How to Start a Bar in 10 Steps: Small Business Guide

A career as a bar owner is a great fit if you enjoy curating drink experiences, have organizational abilities, and want to be your own boss. Opening a bar requires planning, dedication to following regulations, and between $125,000 and $2 million. The more prepared you are when starting your bar, the better you’re able to resolve challenges and drive profits.

We cover the 10 essential steps for opening your own bar. They are in a loose order; you’ll likely be working on a few at the same time. However, they address the most important parts of successfully opening a bar, plus tips for how to own a bar once you’ve opened.

Step 1: Develop Your Concept

A successful bar is more than a place that serves drinks. Bars have an atmosphere that attracts a particular type of customer. To begin determining your concept, ask yourself: How do I want people to feel when they walk into my bar?

Determine Your Customer Type

It’s important to understand your potential patrons when developing your concept. College students have different expectations from an older, businessperson crowd. Similarly, if your town caters to tourists, they will want a different experience from the locals. Consider checking with your local Chamber of Commerce for demographics and see if there’s a customer base that isn’t being catered to.

Find a Unique Angle

You want some angle that helps you stand out from the competition while still meeting the needs of your audience. Here are some examples:

• Play to your artsy community by selling local art on consignment and using it to decorate the bar.
• Consider entertainment like live music or comedy.
• Target singles with meetups or speed dating nights.
• Reserve space for a dance floor.
• Specialize your offerings: local brews, exotic rums, or unique mixed drinks.

Step 2: Design Your Brand

Once you have the concept determined, create a brand that reflects it. Start with the bar name and logo. You want it to be catchy and memorable. Your image should be simple, recognizable from the street or in a thumbnail on the screen, and reflect your concept. Check with your Secretary of State’s website to ensure that the name or logo is not taken, and then trademark your own logo. The federal government hosts a trademark tracking website for this.

A brand is more than a name and logo, however. They are reflected in your decor, your storefront sign, what your employees wear, and even who you hire. (Hooters is a good example of this.) Consider, too, creating a signature drink that you can brand as your own.

Step 3: Create a Budget

You may find yourself revisiting this step throughout the process of opening a bar. However, starting it early makes it easier to make decisions down the road.

Costs to Start a Bar

How Much Do Bar Owners Make?

In general, bars make between $25,000 and $30,000 a year, on average, with a net profit ranging from 5% to 15%. Bar owners generally make between $40,000 to $74,000 per year.

It’s difficult to give a firm estimate because much depends on the type of bar you own, your markup, and your location. While our estimates are based on several sources, you’re better off consulting your local Chamber of Commerce or networking with other bar owners to get an idea of what you can earn locally.

Step 4: Find Your Location

Location can make or break any business, but especially so with a bar, where so much depends on getting the right walk-in customers. Find a business real estate agent to help you with this and be sure they understand your concept.

Evaluate the Location

Here are some things to consider when you’re looking for the ideal location:

• Zoning: Can you build a bar at the location? In addition to restrictions like residential areas, some communities restrict bars near schools or other types of businesses.
• Demographics: You’ll want to be sure that the area you chose is frequented by the kind of patrons you want. For example, if you want to appeal to a professional demographic, then consider it somewhere close to the business district.
• Accessibility: While there are some bars that make inaccessibility an asset, most bars need to be visible. Whether in a strip mall or in its own location, you want your bar to be easily seen from the road and easy to access.
• Parking: Where possible, you want to have ample parking for your customers, especially if you are appealing to a local clientele rather than a tourist crowd.
• Establishments in the vicinity: Unless you have a truly standout angle, you may not want to be in an area heavily populated by bars. Other areas may not be the best for bars, such as a neighborhood heavily populated with churches.
• Rent and utilities: Make sure the rent is something you can support with your anticipated revenue from the kinds of customers you want to draw in. The high-rent district might not be the best choice if you’re looking to cater to a college crowd who will expect cheaper prices.
• Necessary work: How much work will it take to make your chosen location fit your dream? Will you need major renovations or just some light revisions? What equipment is already provided and is it in good shape? Is there room for the extras you want, like a stage, party room, or pool tables? Does it have these already?

Design the Space

A major consideration in starting a bar is designing the space to match your brand and the atmosphere you want to present. This can mean a coat of paint or a whole new bartop, adding a landscaped patio that looks out to the river, or replacing the lighting to either make it more dim and private or more bright and friendly.

Design is not just the visual space, either. Be sure the music and even the staff support your brand. If you’re catering to a conservative, big-business crowd, loud top-40s music and a bell won’t set the right mood.

Step 5: Get Permits, Licenses & Insurance

You may be starting this step even before searching for the location by securing your business license, but some steps will require having the location in hand. Here’s a (mostly) comprehensive list of what you need. Since each state has its own requirements, you should check to ensure you have everything you need:

• Incorporation: Bars have great legal risks, so you need an LLC or incorporation. A business attorney can advise you on the best decision for your bar. These are the most common. Follow the links for more information on each.
  • Sole proprietorship
  • General partnership
  • S-corp or C-corp
  • Limited liability corporations (LLC)
• Employer identification number (EIN)
• State tax ID
• Liquor license
• Food and beverage license
• Sign permit
• Pool table permit
• Dumpster placement permit
• Music and entertainment permits
• Certificate of occupancy
• Registration with the Alcohol and Tobacco Tax and Trade Bureau
• Liquor liability insurance
• Business income insurance: While optional, it can protect you if you need to shut down temporarily.

