Most people who think about opening a bar focus their efforts on the costs first. It’s not a cheap effort, but more and more entrepreneurs dive into the business making it quite competitive. If you manage to stand out, the profits are imminent. However, it’s easier said than done. While there’s a lot of money to be made in this business, there is also a lot of investment involved, especially if you’re starting from scratch.
The nightclub industry in the US has been growing and becoming more popular in the past decade, so be prepared to run into a saturated market. But, if you play your cards right, you might end up profiting big time. In case you’re not familiar with bar operating costs, take a look at some of the things we’ve covered in this article, and you’ll have a better idea of how big is the cost of running a bar, if you decide to undertake such an endeavor.
The Average Costs
- Startup Costs
The most important variable you have to establish before calculating the expenses is the size of the bar. The startup cost for a leased bar can be anything from $100,000 to over $600,000, depending on both the size and location. If you were to purchase a location and opt to pay mortgage, you could expect to pay a price range of $200,000, up to $850,000.
The easiest way of getting into the market would be buying an already established bar. Startup investment would be significantly lower, in the neighborhood of $25,000, depending on what you want to change and improve.
- Permits And Licenses
In order to run a legitimate business, you have to obtain all the necessary licenses and permits as well as take care of insurance.
One of the important permits is the license to sell alcohol which is mandatory for every bar that offers alcoholic drinks. The price varies depending on the city and the type of license, but for example, a beer and wine license in California costs between $3,000 and $5,000, and it takes approximately two months to get it. Bear in mind that there are numerous types of licenses, and some can cost up to $400,000 (California).
- Operating Costs
Stacking your inventory and keeping the numbers updated is one of the biggest operating costs. You could spend up to $5,000 for inventory orders on a monthly basis, depending on the size of the bar.
If we assume a rent cost of $5,000 and include inventory and staff expenses, it would cost about $13,000 per month. Of course, these are all average values, and the actual cost greatly varies depending on several critical factors.
Profit And Loss
Thorough bar analytics is critical in cases where a lot of money is involved. It goes without saying that you shouldn’t even think about opening a bar if you haven’t already analyzed potential margins and profits!
It can be somewhat of a complex calculation, but for the sake of simplifying things, you should look to get a return on investment (ROI) of about two years. Anything less than that can be considered a success, but having a bit longer ROI isn’t a big deal as long as your business stays sustainable.
Whether you decide to buy an already established bar, or perhaps start from scratch, you can expect a bloody fight with the market, due to its saturation. However, as long as you develop a viable strategy and take care of your finances properly, you should be able to make a profit.
For more similar articles, make sure to visit our blog, today!