If you love nightlife or a nice night out on the town, you have spent some time in a bar. Bars offer a great place for friends and family to hang out, enjoy a nice drink, or meet new people. Often, bars have themes or special types of drinks. They offer a variety of fun and exciting atmospheres to enjoy socializing and relaxation.
If you are an entrepreneur or someone who wants to open their own business, you might be considering opening up a bar. Indeed, opening up a bar might be a great idea. A new bar can attract a lot of attention in a town or city and become popular with the local residents. When run correctly, a bar can be a profitable business.
As you consider starting your own bar, you might be interested in how to become a successful bar owner. You may want to ensure that your business plan puts your bar on the road to success. In addition to making sure that your startup bar is set up to run profitably, you might also be interested in financing options for helping your bar get off the ground.
The good news is that you have come to the right place. In this post, we will review all the necessary steps to open and run your bar with the financing options to help your bar operate smoothly. We’ll cover the following in detail:
Design Your Bar
The first step in starting your own bar is to design your bar. Designing your bar is an essential first step because it lays the groundwork for what type of bar you will have, the niche of the bar, and the type of customers you serve.
You might think about the style of bar you are hoping for. Some people want to start small-town bars with a nice local feel. Some start bars in a college town and serve predominantly younger populations. You might consider starting a restaurant business and bar to provide your customers with food options. Or, you might consider building an upscale bar complete with a host of specialty drinks and a luxurious experience.
In addition to selecting the style of the bar that you are thinking of starting, you should also consider if you want to have a theme for your bar. Some bars try to have a classic, old-American feel to a bar. Others may try to replicate a country or southern feel to the bar. Different bars might try to make you feel like you are having an island experience with more tropical decorations and a laid-back atmosphere. Yet, you might also want a bar to feel more like a nightclub, with dark lighting and a music-heavy environment.
After thinking about the style of bar and theme of the bar that you are seeking to start, you should consider who your customer base will be. For some bars, college students and young professionals will be a great customer base to cater to. You might consider offering cheaper drinks or menus specifically catered to young people. Or, you might want to cater to adults and middle-aged people seeking high-quality drinks and a slower vibe with interactions, music, and so on.
All of these factors will help you picture your bar and those who will frequent it. This can help greatly as you get ready to start your bar since it will help you with customer research and planning for the construction and operation of your bar.
Part of helping this design process is considering what drinks and food you will serve at your bar. If you have bartending experience or know how to make great drinks, you might be able to design the menu yourself. This might be a great idea if you are passionate about mixology. However, if you are less familiar with making drinks, you might consider hiring a consultant to guide your bar in creating a great drink menu.
This is especially important since your bar will primarily serve drinks. Depending on your customer base, this importance can be even larger. Spending time and resources on crafting a great drink menu can have a profound impact on your later profitability.
While not all bars serve food, it is a wise idea to consider offering a food or snack menu at your bar. This may not turn you into a restaurant owner, but it can allow guests who are already drinking at your bar to eat there too. This is another potential source of revenue for your bar.
Thinking about the style and theme of your bar, the customers that you are trying to attract, and the prospective menu that you will offer will make starting your bar much easier. It will give you precise insight into the research that you need to do as well as the objectives you are trying to achieve during the construction and operation process.
Write a Business Plan
Designing your bar is a good prerequisite to writing your business plan. This is because thinking of the theme, style, menu, and the customers that you serve will greatly help speed up writing a business plan while simultaneously improving the precision with which you can define key business goals. You might be wondering how to make a business plan.
While the contents of a business plan can differ depending on whom you ask, you should be prepared to include sections on a business description for your bar, a market analysis of bars in your area and strategy for your bar, a bar marketing plan, a bar management and organization description, a products and services description including an overview of your menu for your bar, a section on competitive analysis of competing bars in your area, an operating plan for your bar, and some financial projections and a description of bar needs.
Writing a business plan can help increase the likelihood that your bar will be profitable. These sections will allow you to think comprehensively about the potential success of your business. Moreover, it can help you outline the future steps you need to take in the process of starting your bar business.
Find a Location for Your Bar
A large part of your bar’s performance will be attributable to the location where it is situated. Choosing a great location for your bar is an important step in the process of starting your bar. Before you begin, you should consider whether you want to buy or rent a space for your bar.
Buying the real estate on which your bar is located can be a great asset for your small business. However, this can be an expensive option. If you are not planning on infusing a lot of capital into the business early on, you might consider renting to be a better option for starting your bar. However, even if you do not have all of the capital to do this upfront, you can also seek financing options to help your business afford the cost.
Renting can provide your bar with a lot of benefits. First, you will likely already have a building constructed for you in which you can put your bar. Second, you will not need to spend as much capital upfront in making the investment. This can help you reduce the startup costs that you will have as a small business owner. Likely, you are trying to seek a central location for your bar in a town. In doing so, a space for your bar may only be available for rent. This can help solve this logistical problem to help your small business harness a great location for your bar.
