How to Start a Bar: An Overview

Starting your own bar is an exciting prospect. From creating signature cocktails to establishing the perfect ambiance for your guests, running a bar combines business skills with design awareness and superior taste. Before you open your doors, you’ll want to ensure you have everything in place to run a successful setup. 

Learn the benefits of starting a bar, how to establish your niche, what to consider when choosing a location, how much money you’ll need to start your bar, how to register your business and the appropriate licenses and permits, how to hire employees and the best ways to market your bar. 

 

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Benefits of starting your own bar

Owning and operating your own bar has a number of distinct advantages over working in someone else’s bar or club. Consider the primary benefits of starting your own bar: 

  • Profit margins: Profit margins on alcohol are incredibly high. Patrons pay for both the drink and the experience your bar provides, so you can make anywhere from 200% to 400% profit on your drinks. 
  • Networking opportunities: Many business people use bars, restaurants and clubs as locations to network with other professionals. You’ll benefit from those interactions and grow a diverse professional network yourself. 
  • Creative control: With your own establishment, you get to decide how it’s designed, what it features and how it runs. You’ll have the opportunity to set up the perfect bar and maintain full creative control. 
  • Oversight: As the owner, there’s no oversight. You can make creative decisions for your business without anyone telling you no. 

Related: Planning for Business Success

 

Determining your niche

One of the most enjoyable things about starting a bar is choosing the niche you’ll fill in the marketplace. You’ll want to consider these questions before determining your niche:

  • What’s my target demographic?
  • What consumer problem am I solving?
  • What ambience do I want to create? 
  • Will my bar serve food?
  • Will my bar offer entertainment?

Answering these questions will help you determine what resources you’ll need to create your business. For example, a bar concept might include these answers to the niche questions:

  • Target demographic: Young professionals
  • Solution: Filling the need for a cocktail bar with live music
  • Ambience: Contemporary design with curated, seasonal cocktails, an outdoor space and stage area
  • Menu: Light snacks and appetizers 
  • Entertainment: Live music from local bands regularly 

Related: How to Write a Business Description for a Business Plan

What to consider when selecting a location

Your location is a vital component of your business plan when it comes to a bar. While you may have a dedicated group of patrons who will seek your establishment out regardless of location, you’ll rely on some street traffic to bring in business. Think about these elements when choosing a location for your bar:

  • Customers: You want your bar near your target demographic. For example, if you’re planning your bar for young city-dwelling professionals, it doesn’t make sense to choose a location in the suburbs. 
  • Zoning: Understand the zoning laws in your city. There may be some restrictions on what you can and can’t do with your commercial location. 
  • Visibility: Ensure your bar is visible from the sidewalk or road so that passersby see your bar. 
  • Access: If most of your patrons will drive to your bar, ensure there’s adequate parking to accommodate everyone. 
  • Competition: Make sure that your bar has a competitive edge over any other bars in the area. 

Related: Writing a Mission Statement for Your Team or Business

 

How much money you’ll need to get started

When you start your bar, you’ll need a substantial sum upfront to cover initial costs and some reserves to ensure you can make your overhead payments until you make a profit. When considering exactly how much money you’ll need to start your bar, consider these common expenses, both upfront and continuing, that most bars incur: 

 

Location

You’ll probably need to provide a deposit plus a few month’s rent on your location. Depending on where you are, monthly rent could be anywhere from $1,000 to $10,000. Additionally, you may have to pay extra money upfront for any remodeling you want to do, like adding a built-in bar, a stage or a dance area. 

 

Seating

Another expense is tables and seating. Depending on the size of your bar and the layout, you may need quite a few standalone tables in addition to bar stools. You might also consider other furniture options like club chairs and coffee tables for a cozier setting, depending on the ambience you hope to create with your bar. Outfitting a bar space with seating can cost anywhere from $5,000 to $15,000. 

 

Interior design

The design elements and decorations of your bar will help your customers feel comfortable and relaxed. You might consider hiring an interior designer or decorator to help you achieve the perfect look for your space. Their services can cost a few thousand dollars, not including the decorations they select for your space. 

