If you’re interested in starting a bar, club or other business that serves alcohol, there’s plenty to do.
You’ll need to balance the competing demands of long hours, regulation, employees and competition. That's why we’ve put together this guide — it explores everything you need to do to set up your bar or club business and maximize your chances for success. We’ll cover:
Understanding the world of the bar or club
Finding information on taxes and finances for your bar or club business
Deciding if you’re ready to start a bar business
Following the various rules and regulations your business requires
Determining the best legal structure for your new organization
Managing marketing and administration processes
Locating resources for your bar or club business
Planning your bar business
Hiring employees
... and much more
By the time you’ve read through our complete bar business guide, you will have all the information you need to set up and manage a thriving bar, club, pub or similar business. Let’s get into it.
Understanding the Bar and Club Industry
Key Background Stats for Bar and Club Businesses:
$25B
Revenue of bar and nightclub industry in the U.S. every year
1.1 - 1.4
Percent of sales increase each year
400k
People employed in the industry
200m
Barrels of beer are sold every year
There are over 65,000 bars and clubs throughout the U.S.
Each establishment employs an average of six to seven people.
The split of alcohol sold tends to be 42% beer, 31% spirits, 10% wine and the remainder as food and non-alcoholic drinks.
Nearly 80 percent of establishments are small businesses employing fewer than 10 people.
Understand Your Local Market Opportunity & Customers
The bar and club market is very much driven by your customers’ personal incomes and entertainment needs. It’s vital to look at the competition in your local area and find a niche you can fill. It’s easy for an area to become saturated with bars or clubs, so choosing the right location will be vital to your success.
What Kind of Bar or Club Should You Open?
When you’re looking to start a bar or club, you have plenty of options to help you stand out. It’s important to cater to your customers’ needs. There are many different types of bars or clubs you could run; here are some suggestions:
Brewhouse and pub
Where you make and serve your own beer
Cocktail bar
Mainly serving spirits and mixers
Nightclub or dance club
Where customers can move to the music
Themed bar
Like an Irish, Mexican or British pub
Wine bar
With plenty of choices for medium- and high-end wine
Sports bar
Where people can enjoy the big game
Bar
Specializing in live music or comedy
Explore what’s already on offer in your area and think about what your ideal customer would want. Talk to people in the local area about the type of pub or club that might be missing.
The Challenges of Running a Bar or Club
Is Being a Bar or Club Owner Right for You?
The popularity and profitability of your bar or club will depend on balancing several different areas. You’ll need to have loyal, repeat customers, be good at marketing and provide a unique experience for your patrons. Fortunately, there are no large companies that dominate in the bar and nightclub industry — the combined revenue of the 50 largest bar and nightclub companies only accounts for 5 percent of all sales.
You’ll also have to work long hours and need to get involved in every aspect of the business, from accepting deliveries to training staff, resolving problems and serving beer. You can compete most effectively by understanding your local customers, providing the right atmosphere and experience and focusing on great customer service.
There are low barriers to entry, meaning new bars and clubs open fairly frequently, so there will always be competition. Margins are slim though, so unless a bar or club is well-managed, that competition may not last for long.
There are strict rules, regulations, and compliance on serving alcohol that are different from state to state.
One of the main issues new bar owners will face is getting the right licenses to serve alcohol and food. The type, cost and availability of alcohol licenses vary widely; you may also need a specialized entertainment license.
Bar and club locations must have proper zoning from local government, and you may face issues with community resistance due to patrons and noise. Additionally, local laws will dictate when you are and are not allowed to be open.
Skills Needed to Be a Successful Bar or Club Owner
If you want to run a bar or club, you’re going to need multiple skills:
Market research
So you know what your customers want and need
Employee management
So you can choose, hire, and work with the best people
Marketing
So you can get your name out there and attract customers
Financial management
So you can get the most out of the thin margins
Negotiation
To get the best deals from suppliers and distributors
Customer service
To keep all your patrons happy
Time management
So you have enough hours to do everything
You will be working long hours, often up early in the morning, and staying past closing time. No two days will be quite the same, although many of those days are likely to be tiring! You will need to deal with a high staff turnover and be able to spot good servers and bartenders who will work well with your patrons.
Plan Your Bar or Club Business
Before you start your business, there are a few key areas you need to focus on. You will need to establish whether there’s a demand for your bar or club business services, look at potential benefits and pitfalls, understand how your business finances might look, and ensure everything is in order.
In short, you need a business plan — here’s how to think about your business idea.
Do Market Research and Validate Your Bar or Club Products and Services
Before you launch your bar or club business, you need to understand if there’s a demand for what you’re selling. That means carrying out market research and “validating” your products and services. Here’s how to go about it:
Find market research reports for bar or club businesses
These types of businesses rely almost completely on locality and location, so understanding the residential and tourism markets in your region is critical.
Check out your competitors in the space
Having competitors is a good thing as it shows there’s a market. Additionally, in the bar and club scene there’s generally plenty of room for a niche establishment that provides a unique reason for customers to drink there.
Talk to patrons
Speak with potential customers to understand what they want from your bar or club and find out what’s currently missing in the local area.
Identify your business’s unique selling points (USPs)
These are the areas that will set you apart from competitors and encourage customers to come to you. This will mainly be driven by the type of bar or club you choose to run.
