How much will it cost to start a bar? This is the focus of our discussion. It’s common knowledge that capital plays a crucial role in establishing a business. This includes a bar business.
Now, the amount of capital required is what we’ll be discussing.
Do you know you can even open a bar without money?
How Much To Open A Bar
The bar business is quite lucrative because people need to unwind at the close of the day. Bars generate a lot of sales and traffic each day.
If you’re interested in the idea of starting your own bar, one of the first things you’ll need to have figured out is the cost of starting one.
It’s a Stiff Competition
Before we get into specifics about the startup costs for a bar business, we need to mention that a bar business is highly competitive and also a saturated market.
A study by the American Nightlife Association gives the number of bar establishments within the United States as being more than 65,000.
That’s a significant number spread across various states, regions, or locations. As an entrepreneur seeking to open your own bar, you’ll have to compete with these existing businesses.
More so, there are new entrants each day that add to the total of existing bar establishments.
The startup costs required to open a standard bar depend on multiple factors. One of these includes your location. The ease of doing business in certain states tends to be greater than for other areas.
You’ll also need to consider the living costs within the location you wish to open a bar.
Another determining factor that impacts startup costs is the size of your bar. How many customers do you wish to cater to? This reveals a lot of information on the scale of operation to embark on.
Average Cost Of Opening A Bar
The capital requirements for opening a bar will be categorized in two; the startup costs and the operating costs.
Bar Startup Costs
Do you wish to rent or lease the location where you do business? If you do, expect to attract an estimated cost between $110,000 and $550,000. This will mostly be influenced by the size of the bar.
The cost mentioned is in the lower range compared to owning or buying your location or property.
In the case where you buy up a property to open a bar in, the costs you’re likely to incur will be between $175,000 and $850,000. However, if have an existing location with structures put in place in readiness for takeoff, a startup capital of around $25,000 should suffice.
Insurance, licenses, and permits are part of the requirements needed for setting up your bar operation. These are key requirements you cannot avoid to sell alcohol within products.
The cost of licenses, permits, and insurance vary across different states.
On average, you’re likely to spend between $2,000 and $5,000 in licensing and permit fees among others to open a bar.
Bar Operating Costs
Operating costs are crucial to a bar business.
This enables the business to stay afloat and is spent on supplies or alcohol inventory. You may have to apportion a certain percentage of your operating cost to the purchase of beer, liquor, wine, and mixers.
Your expenses on alcohol supplies alone are likely to be around $6,000 on average.
For an average-sized bar located within areas with high living costs, operating costs including staff wages among other expenses are likely to be around $13,000 per month.
So far, we’ve only focused on the cost involved in opening a bar. While that is the major focus of this article, it’s also important to consider the earning potential within the bar industry.
According to IBISWorld, there has been phenomenal growth in the bar, tavern, and nightclub industry.
Between 2013 and 2018 alone, revenue proceeds have grown to an estimated $28 billion. The sales volume (in percentages) of alcoholic products and beverages include beer and ale taking up about 35% of sales.
Distilled spirits accounted for about 35% of sales while wine attracted around 10% of total revenue.
On average, the revenue brought in per employee stood at around $64. There are peak periods (in terms of sales) as well as low ones. On average, your bar can earn between $25,000 and $30,000 per week.
This is an attractive price margin for many.
With this data, you’re able to have a rough idea of how much earnings you can make. This can be compared with the cost of opening and running a bar.
The goal is to determine whether your financial goals can be met or not.
Of course, the data on earning potential is only estimated. So, to find out what applies to your business, you’ll need to carry out a much detailed study or research.
This gives you all the needed information to run your operations successfully without a hitch.
There’s a need to factor in miscellaneous expenses as part of doing business.
Basically, such expenses cover inventory replenishment, monthly purchases, utility expenses, and more. This could amount to around $20,000 on average.
It’s important to further state that this is only the average and could be lower or higher depending on your location as well as your scale of operations.
Of course, a larger bar will require more startup costs than a smaller one. So, you’ll need to have all that taken into consideration for better cost estimation.
How long before You Begin to Get Returns on Investment?
Returns on investment are very crucial to every entrepreneur.
As a bar owner, you’re in business to make a profit. If you fail to achieve your set objectives, you’ll have to re-evaluate your business strategies to find out why you aren’t profitable.
With a successful launch of your bar, you should expect to start paying yourself or your investors within a period of two years or more. This is assuming that everything has gone as planned.
In a nutshell, the cost of opening a bar is varied.
We’ve looked into the different cost aspects of doing business.
With the information provided, you should be able to have a rough idea of what it takes to realize your goal or objective.