Running a bar sounds glamorous. But the reality is that owning a bar is like owning any other business: it requires a lot of dedication, responsibility and hard work. The bar and restaurant industry is extremely competitive. Businesses operate on slim margins and experience high rates of failure. However, for an entrepreneurial person with the right skills, owning a bar can be a lucrative venture.
What is the National Average Salary of a Bar Owner?
Bar owner salaries vary depending on several factors, including the location and size of the bar, the surrounding market and how the business is run. However, according to BLS statistics, the national median annual salary of all bar management positions is $67,390. Meanwhile, the national median annual salary of top bar executives is $71,550.
Of course, how much you earn as a bar owner will depend on your individual business. Nightlife is a competitive industry that requires a large up-front investment. For inexperienced bar owners, it can be difficult to turn any profit, much less a healthy salary. If you want to run a profitable bar, it’s important that you first understand what a bar owner does, and how the industry works.
What Does a Bar Owner Do?
Being a bar owner isn’t all parties and free drinks. A bar is a business, and the owner has many responsibilities in running that business. An owner must plan the business and handle its operations. Some bar owners are more akin to financiers who invest their money in the business and handoff operations to managers. For the bar owner who plans to roll up their sleeves and do the hard work, there are several tasks to consider:
- Inventory: A bar owner is typically in charge of keeping track of the business’s inventory. This means making sure that there is enough product in stock for customer demand, but not so much stock that you are stuck storing more product than you need.
- Staffing and training: A bar owner should take an active role in hiring and training the staff. Having quality, trained professionals make all the difference in the highly competitive hospitality industry. These employees will be the face of your brand, interacting with your customers on a daily basis. Make sure to hire people who will represent your brand well and train them to the fullest extent possible. All employees should be familiar with the systems of the business and understand their individual roles.
- Scheduling: A bar owner is often responsible for scheduling the staff to make sure all shifts are covered. Many bars have a manager doing scheduling, but for smaller operations, the owner jumps in. Employee availability can change on a dime, so it’s important to make sure there is always backup coverage available as schedules shift.
- Setting Prices: As a bar owner, you must set the prices in your establishment. Profitable bar ownership is all about hitting the right margins. Setting prices for a bar menu is a science. You should consider multiple factors, including your operating costs, beverage costs, the local market, the quality of your products and your location, to name just a few. These will help give you an idea of where to set your prices. You need to charge enough to turn a profit, but not so much that you are pricing your customers out.
- Choosing a menu: Another responsibility of a bar owner is choosing a menu. This could be a simple beer and cocktail menu, or it might be a full food menu. As the owner, you decide what products you sell, and what will be offered to guests. Offering a food menu requires significant resources and systems. So consider how you will handle the operations if you plan to serve food.
- Marketing: A bar owner is responsible for marketing their bar. This includes advertising, promotions and special events. For example, if you are in a young professional neighborhood, you might consider doing a trivia night. If you are operating in an artsy area, perhaps a live music night would attract a crowd. A bar owner is always thinking of new ways to bring customers through the doors, with the hopes of converting them to regulars. Promotions and events are a great way to do this. And don’t forget about good old-fashioned advertising and word-of-mouth. People need to know you’re open, or they won’t know to visit.
- Operational systems: It is important that bar owners put in place operational systems. This means a point-of-sale (POS) system for handling orders, and perhaps a related inventory system for handling vendor orders. Further, you need to choose a payroll system and decide how tips will be allocated. You should train your staff thoroughly on all systems. How will security handle violent patrons? What should a bartender do if they catch someone stealing or running out on their tab? Do the bartenders serve customers in a certain order? Who will close out the bar at the end of the night if you are not on the premises? All bar employees should be on the same page when it comes to these systems and they should run like clockwork.
- Licenses: As the bar owner, you need to make sure that your licenses and any certifications you need are up-to-date. This includes your liquor license and certificate of occupancy, among others.
- Accounts and billing: The bar owner is responsible for the finances of the operations. This means keeping track of all money that flows in and out of the business, including salaries, vendor orders, customer orders, rent or mortgage, insurance, utilities, payments to creditors, training, POS membership and more. You must keep track of every money transaction your business makes and pay all bills in a timely manner. Ultimately, these accounting numbers determine whether your business is profitable or not, so always be in-the-know and keep records of all financial transactions.
