8 tips for running a profitable bar business

the ultimate guide to profitable bar business

How many times have you heard someone say “I would like to open my own bar”? 

Well, a lot of people dream of opening a bar, as you might imagine yourself selling delicious booze, hanging out with regulars and most importantly, getting paid while doing all this cool stuff.

This might be a great vision but it also represents hard work, sweat and tears in the extremely risky business, considering that according to Cornell University, and the National Restaurant Association, 60% of all bar businesses fail within the first three years and as high as 75% fail by the fifth year.

You need to ask yourself what is it that you want to get out of the place because the only way to succeed is to treat it like a real business. 

If you want to keep hanging out with cool people in the fun environment and call it a work, you need to put in the effort, set expectations and measurable goals for your bar that will lead to a profitable business.

Unfortunately, like many new businesses, opening and running a successful bar is against the odds but it doesn’t mean that it’s impossible. With the right knowledge, marketing tools and business strategies, you can steer those numbers straight towards your goals.

No more excuses because with all the information at your finger tips, there is tremendous opportunity to be in a bar business if you’re willing to put in the effort or find the right people that will do all of that for you.

Here are my top tips, tricks and strategies that will help you to run your bar successfully.

#1 Set realistic Bar business Strategy

business strategy for a profitable bar

If you do your research about the location, competitors etc., you will notice that with craft cocktail movement and the increasing number of craft cocktail bars, it can be pretty difficult to compete in the crowded market space.

To be able to stand out in the existing market space that is filled with a competition, you need to either differentiate your bar from the competition, consistently provide a higher value or compete on the lower price.

Competing on the lower price has never been the best long-term strategy and can bring your business quickly up for the failure. By lowering the price, you need to also adjust the pour cost or labour cost which will get quickly noticed by your customers in the poor customer service or low-quality drinks.

I’ve seen this problem in the hospitality industry over and over again. The owner of the establishment break into the market but the big competition and poor strategy result in fewer customers. This causes him to lower the cost, attract more unhappy customers and get lower profit margins. I call this the Low-Value Circle.low value circle in the hospitality industry

If you are opening a new cocktail bar or trying to reinvent the existing one, there are strategies that can set your bar for a success.

1. Target existing market and differentiate your bar

”Simply running a bar with craft cocktails using freshly squeezed juices, homemade syrups and good quality ingredients might be not good enough anymore, you need to differentiate your cocktail bar from the competition.”

So how do you differentiate your cocktail bar and attract more customers?

  • You need at least one unique thing to be known for using different marketing strategies
  • Niche down or specialise on something (Offer a huge selection of Rums and Rum based cocktails)
  • Drive Innovations at your bar

2. Target anyone else providing high value with the low cost

This strategy is based on targeting non-consumers by providing consistently higher value but keeping the initial cost low. By creating and capturing new demand, you can completely eliminate your competition.

Notice that I didn’t mention ”keep the price of your beverages low” neither did I say ”serve poor quality drinks”.

 ”A higher value means exceeding customer’s expectations with every single reaction to your service, product or brand. It’s the quality and presentation of your drinks, consistently great customer service but also how you label and brand your bar or beverages can increase the perceived value.”

Let’s imagine that your bar is located in the financial district in one of the biggest cities in the world with income higher than average. These type of customers prefer a personalised and knowledgeable staff in the relaxed environment.

In this case, you will want to increase value by emphasising excellent customer service that will be compensated with higher prices of your drinks but the initial low cost.

#2 Brand Development

bar branding development and identity

There is a common misconception that your brand is just a logo or design but it’s much more than this. It’s a desired perception how you want your audience to view you with a brand identity, messaging and brand experience. The perception and marketing message of your bar business must be consistent and personalised in order for you to have a successful brand.

This is an early stage of your bar so you need to make sure that you get as much exposure as possible. How do you do that?

Take something unique about your establishment or the thing that you want to be known for. And shape it, using different marketing strategies.

This is probably the most effective free marketing method out there. Since people will promote your bar and spread the word with no extra cost.

Why does it work?

”Because people visit your bar for experiences or feelings, not for a product itself.”

Let’s say you are the bar that uses a sensory experience or a bar where monkey plays the ukulele. Whatever that is, your goal is to promote it until your bar will be known for this particular thing.

Then you hear people say ”Let’s go to that bar where monkey plays the ukulele”.

Wouldn’t you?

#3 Providing consistent value and exceeding expectations

providing consistent value

Exceeding customer expectations on every level of your cocktail bar business from customer service, product quality and presentation.

It basically means how your customers react to every situation, once they enter the doors of your cocktail bar.

The value can be perceived on the conscious(when we are aware of it). Or subconscious level(we are not aware of it but still influence our decision).

