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An Overview of Bar Economics
Opening a bar can be an exciting adventure. The vibrant social life and networking opportunities are plentiful. Better yet, alcoholic drinks tend to be very popular, so you can look at making an impressive profit.
It’s easy to get lost in the glitz and glamor of running a bar and forget about the economics of it. New bars face a lot of competition and you’ll need to invest quite a bit into your business to help it succeed.
If you’re interested in learning about the economics of running a bar, keep reading. You’ll discover some critical financial tips to help guide you.
5 Things to Remember
Brainstorm Ahead of Time
You always want to make a clear blueprint of what you’d like your bar to be. Do you envision it to be a luxurious area or more of a cozy pub?
It’s also important to ponder the space you’d like to run one in. For instance, if you want a small community bar, the location charges will be much less than if you operate one in a busy downtown section.
Besides this, contemplate whether buying or renting a building is right. Both have their pros and cons so you’ll want to carefully consider each.
By brainstorming aspects like these, you can create a firm foundation of how you’d like to operate your bar.
Running a bar isn’t cheap. Whether it’s buying furniture and decor for it or high-quality alcohol, you’ll need to be prepared to spend a lot.
It’s estimated that it can take anywhere from $110,000 to $850,000 just to open one. You’ll also need to factor in daily and monthly costs, like to restock your inventory or to fix structural issues.
You might want to come up with a daily calculation of operating fees. If you plan to make a profit of $3,000 each day, you don’t want your operating costs to be higher than this.
Remember that you’ll also need to apply for business and alcoholic beverage licenses. The price for these will vary depending on the area you’ll run it in.
Look at Investors
If you’re serious about running a bar, it might be worthwhile to look at getting investors. This might seem a bit scary, especially if you’re not sure that you can pay them back, but it’s usually a beneficial leap.
If you don’t know where to start, begin with those closest to you. Ask if they’d be willing to contribute to your new business and show them your business plan.
If you prefer not to go that route, look for restaurant and bar investors. While there might be more technical aspects with them, they’re more likely to provide you with larger monetary amounts.
Sometimes things can get messy in bars. Injuries, tainted food, and rowdy customers are just some hazards that you’ll need to protect your business from. In many cases, insurance is legally required for bars.
With food and beverage insurance you can safeguard all aspects of your business. You can get a customized insurance package based on things like your income and where your bar is located.
You can also go deeper into the insurance world and apply for other coverage types. These include workers’ compensation, commercial property, and commercial auto. A quote is usually available so you can get a general idea of the food services insurance cost.
Use Inventory Control
As a bar owner, it’s easy to get overly excited when buying liquor. Before you know it, you might end up purchasing more than your bar can hold. On the other hand, you might run out of a favorite drink too quickly. Because of this, keep a consistent inventory of your stock. Without one, you might find yourself overspending or not keeping up well with customer demand.
Is it Profitable?
Running a bar can be profitable but you’ll need to dedicate a lot of time and effort in it.
Be prepared that it just might not work out at first and that you might need to shut down.
If you have to close your bar, don’t get discouraged. Go back to the drawing board and rethink your plan by using lessons from your previous experience. Sometimes you’ll find that a bar itself might not be enough for the area you’re serving. Instead, you might need to include food options, like breakfast or late evening meals. You could also try to stand out by specializing in certain cocktails and beverages. While it might seem financially safer to go the traditional route, quirky ideas offerings might be what get you a solid base.
Running a bar can be an exciting journey but it takes strong financial commitment. By keeping this information in mind, you can better prepare yourself for any issues that might come your way.
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