- Managing vendor relationships: Managing vendor relationships is an important aspect of running a bar. This goes hand-in-hand with managing inventory. Make sure all your vendors are scheduled to deliver products when you need them and paid in a timely manner.
- Loss prevention: One of the most difficult and often overlooked tasks of being a bar owner is handling loss prevention. Because a bar is a business of slim margins, loss is a bar owner's worst nightmare. Whether it’s bartenders giving out drinks for free or patrons stealing, you should minimize losses as much as possible. A huge part of this is properly training your staff in loss prevention. A bar owner simply can’t see everything that happens, so make sure your employees are looking out for you, too.
How to Start a Bar
Starting a bar is a massive undertaking that requires a significant time and money investment. Before opening a bar, make sure that you understand the responsibilities involved and prepare yourself for a lot of hard work. Most bars fail either because the owner doesn’t understand the bar business, or because the money runs out. It takes most successful bar owners three-to-five years to recover their initial investment, so be mindful of this fact before deciding to open a bar.
Market research: Do some market research to help develop the concept for your bar. Visit competing bars in the area and check out their concepts. What do you like? What would you do differently? Start thinking about what your target market looks like. This will help you create a concept for your business. Every bar needs a strong concept, especially when just starting out. Are you a sports bar, a German bier bar or perhaps a fancy nightclub? Your market research should help you determine where you can fill a need in your region.
Business plan: Write a business plan outlining your concept and how you plan to earn back your investment, plus turn a profit. Your plan should include cost and profit projections, as well as your findings from your market research.
Secure funding: Use your business plan to help you secure investments to help with startup costs. The startup costs for a bar can be anywhere from $110,000 to more than $500,000, depending on the location, size and condition of the building. Make sure you understand the various expenses of running a bar in your area before securing financing. Startup costs include location, remodeling, decorating, purchasing equipment, purchasing initial stock and more. Operating costs include rent, utilities, inventory, payroll, marketing and a security system, to name a few. Small business loans may be available if other investors are not an option.
Location: Secure a location for your bar. Consider whether you’d like to take over and remodel an existing bar, or start your concept from scratch. Will you purchase property and build, or will you rent? Do you want a massive nightclub or a tiny dive bar? Factor all of these options into your available funds and decide which is right for you and your business. The location of a bar is extremely important. Decide if you want to locate your bar where there will be heavy consumer traffic, or if you want your location to be a destination of its own.
Licenses and paperwork: Once you have secured a location, it’s time to deal with paperwork, licenses and permits. These requirements vary based on geographic location, but at the very least, expect to secure a liquor license, a certificate of occupancy, a business license and a food service license if you plan to serve snacks. Make sure you understand all applicable laws, certificates and licenses. This is also a good time to secure an EIN number and a payroll system for the time when you hire employees.
Name and menu: Now, it’s time to name your bar and come up with a menu. These should tie-in closely with your concept so you have a cohesive business your customers will recognize. For example, if you plan to go the German bier bar route, choose a menu with beer steins, sausages and plenty of sauerkraut. For a chic lounge, small plates and cocktails could be a good fit. As you are creating your menu, you will also have to set prices. Of course, determining what to charge is challenging and shouldn’t be taken lightly. Consider all relevant costs before setting drink prices.
Decorate and outfit your bar: Design your bar to match with your concept. Purchase all the bar equipment you need, including seating, tables, appliances and equipment such as coolers, ice makers and dishwashers. You'll also need beer taps and glassware. Stock up the bar and set up employee or POS systems you plan to use. It’s a good idea to think long and hard about systems before training employees, so everyone is on the same page from the very first day of opening.
Staff, train and firm up systems: Once all of the planning, designing and securing of licenses is behind you, it’s time to hire and train your staff. Again, make sure you have good systems in place from the very beginning, starting your new business off on the right foot. Most bars spend their first six months “in the black.” Make sure you are prepared for a smooth transition time. Your employees will help you navigate this crucial period for your business, so train them accordingly.
Grand opening and promotions: Finally, plan your grand opening and start promoting your bar to your target demographic. Now is the time to kick your marketing into full gear, and invite everyone to visit your new venture.