  • On the conscious level, it’s the product quality, customer service and presentation of your bar or beverages.
  • On the subconscious level, it’s our expectations, emotions, learn associations and everything going on around us can influence our sensory experience. That we perceived with our 5 basic senses sight, sound, smell, touch and taste.

Every reaction to every situation at your bar should exceed the expectations and bring a consistent value. So you can turn your customers into most loyal regulars.

#4 Encourage your most loyal customers their return, pay attention to their feedback

Getting customers to your doors is only the part of the successful marketing strategy and profitable bar business.

The second and probably much more important is to encourage their return. Since attracting a new customer is much more expensive and more difficult than keeping the existing one.

Apart from providing consistent value #3. You can also offer them a discount or free drink on their next visit in exchange for signing up to your Loyalty program.

The loyalty program can be part of your Email marketing strategy. A powerful tool where you can build the relationship with your customers.

When it comes to Email marketing, there are a few tips that will help you to win customers on your side.     

  • Keep it personal
  • Remeber special occasions
  • Ask for a review
  • Send a “thank you” note

The success of your bar business depends on a strong, personable relationship with your customer, so make sure that you pay attention to their feedback.

#5 Efficient bar inventory management

bar management inventory analytics

Bar inventory management can be pretty hard and time-consuming job but it’s crucial to running a successful beverage program. 

Here are some tasks that Bar inventory will help you with:

  • Maintaining enough beverage levels
  • Calculating profit margins
  • Detecting over-pour or theft
  • Determining overall product performance

Efficient inventory management is the key to maintaining a profitable bar whether it will be through one of the Bar management software, inventory spreadsheet or simply with traditional pen and paper methods.

Let’s explain the theory behind the efficient bar inventory.

Firstly, you need to understand exactly how much of your product is being used over any given period of time which is known as your inventory usage.

Inventory usage formula:
Inventory Usage = Starting Inventory + Received Inventory – Ending Inventory

When you calculate your inventory usage, you need to know how much stock you had at the beginning of your inventory period. How much stock you received during this period and how much stock you have at the end of this period.

Use these tips to manage a bar inventory efficiently

  • Make sure that you keep the style of counting and the inventory period consistent (weekly, monthly).
  • Sitting inventory at your bar is often overlooked as something that will be sold later. But the fact is that until it does, it represents an investment that could be used elsewhere.

#6 Use Upselling technique

No matter how great your bar might be, chances are you would like to make more sales. One of the easiest ways to do this is upselling. And either offering customers to upgrade their current purchase or buy additional items.

But it’s more than just a selling technique. It’s anticipating the customer’s needs, interests and desires and offering them a solution to enhance their experience at your bar.

This is a popular technique that is successfully used by all the major companies around the world.

Think of McDonald’s when you order a relatively cheap meal, they ask you ”Would you like some fries with that?”

You will most likely say ”yes” but the point is that the upselling is how they generate the most of their profit. Not by selling a cheap meal which works more as a lead generator where the profit margins are very thin.

But the question is, why does it work so well?

It’s all about the state of mind, so when people are determined to buy a drink(buying mood) then they will most likely agree to purchase additional items but your goal is to make them sound irresistible. 

You can also design a drinks menu and highlight your most profitable items that you would like to upsell.

But remember, you shouldn’t be forcing customers to order things they don’t want. You should be helping them make their experience in your place even better.

#7 Embrace new digital technology solutions

bar innovations and digital technology

In today’s age of technology, there are thousands of digital solutions that can make running a bar whole lot easier. But also can attract attention and new customers to your bar.

Here are a few of the digital solutions to consider

Point-of-sale system(POS) is essential these days, but it should be able to do more than just accept payments and process sales. It should come with additional features such as inventory management, staff management, capturing customer data. And other time-saving tasks that will make it easier for you to run and grow your bar business. 

New mobile payment solutions offer a simple to use, contactless payment services performed from or via a mobile device, instead of paying with cash, cheque or credit card.

Simplify your payments with the app called Split that automatically split the bill for the larger parties in the restaurants or bars, solving the common pain point.

Create employee schedules with a scheduling software simple drag and drop, easily accessible anywhere online.

Booking and Reservation systems should be easy to use with special features such as custom bookings, pre-orders, calendar bookings or table management and easily connected with your website.

Tabletop ordering enables your customers at the bar to order food and drinks from their table with a device or a smartphone.

Did you like this article? If so then share it. Still got some questions or looking for more info? Then go over to my consulting page and let me know what you’re struggling with. You never know, I might be able to answer just that.

One thought on “8 tips for running a profitable bar business

  1. I’ve learnt a lot in this article. I’m planning on starting my own business cocktail by next year January. I’m looking forward to face every challenge , I’m so positive about everything.

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