state where they don't allow those products to be sold outside of liquor stores. So, for instance, like Walmart, grocery stores, they can't sell liquor. The laws changed in. It was late 2018. Even up until that time, the grocery stores could not sell wine either. And so that was a change we went through in 2018. And so that's still kind of the biggest potential risk that's out there for me. And after talking to people, I decided it was an acceptable risk to take to go ahead and jump in and buy it and make a go of it. So that's still the biggest risk that

[7:13] Host: I face, though, when you say this is a big risk. But if this regulation already was pulled back or loosened or whatever in 2018, why does it remain a risk? Just because the idea is that buying habits could change over the next five years and people would start buying more. Not at liquor stores and other retail outlets.

Guest: Yeah. So if a law were to be passed that allowed grocery stores to sell liquor, that would definitely harm our business. Because if we look at numbers prior to when the laws changed on wine, the store definitely took a hit. At that point in time, it's recovered some of that. But spirits is probably 55% of the overall revenue of my store. So if all of a sudden everybody in town could sell that and not just the liquor stores, it would definitely be a hit. Now, granted, I look at, like, Missouri, I think, is the closest state to me that where basically grocery stores, everybody can sell liquor. And there's a right across the state line. When you're leaving Arkansas to Missouri, it's an area I used to vacation, so I know a little bit about it. There's a Huge Walmart that has almost like a standalone liquor store in it and then a thriving liquor store right across the street. So obviously people figure this out. I know grocery in California can sell it, but yet you said there's still plenty of liquor stores there. So yeah, there would be some survivors, but it would be a monumental shift in my business. No doubt if that happened,

Host: it would be a big change in the law of the land as well. I mean this is a very, a law that the public would be aware of. So you probably would get a multi year heads up before something like that hit the books. Right. This isn't going to slide in.

Guest: Yeah, that it played out when the laws changed around wine as well. So that was part of my risk calculation is all right. Well you know, at a minimum when I bought it I was kind of saying, well there's nothing like that in the works now. And so I can pretty comfortably say there'd be at least a three year Runway if things moved at lightning speed. Which historically in Oklahoma on things of this subject have not moved at lightning speed. So I would say minimum of like three to five years is what I thought I had to work with and potentially 20, 30, who knows, I mean maybe never. So not to say that I couldn't be totally wrong about that, but those are sort of the calculations and estimations that I made when I decided that yeah, I'll pull the trigger on this deal.

[9:48] Host: Now you had experience in doing deals in small business, but you didn't have experience in retail, didn't have experience in the alcohol industry. Do you think that somebody similarly under experience in this industry could come in and do the same as you did?

Guest: I've always had a great confidence in myself to figure things out. Major exceptions being like I've never really been a fan of like science or really in depth engineering type things, but things that I consider to be, even if they're totally foreign to me, but simple operations, then I'm generally pretty confident. And when I compare it to the ins and outs and difficulties of like the sign manufacturing business and we're running installers in an eight state span and dealing with Fortune 500 companies, you know, the difference here is that the entire business is contained within four walls. And so like span of control is drastically smaller vendor relationships, I mean we deal primarily with like maybe seven or eight vendors. Those were the kind of things that gave me a level of confidence that I could figure it out. There was also a solid general manager in place that's still with me now. But yeah, I Mean, I think maybe some of it was, like, hubris, but then other things were. I had acquired businesses that I felt were significantly more complicated and found a way to make those work. So, you know, I was. I was comfortable taking that risk.

Host: Can you describe the store to us? Size, style, kind of give us a picture?

Guest: Yeah. So we have about 9,000 square feet compared to maybe some of the average liquor stores you've been in. We're set up to cater more to, like, perhaps your mom or somebody like that. So, you know, very wide aisles, very well lit. It's spread out. A lot of liquor stores are kind of like, claustrophobic and product stuffed in there, and you can barely get down aisles. And so we're kind of, I guess, upscale, if you want to call it that. We carry about 5,000 different products in the store. That's something that I've focused on significantly this year, is kind of expanding some of our offerings. That's a whole different animal in and of itself that I've been trying to solve because there's, you know, we'll have people come in every day just about with new products that they think we should have. And so, you know, if you just went with every single one of those, you'd be quickly just overwhelmed in inventory. So I'm still trying to figure out the balance of what do we bring in, what do we get rid of. That's kind of a daily battle that I. That I have to go through. So, yeah, I would say just kind of like upscale, very large footprint for a liquor store. And clean, wide aisles, kind of a welcoming shopping experience.