Regardless of whether you decide to rent or buy the location where your bar will be, your bar business income will depend on where your bar exactly is. In most cases, it will make sense to locate your bar in a place where many people can get to and from your location. A central location in a city or town might make the most sense since cities usually have a vibrant nightlife. Making your bar accessible is a great way to ensure that people choose to spend their evenings at your bar.
In considering exactly where to locate your new business, you should consider doing due diligence on the location. When you look at prospective locations, you can interview other tenants of the landlord or building to see what the renting situation is like or how many people frequent these businesses. Talking to nearby bar owners about their business might also be a good way to gain insight into the profitability of a bar business. Enlisting a commercial real estate broker might also be a good way to get advice on the benefits and drawbacks of a particular space for your bar.
Form Your Business
Once you have a particular location in mind, it is time to start your bar. The first official step that you will need to take is to form your business by creating a legal structure for its operation.
First, choose a name for your bar and business. You can look in the state where your bar is located for the secretary of state’s website and make a name availability search to ensure that your bar name is available for use. Once you have this bar, you are ready to file to start your business.
Now, you should consider what kind of business entity you want to form. For liability reasons, it is best to select a business structure that protects your personal assets. Since there is a risk of accidental food poisoning or injury at your future bar, you need to be wary of the risk of lawsuits. As a result, you should consider forming a limited liability company, limited liability partnership, corporation, or other relevant business entity that will provide a level of protection for your personal assets. Filing to form your business entity is an important step in starting your bar, and you can start by using a lawyer or other services to make the appropriate filings.
Finance Your Bar
As you are filing the relevant forms to form your bar business, you might be wondering how you will be able to afford to finance your bar. Luckily for you, there are a variety of financing options available to small business owners. These include both financing options for starting your business as well as help in the early stages of operations. Expenses like real estate, construction, renovations, working capital help, inventory, or equipment can easily be helped with business financing.
The U.S. Small Business Administration (SBA) provides a host of small business loans to different types of businesses, including your bar. The SBA was formed in order to help people who are interested in starting and operating their own businesses. In today’s economy, some small business owners are finding it difficult to get financing through traditional loans or other means. As a result, the SBA has started loan programs that guarantee a portion of a lender’s loan to make the ability to borrow more widespread.
SBA loans usually have low-interest rates and favorable repayment terms, including no prepayment penalties. This makes the prospect of getting a loan with an SBA lender very attractive for bar owners. The SBA 7(a) loan program is one of the most popular that the SBA offers. With loan amounts up to $5 million, this loan program helps with working capital, real estate, equipment, and inventory needs for businesses like your bar.
If you are interested in getting an SBA loan for your bar, you can learn more about SBA loans. The SBA website also offers a lot of materials on information about SBA loans, the SBA loan application process, and finding an SBA lender for your bar.
Term loans are a great lending option for short-term investments in forming or operating your bar business. If you need to acquire inventory, get equipment, or do renovations to the location where your bar will be located, a term loan might be for you.
Term loans are fixed interest-rate loans that offer your small business a large amount of money that can be used for purposes like real estate, inventory, working capital, equipment, and more. This alternative financing option is available from both banks and alternative lenders (like Biz2Credit!)
Bank loans usually come with lower interest rates for your bar. However, the eligibility requirements for this loan are typically stricter. Your business will probably need to supply a bank lender with several documents, including financial statements and information about your intended purchase. Your credit history will be examined. This may include your personal credit as well.
If you are hoping to get access to capital faster than a bank loan and have an easier time applying, an alternative lender might be right for you. The application process is quick, convenient, and less strict on qualification requirements like having a great credit score. To compensate alternative lenders for the added risk with less due diligence and less strict qualification requirements, interest rates will likely be higher. However, this option might still be right for your bar, depending on the situation.
Lines of Credit
While SBA loans and term loans may help you set up your bar, you might be looking for a credit option that can help your bar deal with ongoing, unexpected expenses. In this case, a line of credit might be what you are looking for. A line of credit can help you deal with problems like water damage or the need to place a large inventory order due to unusually busy business.
A line of credit is similar to a credit card. A lender will provide a borrower with a borrowing limit, like a credit limit. You can borrow as much as you need up to the borrowing limit and pay interest on the money that you use. Typically, a line of credit comes with a variable interest rate. Both banks and alternative lenders issue business lines of credit. Banks might be better if you can qualify and wait for a while, or alternative lenders might be better for a faster and easier qualification and application process.
Equipment financing, or equipment loans, is a great financing option available to your bar. If you anticipate needing to finance equipment for your bar, like a dishwashing station or refrigerators, you should consider equipment financing.
Equipment financing allows you to finance equipment at lower interest rates than other types of loans. This is because the equipment that you intend on financing serves as collateral on the loan if you default on it.
In addition to taking a loan out on the equipment, there are also several other equipment financing options in equipment leasing. Equipment leasing allows you to lease the equipment that your bar will use. These options include lease financing, capital leasing, and operating leasing. These options can allow your bar to be confident that it can replace its equipment with newer equipment as necessary and be protected from the rapid depreciation of assets.
