A place where old friends and new acquaintances come together to laugh, share memories and ease worries - bars form the cultural epicenter of all cities. The fact that Brits love going to the pub is not, however, enough to secure their profitability alone.
With increasing drink prices, stock costs and unstable attendance rates, a bar owner can quickly find himself in the red zone.
It's a scary thought, but the good news is that with a few tricks, your bar profitability can be significantly improved.
To help you along the way, we've created this guide to share our top tips on optimizing bar profitability.
Keep an eye on your bar's stock to increase bar profitability
This may seem obvious, but it's worth remembering that to increase the profitability of your bar, it's essential to optimise the margin between the purchase price of your drinks and their selling price.
To improve this margin, do your research on different drinks suppliers and identify the ones that offer the best value for money services. With this knowledge, you can (if necessary) renegotiate prices with your current suppliers to get a better deal.
One effective way of minimising your supplies cost is by agreeing to buy stock in larger quantities, thereby reducing the frequency of supply.
Be careful, however, not to buy more than is necessary so that you can avoid high storage costs and limit losses on perishable goods.
Besides the drinks and snacks you'll offer, you'll also need to turn your attention to the equipment needed to operate the bar, including a beer tap, fridges, a dishwasher, pourers and measurers and cocktail shakers. Without skimping on quality, you could explore the possibility of buying some of this equipment second-hand to save a few pennies.
Control your overhead costs
There are many overhead costs when running a business, from gas, water and electricity bills, to professional insurance, accounting fees and staffing costs.
We advise you to into the habit of regularly checking these costs, as reviewing them overtime will give you a better idea of what costs you might be able to cut and whether you can renegotiate terms with your suppliers. Every little helps, and if you're savvy enough about it, you could end up with an extra few hundred quid saved at the end of each month.
Re-evaluate your needs and adjust your supplier agreements accordingly - putting up a fight for the most competitive rates.
Switch up your menu to enhance bar profitability
Enhancing your bar profitability requires, of course, a thorough knowledge of your customers' habits and the optimization of your bar menu.
You can carry out several different actions here. First of all, try reducing the amount of drinks you offer and keep only the most profitable ones.
For example, if you realise that selling one Pinot Noir in particular by the glass brings in more of a loss than a profit, don't hesitate to swipe this option from your menu.
A second action you could take is to increase your prices very subtly. Adding an extra 20 pence to the price of a pint won't make a huge difference to your customers, but it could have serious benefits for your bar's accounts at the end of the bar.
Finally, encourage your staff to upsell. If a table orders five drinks, for example, implement a policy whereby the waiter asks if they'd like a pizza or a side of fries to accompany their refreshments.
Develop a strong marketing plan to attract and retain customers
Like any business, your bar is bound to experience periods of high and low demand.
To attract customers on weekday evenings, you can come up with promotional offers. From student discounts to happy hour, two-for-one cocktail deals and offering a free pub quiz, it's up to you to pick the actions that seem most relevant to your customers.
Take time to test out a few different actions so you can find the ones that are most effective when trying to enhance the profitability of your bar.
Setting up social media profiles on platforms such as Twitter and Instagram are also great ways to not only advertise new drink deals but also create a community for local beer lovers and build a rapport with your customers.
Create a financial forecast to track bar profitability
Whether you're just starting up or looking to improve the profitability of an already operating bar, creating a financial forecast for your business is imperative.
The financial forecast will enable you to assess the impact of the actions reviewed in this article, as well as taking into account all your costs and expected revenues to ensure the future profitability of your bar.
It's clear then that creating a financial forecast for a bar is crucial, albeit pretty technical. If you don't have a strong accounting background and would like assistance breaking down the numbers, there are powerful online solutions that enable you to develop a reliable financial forecast - such as the online forecasting software we offer at The Business Plan Shop.
If you opt for The Business Plan Shop's forecasting software, all you need to do is follow our simple instructions and fill in the 4 tables set out for you. The calculations are also done automatically, avoiding any potential errors. In just a few clicks, you'll obtain a full financial forecast consisting of a provisional income statement, provisional cash flow statement, provisional balance sheet and a break-even point calculation table.
If you are interested in this type of solution, you can try our forecasting software for free by signing up here.
So, is opening a bar profitable? We hope that with our advice on how to enhance bar profitability, you'll find that the answer is yes.
Don't hesitate to contact us if you would like to share another tip for optimising bar profitability, or if you have any questions regarding the financial forecast of a bar.
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