The liquor industry is highly regulated. Be sure you do your research. Consult the Alcohol and Tobacco Tax and Trade Bureau for regulations and resources, as well as your state and local governments.

Step 6: Create a Business Plan

A business plan is a general roadmap for how to start a bar business from idea to success. It covers concept, value, location and team, legalities, and financial projections. You use it not just for how to start a bar but also for getting loans or investors. You can create a slide show from the information to use for multiple purposes.

Start with your mission statement: How will the bar serve the community and rise above the competition? Then you’ll start working on details of the market, location, and financial need. Check out our business plan template for the basic steps.

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Restaurant Business Plan Template

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Step 7: Get Funding

Most people haven’t got several hundred thousand dollars on hand to start a bar, but there are ways to get funding. Startup business loans, lines of credit, and business partners are the most common ways to secure funding.

More and more businesses are looking to crowdfunding for startup capital. You can offer rewards or equity to your investors. Of course, you can ask friends or family to pitch in. You may even use a combination of sources.

Consider getting a business credit card as well. This not only gives you some flexibility for unexpected small expenses but also provides a way to pay for subscription services (like point-of-sale (POS) software).

Step 8: Source Suppliers

You may have already found a few of these as you were determining the budget. At the very least, you should have a list of the items you will need on an ongoing basis. Ask bar and restaurant owners in your neighborhood for recommendations then be sure to ask questions before you sign a contract:

• Time in business
• References
• Minimum order amounts
• Payment terms
• Quality assurance process
• Return policies

Before supplies come in, it’s a good idea to have your inventory processes set up. A bar POS system with strong inventory tools, or an inventory software that incorporates with a POS system, will help you keep on top of inventory, track what items sell, and give you insights into how to maximize your supply budget.

Step 9: Hire & Train Staff

When hiring staff, you need to look beyond skills and consider personalities that match the culture and concept of your particular bar. It’s especially important in such a high-turnover business. Some of the positions you’ll need to fill include:

• Bartenders
• Barbacks
• Waitstaff
• Cleaning (or outsource it)
• Hosts
• Security/ID checkers
• DJs or musicians
• Administrative assistants
• Bookkeepers

In this highly regulated industry, you’ll want to run background checks for managers and confirm references as well as ensure your staff has the appropriate training and certificates. Some courses your staff may need include:

• Food safety
• Training for Intervention Procedures (TIPS)
• Alcohol Responsible Beverage Service (RBS) training
• Bartender training
• Sexual harassment prevention

Of course, you’ll also need to train them in the running of your bar in particular, including any specialty drinks or food preparation, using the equipment (like trading out kegs), procedures, even how to treat customers.

Step 10: Market Your Bar

When considering how to open up a bar, you must consider marketing. Even though it’s an in-person business, you need to consider online as well as print and other avenues, like participating in local events. Invest in high-quality photos of your bar, location, and drinks to use for advertising, and be sure to include people!

Here are some common promotional avenues to consider:

• Flyers at local hotels
• Ads in community papers
• Registration with Google Business and Yelp
• Website
• Social media (be sure to go where your audience is!)
• Event hosting
• Participation in community events like fairs or neighborhood celebrations
• Branded items like T-shirts or cups (especially good for tourist areas)

Starting a loyalty program can encourage repeat customers as well. This is easy to accomplish with good POS software.

Opening Your Bar

You’re ready! You’ve found the perfect place, and it looks great. The bar is stocked! Your staff is trained and certified. Your marketing plan is building buzz. All that’s left is to have a grand opening with the press and influencers in attendance.

Or is it?

Before you throw open the doors to a big party, consider having a soft opening first. A soft opening lets you try everything out on a limited number of guests, usually family and friends, before opening to the public. A soft opening can give your employees a chance to practice without pressure and to work out any kinks you might not have uncovered—whether a mistake in a price or an actual kink in a hose.

When you’re ready for the grand opening, be sure to plan more than just a great party. Find a way to make it a memorable event. Some suggestions:

• Bring in a local celebrity to perform or bring in a local radio station
• Host an activity—wine and art stations; beer tasting; pool contest
• Have free swag or giveaways
• Invite a food truck
• Host a contest (but probably not a drinking one)
• Create an Untappd badge

Pros & Cons of Opening a Bar

Owning your own bar is a great business option for extroverts who like an exciting and varied pace, and when run well and with the right location, can be highly profitable. However, you have to be ready to handle problems like the drunk and disorderly, and it can be demanding, especially when you are first starting out.

Frequently Asked Questions (FAQs)

These are the most common questions we hear about opening and running a bar. Expand the sections below for detailed answers.

Last Bite

A well-run bar can be an asset to the community: a place to meet or make new friends or to unwind after a hard day. Many bar owners find great satisfaction in their business. If the idea of bar ownership appeals to you, do your research, plan well, secure more-than-adequate funding, and follow these 11 steps to build your dream. Cheers!