How to run a successful bar business
If you’ve just opened up a bar or are a few years old, trying to better establish yourself within the community, you might get to a point where you’re feeling in over your head. There are a lot of skills required of small business owners such as being the CEO, CFO, HR/recruiter and manager that might be pushing you outside of your comfort zone a little too much.
This article is to help bar business owners figure out how to establish and run a successful bar – specifically within the most volatile stage of the first three years in business.
Bar Business Fundamentals
Regardless of where your bar is located or what you do, there are a handful of business fundamentals you can use to benchmark yourself against competition. Knowing where you stack up – and figuring out how to come out ahead – will help you become a successful business within your chosen industry.
Define your USP
One of the most important first steps to becoming a profitable bar is knowing what your unique selling proposition (USP) is. What makes you different than everyone else? What value can your business offer that others can not? Maybe you have an incredible selection of whisky or gin. Maybe you specialise in craft beers, local wineries or have a unique theme with specialised cocktails. Whatever you hang your hat on to make you different, that should be the driving selling point for your customers. This isn’t the time to be humble or modest – tell them why they should make your bar their new Friday night go-to.
Identify the ideal customer
Once you know what makes you unique – the next thing to do is find the people who’ll appreciate your bar. Before you can market to them and bring in loyal customers, you need to know who you’re trying to target. Defining your ideal customer involves a persona breakdown that includes their age, demographic, interests, location, etc. Take the time to figure out who is equally interested or passionate about your bar. Don’t assume everyone will care and try a ‘more is merrier’ approach with generic marketing. If you try appealing to everyone, you’ll end up appealing to no one.
Determine your channels
Step three, after creating a bar that fills a market gap and knowing who will value that difference, is going out to find those people. Develop a marketing strategy to help you use your advertising budget wisely. Be where your customers are – figure out if that means online, on-premises or offline. Most likely it’s a combination of all three, but the important part is figuring out where to spend your money. If your customers are digital savvy millennials, then focus mainly on social media platforms. If your bar is geared towards retirees and lovers of rock’n’roll then consider tailoring to radio or printed ads. No matter where you decide to be – make sure your branding and messaging is consistent across all channels. Customers should recognise your logo, brand name and advertisement no matter where they see you.
Obtain a bar licence
Before you can officially open your doors, you need to obtain a bar license. This might sound simple, but there are probably more than you think. For example, Western Australia has 11 liquor licenses. Look online or go into your local council to learn the specifics for your area. After determining the right license for your business, then you can apply. There most likely is a licensing fee, so be sure to take that into consideration when determining operational costs.
Choose a location
When choosing a location for your bar, there are a handful of key factors you should consider. Here are a few guiding questions to help you find the right spot:
- What competition is in the area? You need to find the sweet spot between too much competition and not enough (if no one else is around… there’s a chance that means the area doesn’t have enough interest).
- Is the building in a spot where there will be high foot traffic? Will people be organically close to your bar, making it easy for them to spontaneously pop in, or do they have to go out of their way to find you?
- Can you afford the rent? Ask nearby stores and consult other property agents to get a feel for the market rate. Look into the turnover as well. Are other bars well established and it’ll be hard to build up a customer base? Or on the flip side, do most bars struggle and only last a year or two before folding?
- Is your building close to your customers? Make it easy for them to get to you. If you want people to come in after work for drinks with colleagues, be close to their offices. Avoid surrounding yourself with buildings that attract different demographics – like primary schools.
- Pick a venue that encourages the vibe and atmosphere you’re looking to create. Consider the architecture, age and feel of the space. Beer gardens, sports pubs and 50’s themed bars all need different design layouts.
- Make sure you have all the right utilities such as bathrooms. Will they be in-house or, if you’re situated inside a building complex (e.g. hotel), are there ones nearby? Can you ensure they’ll be clean and well-maintained?
Invest in your equipment
Bars have a variety of systems and equipment that allow it to run smoothly and efficiently. This includes business equipment such as your POS system, computers and cash registers that make it possible for you to give a quality customer experience and avoid unnecessary errors and frustration from your staff. Equipment related to your drinks such as fridges, ice machines and bar equipment (e.g. glasses, electric blenders, cocktail shakers, cutting boards, etc.) also need to be factored into your inventory list. Last but not least, furniture and speaker systems for music provide the final touches on environment and quality. Even though there are a lot of expensive purchases to make, it’s vital to invest in premium equipment that ensures the very best for your customers. A bar equipment loan can make it possible to attain all the assets necessary that may be required to pull this off.
