Have you ever looked around your local bar and thought, âI could run a place like thisâ? For many, itâs easy to get caught up in the excitement ofÂ potentially opening a bar, but for a select few, this is more than just a fleeting idea. These aspiring entrepreneurs want to make this dream a reality.
Opening your own bar or sports pub seems like a fun and exciting experience. After all, who doesnât love gathering with friends and family to watch the big game with a cold drink in hand and appetizing snacks on the table? Behind-the-scenes, though, itâs a little different. While it may seem exciting to become a small business owner and call the shots, thereâs also a lot of planning and work involved in starting a profitable business.
If opening a little corner pub sounds like a dream come true but you donât know quite where to begin, youâre in the right place. In this article, weâll share our top tips for starting the exhilarating and lucrative path to owning your own bar. Weâll go over what you need to legally open a bar, expenses to start and maintain your business, and the importance of a business plan. Weâll also help you decode one of the biggest pieces of the small business puzzle: getting financing for your new business.
If youâre ready to stop dreaming and start doing, keep reading!
Begin With Branding
One of the first things you need to do before you take off running is to visualize a name, a theme, and an overarching concept for your bar. Do you picture yourself running a neighborhood pub where all of the locals gather? Or maybe youâd rather open a thriving nightclub where young club hoppers from around your city come to dance the night away?
Evaluate your different options, considering the type of patrons youâd like to attract as well as where you plan to open your bar. For example, if you want a younger crowd, a nightclub in a trendy part of town makes sense. If you want to attract an older, more sophisticated crowd, consider opening a wine bar, martini bar, or cigar bar in a thriving downtown area. You could also target sports fans by opening a sports bar or draw in foodies with a new gastropub.
Knowing what type of bar you want to open helps you plan out additional details. For example, if youâre opening a hot nightclub spinning the latest top 40 hits, country-western dÃ©cor wonât fit your theme. If you want to draw in a sports crowd, loud music and fog machines probably wonât be on your list of supplies. Choosing the type of bar you want to open and nailing down your target audience first will help you accurately plan everything from the design and layout of your establishment to your name and logo.
Speaking of your barâs name, it goes without saying that youâll need one. Because itâs your bar, youâre free to name it anything you want. However, you want to make sure that you choose a name that reflects your concept. âJohnâs Neighborhood Barâ may incorporate your name, but it doesnât stand out. When brainstorming ideas, think about the audience you want to bring in and pick a moniker thatâs attention-grabbing — a name that lets customers know what to expect when walking through the doors of your bar.
Find A Location
One of the most important first steps in opening your own bar is choosing a location. There are a few options you have at this stage of the game:
- Purchase an existing bar
- Start from scratch
- Buy a franchise
There are advantages and disadvantages for each option. If you purchase an existing bar, you inherit the existing clientele and may see immediate income. However, you could pay a steep premium if the bar is extremely successful at the time of sale. You may also rack up high costs if the bar doesnât mesh with your vision and you have to pay for renovations.
If you start from scratch, youâll be able to see your vision through from start to finish. However, it may take many months (or even a year or longer) to open your doors, and the costs can really rack up if you have to completely renovate a space or build a new bar from the ground up. With this option, careful planning, budgeting, and at least some knowledge of the bar and restaurant industry are needed for the highest chance of success.
Finally, you could purchase a franchise. This option could shield you from some of the mistakes you’d almost certainly encounter if you attempted to go it alone. However, you wonât be able to fully showcase your creativity with a franchise.
Finding a location takes planning and a dedicated eye on financials. Sure, putting your bar in a trendy and popular neighborhood could help your business become your cityâs next hotspot, but real estate costs may be prohibitively high. Before you put down money on a location, make sure to do your market research and understand the costs.
Create A Business Plan
Every successful business starts with a solid business plan, and a bar is no exception. Not only will your business plan act as a blueprint for starting, operating, and growing your business, but itâs also a necessity if you plan to apply for business loans from a bank or other lender.
No two business plans are exactly alike, but there are some standard sections you should have in yours. This includes:
- Executive Summary: Basic information about your business and why it will be a success
- Company Details: Specific details about your business
- Organizational Chart: Outline of your company structure
- Marketing Strategy:Â How will you market your business?
- Financial Projections: Show the financial outlook of your business
Your business plan should showcase the goals of your company and serve as a map for you to follow, keeping your business on the right path. Lenders will want to see a business plan that demonstrates thought, intelligence, research, and reasonable plans for successÂ in the future.
