Do You Have What it Takes to Open a Bar?

Opening a bar on your own seems glamorous: free drinks for all of your friends, a steady income, and a great place to hang out when not pursuing other entrepreneurial endeavors. Unfortunately, the reality isn’t nearly so neat.

Like any small business, bars present a host of responsibilities, along with a few extra essentials that can add up to a stressful and costly venture.

If you’re contemplating a foray into the world of bar ownership, take these facets into consideration first.

1- Create a Detailed Business Plan

It’s important to do your research and understand the true state of the market you’re about to enter. Cue a detailed business plan. This requires an overview of all the minute and large details you expect to encounter over the next few months, and a look at the things you might not expect (or hope) to encounter. This means crafting a concept for your bar and flushing it out—bar patrons can drink anywhere, so your establishment will need to fill a unique hole that guests aren’t finding in other bars currently.

business plan outline

You’ll need to understand just how much money you can expect to spend during the setup and maintenance of your bar, and have a solid plan for all procedures, including securing the right venue and procuring the applicable permits to stay on the right side of the law. When it comes to market research, you’ll need to take a gander at your chosen locale; what type of demographic are you trying to appeal to, and does that demographic reside in said area? These are the types of questions you’ll need to be well-versed in, especially when it comes time to secure the financing you need.


2- Securing the Right Capital

The restaurant and hospitality industry isn’t cheap to get into, and opening your own bar will take a huge cache of capital, and it will be a long while before your establishment sees any real profits—most bars don’t recover their initial investment until three to five years after opening. If you don’t have accounts of money ready to funnel into this endeavor, it’s important to determine how you’ll fund this costly venture.

securing the right capital for business

In recent years, it has become much more difficult to secure traditional loans from banks, leaving bar and restaurant entrepreneurs to approach different money sources to get their business ideas off the ground. There are other options, but they do come with their caveats. Routes like P2P lending and hard money loans can secure cold, hard cash quick, but their interest rates are quick to add up and can cost you much more over the long run.

It can be wise to use current property as collateral if no other routes exist, but it’s not always advisable to approach family and friends for funding—money changes relationships.


3- Securing Bar Insurance

It’s important for bar proprietors to find restaurant insurance from a company like that fits their needs. The basics covered under general plans usually entail property damages, liability issues, and workers comp insurance. Depending on location, square footage, types of activities offered in your establishment, and how much you make from alcohol sales, insurance costs can greatly vary.

insurance policy

Where alcohol is involved, more risk lies. From customer scuffles to your liability for serving someone who drives intoxicated later on, it’s important to have full coverage to ensure your property and assets are kept safe.


4- Liquor License

To sell alcohol, you’ll need to secure the right permits. Depending on the state and county you live in, this can be a tougher task than previously anticipated. Take a populous state like California, for example. Each county has a limited amount of alcohol permits available, and in most, the quota has been met and the permits all issued.

This means new proprietors must purchase their California liquor license of choice from a pre-existing pool of those already available. Unfortunately, this competition leads to exorbitant prices, and can make it hard to secure the license you want in a particular area.

liquor license

Licenses can range from a few hundred dollars to hundreds of thousands of dollars, so it’s important to understand the capital you’ll need in order to secure the right license in the venue you’ve chosen.

Opening and running a successful bar is no walk in the park, but the benefits and profits can be vast. If you’re consider a bar venture, keep these facets of the industry and setup costs in mind before beginning.

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