[12:54] Host: And was the seller getting out of it because they were retiring?

Guest: Yes, absolutely.

Host: And can you talk about the numbers at all of the deal itself and the revenue that it was doing, doing now? Profit that it was doing doing now.

Guest: So let's talk about revenue at least. So we're just shy of like 3 million, which I bought it. You know, 2020 for a lot of liquor stores was probably the best year ever because of COVID and what it did to people's drinking habits. So this year, I think we're probably down actually, like 3.5% year to date compared to last year, which I consider to be pretty good, because there were some months that you look at historically that are pretty slow in our business that were just crazy last year. And I know there's a lot of people that are seeing, I say, downturns. I mean, really what I'm looking at is kind of like, where are we on trend from 2019 with 2020 as an outlier, and we're 2019 in our state was also the first year of the law changes. So it was a down year for a lot of stores, and we're up pretty significantly over where we were in 2019. So overall, we're slightly ahead of what I projected from a revenue standpoint and then from a profit standpoint. One of the things I did probably just because of, I guess, some of my knowledge of pricing and maybe people's maybe apathy toward pricing in certain situations like that was something in the sign business was, you know, we hardly ever lost deals due to pricing. And so we would experiment a lot of. All right, here's kind of our formula. Okay, let's add 5% to that and see if we're getting deals, and let's add 10 and 15. And so the one major change I made at the liquor store is, you know, the former owner had target margins for sort of every type of product, and then whatever that price was, if it was 1855, then it was priced at, say, 1855. I came in and said, well, why don't we just round everything up to either 49 or 99. It looks a little bit cleaner on the shelf. I don't think anyone's really going to care. Well, we've expanded our gross margin by, I think, a point and a half just by doing that. And it took us, I think, a week to go through every section in the store and adjust all the prices up to 49 or 99. So we didn't really. We're not doing anything different other than just a little bit different look and feel on pricing. And that's a point and a half on, you know, call it 3 million a year in revenue for not doing anything. So that was great experience.

[15:45] Host: What an easy win.

Guest: Yeah, exactly. Exactly.

Host: Well, many people who buy small businesses, they actually, you know, there's a sweet spot of what's wrong with it and what's right with it, and you want just enough because you want there to be some upside in bringing your new energy as owner to. To improving some of the things. It sounds like, though, other than the example you just gave, that this business is actually already pretty well run. Am I wrong, or did you see some nice opportunity to add new energy and expertise to making it a better business?

Guest: There was really nothing major. I think the only difference was maybe a little bit more energy toward keeping product fresh in the store. The former owners were very conscious of, like, their inventory levels and, you know, cash, and that's great. You Certainly have to keep that in mind. But being a 9,000 square foot store, there were parts of the store that were very bare. So I think inventory when I bought the store was at 250 on average 250,000. And today we run closer to 300. We're a little bit higher than we have been because of the supply chain issues that we're seeing, as most industries are. So now when we have the ability, we get deliveries from our big vendors three days a week. So if product is always in stock, then I don't have to carry more than a few days worth of inventory. Well, on certain products, especially in October, I started buying enough to last me through the end of the year just because we were starting to see outages and real erratic shipments from them. And so when things became available, I just said, you know what, I'm locking up enough to get us through the end of the year because for most stores, November and December are huge. And so I'm sort of counting on at least being able to hold my own, if not being able to pick up some additional business in those months because I've really stack inventory in there right now. So that's been the biggest thing. And then, you know, in our business, the American whiskey slash bourbon market is by far like the most trendy and on fire segment. That was probably something the previous owners, I'm not saying no, they knew the least about, but it wasn't like high on their list of knowledge and it's probably the thing that I know the most about. So I've greatly expanded our offerings and that. And it's really made a huge difference in our, in our revenue, specifically in that part of the store. So I think just probably some new energy and coming in and shaking up how things are laid out and just the overall presentation and fullness of the shelves and things have been the major thing, but nothing earth shattering. You know, a lot of businesses that you may look at are completely broken and it wasn't the case here.

[18:47] Host: And were the previous owners passive, semi passive like you, or were they in the store every day?

Guest: They were, it was a husband and wife and they were, I think between them, at least from what I was told, they worked about 50 to 60 hours a week.