Register Your Business
Before you open your bar and begin serving customers, you have to register your business. First things first: register the business’s name with your state. This can be completed via the county clerk’s office in the state where youâll operate.
Next, youâll need to determine your formal legal structure. Do you plan to be a limited liability company or a corporation? Your business structure will determine how much you pay in taxes, what paperwork needs to be filed with the government, and your personal liability. If youâre unsure of which structure is right for your new business, consult with an attorney, accountant, or business counselor.
Your business will also need to be registered with the state revenue office and the Internal Revenue Service. Because your business will have employees, youâll be required to apply for an Employer Identification Number. Youâll also need a sales tax permit.
Finally, youâll be required to obtain the proper licenses and permits to legally operate your business. Because your bar will serve alcohol, a liquor license is required. If your bar serves food, youâll need a license from the health department. You can find out more about the requirements in your area by contacting your state Department of Commerce.
Obtain A Liquor License
In the previous section, we touched on acquiring the right permits and licenses. One of the most important things you need to open a bar — if not the most important thing — is a liquor license. This license makes it legal for you to sell alcohol in your business. This should be a top priority, as getting approval from your stateâs Alcohol Beverage Control agency typically takes at least one month. In some cases, it may take up to six months to get approved.
The steps required to obtain your liquor license vary by state. In all states, though, you will be required to fill out an application. You may be required to submit additional documentation with your application, such as a certificate of incorporation, your proposed menu, and the certificate of title for your bar. You may also be required to pay a processing fee.
Once your application is reviewed and approved, youâll have to pay for your license. Fees vary by state and range from a few hundred dollars to several thousand dollars. Your license will last for at least one year, and you must pay a fee when itâs time to renew.
Even though getting your liquor license is a hassle and can get very expensive depending on your state, this is a critical step that canât be overlooked. To learn more about the process, fees, and type of license required for your business, contact your state ABC agency.
Business licenses. A construction loan or lease. Renovations. You havenât even stocked your bar, and the expenses are already piling up. Unless youâre already a successful entrepreneur with plenty of money in the bank, these expenses may seem completely overwhelming.
Very few small business owners have the resources to launch a business on their own. Instead, they turn to lenders for money to fund startup costs. Even after you launch your business, there will always be a need for more capital, whether an emergency has popped up, you need to expand, or a slow period has affected your day-to-day operations.
Even if your credit history is blemished, youâre a startup with no business history, or you face other challenges, thereâs funding out there if you know where to look. Start with these options.
Many new business owners have at least a little bit of money put away in their savings accounts. If youâve been socking away pennies for a rainy day, now may be the opportunity to put these savings to use. By using your own money, you wonât be indebted to a lender (or at least not as much). You wonât have to worry about making scheduled payments, and there wonât be interest or fees to worry about. On the downside, if your business is unsuccessful, you lose part — or all — of your savings.
Loans From Friends & Family
If you have a friend or family member with extra money to invest, pitch them your business idea to see if theyâre interested. But be careful! Even though you have a more personal relationship with this person, donât just have a casual conversation asking to borrow funds. Instead, give them your business plan and present your pitch just as you would with a bank or other lender. Show them why you think your business will be a success, and give them a good reason to invest in you.
If you come to a loan agreement, get everything in writing, including the total borrowing amount, rates, and terms of the loan. Put your personal relationship aside and make sure you follow all terms of the loans just as a responsible borrower should.
Personal Loans For Business
Getting a startup loan from a bank or other lender can be tough. Sure, there are options, such as Small Business Administration loans, but these loans can be very difficult to receive — especially if you have a short time in business or low annual revenue. However, if you have a solid personal credit profile, more low-cost loan options are available to you.
Instead of going directly for a business loan, try applying for a personal loan for business. With a business loan, lenders consider your time in business, personal and business credit histories, and annual revenues. But with a personal loan, your personal credit score and income are used to determine if you qualify.
By going this route, you may be able to avoid many of the high fees and interest rates of alternative business loans. Depending on your credit history and the lender you select, your cost of borrowing could be much lower with a long-term, low-interest personal loan.
Recommended Option: Upstart
You may qualify to receive a personal loan of between $1,000 and $50,000 through Upstart. These loans have competitive interest rates starting at 7.74% and going up to 35.99% based on your creditworthiness. Repayment terms of 36 or 60 months are available. The application process is quick, easy, and completely online.