Get involved with business communities and discussion groups
Ask questions about bar or club businesses and meet up with other owners. You can find links to some excellent discussion groups later in the article.
Understand Your Bar or Club Business Model and Financial Projections
All businesses need a business model, which details the way you will generate sales, provide services and make money. Think about your business model now, because it’s better to have that in place so you can start acquiring customers and generating revenue from day one.
You will also need to look at financial projections for your bar or club business. What are your expected sales and revenues? What is your profitability? How much money will you keep in the business to grow it? How much will you pay yourself and others? If you can, try to plan your revenue out for the next month, three months, year, and two years.
Write a Business Plan for Your Bar or Club Business
Finally, you should put your business plan together. Business plans do vary slightly, but they should cover the following areas:
An executive summary with the most important points from your business plan
Your goals and what you hope to achieve with your bar or club business
A description of your business, background information, and context
A market analysis and likely demand
An overview of how your handyman business is structured
Your business model
How you will market and sell your offerings
Financial projections, revenue and profitability
Appendices
We’ve got the perfect guide to writing your business plan.
Setting up Your Drinking Establishment
Once you've legally created your bar or club business you’ll need to get some other things in place.
Your Bar or Club's Location
As we’ve discussed before, location is everything for this type of business. It’s worth holding out for a great location, since local traffic and pedestrian patterns will have a major impact on your success.
Marketing a Bar or Nightclub
You will probably need to build a website and should also get professional branding, marketing and business cards.
Employees
You will almost certainly need to hire employees to help you out. Staff turnover in the bar and club business tends to be high and positions are not very well-paid, so expect to always be on the lookout for new servers and bar staff.
Equipment Needed
Running a bar or club is all about the furniture, fixtures and fittings. You’ll need to outfit your space first and then develop a good inventory of the stock you’re going to be selling. Depending on what your bar does, you may need other specialized equipment like commercial cooking and kitchen facilities or brewing gear.
The Complete "Start Your Business" Checklist
A Clear and Comprehensive Guide to Starting Your Business the Right Way
Requirements for Maintaining Your Bar Business
There are certain forms and legalities you need to follow to keep your business in good standing.
1
File an Annual Report
Most states require all businesses to file a report once a year. This report has details of any major changes to who owns a business and other major impacts on a business’ legal status. We can file your Annual Report on your behalf.
2
Pay Estimated Taxes
You will be expected to pay estimated taxes on what you plan to earn in the current business year. Typically, you will need to pay estimated taxes in April, June, September and January (of the following year).
3
Renew Business Permits and Licenses
Your business will probably have several licenses, permits and other regulations. These typically need to be renewed every year.
4
File Your Taxes
You will need to file your taxes once a year.
Most states require all businesses to file a report once a year. This report has details of any major changes to who owns a business and other major impacts on a business’ legal status. We can file your Annual Report on your behalf.
5
Pay Payroll and Sales Taxes
If applicable, you will need to make payroll and sales tax payments on a regular basis.
6
Prepare Your Taxes
You will need to work with your accountant to prepare all the taxes you need to pay.
Requirements for Maintaining Your Bar Business
Since you won’t be able to run your bar or club solo, you will need to hire employees. Additionally, because bar and server wages are typically very low and supplemented with tips, expect to have a fairly high staff turnover. This could mean you spend a lot of time interviewing and hiring. See our 10 tips on hiring employees.
Your bartenders will be mixing and pouring drinks, which means their speed, efficiency and pour accuracy will all have a direct impact on your profitability. For that reason, it's vital to train your bartenders well. Be aware that both over-pouring and theft can be fairly common in the bar and club industry, so try to hire people you know you can trust.
Report employees as "new hires"
In most cases, you will need to report the hiring of employees to your state.
Pay employees
On a raff and workers typically receive a low hourly wage which is supplemented by tips from patrons.
Get worker's compensation insurance in place
As listed above, you will need to make sure you have proper worker compensation insurance to cover injuries, illness, medical costs and the like.
Make sure your employees can work in the U.S
Your employees must be legally able to work here. Carry out background checks and ensure they have any necessary legal documentation.
Get an Employer Identification Number (EIN)
Contact the IRS and let them know you will need an EIN for your bar business. This is a number you will use to file and pay your taxes. We put together this guide to getting your EIN.
Withhold income and payroll taxes
You will need to calculate and keep back income tax so you can pay the appropriate bodies. You will also need to pay the employer portion of the payroll tax.
Learn about legal requirements
You do have certain responsibilities and requirements for hiring employees. In addition to getting a proper employment contract in place with them, you have a duty to provide them with a safe working environment, proper training, regular pay and certain other criteria. OSHA covers your health and safety requirements, while the U.S. Department of Labor provides information on other responsibilities.
Useful Online Tools for Bar
and Club Owners
Here are some really great online tools for managing your bar or club business. They will reduce the time you spend on administration, help you to collaborate with others and free up your time to grow and manage your new venture.
Collaboration
Social Media Management
Communication
Email Marketing
Advertising
Marketing Automation
Customer Relationship Management (CRM)
Customer Support
Human Resources
Website Development
Analytics
Hiring
Conclusion
Although there are many challenges in running a bar or club business, they can still be an excellent way to generate revenue and create a great place for your patrons and employees. Find the perfect location, create the right type of bar, hire excellent people and share your establishment's uniqueness to really stand out.