Host: It's more than you're putting in by a lot, even individual, even individually.

Guest: Yeah, absolutely. So I'm not really sure. And part of that is just because of their, you know, they were hesitant, I think to like hire people. So they would work, you know, they would have themselves scheduled for shifts Actually working the floor, working the front counter. Whereas in our standard scheduled week, I'm not on the schedule. You know, I go in, I do most of the product ordering, then I'll meet with vendors when I'm there. But I'm not scheduled to work like a six hour shift in the store itself. Friday's like by far our busiest day, Friday afternoon. So a lot of times I'll be there just because it's fun to interact with the customers. And then we're in football season right now. We just had homecoming a couple weeks ago. So on days like that, when I know we're going to be really, really busy, then I'll make a point to be there because I like to interact with people. I'll see a lot of people I know, people that are well known in the community will come in there and I can talk to them about all the products I've bought. So it's really not like work necessarily for me. And then, you know, there'll be people that call in sick, you know, here or there, and take vacation and I'll fill in at those times and work a little bit more. But in an average week, just for me to get done what I need to get done is probably maybe 15 hours, I would say.

Host: And do you think the previous, the previous owners just couldn't get comfortable just outsourcing, that they just wanted to have their eyes on the store or be in the store? I mean, what's, why didn't they do what you're doing? Sounds, it's, it's night and day. The difference in free time that you have versus them?

Guest: I can't answer that question. I think part of it is, you know, they actually started the store. And so, you know, if you go start something like this, you're probably going to be there working every hour that it's open because you're, you're starting out with zero revenue. Right? So I think perhaps when you, you know, when you build something, it's, it's hard to see past how you, how it was when you started out. Whereas for me, I get to come in day one and I don't have preconceived notions of like, well, I'm used to being here 60 hours a week. It was kind of like I started out and I did the things that needed to get done and it didn't take me more than 15 or 20 hours. And then I was like, all right, cool. That's what I needed to do. And so I don't just sit around there and when you were looking at

[21:33] Host: buying this business, did you project 15 or 20 hours of weekly work or what were you thinking the time commitment would be?

Guest: I really didn't know. I was probably, and I don't know, it's been 10 months is a long time ago when you're as old as I am.

Host: I'm older than you, Devin, so please.

Guest: I was thinking it would probably be closer to a full time job, but I really don't remember what I.

Host: Well, talk to me a little bit about the emotional, for lack of a better word, component of this. You had a great tweet recently where the quote you used to tell people at cocktail parties or Sunday barbecues or whatever, I'm president of a manufacturing company with $10 million revenue and 50 employees. And now what you tell those people is, I own a liquor store. So you don't seem like a guy who actually,

Guest: I'm a retail store clerk is what I tell people.

Host: You run the CA register. You don't seem like somebody who cares a lot about how people, you know, what people think, but you recognize that there is a totally different kind of professional story that you tell people. Now did you, did that take getting comfortable with or what? Talk to me about that.

Guest: Yes and no. I mean, there's still, there's still times, like I was invited to a thing at the university last weekend where they were recognizing like the top 100 businesses that are ran by OSU Cowboys. I think, you know, in those type of situations, it can be like at least momentary or fleeting thoughts of like, man, what am I doing? But then, you know, every day I walk my kids to school. You know, most days I'm at the house for lunch with my wife. And then two or three days a week I'm, you know, in the afternoons playing golf. Like, there's a lot more moments of like, you know, comfort and hey, I'm really living the life I want to versus, you know, the one that people think maybe I should be. So, I mean, deep down I know that I'm doing what I want to be doing, but there's still parts of me that are like, well, I'm probably capable of doing more. And everybody's like, oh, so you're going to go buy 23 more of these?

Host: That was my next question.

Guest: Yeah, that's always where, you know, my mind would typically start to run. But I don't know, I mean, it's the last 10 months of have changed that mindset a lot. And specifically, you know, because of some of like, the regulatory risks That I talked about a little bit earlier. I'm not sure that I would make additional investments in this space. I'd probably diversify outside of it. Unless just, you know, the perfect thing came about that I couldn't resist. But it's not something I'm actively pursuing.

[24:37] Host: Well, you'd also mentioned to me that there's the stimulation, the intellectual stimulation is different running a liquor store than when you were, when you were an executive. And, and that, and that can be something that one misses. Like if you, you know, if you get bored and what you're doing, you might want to do something more just to, to assuage that boredom. Can you talk about what margins are at your store?

