Starting a bar is one of the most lucrative business ideas one can have. You have endless options, and the ability to make your bar completely your own. While opening a bar can be fun, rewarding, and profitable, there's a lot that goes on behind the scenes before you start to turn a profit.
Unfortunately, you're not going to immediately open your bar and rake in thousands. Oftentimes, it takes months–sometimes years–to see a significant return on investment. However, this doesn't mean that owning a bar isn't profitable.
Before you dive in head first, take some time to learn what it takes to run a bar. Start by weighing the pros and cons, conduct some research on startup costs, and learn what you can earn in a quarter, and what it takes to run a successful bar.
Lucky for you, we've already done some research. Keep reading to learn the answer to the question "Is owning a bar profitable?"
Pros and Cons of Owning a Bar
Whether you're starting an eCommerce business or a traditional brick-and-mortar business, like a bar, it's important to weigh the pros and cons. This way, you'll know whether or not your business idea is a worthy investment.
Moreover, you have every piece of information in front of you. You'll know startup costs, bar profit margin, and potential downfalls.
Here are the pros and cons of owning a bar:
Pros of Owning a Bar
- The profit margin for owning a bar is typically high. You can expect to make anywhere from 200% to 400%. Most of this profit will come from drinks alone.
- The networking opportunities for bar owners are endless. From the minute you decide to open a bar, you'll be able to connect with bar owners near you to find out what works and what doesn't. More than this, you now have the perfect opportunity to conduct a competitive analysis.
- You're your own boss. As a business owner, you create your own schedule and work on your own terms--which many people love.
- Finally, as a bar owner, you have endless creative enterprise. The most successful bar owners didn't come from copying other ideas. Instead, they put their own creative twists on already existing ideas. Let your bar be known for one thing and profit off of it.
Cons of Owning a Bar
- Starting a bar comes with high startup costs. This is especially true if you're interested in owning a sports bar, which has the added costs of entertainment. Additionally, you have to pay to get a liquor license, location fees, and equipment.
- Not only is the cost to open a bar expensive but so is running a bar. You'll want to account for rent, worker salaries, and other unforeseen expenses. Not to mention, if your bar is not run correctly, you'll suffer from the lost profits of dine and dash customers. Even worse, many bars lose easy money due to over-pouring alcohol, over-pouring beer, and even bartenders stealing alcohol.
- A major downfall of owning a bar, is that you'll often experience long hours. Bars are notorious for being open until 5am sometimes. Moreover, bars make the most money on weekends. So, expect to work and manage a bar on weekends too.
- The market is already saturated with competition. There are bars on virtually every street and corner, regardless of where you live. Additionally, bars don't just compete against other bars; they compete with restaurants too. This means you'll need to look into effective restaurant marketing strategies like restaurant SEO.
How Much Does It Cost to Open and Run a Bar?
As previously mentioned, opening a bar comes with notoriously high startup costs. Just how high these costs are depends on various factors like:
The Type of Bar You Own
Different kinds of bars come with different costs. Choosing to open a neighborhood bar costs less than opening a sports bar or club. The more equipment your bar setup requires, the more expensive it'll be to start.
The Size of Your Bar
Obviously, the larger your bar the larger your costs. You'll also need to think about staffing costs. Opening a bar means you'll need to hire a barback, a bartender (and a bartending license for yourself), and wait staff (depending on the bar).
Business and Liquor License Costs
Finally, there are the building costs as well as licensing costs. The costs for a liquor license will vary depending on where you live. Licensing costs in California will differ from costs in Georgia.
To help you out, we've compiled the average price range for opening a bar. These costs include factors like renting or leasing, creating a bar from scratch, and using an existing bar:
- Renting or leasing: $110,000 to $550,000
- Creating a bar from scratch: $175,000 to $850,000
- Purchasing an existing bar: $25,000
On average, you can expect to pay a minimum $20,000/month for an average-sized bar. These costs factor in alcohol and food costs, salaries, and wages, rent, and miscellaneous expenses.
How Much Can You Earn from Opening a Bar?
Estimates suggest the revenue of the average bar is between $25,000 to $30,000 per month. These estimates are based on certain assumptions: An average price of $8 for drinks, $6 for appetizers, and $13 for mains.
Your profits will depend on how well you run your bar and manage your operating costs. However, assuming your monthly restaurant operations costs are $20,000 and your revenue is between $20,000 to $30,000, you will pocket anywhere from $5,000 to $10,000 per month.
How Do I Run a Profitable Bar?
Knowing all aspects of what it takes to open a bar will help you run a profitable bar. However, there are a few other ideas you'll want to consider:
1.) Maintain Your Finances
As with any other business, you need to track finances in order to ensure that you are making the best business and financial decisions. Consider reports such as:
- Food and Beverage Sales Reports: These reports should be generated daily, weekly, and monthly.
- Prime Cost Report: Prime cost is the total cost of the goods you've sold (food and liquor), plus any added labor cost.
- Inventory Reports: Run inventory reports on a weekly basis. It's best if you use inventory management software to help you out. However, remember to run alcohol reports on a daily basis.
- Cash Flow Statements: Cash flow statements identify cash inflow and outflow for certain time periods.
- Profit and Loss Statement: Profit (or loss) is calculated by subtracting expenses from revenue.
2.) Keep Your Bar Stocked
Regardless of what day it is, your bar needs to remain stocked. This way, you're pouring and moving in the most efficient way possible. Having to run to the back of the bar to grab new bottles in the middle of a rush is going to slow you down and leave a bad taste in your customers’ mouths. This also applies to popular cocktails.
3.) Measure Pouring
Over-pouring throws hundreds, sometimes thousands, of dollars down the drain. Your revenue and profits are easily impacted by over-pouring. Use measured pourers and a liquor cost calculator to help you out.
Also, think about investing time into bar staff training. Your bartenders should be using jiggers to craft consistent cocktails every time.
4.) Optimize Your Menus for Maximum Profit
It's a best practice to optimize your restaurant menus. For example, you can track your menu item sales in order to calculate what items sell the most. This way, you can price them accordingly.
5.) Run Promotions: Happy Hour Specials
Running bar promotions, like happy hour, lets you offer drinks at discounted prices. The idea here is to attract customers into your bar to make a purchase.
Additionally, you can host special holiday events or quiz nights. This allows customers to stay for longer periods of time, which drives more purchases.
So, Is Owning a Bar Profitable? Here's the Bottom Line
Overall, the answer to "Is owning a bar profitable?" is neither here nor there. That answer largely depends on how you decide to run the bar. Moreover, the net profit margin is variable; you have to compare it to the baseline of an investment in the stock market.
Owning a bar can be an exciting time for you as a business owner. Being your own boss is not only liberating, but it's also the perfect opportunity to network and make money.
However, bar owner life is not for everyone. We highly encourage you to take some time and weigh the pros and cons of owning a bar.
Frequently Asked Questions About Bar Profitability
Is Opening a Bar a Good Investment?
Owning a bar has the potential to be the most rewarding investment one can make. When run correctly, bars generally turn good profits.
What Type of Bar Is Most Profitable?
These are the top three most profitable types of bars:
- Bar and Restaurant Combination
- Sports Bars
What Is the Average Bar Profit Margin?
Most bars aim for a profit margin of around 80 percent; the key to reaching that number is to measure and control your pour costs. Pour cost is an essential benchmark for your bar's profitability.