Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.
David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.
Updated on May 22, 2023
$64,550 - $120,100
$274,000 - $1.095 million p.a.
Time to build
1 – 3 months
$55,000 - $219,000 p.a.
How to Start a Bar
Decide if the Business Is Right for You
Hone Your Idea
Brainstorm a Bar Name
Create a Bar Business Plan
Register Your Business
Step 6: Register for Taxes
Fund your Business
Apply for Bar Business Licenses and Permits
Open a Business Bank Account
Get Business Insurance
Prepare to Launch
Build Your Team
Run a Bar - Start Making Money!
Bar Business FAQs
Bars in the US are bouncing back from the pandemic in a big way, up 43% from their 2020 low and forecast for continued strong growth. People love going to bars for the drinks as well as the social interaction.
Many bars also offer food, from burgers and snacks to more upscale dining. If you like bars, you could design your own and open a bar in your area, adding a lively social spot to your community and making a good living.
But before you start mixing up drinks, you’ll need to understand how to launch and market a business. Luckily, this step-by-step guide is filled to the brim with all the information you need to start a successful bar.
Looking to register your business? A limited liability company (LLC) is the best legal structure for new businesses because it is fast and simple.
Cannabis beverages are being served more frequently in bars in states that allow them. Cannabis beverages provide a buzz, but the effects wear off faster than alcohol, allowing people to safely drive home.
Bars are going digital, offering digital payment options, loyalty and rewards programs, and pre-reserving tables.
Challenges in the bar industry include:
Liability due to overserving is a huge concern in the bar industry, so training employees properly regarding serving levels is of the utmost importance.
Many bars have had to raise their prices due to the impact of inflation.
Average level of education –The average bar manager has a bachelor’s degree.
Average age – The average bar manager in the US is 38.8 years old.
How much does it cost to start a bar business?
Startup costs for a bar range from $65,000 to $120,000. Costs include the space and its preparation, furnishings, bar equipment, and a liquor license.
If you need to learn bartending skills, you can find a bartending school in your local area, or you can take courses online on a site like Udemy.
You’ll need a handful of items to successfully launch your bar business, including:
Tables and chairs
Setting up a business name and corporation
$150 - $200
Business licenses and permits
$100 - $300
Business cards and brochures
$200 - $300
$1,000 - $3,000
$4,000 - $6,000
$1,000 - $5,000
$25,000 - $45,000
Glassware and furnishings
$5,000 - $10,000
$8,000 - $10,000
Labor and operating budget
$20,000 - $40,000
$64,550 - $120,100
How much can you earn from a bar business?
The average bar patron spends $30. Your profit margin after all costs should be about 20%.
In your first year or two, you could get an average of 25 customers a day, bringing in $274,000 in annual revenue. This would mean $55,000 in profit, assuming that 20% margin. As your bar gains popularity, you could have 100 customers a day. With annual revenue of $1,095,000, you’d make a tidy profit of $219,000.
What barriers to entry are there?
There are a few barriers to entry for a bar. Your biggest challenges will be:
The startup costs of preparing the space for your bar
Drawing drinkers away from established local bars
Related Business Ideas
If you’re still not sure whether this business idea is the right choice for you, here are some related business opportunities to help you on your path to entrepreneurial success.
Now that you know what’s involved in starting a bar, it’s a good idea to hone your concept in preparation to enter a competitive market.
Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.
Why? Identify an opportunity
Research bars in your area to examine their products, price points, and customer reviews. You’re looking for a market gap to fill. For instance, maybe the local market is missing a sports bar or a wine bar.
You might consider targeting a niche market by specializing in a certain aspect of your industry, such as craft beers, signature cocktails, burgers or pizza.
This could jumpstart your word-of-mouth marketing and attract clients right away.
What? Determine your products or services
Your best bet is to offer a wide variety of alcoholic beverages, including beer, wine, and all types of liquor. You can also make unique signature cocktails that will make your bar stand out.
You could also put a kitchen into your bar and offer food. Studies show that customers stay longer and drink more if they have food.
How much should you charge for drinks?
Prices for drinks vary. A beer might sell for $6 to $9, wine for $8 – $12 a glass, and fancy cocktails from $10 to $18. Check prices in your area to make sure you’re competitive. Your profit margin after all cost of goods, rent, overhead, and labor, should be about 20%.
Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.
Who? Identify your target market
Your target market will depend on the concept you create. If your concept is designed to attract a younger crowd, you should focus your marketing on TikTok and Instagram. If you create a neighborhood bar, your target market may be a bit older, so you might want to turn to Facebook.
Where? Choose your bar location
Selecting the ideal location for your bar is paramount to its success. Look for a spot in a vibrant and lively area with high foot traffic, such as a popular downtown district or a bustling nightlife area.
Consider the demographics of the surrounding community and target your desired customer base accordingly, whether it’s young professionals, college students, or a specific niche market.
Additionally, assess the level of competition in the area and aim to differentiate your bar by offering a unique concept or atmosphere. By strategically choosing the right location, you can attract a steady stream of patrons and establish your bar as a go-to destination for socializing and entertainment.