To qualify for an Upstart personal loan, you must meet a few basic requirements, including having a valid email address, verifiable personal information, a source of income, and a U.S. checking account. You also have to meet the lenderâs credit requirements, which include:
- A credit score of 620 or above OR 580 or above for California residents
- A solid debt-to-income ratio
- No bankruptcies or public records
- No delinquent accounts or accounts in collections
- 6 or fewer inquiries on your credit report over the last 6 months
Lines Of Credit
A more traditional financing option is a flexible line of credit. The one drawback with a line of credit is that business performance is typically a qualifying factor. If you havenât made any sales, you wonât qualify, so this isnât a good financial option if youâre not in business yet.
As you build your business, though, a line of credit can be very useful. It can be used to purchase supplies, inventory, or cover that emergency that pops up when you least expect it. You can also use your line of credit to cover payroll or daily operational expenses.
When you receive a line of credit, a lender provides you with a credit limit. You can make as many draws as you need against the line of credit up to and including the credit limit. Once you initiate a draw, the lender will transfer the money directly to your bank account, giving you access to the money you need. Over time, youâll make payments that are applied to the principal (the amount youâve borrowed) and any fees and/or interest charged by the lender.
A line of credit is a revolving account, so as you repay the lender, money becomes available to draw again.
Recommended Option: Fundbox
You may qualify to receive a line of credit of up to $100,000 through Fundbox. Fundbox lines of credit have no restrictions and can be used to cover any business expense. Once approved, youâll be eligible to make draws immediately and receive funds as quickly as the next business day.
The Fundbox application process takes just minutes, and itâs easy to qualify. The lender focuses on the performance of your business — not your business or personal credit history — so even borrowers with credit challenges can qualify. You do, however, have to meet the following requirements:
- Own a U.S.-based business
- Have a business checking account
- At least 3 months of transactions in your business bank account or at least 2 months of activity in a supported accounting software
- At least $50,000 in annual revenue
Once you make a draw on your line of credit, automatic drafts are made weekly from your linked business checking account. If you do not use your funds, you do not pay. Repayment terms are 12 or 24 weeks and fees start at 4.66% of the total borrowing amount.
Business Credit Cards
Business credit cards work just like the personal credit cards in your wallet, only theyâre used to pay business expenses. Business credit cards are great for emergency expenses or any time your cash flow is a little short. You can also make recurring payments, such as your utility bills, using a business credit card. This is especially beneficial if you have a rewards card that gives you cash back or other rewards simply for making qualified purchases.
When you apply for a credit card, your lender will set a credit limit if youâre approved. You may spend up to and including this credit limit with one or multiple transactions anywhere credit cards are accepted. Each month, youâll make a payment that is applied to the principal, interest, and fees charged by the lender. As you pay down your balance, funds will become available to use again. If you donât have a balance, you wonât pay any interest, although you may have to pay annual fees depending on the card you select.
Recommended Option: Chase Ink Business Unlimited
If you have an excellent credit score of at least 740, you may qualify for the Chase Ink Business Unlimited credit card. This is a rewards card that provides you with unlimited 1.5% cash back on all purchases made for your business. As a new cardholder, you will also be eligible to receive a $500 cash back bonus if you spend $3,000 within 3 months of opening your account.
The Chase Ink Business Unlimited card comes with a 0% introductory APR for purchases and balance transfers for the first 12 months. After the introductory period, the card has a variable APR of 15.49% to 21.49%. This card comes with no annual fee. You can also receive additional cards for employees at no extra cost.
Rollover For Business Startups (ROBS)
Do you have a retirement account? If so, you can legally leverage these funds to pay your startup costs without facing tax or early withdrawal penalties. With a Rollover for Business Startups (ROBS) plan, you can put your retirement account to work for your new business.
It’s possible to access your retirement account funds with no penalties in just a few easy steps. First, create a new C-corporation. Next, create a qualified retirement plan for the corporation. Then, the funds from your qualified retirement account are rolled over into the new retirement plan. Finally, the funds that were rolled over can be used to purchase stock in the corporation, giving you access to the capital you need to start or grow your business.
Throughout the process, you do have to remain compliant and follow legal guidelines. For most new business owners, the process can get confusing, which is why ROBS providers are available to help. A ROBS provider will set up your ROBS plan to ensure everything is by the book. To get started, youâll need to pay a setup fee, then pay a monthly maintenance fee for maintaining your account.
