subject: The True Costs Of Opening A Bar [print this page] When preparing your bar financial plan, you will need to show an understanding of the cost of starting up the business before a cent of revenue comes in. Pay attention to estimating the following key categories.
Leasehold Improvements
Leasehold improvements, defined as fixtures and additions to the space made by the tenant, can be a significant cost, especially if the space was not previously used as a bar. Lighting fixtures, sound equipment, booths, the bar itself, and storage spaces are all included in this category. Before starting the lengthy process of talking to all of the necessary contractors to do the needed work, consider talking to someone who has opened a similar business, such as a bar or restaurant, to get a ballpark sense of what the costs may amount to.
Licensing
The liquor license can be a large cost, but the work of getting this license can increase this cost even further. It may be worthwhile to hire an expediter if you are inexperienced with the local and state government application process. Beyond the liquor license, you will need to pay for incorporation and a general business license, and probably a certificate from the state or local department of health which oversees the safe service of food and beverages. Again, speaking with someone who has gone through the process before can give you a topdown estimate of these costs which you can break down further later on.
Equipment
You will need to spend significant sums on glassware, bar tools, and furniture. Kitchen equipment will depend on the types of food you intend to serve alongside drinks. If you choose to create atmosphere through the choice of specific glasses or furniture, these costs may be higher than otherwise. Receive catalogs from distributors of bar equipment to estimate these costs.
POS System
The POS or point-of-sale system speeds up the service process by allowing bartenders to use the software to select drinks, find the price, and make change. While not every bar has a POS system, it does create a control on bar transactions by recording the sales and creating a double-check system for inventory.
Marketing
Marketing efforts and legwork before you open your doors are included in start up costs. Putting the right amount of money into successful marketing tactics before opening will put your bar in the right position to hit the ground running when you open. Look at the costs of each method depending on the scale you wish to achieve.
Working Capital
Working capital is an additional buffer of cash which sees your bar through to the point where the incoming cash from sales is greater than the cash going out for all operating expenses. Only by creating a cash flow statement for your first year can you estimate how much working capital you will need to show a healthy bank balance at all times. If you run out of cash and are late in paying your vendors you run the risk of being black-listed by liquor distributors, requiring you to pay cash on delivery.
by: Eric Powers
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