If you’ve ever sat in a bar enjoying a good beverage with friends after work, you’ve probably considered the possibility that you could quit your 9-to-5 job and open your own bar. This dream is rather common, and for many, it remains a dream. But for those who take the leap, running a bar often turns out to be much more difficult than they imagined, and the venture ends in financial disaster. That said, if you’re willing to take some risk, there are some key measures you should take in order to avoid going broke.
First of all, you should prepare yourself for working very long hours. Chances are until you get established, you’ll be working just about every waking hour for the first year at least. This takes emotional and physical stamina, and if you lose the ability to put in this effort, your bar will suffer accordingly.
Next, make a business plan. Writing a business plan will make sure you’ve considered all the factors involved, including investment costs, competition, advertising costs and needed cash flow. Not only this but if you’ll be seeking investors — whether from banks or personal connections — your business plan will be crucial. After writing your plan and getting underway, don’t forget about it. Check it often and keep it updated. Use it as a measuring stick of your progress going forward toward your goals.
If you’re taking over an existing bar, make sure you understand why they’re selling. Are they retiring, moving or did the bar fail to meet their expectations? If the previous venture failed, you don’t want to repeat those mistakes. So make sure your business plan reflects your ideas on how to turn their failure into your success.
Get to know the liquor laws, food service requirements and zoning laws for your area. Do not violate the law, as this is a sure way to go broke in legal fees and fines. Establish personal relationships with your local officials and inspectors, and lean on them for advice. If you’re getting your information straight from them and following it to the letter, you can rest assured that they won’t come after you later for violations.
Make sure your property and equipment are inspected for bar use. Copper plumbing, for instance, can be corroded by liquids high in citric acid. Also take into account all the consumable items that go along with the drinks themselves: napkins, straws, coasters, garnish and such.
Don’t invest what you can’t afford to lose. Some people choose to fund their business venture by taking out a home equity line of credit (HELOC), but this means that they’re literally putting their house on the line. So if the business fails to return on investment, it could mean losing the house.
Hire the right staff, and make sure they’re trained and experienced. “Although it may seem like fun, you want to avoid employing all your friends just because they like the idea of running a bar,” says Paul Michaels, CEO of National Bartenders.
Finally, put aside a month’s worth of costs into a rainy-day fund. You’ll need this money to cover for those times when unforeseen expenses arise.