Entrepreneurs around the globe are constantly turning to the hospitality industry to expand their empires and grow their wealth. The decision to start a bar is one that should be carefully considered – whilst operating a bar can be an extremely lucrative venture, there are detailed blueprints to be made and many risks at stake. Only through careful planning and meticulous research can you successfully turn your vision into a reality – there is much more to this industry than meets the eye. Before the red tape is cut and the celebrities begin posing for the paparazzi over your carefully chosen cuban cigars and XO Cognac, there are a number of key concepts that you’ll need to understand and master before you can reap the benefits of being ‘the owner’.
Listed below are some strategies and ground rules you’ll need to understand in order to increase your chances of hospitality success, ranging from initial market research through to staff selection and the general public’s perception of your venue.
Firstly, you’ll need to do your market research – it is not an intelligent business venture to blindly open a five star venue and hope for five-star customers to show up. The most successful businesses, regardless of industry, know the importance of performing extensive market research. Doing so gives a person or group the opportunity to research specific information about their potential customers (which will vary greatly between geographical locations – For example, researching one particular suburb or shire may not reflect the demographics of a neighboring suburb or shire – it is extremely essential to research all influencing areas). Knowing the gender, age, income, education, occupation and buying habits of a concentrated group according to location can help influence a number of decisions in the beginning phases of starting a bar. Contact your local council for publicly released census information (if possible in your area) to determine the demographics of your target location.
For example, if the area you’re thinking about choosing to start a bar is in a geographical area which happens to be frequented by middle age couples with young children, or older individuals that are of retirement age, chances are you won’t experience high volumes of business (it is safe to conclude that this demographic aren’t your desired clientele). If you compare this to a bar in a part of town that is known for university students and young singles, chances are your establishment will be busier and you’ll make more profit (as university students and young singles are likely to spend more money on the products you are selling). It wouldn’t make sense to open a nightclub around a retirement village, nor would it make sense to open a five star tapas bar in a low-budget university area.
So, it pays to research your surrounding area – you’ll need to rest assured knowing that the residents in the surrounding area are able to support themselves financially when they visit your establishment. It’s wise to start building this into a business plan – perform a SWOT and PEST analysis.
A SWOT analysis clearly outlines internal Strengths, Weaknesses, Opportunities and Strengths (SWOT) in your venture. A PEST analysis outlines any external challenges you may face in the Political, Economical, Social and Technological aspects of your local economy. Although this may take time to complete, your business plan will be an extremely valuable tool for compiling your research and conclusions, presenting the plan for your bar and (most importantly) obtaining finance to pay for the creation of your bar. As soon as the idea to start a bar enters your head, you should be jotting down your ideas. Ultimately the goal is to develop a solid business plan, which details each aspect of the process, from the name of the bar and the proposed location, to the niche you want to serve and who your target audience will be, among many others. Use your business plan as your guide and don’t deviate from it. Each step must be carefully planned first before taking any action.
You’ll also have to be sure that you know exactly what you’ll offer your customers when they visit your venue. It is foolish to assume that customers will automatically visit a bar just because it is open for business – you’ll need to be clear cut in what you are going to offer, designed in a way that will attract the demographic in your area. You’ll need to explore every concept and idea, and make it an essential habit of asking yourself a thousand questions about each idea. Will this idea make money? (for example, a bakery will not make as much money as a cafe, as customers may only buy a pie in a bakery – in a cafe they may sit down and spend five times as much) Will this be an easy style of venue to operate? Will you need different shifts of staff to work morning, dinner and night? Will you need to get different licenses for different features of your establishment? Do you need food handling permission? The number of questions is limitless. The services provided mean more than having a bunch of drinks and a few appetizers on the menu. Think about not only the service and products you want to offer but the type of atmosphere as well.
Ask yourself overall: What is your goal in opening a bar? Knowing the answer to this question will make everything else much clearer when you define your style of venue.
There are a variety of bar styles out there – pubs, sports bars, specialty bars, neighborhood bars and even club bars. Unless you know this basic information, trying to start a bar is going to be difficult-not to mention unorganized. When trying to make this decision, don’t just think about which type will make you the most money, either, although making a profit is essential. The style you choose should be one that you’ll enjoy running and can see the true potential in growing it into a success. As I mentioned earlier – ask yourself a thousand questions, and when you have chosen a style, stick to the idea. Do your research – visit as many other establishments as you can.
The challenge with trying to start a bar is the fact that there is a lot of competition. This makes it hard to stand out from the rest. However, by identifying a niche market for yourself, your bar has the opportunity to truly be unique (compared to other bars that may be located in the same area). One way to approach this is to evaluate the types of bars currently in business in the area you wish to conduct your operation. Are they all sports bars? Which ones are the most frequented and why? Do you recognize certain consumer trends, activities or interests that the people in the area have in common? Do you thing there is an ‘untapped niche’ in your area? This all comes down to doing your research – by doing enough research you’ll soon find the right ‘formula’ of bar which will create enough revenue, exploit an untapped niche and appeal to the back pockets of the people in your target geographical location.
Before investing time, money and effort into starting a bar, it is vital to crunch the numbers to establish profit amounts, based on the details of your business plan. Using an income simulator is an effective way of obtaining this type of information. Income simulators and profit/loss calculators can be found on various websites. Enter a range of numbers into the required fields and see what figures you come up with. Estimate how much money you would need to pull in to make a decent profit and run your bar optimally. Knowing the potential numbers ahead of time will prevent any unpleasant surprises after you have opened your business. As I mentioned earlier – prior research will remove the chances of the effects of unforeseen circumstances in your establishment.