By on Jul 21, 2010 with Comments 1
Working on volume is far and away the best way to make money in this business. You’re here to make money, right? Bars vs nightclubs? Where is the revenue? No contest! Let me explain.
There are definitely more bars in this country then there are nightclubs, no doubt. But before you get into this industry, you have to weigh the best options for yourself. Ones that make sense financially.
Opening a bar is nice. By doing so, you are able to get into an industry that maybe you have always wanted. And that’s good. But there are many decisions you need to consider before doing so. When opening a bar, you have a small place that you will need to keep busy with customers, all the time. Without it being busy all the time, you will never be able to pay your expenses.
It’s nice having a smaller place. It’s cozy, and definitely more personal. Many people feel secure in opening a bar as just the small size makes them feel more secure. They feel like that they can handle it. This is especially true for people new to the business. However, if you are honest with yourself, and you find that you really don’t have the experience in this industry, or the business acumen, you shouldn’t go into any business, especially this one.
But, generally if you do, it’s usually a small bar. Anyone can do it, right? Wrong. Bars have to be marketed like any other business. Growing a bar business is tough, but it can be done. And a small bar will limit you working on volume.But don’t count on friends and family to be your mainstay.
In a bar, you have the possibility to make only so much money. Period. The size itself will limit you to growth and profit dollars. However, you will find that the overhead to operate one is not small. Especially in the States that do not allow bars, only restaurants. These States need to wake up and realize it is 2009. That’s another story.
States that do not the sale of liquor only, and require restaurants put a burden on bars as then as the bar owner you need to hire staff to make and serve the food. Now your overhead is really high, and we haven’t even talked about the costs associated with food. OMG!
As you probably already know, sixty five percent of restaurants that have opened for three years, fail. There is very little margin for error here. And it’s not only the privately owned ones, but the franchises too.
Opening a bar requires you to be busy all day and all night. It will take you years, if ever to pay it off, let alone make substantial profit dollars. Without working on volume, you need to make money per person. Then, like all of them, you will start to offer specials for beer, and food, which MAY bring in more people, put at less of a profit margin then you had before your specials. See what I mean.
Now, you are living on specials! You know what I mean. Look at all the ads in the paper, tv, and radio, advertising their specials!! That’s smart? If you can’t build a bar that can charge full price for the product and service you provide, and keep your customer base coming because they love your place and what you provide, you shouldn’t own a bar!
Are their exceptions? Sure there are. This is life and there are always exceptions. Many times it depends on where you are located geographically. In smaller towns the cost of a lease is dramatically less expensive then a large city. Also, you will find labor is less too, along with insurance, food and beverage, and many other things.
And as there are more bars then nightclubs, your competition is greater. Now, you all are offering specials! In most small bars, you have no room to grow, have larger gatherings, and most of the time, you don’t even have room to put a mop and bucket.
The best exception, and I feel the only exception that makes sense, is when you decide to build your bar, is to build a large one. This is where you will have the opportunity to begin working n volume. One that you can accommodate a larger group of people to make money. No too small where fifty people are going to fill you to capacity, but not too big where if you are slower it won’t look so empty.
So what’s the size? In my opinion, I think 2500 sq ft is perfect. That’s customer space mind you. Add the amount of square feet necessary for bathrooms, storage, office, walk in coolers, kitchen, etc. This is where you make money. Small enough where it is cozy and personal, and large enough to accommodate a larger group of people, entertainment if you wish, or whatever your needs are. Here, you have the ability to host a larger group of people and make more money.
When you are working on volume, you have options. It’s like this. In a smaller arena, you need to get top dollar for everything you sell in order to make money. In a larger bar, you can charge a normal price, provide more fun, and make more money.
Example. In a smaller bar, you may have a hundred people walk through your door in the course of a night, that spend an average of twenty dollars. So you have two thousand dollars. In a larger bar, you may have two hundred people walk through the door and spend fifteen dollars per person and you end up with three thousand dollars. That’s an extra thousand dollars just for one night. Keep the prices up, and that will relate to an extra two thousand dollars! This is for one night! In other words working on volume works, and the shear size, gives you options. And we haven’t even spoke of cover charges.
It’s like if one person gave you a dollar, no big deal. But, if a million people gave you a dollar, you are rich! You can’t make money on a few! Period! You need to be working on volume.
Then there are nightclubs. The grandaddy of the bar business. Talk about volume! These monsters make money if managed and marketed correctly. Do they cost more to build? Sure they do, bu sometimes not all that much more for the possibilities of profits there are to gain.
Working on volume is great here, but most people say away from these as the get intimidated my the shear size of these. Also, without a good imagination and marketing skills, you may be better off in a larger bar then a nightclub. And honestly, regular bar owners don’t have the skills or education to operate one. That’s the long and short of it.
But these are cash cows. This is working on volume. Properly run, sales, plus vending, plus cover charges, will bring you profit dollars. And it doesn’t have to be all that huge. When you go to lease space for these large sites the square footage price is less, and they come with parking. The days of operations can be as little as two days a weeks, Friday and Saturdays.
These don’t have to be million dollar investments. There is only one Las Vegas. You are creating in most instances a fun atmosphere not a five star atmosphere, so the build out costs are not all that bad. What a nightclub would make in gross dollars in one night would be the equivalent of an entire week in a bar. And depending on the size, more. Working on volume is the making money. Why else are you going into business?
So the next time you are thinking of investing in the bar business, weigh all your options. Small will create you problems I am sure. Working on volume is the way to go. Remember, bigger is better!
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