 

Equipment and technology

To serve your drinks, you’ll need equipment like glassware, blenders, pitchers and ice makers. While the larger equipment should last a while, you’ll need to build in the expense of replacing broken glassware regularly. In addition to equipment, you’ll also need technology like a point of sale system, internet and computers for your office space. Altogether, you’ll probably spend upwards of $10,000 ensuring your bar is properly outfitted to serve drinks and track expenditures. 

 

Licenses and permits

Bars need specific licenses and permits to operate legally. Most permits and licenses are set at the state level and costs can vary by county. Usually, most bars spend over $7,000 acquiring all the necessary permits and licenses to run their businesses. 

 

Inventory

Before you open your doors, you’ll want a solid inventory of alcohol, mixers and any food you plan to serve on hand. These costs can vary considerably depending on the type of alcohol you sell — beer and wine can be less expensive than spirits upfront — and how much inventory you plan to keep in stock. 

 

Labor

Labor costs include paying for front-of-house employees like bartenders and waitstaff in addition to behind-the-scenes employees like managers and bookkeepers. The Bureau of Labor Statistics states the average salary for a bartender is $23,680 per year, while it’s $22,890 per year for waitstaff. 

 

Marketing

Marketing is a necessity to draw in business before you’ve established your brand and reputation. Consider allotting a specific amount of your start-up fund to marketing costs in order to develop interest in your bar before opening day. 

 

Insurance

You should insure multiple aspects of your bar, through business insurance, renter’s insurance, general liability insurance and workers’ compensation insurance. Insurance costs usually vary depending on multiple factors. It’s best to get estimates from several insurance companies and ask about and discounts for bundling policies before committing to a policy.

 

How to register your business

Before you can open, you’ll need to register your business. Learn how with these four steps: 

 

1. Select a business structure

The first step in registering your bar is deciding how to set up the business structure that supports it. Your options include: 

  • Sole proprietorship: You are the owner of your business when you are a sole proprietorship. While it’s beneficial to have full control, your business and personal assets are not separated in this business structure for liability purposes. 
  • Partnership: Partnerships allow more than one person to own the business. Some types of partnerships protect the owners from a portion or all liability while other types do not. 
  • Limited liability company: LLCs protect the business owner or owners from any personal liability in regards to the business. 
  • Corporation: There are different types of corporations, but the benefit of registering as a corporation is that they’re considered their own entity totally separate from the owners, so your personal assets are protected in the case of liability. 

 

2. Pick a name

Ensure you pick an original name for your bar that’s not already registered in your state. You can search through online databases to ensure you’re not encroaching on any trademarks. Once you’ve selected your name, you should trademark it so no one else can use it. You’ll register your business under this name. 

 

3. Register with the IRS

You’ll need to register your bar with the IRS so they can issue you an employer identification number, or EIN. You can think of an EIN as a Social Security number for your bar. This number will allow you to file taxes with the IRS. 

 

4. Register with local agencies

Finally, register with any local and state agencies. Every state dictates different requirements for bars, but most bars need to register with their local revenue office if they plan to run a payroll for their employees. Check with your local government to ensure compliance. 

 

How to obtain permits and licenses 

Bars must have a number of permits and licenses to legally serve alcohol in most states. Follow these steps to help you acquire the necessary permits and licenses for your business: 

 

1. Consider an attorney

One of the best ways to ensure you’ve gotten all the licenses and permits you require to legally run your bar is to hire a local attorney who specializes in this field. They can help you ensure compliance in all areas. 

 

2. Check your state laws

Look into state and local laws regarding alcohol and food service. Since each state, and sometimes each county, has different regulations, it’s best to go directly to the source to ensure you have the complete list of permits and licenses you need in order to run your business. 

 

3. Get a liquor license

You’ll need a liquor license in order to sell beer, wine and spirits. Some states offer a different type of alcohol license if you only intend to sell beer and no spirits. Determine exactly what inventory you plan to sell and purchase the corresponding license. 

