Top Five Reasons Bars Fail

Take a minute to read the article below. If you plan on being successful in bars, you must avoid these critical mistakes- the killers that bring down such a high percentage of new ventures- and the reason many people think of bars as "risky".

The truth is, bars can be extremely profitable cash cows- but only if you know how to avoid these mistakes!

You have probably noticed in your own experience that bars with nothing special inside and marginal locations can manage to fill up night after night, while others, with great locations and big advertising promotions and hype seem to be closing almost before the Grand Opening banner has come down. Now you will understand why!

Poor Management

This is the number one cause of bar failures. Poor management is a broad problem that covers a lot of ground- and usually means that there are many things wrong with the bar's operations. These could include excessive staffing, poor inventory control, unchecked employee theft, low enforcement of service standards and a variety of other problems.

The number one secret to running a professional, highly successful and profitable bar is having a great manager. In fact, taking over a troubled bar is very often a good way for a new bar owner to inexpensively acquire what turns out to be a very healthy operation once properly run from a previous owner anxious to get rid of it because they don't know how to run it or fix what's wrong. And not managing a bar well is the fastest way to bankruptcy!

So how do you manage a bar well? This question fills a good portion of the book that comes with our kit, but here are some key basics:

Know your numbers inside and out. You can’t prevent food waste, inventory overstocking, poor pricing, incorrect staffing levels, or employee theft (to name a few) if you don’t know what the numbers should be. And certainly if you aren’t religious about tracking everything and keeping clean, accurate and up to date books.

Get, be and stay organized- things will be hectic and chaotic enough without the added problem of a disorganized manager.

Be ruthless with cost control- a few extra dollars here and there adds up much faster than you would ever imagine.

Demand your employees provide A+ service at all times, and A+ quality work. If they don’t, they shouldn’t be kept around.

Remember at all times that the only reason you have a business is because people decide to come and drink at your bar- they have other choices, and you want to make sure they always leave happy- make their night as pleasant as possible and they will keep coming back.

Lack of Financial Resources

Many times a bar would have been successful if it just could have lasted a few more months- but bills piled up and the owner miscalculated how long it would be before the new operation broke even. Many bars end up shutting their doors because of this fairly basic problem.

The financial planning of a bar is a very critical part of the overall success of the venture, but few people really have the knowledge and experience to do it right. Some get lucky, but some don't. With the Bar Success Kit, the financial planning is made very easy and very understandable, and we lead you step by step through the process to ensure that you know exactly how much money you will need to raise, and how much you can spend each month, and how much to expect to make. But no matter what method or software you use, make sure you know these numbers inside and out, and don’t start until you have enough money to make it all the way through even your worst case scenario, or else you might not make it, and it is much harder to raise more money later than it is to raise the right amount in the beginning.

Wrong Atmosphere

Easy to say- hard to get a good grip on! The wrong atmosphere is just one that isn't in sync with what the majority of your clientele want. If you take over a country western themed bar and decided to play rap music, don't be surprised when most of the regulars never come back. This may seem obvious, but many new bar owners create the perfect bar for themselves, only to realize there aren't enough customers for that type of bar to keep the place open.

Whatever theme you choose, keep it consistent, and make sure you are always polling your customers to keep them happy. A place can go in and out of fashion without much time going by, an owners job is to make sure that they keep up with the new things the customers want with out changing so much that the regulars no longer recognize the place. Slow, steady changes to keep pace with the times but not alienate the regulars is the hard balancing act that every owner must face.

Poor Market Analysis

Contrary to how a lot of new owners seem to operate, you shouldn't simply throw open a bar in the first good space you find and expect the crowds to find you. Choosing your location, type of operation, menu, pricing, layout, and many other factors are important considerations which can be greatly enhanced by a good understanding of the market you are entering. Many bars that could have succeeded elsewhere fail because they were put in the wrong place or were the wrong concept for the area.

These mistakes are easy to avoid with a little advance planning and research, and in fact the best way to establish a highly profitable venture is to find the best fit for the best area and go with that. If you were thinking upscale wine bar but determine the area is begging for a rock 'n roll joint, you would do well to go with your findings. Or if you have your heart set on an original concept, then you can find the place it would work best, which isn't necessarily where you were looking. The trick is putting in the time to do the research, which really isn't that hard and doesn't take very long, but it pays huge dividends, and puts you ahead of most people who don’t do any at all.

Employee Theft

Being a mostly cash business, and a hard one to monitor, bars are more prone to employee theft than almost any other business. And employee theft hits directly on the profits of the owner. The best way to manage employee theft is to hire good employees with thorough background checks, keep a very tight control on the liquor inventory, have a strict policy on giving away drinks, and carefully monitoring the cash registers and your bartenders actions. No system is perfect, but with even a little slack in the system an owner can lose $1000s a month with no way of recovering it. This is another good reason for having a very good idea of what your numbers should be, so you can quickly detect if there is a problem, and deal with it immediately.

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Hopefully this overview helps get you on the right track. Obviously there is much more to learn, and it is key to understand the details before plunging your hard earned dollars and valuable time into a project of this scale. And the best way to do this is with a business plan and financials package tailored specifically for bars- our Bar Success Kit!