Loss prevention and security measurements
Protect your equipment and inventory with appropriate security measures for your facility and location. This could include alarms on doors, storage/back rooms and cash registers. Cameras are staple but be careful not to overdo it as it can make customers feel uncomfortable if you have cameras in every corner. Consider strategically installing cameras at your bar-front and areas surrounding your bar as they are high-risk areas due to the availability of alcohol and long opening hours. Also consider using specialised lenses for dimly-lit areas. While it’s possible to minimise risk, there’s no way to completely eliminate it. Complementary to everything else, take out insurance on your assets including building, inventory, and equipment.
Implement a Marketing Strategy
Your marketing should evolve as your business does. Starting with awareness and becoming the number one bar requires regularly re-evaluating the progression of your campaigns and adapting accordingly.
Marketing isn’t just about advertising. It also encompasses your presentation in-house. Think about what you are displaying at the bar and the experience you want your customers to receive. We’re talking seemingly insignificant but important details such as what you’ll have on your countertops (e.g. straws, napkins, water jugs, cups). Will your bar area be a standing-zone, sitting-zone, or only a place for customers to order and grab their drinks? Will all your alcohol be viewable from standing at the counter or will you need to decide what to showcase (consider putting your more expensive alcohol on display to make it easier for your bartenders to upsell)? You might want to have a mirror behind the bar as it can help reduce the number of aggressive customers too.
Everyone loves a good deal, so consider what promotions you might want to put on. This could include having happy hour on specific days and hours (keep in the mind that your nearest competitors might have similar deals, in which case you can decide if you want to stagger times or go head-to-head with the same deal), having a beer/cider on tap of the day, cocktail of the week, and cocktail jug specials. Setting yourself apart, even a little bit, could be the difference between a group of friends heading to your place instead of the bar closest to their office.
Word of mouth
Referrals and testimonials are the holy grail of marketing. They cut through all the chatter and bombardment of advertising as people trust reviews from other people. It doesn’t even have to be from their friends… strangers’ opinions are valid and influential these days. For this reason, have a strong online presence to make it easy for people to leave you reviews online and tag your bar in their social media posts. You can also encourage your customers to bring their friends and talk about your bar by putting on promotions such as 2-for-1 drinks.
Developing online marketing strategies to promote
There are two vital aspects of creating a strong online presence that you need to run a successful bar business: Google My Business and social media. Your Google My Business account should include all the important details customers need to find you and decide they want to visit your bar such as your website URL, NAP (name, address, phone number), USP (what makes you different), social media accounts, and menu. Your social media accounts should have your info in the bio section and push your current promotions, services and brand.
Recruit High Quality Staff
One of the most important aspects of creating the right customer experience is your staff. Ensuring they deliver the right energy and follow the right processes will guarantee top-notch quality both for you and your customers.
High Quality Employees
We can’t overstate the importance of having high-quality staff. They will minimise human error (inventory count, sales, order delivery, etc.) and create a fun, enticing atmosphere. Hiring people with previous experience as bartenders and waitresses is one way to help guarantee an experienced staff. Not all bars operate the way you’ll want yours to though, so remember that hiring people with experience is a trade off in regard to them knowing how to do everything but maybe not the way you want them to.
For that reason, it’s important that you train all staff no matter their experience level. Giving every person the same induction will ensure they all know – and follow – the same process. This will increase speed and efficiency within your team. Training should cover opening and closing tasks, POS systems, inventory management, dress code, and anything else that you feel is necessary for them to give each customer the same experience no matter who’s on shift.
All employees who work where alcohol is served are required to complete Responsible Service of Alcohol (RSA) training. Add this certificate to your hiring requirements and decide if you’re willing to interview someone who is willing to get it but doesn’t have it yet. All states in Australia require this certificate, and all except for Victoria offer the course online.
The age-old requirement to balance supply and demand for a profitable business is relevant for bars too. Managing your cash flow and stock levels might take a while to get comfortable with as there is potential for fluctuation with sales month-to-month when you start out, but it’s something you need to keep a strong pulse on from the beginning. Make sure you match market/customer demands and avoid overstocking. Once you’ve got a handle on your inventory and find suppliers you’re happy to work with, negotiate a discount to get bulk deals on your regular items.
Along with inventory management, successful bars have a good handle on their cash flow and budget. Keep track of previous expenses to help you forecast upcoming ones. This includes taking note of monthly vs quarterly bills. Budget for the quarterly ones every month to ensure you can spread costs effectively and aren’t taking a huge hit every three months when the invoice comes. After a year or two in business, you might notice on and off-peak periods due to holidays, finances and seasons. Save money in the busy periods to cover costs in the slow parts of the year.
The expenses you’re paying every fortnight, month, quarter and year can be hard to keep track of. Consider having an expense checklist to help you quickly guestimate upcoming costs such as:
- Store insurance
- Payroll & accounting costs
- Water bills
- Credit card fees
- Bank fees
Learn how to grow sales and re-invent your bar small business.
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