Build Your Bar
After you have considered your financing options and secured the loans that you need to finance your bar, it is time to get to work on building your bar. Whether you have bought real estate and need to construct a bar or rent a current building space and need to remodel, it is time to implement your designs.
Your business plan should guide you for what kind of bar you are looking for. In your business plan, you laid out the information that you need to perfect the style, theme, and decorations of your bar. You can begin to shop around and purchase the furniture to create the seating and decorations in your bar.
Make sure to control the costs of your construction and renovations. Going with reputable contractors in your area can help prevent the risk of being overcharged for starting your bar. Be cognizant of the progress in building your bar and be involved in the decision-making process to ensure that your money is being spent effectively.
Apply for Permits
Now is the time for you to secure the permits necessary to start and run your bar. As you may know, bars are heavily regulated in the United States because they serve alcohol. To run your bar establishment, you need to acquire a liquor license. This license can be obtained from a local Alcoholic Beverage Control licensing location. States regulate liquor license issuance differently, and the requirements for getting one can vary.
Your liquor license will require you to fill out application paperwork and wait up to approximately sixty days in order to have your business investigated. After the investigation, and assuming that your business is approved for a liquor license, you will have it issued in 30 days.
In addition to a liquor license, you will likely need to acquire a food license to allow you to serve your menu and operate the equipment you use to make your food. This process will likely be regulated by your state public health department.
Special fire department permits may also be required for your bar. To check if this is needed, you should consult your local department.
Since compliance is so important to the functioning of your bar, and because regulations vary by state and locality, you should consult with your local health department and fire department to figure out the exact requirements for your bar in your area.
Buy Insurance for Your Bar
While you are obtaining the permits necessary for starting your bar, you should also buy business insurance for your bar. Business insurance is generally divided into two areas: liability insurance and property insurance. However, business insurance can vary in just what it covers. Considering what kind of protections you want is a good idea separately.
Liability insurance can help protect you and your bar in the event of lawsuits. You might have an accident at your bar where someone gets injured or gets sick from your food. In the event of a lawsuit, liability insurance can help protect you. Property damage insurance might be a great idea to protect against accidental problems that damage your property. For example, your windows might get broken, or your sink might leak and flood a part of your bar. Property damage insurance can help cover part of the damages. This can help protect your bottom line and overall cash flow.
Get Inventory for Your Bar
As you approach the opening of your bar, it is time to acquire the inventory for your bar. You will need to start buying the equipment to produce the food and drinks that you will serve at your bar. At this time, you should set up suppliers to help you with food and drink delivery. You can help judge the drinks and food that you will need from the menu that you created.
Having this inventory on hand can help your bar run smoothly at your grand opening.
Hire and Train Your Employees
One of the basic parts of running a successful bar will be depending on great employees. Employees, and especially bartenders, will help your bar form key customer relationships. They help your bar maintain great friendships with customers and keep them coming back.
If your bar prides itself on having great drinks or awesome food, you will need to ensure the quality of these items every day. Having dependable employees who can help your bar execute this will make running your bar much easier.
As you near the grand opening of your bar, spend a lot of time hiring your employees. You might consider focusing on finding experienced bartenders who can help your bar make great drinks. You could also consider hiring team members in the kitchen with great culinary skills to help your bar make great snacks. All in all, doing well at hiring your employees is a great first step to running a successful business bar.
At the same time that hiring employees is important, training your employees is also important. You should spend some time before opening your bar training each of your employees on their essential duties. When the grand opening comes, your employees will need to execute well on their tasks, especially since the grand opening crowd is typically much larger than what your usual business will be.
Advertise Your Bar
Your bar is almost set for a complete start. Now is the time to start advertising the opening of your bar. You can start social media accounts to help inform people about your bar. You might consider advertising on social media or through local channels like a local newspaper. This can spread the word and ensure a larger amount of traffic to your bar when it opens.
Consider offering specials, too! Your drink and food choices can attract people there. Whether by discounts or specialty offerings, there is certainly a lot of room to create a unique and engaging experience for your customers.
Get Ready to Open Your Bar
That is it! You have reached the final step. You can finally enjoy running your very own bar. With the great design of your bar, you are setting your bar up for long-term success. Customers will be attracted to discover and come back to the attractive theme and style of your bar and bar menu. You might become famous for your best drinks or appetizers. Moreover, you will start to get and develop great relationships with some of your customers.
Your business plan has guided you through the process, helping you select a wonderful location for your bar. You have acquired all the permits that you need and have bought insurance, giving you peace of mind about the operations of your bar. Your equipment and inventory allow you to serve great products through your well-trained employees. Your marketing campaign also gives your bar a basis to continue its successful operation.
While you may have used some of the available financing options to support the opening of your bar, keep in mind that you may have additional financing needs in the future. Your bar may operate without a hitch at the start, but you might have unexpected expenses that appear down the line. Having the ability to draw on credit is a great tool for flexibility. A line of credit might help with this.
In addition, if your bar is really successful, you can revisit financing options to help you gain leverage to open up additional locations. In all, the options are endless. Congratulations on establishing your bar business!
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