How Do I Open a Bar?

It has been my dream to start a bar of some type. My mother and grandmother have worked as bartenders and cocktail waitresses. I don't want to open a grill or restaurant -- just a bar where people can go at the end of the night and enjoy a drink. Of course I want to have enough customers so that I can make some money. Is this a good business to get into? What are my first few steps?

First, you should consider the market for another bar in your area. Is there really a market for one, and if there is, how will yours be different that the competition? Do they offer food to their patrons?

One way to do this is to find out how much people in your metro area spend on dining out, bar services and entertainment in your area, then see how many bars and restaurants are in your area -- as you will be competing against them as well.

Then, divide numbers. Say, for example, you see people spend $1 million per year in your area on these services and there are 10 bars and restaurants in your area. That means each bar and restaurant is grossing $100,000 per year.

But we expect that not every business is doing the same amount of business. Typically, the top two or three players in any category reap anywhere between 40 percent to 80 percent of the category's revenues.

In our example, let's say 50 percent, which means the remaining seven business are fighting for over $500,000 in revenues, or a little more than $70,000 in gross revenues per bar.

Remember, that's gross, and doesn't take into account the expense side -- be it rent, employees, supplies and taxes, among others.

This is why many bars or restaurants don't make it. It can be difficult to operate on those types of numbers and difficult to propel a new bar or concept to the top in a short amount of time and keep it there.

You said you just want to open a bar, but is that what your ideal target customer wants? A main fault I see with new and prospective owners is that they want to sell things they think their customers want to buy, versus what people really want to buy or already buy.

You have some good resources in your family that have experience in the industry, and they should be good sources of information and knowledge for you. But you should also look into outside help from a bar consultant or a coach who specializes in that category.

These consultants generally have "been there and done that," and can guide you in the numbers and the resources you'll need to be successful. They'll also be knowledgeable about how to run a successful business -- skills that employees may not have.

Remember, the main thing is to know your numbers first, and you'll always be able to make better decisions. The numbers won't always be perfect or right 100 percent of the time as there is no "magic bullet" in business, but they will inform you about the potential your idea has in your market.

They can also help you avoid costly mistakes -- especially if this is your first business venture.

Related: Three Things About Owning a Bar That Might Surprise You
Related: Video: How to Start a Bar
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