The great thing about ROBS plans is that you are using your own money, so you wonât have to pay interest on a loan. You will, however, have to pay a monthly fee to maintain your account. You also risk losing your retirement funds if your business is unsuccessful.
Recommended Option: Benetrends
Benetrends is a pioneer of ROBS, launching its Rainmaker Plan in the 1980s. This visionary-plan is the longest-running ROBS plan, and Benetrends offers many benefits that outshine its competitors.
With just four easy steps, Benetrends can get the capital you need from your qualified retirement plan. With the Rainmaker Plan, you can have your funding is as little as 10 days.
To qualify, you must have an eligible retirement plan with at least $50,000. Most retirement plans are eligible, with the exception of Roth IRAs, 457 plans for non-governmental agencies, and distribution of death benefits from an IRA other than to the spouse. There are no time in business, annual revenue, or personal credit score requirements.
To get started with Benetrends, youâll be required to pay a setup fee of $4,995. After paying this fee, your C-corporation and ROBS plan will be set up. After your plan is set up, youâll be required to pay a monthly maintenance fee of $130. This fee covers ongoing support and services including legal support, audit protection, and compliance.
Paying your vendors will be an ongoing expense for your business. You have multiple options available to pay your vendors. You can pay out-of-pocket, you can use a credit card or line of credit, or you can take advantage of purchase financing.
With this type of financing, your vendors are paid immediately, while you get more time to pay. A lender pays your vendors up front, then you repay the lender over a set period of time. The lender will add fees and/or interest to your loan balance for paying your expenses upfront.
By using purchase financing, youâre able to pay your vendors immediately to receive the supplies, inventory, or services you need for your bar. Then, you can spread out your payments over time to make these purchases more affordable for your business.
Recommended Option: Behalf
Behalf offers purchase financing of up to $50,000 for qualified borrowers. Repayment terms of up to 180 days are available. Behalf charges fees of 1% to 3% of the borrowed amount per month for using this service. There are no additional fees. You can repay on a weekly or monthly schedule.
Behalfâs financing can be used to pay merchants for inventory or services. However, there are some restrictions. You canât pay bills, cover payroll, or pay other existing debt through Behalf.
Behalf analyzes the performance of your business when making its approval decisions. There are no time in business or business revenue requirements. Behalf does not have a minimum personal credit score for approval, although your credit history will be considered during the application process.
Create Your Menu
Before you open your bar, you need to know what food and drinks you plan to serve and what equipment is needed to properly prepare each menu item.
When planning your menu, think about your theme and the type of customers you plan to attract while also keeping your budget in mind.
Decide what type of drinks youâll serve. Most bars serve a variety of wines, beers, liquors, and mixed drinks, but what you serve may be different based on the theme of your bar. For example, in a sports bar, your drink menu may feature a wide selection of beers. If you open a nightclub, you want to have a variety of liquors and mixers on hand to create many different types of drinks. If you have a cigar bar, wines and craft beers may make up the bulk of your menu. Again, the type of bar you want, the theme, and your target audience can help you determine what you serve.
If your bar will serve food, think about the types of food youâll serve. In a neighborhood bar, appetizers like fried cheese sticks or nachos may be enough to keep your customers happy. If you have a gastropub, meals made with high-quality ingredients should make up your menu. Remember, creating the perfect menu takes careful planning, so take the time to brainstorm your ideas.
Itâs also wise to start off small and add new items as your business grows. If you have a huge menu that features every type of food and beverage you could think of, your bar will require more equipment. More equipment equals more expenses. Working with a smaller menu can also ensure that your bartenders and kitchen staff arenât overwhelmed and can focus on creating high-quality food and drinks. As you draw in customers to your bar, you can tweak your menu based on what customers are ordering, what gets rave reviews, and what falls flat.
Once youâve determined what your bar will be serving, youâll need to talk with suppliers to get estimates of costs. As you approach opening day, youâll place your order with your selected suppliers.
Still stuck on your menu? Check out our tips for creating a great menu.
Purchase Your Equipment
Once youâve secured a location and have moved further into the process of building your bar, itâs time to think about the equipment and fixtures that you need. What your bar needs depends on the theme youâve selected and what youâll be serving, but some items you may consider include:
- Bar & barstools
- Tables & chairs
- Industrial ovens & other kitchen equipment
- Coolers, refrigerators & ice bins
- Blenders & other bar equipment
- Big-screen TVs
- Sound system
- Microphones & other audio equipment
- Beer taps
After youâve leased, purchased, or built your building, itâs important to create a detailed layout of your business. You want to ensure that you have enough room for everything required to run your bar, while also leaving enough space for seating, a dance floor, and other features that will be important to your customers. As you grow your business and need to add or update equipment, consider equipment financing to make these expenses more manageable.