Guest: So we run about, call it a 25% overall gross margin and then hopefully roughly 10% net.

Host: Okay, all right. Why is it that I just hear the conventional wisdom is that retail is just extremely difficult, Razor thin margins. Why are you making it look so easy? Or how are you making it look so easy? Is there something different? Because it's protected right from the. By regulation and so it's kind of a captive market or. Or what? Because most people say if you're going to buy a business, the last thing you want to buy is a store or a restaurant or a salon.

Guest: Well, you know, I can't speak to any other type of retail because my involvement spans the last 10 months. I mean, I never worked retail when I was younger. I mowed lawns and things like that. So this, the last 10 months is everything that I know, which is very little. Part of it is again, the regulatory environment in our state. Like in my town, there's probably seven stores, but three of us are like significantly larger than the other. So I think being one of those three, and then also I'm located on kind of like the newer up and coming side of town, which plays into the clientele and product mix that we have. So I think that's a lot of it. People talk about staffing issues and things like that. I haven't had to deal with that yet. I did raise wages for people shortly after I took over. And then operating in a college town, I think makes a little bit of a difference because we have some really high quality people that are, you know, they're in school, they're going to have degrees here shortly, but now they're okay working retail jobs that they probably won't be okay working in two or three years when they graduate. So we may have a little better pool to grab employees from than a lot of people. So and you know, it's from an employee perspective. I mean, they get to try products and hang out and talk to people about beer and wine and spirits all day. It's a pretty fun, relaxed environment, really. I mean, there's not a lot to it. Well, a lot more fun than working at like Taco Bell, if it were.

[27:16] Host: I think you've already touched on part of the answer. When I look at the liquor stores that are available, as I said, the seven that are available here in San Francisco, first of all, none are as big as 3 million. They look like they range from half a million to 1.5 million. And these are not stores that look like they're staffed by people who are about to graduate college. They're seem like mangy in city kind of places with Plexiglas and so on. So the staffing opportunities are probably much more challenging for the owners of those businesses. There's a lot more competition, probably because there are a lot of them around and they just do. They do a lot less volume, although they're probably also, you know, I mean, they have a smaller footprint. So there's nothing inherently wrong with that.

Guest: That's a lot of, you know, that's a lot of small businesses. Just speaking about things in general and what I saw as a banker and in the business, there's a ton of small companies that may do, let's say, 750 to a million in revenue that provide the owner, you know, maybe 60 to $80,000 a year. But as far as true profits to where you could, you know, hire people to run it, it's not big. There's not enough scale there. So I think that's why we had some success in aggregating some businesses in the, in the sign industries, because we bought three or four. And then when you reach the scale where you can have more professional management and people specializing in what they're good at, it's a game changer versus when we started out, the one that we bought was doing like half a million a year in revenue when we had five people. And I was working 100 hours a week doing sales and accounting and sitting at the front desk when people walked in and working in the shop on Saturdays. And I mean, it was. That's a grind of a lifestyle for somebody.

Host: Well, it sounds like you would probably recommend somebody buy something with, you know, with a kind of a minimum profit or cash flow of something in, you know, the 2, 3, 4 or $500,000 if they're going to be ambitious with this business. And try to and try to grow

Guest: it in a perfect world. But then the flip side is if I didn't have the other opportunities to jump into one where I had to literally do everything, I'm not sure that, like, my abilities and my confidence would be where they are today. So, yeah, it was a. Is a tough time. But I'm not sure, you know, what would my. What would I look like if I didn't have to go through that? It's impossible to know, but you certainly miss out on something.

Host: Sure. Well, Devin, I'll leave it there. This was a great conversation about owning a liquor store. I feel like you hit on the right one, because the ones that I'm looking at here in San Francisco. Francisco. Don't look anything like the way you described yours, and they're not. So yours sounds like a real gem. So congratulations to you on that acquisition.

[30:16] Guest: So far, so good.

Host: Cool. Well, it's Evan Wanzer. D E V I N W A N Z O R For people out there, I really recommend you follow Devin. I was really eager to get him on here because of his tweets. So. Keep those coming, Devin, and we'll have to circle back around in another year, see how things are going.

Guest: Absolutely. Love to.

Host: Thanks.