This excerpt is part of Entrepreneur.com's Second-Quarter Startup Kit which explores the fundamentals of starting up in a wide range of industries.
In the book Start Your Own Bar and Club, the staff at Entrepreneur Press and writer Liane Cassavoy explain how you can launch a profitable bar or club, whether you want to start a nightclub, neighborhood pub, wine bar or more. In this edited excerpt, the authors reveal the correctable problems that can cause your bar to fail.
When opening and running a bar, the most frequent mistakes owners make involve inventory control, and managing and training staff. Another high-problem area is spreading your resources too thin by overspending or underselling.
From purchasing supplies to selling goods, the control of your inventory will deeply affect your profits. Choose your purveyors carefully. Create specifications for each product. How much will you carry of what? Sometimes you'll need to update your original pars (the number of backup bottles you keep on hand). If you make changes, keep a file or log of when and why the change occurred so you can refer to it and keep track of the progress of your business.
Encourage staff to make drinks and food according to standard recipes as instructed during training. Test your bartenders periodically to make sure they're sticking to the agreed-upon standards. Make sure every drink is accounted for in accordance with your policies. Whether a drink or food dish was sent back, made improperly or given away for free, everything should be registered somewhere. If you have inventory-control problems, you'll need to refer to your established reports to figure out the problem.
Your establishment will live or die by how professionally your customers are served and how much they feel like your guests. Your staff will wilt or prosper depending on the consistency and viability of the support given to them by your management team. Your service staff will assist your managers in getting to know your customers both as individuals and as a group. The better you and your employees know your customers, the better you can serve them.
Managers often ignore staff problems, hoping they'll just go away. However, most of the time the issues fester and eventually explode. The primary reason many managers don't get involved with staff problems is due to their fear of the explosion. However, it's always better to identify and solve problems before they interfere with your business or start to affect your customers.
If you're the one who calls the shots for your operation, you'll have to keep abreast of what works and what doesn't. One good way to find out if your bar has the personality you want and is running properly is to visit during peak hours as a customer. Bring a friend in for a drink, and sit at a table to get a feel for what a customer experiences. Try to take in the furnishings, decorations and selections as if you walked into the bar for the first time. Listen unobtrusively to the guests around you. What are they saying about the place, the service, the food, the drinks?
Watch your staff interact with each other and the customers. Do employees ignore the customers? Or do they greet them and try to make them feel welcome right away? You'll experience a totally different point of view of how your guests are treated if you're sitting at a table like any other customer and allow yourself to be treated as such. Of course your server will try to impress you, but you should pay more attention to how other guests are treated.
Spreading your resources too thin creates major pitfalls and causes many bars to fail. The most common and obvious culprit is financing: You don't start with enough capital, you spend it on the wrong things, or you pay too much for equipment. The financial woes of this industry can snowball at any time, so be prepared with backup capital. Bob Brenlin, a neighborhood bar owner in Seattle, puts it bluntly: "Have enough money going in so you can withstand the first few months of less-than-projected income."
Finances aren't the only resource you must be careful with. Your employees can also be spread too thin. Your bar's business will fluctuate depending on the weather, time of year and a host of other variables. Often, bar owners overwork their employees to the point of exhaustion. When your employees are overworked, they can become cranky and short-tempered, and their job performance and customer service will almost definitely suffer. Keep in mind that happy, satisfied employees are less likely to start acting flaky.
One way to keep employees happy and loyal is to be aware of their work schedules. For example, if Julie bartends every Friday and Saturday night for the first three months she works for you, then you change her shifts to Wednesday and Thursday afternoons without notice or explanation, you may find that her demeanor and attitude change drastically. Even though she's working the same amount of time, her income has probably decreased to such an extent that her mind is consumed with it. If she starts directing her attention elsewhere, her performance at your bar will suffer--you may even lose her altogether. Talk to your employees if you have to make major scheduling changes; explain your reasons and let them know if it's a temporary or permanent change.
When you do get your business up and running, you can prevent many mistakes by putting efficient and practical controls in place. R.C. Colvin, a bar owner in Niles, Michigan, says, "In the bar business, it's even more important to stay on top of your accounting and hold people responsible. You've got to have a liquor-monitoring program, and you have to be on top of your product."
Brenlin gives this advice to new bar owners: "It has to be a labor of love--you're probably not going to make a lot of money. You need to be able to go small, easy to control, which will make a difference on whether you make any money. There are all kinds of risks when you get larger, so you better have a good location, a strong lease, a good business plan, and solicit as many people as possible. Then market the heck out of the place."