Select Your POS System
Gone are the days when most businesses just needed a cash register or two for their customers. With the rising use of credit cards, debit cards, and mobile payments, businesses — especially bars — need a more advanced system for accepting payments.
A point of sale (POS) system is one of the most important pieces of equipment youâll need for your new bar. A POS system combines software and hardware to create a centralized point for business operations. Through this system, youâll be able to take orders and accept payments, but thatâs not all.
Some of the most advanced POS systems come with features beneficial to bars. This includes built-in tipping systems, inventory management that allows you to track your stock levels, and an open ticket system for creating bar tabs.
Your POS system plays an important role in your business, so itâs important that you know what to look for before making your purchase. Check out our top picks for POS systems for bars and nightclubs.
To make sure your bar is a success, you need to have the right employees working for you. If you havenât done so already, you need to apply for an Employer Identification Number for tax purposes. Next, you need to determine how many employees you need and what their roles will be in your business.
Youâll need at least one bartender that prepares and serves drinks in your bar. You will need to add additional bartenders based on the number of bar areas you have in your business, as well as the number of customers you have to serve.
If your bar will serve any type of food, you will also need a kitchen staff. This includes at least one cook, but you may also need prep cooks, dishwashers, and other staff as your business grows.
Youâll also need servers to distribute food or pass out drinks to customers not seated at the bar. The number of servers you have is based on the size of your bar and how busy it gets.
While your servers may be able to handle cleaning tables at first, as your business grows, you may want to add a busser or two, who are responsible for cleaning off tables for new customers.
You may also require additional staff. For example, you may hire a doorman that checks IDs before customers enter the door. A security guard may also be a staff member you hire to handle tempers that flare from customers whoâve had one too many.
You also need at least one manager to oversee the staff. A managerâs role may include hiring employees, firing employees, training, making schedules, and making sure that all staff members are doing their jobs properly.
Before you start seeking job applicants, make sure to create an in-house organizational chart to know exactly who you need to hire. You also need to do your research to figure out what salaries you will offer, as well as any benefits.
Unsure of where to hire new employees? You have a few options. First, post a job ad on online job boards or classified ads to find potential employees. This is an inexpensive (or even free) way to find candidates.
You can also ask for referrals. If you know someone in the industry, ask if they have any new hires to recommend. Donât know anyone in the industry? Ask other colleagues, family, and friends for recommendations.
Bolster Your Web Presence
After completing all of these steps, youâll be that much closer to opening your bar. However, you want to make sure to spread the word about your business, and thereâs no better way to do that than with the internet.
One of the easiest ways to get the word out about your business is through social media. Facebook, Instagram, and Twitter are just a few of the ways you can reach your target audience, andÂ Yelp For Business is a must. Best of all, these accounts are free to use. As you grow, you may consider moving past the free advertising you get through your posts and pictures and invest in advertising on these social platforms.
You also need a good website. Keep your barâs theme in mind when you design your site. Make sure that your website reflects the image you want to project. There are many small business website builders you can look into if you want to create your website yourself. These make it easy for you to create a professional website with no prior web design experience required.
Make sure that you include your address and phone number on your website. Information about your bar including dress code and hours of operation are also extremely useful for customers. You can also include your menu, photos of your establishment and patrons, and news and updates on your website.
Also, remember that word-of-mouth is one of the best forms of advertising for a bar. If your customers love your drinks, food, service, and atmosphere, theyâll tell others. If they dislike your bar, theyâll also tell others â¦ who will make sure to avoid your establishment. Whether your bar is brand new on the block or youâve been in business for some time, keep customer satisfaction high so that customers online and off will have nothing but positive reviews for your business.
As you can see, creating a bar where everyone gathers to have a great time takes a lot of hard work. But just as Theodore Roosevelt said, âNothing in the world is worth having or worth doing unless it means effort, pain, difficulty.â Running your own bar means planning, budgeting, and always being ready for growth. While your bar wonât make you an overnight millionaire, you can become a successful entrepreneur with this potentially-lucrative venture if you put in the work.
The post Want To Open Your Own Bar? Top Tips To Get You Started appeared first on Merchant Maverick.