Conducting due diligence before jumping into bar ownership is a very important step. Owning a bar is not a decision you want to make impulsively.
If you buy a dud, it can be the worst mistake you make of your life—just ask the thousands of people who fail each year. The results can include financial ruin, divorce, and poor health.
To avoid these pitfalls, ask these 4 questions:
1. What is this location’s history?
Operators should look at the history behind each location they are considering getting into. If the previous tenants were all hopeful bar operators who failed in a relatively short time, that could be a clear warning sign that this location may not be able to support a bar.
There are many locations which simply do not work for the bar and restaurant business. To know if the location you are considering is suitable, look at the history of the property you’re contemplating. The success or failure of a previous operator can be an indication of your odds for success with this location.
2. What is my budget?
If you don’t know how much money you have and how much everything costs, you’re going to get into trouble. This sounds like common sense but many new owners jump into a deal then try to figure out what everything costs as they go along. This always results in under-budgeting, which kills businesses before they even get started.
Read this: The Essential Advice You Need Before Buying a Bar
Intelligent owners have their costs estimated before they jump into a new deal. It takes some resources to conduct due diligence and get estimates from all your contractors, suppliers and consultants, but this is money well spent.
When you have all your costs estimated, it gives you more certainty, which results in more speed and less stress. You must know your budget before you buy a bar.
3. What is my marketing plan for the first 6 Months?
You must know what your daily plan to attract new customers will be for the first 6 months before you buy a bar. Do not assume that just because you build it, they will come. There are many failed operators who learned the hard way that restaurants or bars without effective marketing fail quickly.
Successful operators have a plan to aggressively get their marketing message out to their target market, and they have a daily plan of action that they execute in order to reach their desired customers. Make sure you know what you will be doing day by day for the first 6 months to market your business.
Read this: Planning to Buy a Bar Franchise? Read this First
Without this plan, you will be entirely reactive to whatever guests show up based on their own volition rather than proactive…and your profits will reflect that.
4. Who is the market for the experience that I’m selling?
Every bar and restaurant has an ideal customer and you must know and understand this type of person intimately. The more you understand them, the more you can custom tailor their entire experience to match their preferences. Your marketing efforts are much more effective if the message you are broadcasting matches the people to whom you are sending it.
For example, it would be an uphill battle to sell a glamour nightlife experience with a big-name DJ in a neighborhood pub. However, selling a night out for wings, beer and a hockey game would be much easier since that same type of venue’s target demographic tends to desire a more laidback experience.
Fine tune your concept to match your target market. When you know the psychological profile of your ideal customer intimately, you make better decisions.
About the Author
Kevin is an operations consultant with over a decade of experience working directly with bar, restaurant and nightclub owners on all points of the spectrum: from family owned single bar operations to large companies with locations on an international scale. Kevin works with them all and understands the unique challenge each kind of company faces.
He is the author of a book entitled Night Club Marketing Systems – How to Get Customers for Your Bar. He is also a regular writer for Nightclub & Bar, providing information high-level operators seek to get the extra edge in their marketing, sales and operations.
He continues to write today, providing specialized information directly to nightclub, bar and restaurant owners from his workshops, newsletters and magazine articles. He is also active in the field, operating an inventory auditing practice with Sculpture Hospitality.