 

4. Decide on a food service license

If you’re planning to serve food in your bar, you’ll probably need a food service license or your state’s equivalent. Look into the specifics of your state’s foodservice license laws to ensure your operation meets the criteria for the license. 

 

5. Obtain any remaining licenses and permits

Apply for and receive any other licenses and permits you might require. Other common examples include: 

  • Dumpster placement permit
  • Sign permit
  • Pool table permit
  • Certificate of occupancy
  • Music permit

 

How to hire employees

Hiring employees is an important process when setting up your bar. You want employees who are knowledgeable, skilled and able to work the unusual hours that accompany this type of business. Consider these steps when hiring employees for your bar:

 

1. Decide what employees you need

First, establish a roster of the employees you need for your bar to run smoothly. You’ll definitely want to hire a substantial front of the house team and may consider a few business-minded back-of-the-house positions as well. Consider hiring:

  • A general manager
  • A bar manager
  • Bartenders
  • Barbacks
  • Waitstaff
  • Hosts
  • Security
  • Cleaning staff
  • A bookkeeper

 

2. Draft a job description

Once you’ve determined who you need to hire, write job descriptions for each of those positions. You’ll want to include detailed information for interested applicants like: 

  • The necessary skills
  • The necessary education
  • The necessary experience
  • The estimated hours per week
  • The key job responsibilities
  • Information about the bar
  • How to apply

Consider including compensation information like a salary range and benefits packages. You can always address compensation questions later with serious applicants if you’d prefer. 

 

3. Post the job description

Post the job descriptions on your bar’s website and on job posting sites like Indeed. For bartending and waitstaff positions, consider posting the job descriptions on local college campuses. You can also share the job descriptions with your professional network for other candidate leads. 

 

4. Conduct interviews

Hold interviews for qualified candidates. For the bartending position, you might also consider a skills test in which you ask the candidate to make you a few drinks to ensure they’re capable of the task. During the interview, ask questions about experience, handling stress on the job and managing the work hours to make sure you choose the right people. 

 

5. Negotiate offers

Make offers to the candidates you liked best in the interviews. Clearly state how much you’ll pay, whether they’ll receive tips and the number of hours they can expect to work per week. Some may negotiate for higher pay or other benefits, so make the offers several weeks before you intend to open. 

 

Best ways to market your bar

Marketing your bar prior to opening is vital. Enlist a number of traditional and digital marketing strategies to ensure you’ll have customers as soon as you open your doors. 

 

Traditional 

Traditional marketing strategies include anything done offline, like mailers, radio ads, television ads, print ads and billboards. When opening a bar, traditional marketing can help you engage the local community. Consider these traditional marketing strategies:

  • Mailing campaign: Send a special coupon offer for your first week in business to people who live near your location. 
  • Radio spot: Make a radio spot to play on local radio stations. 
  • Posters and signs: Place posters and signs around your storefront to draw attention to your grand opening date.
  • Soft opening: Hold a soft opening for local restaurateurs, critics and other local celebrities who will share their experience at your bar and entice others to come.

Traditional marketing can help you target people in your geographic area, who are the most likely to visit your bar regularly. 

 

Digital

Digital marketing includes anything that happens online, like email, social media, search engine optimization and website visits. Digital marketing is a fantastic tool for bars. Consider implementing these strategies:

  • Create a website. Make an eye-catching website that provides clear information about your location, hours and services. 
  • Make social media accounts. Create social media accounts and interact with the local community. Consider enlisting an influencer or two to help promote your bar. 
  • Use SEO. Create a business page on the major search engines, so when people search for local bars, yours will come up. 
  • Encourage reviews. As soon as you open, encourage patrons to post reviews online.

Starting a bar takes some planning, but it can be a satisfying entrepreneurial venture. Ensure you establish how much money you’ll need for start-up costs and make a definitive list of the necessary permits and licenses to operate legally before you actually open your establishment.

 

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