When choosing a commercial space, you may want to follow these rules of thumb:
Central location accessible via public transport
Ventilated and spacious, with good natural light
Flexible lease that can be extended as your business grows
Ready-to-use space with no major renovations or repairs needed
Step 3: Brainstorm a Bar Name
Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.
Here are some ideas for brainstorming your business name:
Short, unique, and catchy names tend to stand out
Names that are easy to say and spell tend to do better
Name should be relevant to your product or service offerings
Ask around — family, friends, colleagues, social media — for suggestions
Including keywords, such as “bar” or “tavern”, boosts SEO
Name should allow for expansion, for ex: “Speakeasy Bar” over “The Sports Bar” or “The Cigar Bar”
Avoid location-based names that might hinder future expansion
Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these.
Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.
Step 4: Create a Bar Business Plan
Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:
Executive Summary: Brief overview of the entire business plan; should be written after the plan is complete.
Business Overview: Overview of the company, vision, mission, ownership, and corporate goals.
Product and Services: Describe your offerings in detail.
Market Analysis: Assess market trends such as variations in demand and prospects for growth, and do a SWOT analysis.
Competitive Analysis: Analyze main competitors, assessing their strengths and weaknesses, and create a list of the advantages of your services.
Sales and Marketing: Examine your companies’ unique selling propositions (USPs) and develop sales, marketing, and promotional strategies.
Management Team: Overview of management team, detailing their roles and professional background, along with a corporate hierarchy.
Operations Plan: Your company’s operational plan includes procurement, office location, key assets and equipment, and other logistical details.
Financial Plan: Three years of financial planning, including startup costs, break-even analysis, profit and loss estimates, cash flow, and balance sheet.
Appendix: Include any additional financial or business-related documents.
If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.
Make Logos, Business Cards, Social Designs and More!
Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.
Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business!
Choose where to register your company
Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you’re planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to bars.
If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state.
Choose your business structure
Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your bar will shape your taxes, personal liability, and business registration requirements, so choose wisely.
Here are the main options:
Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
Limited Liability Company (LLC)– Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.
We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.
The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN.
Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.
It is important to consult an accountant or other professional to help you with your taxes to ensure you’re completing them correctly.
Step 7: Fund your Business
Securing financing is your next step and there are plenty of ways to raise capital:
Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
Personal: Self-fund your business via your savings or the sale of property or other assets.
Bank and SBA loans are probably the best option, other than friends and family, for funding a bar business. You might also try crowdfunding if you have an innovative concept.
Step 8: Apply for Bar Business Licenses and Permits
You’ll need a liquor license for your bar. If you serve food, you’ll also need:
Food service license
Food handler’s permit
Building health permit
Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits.
You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more.
Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your bar business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.
Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.
Step 10: Get Business Insurance
Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.
Here are some types of insurance to consider:
General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
Business Property: Provides coverage for your equipment and supplies.
Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
Worker’s compensation: Provides compensation to employees injured on the job.
Property: Covers your physical space, whether it is a cart, storefront, or office.
Commercial auto: Protection for your company-owned vehicle.
Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.
Step 11: Prepare to Launch
As opening day nears, prepare for launch by reviewing and improving some key elements of your business.
Essential software and tools
Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.
You may want to use industry-specific software, such as Restaurant365, lightspeed, or toast to manage your menus, inventory, schedule, and invoices.
If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.
Develop your website
Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.
You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.
They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google.
Some of your business will come from the casual passerby or online visitors, but you should still invest in digital marketing! Getting the word out is especially important for new businesses, as it’ll boost customer and brand awareness.
Once your website is up and running, link it to your social media accounts and vice versa. Social media is a great tool for promoting your business because you can create engaging posts that advertise your products:
Facebook: Great platform for paid advertising, allows you to target specific demographics, like men under age 50 in the Cleveland area.
Instagram: Same benefits as Facebook but with different target audiences.
Website: SEO will help your website appear closer to the top in relevant search results, a crucial element for increasing sales. Make sure that you optimize calls to action on your website. Experiment with text, color, size, and position of calls to action such as “Call Now”. This can sharply increase purchases.
Google and Yelp: For businesses that rely on local clientele, getting listed on Yelp and Google My Business can be crucial to generating awareness and customers.
Take advantage of your website, social media presence and real-life activities to increase awareness of your offerings and build your brand. Some suggestions include:
Competitions and giveaways – Generate interest by offering prizes for customers who complete a certain action, such as first beer free during Tuesday happy hours.
Signage – Put up eye-catching signage at your bar and website
Sponsor events – You can pay to be a sponsor at events that are relevant to your target market
Post a video – Post a video about your bar. Use humor and maybe it will go viral!
Start a blog – Start a blog and post regularly. Change up your content and share on multiple sites.
Paid ads on social media – Choose sites that will reach your target market and do targeted ads.
Pay–per-click marketing – Use Google AdWords to perform better in searches. Research your keywords first.
Influencer marketing – Pay people with large social media followings to promote your bar. You can find micro-influencers with smaller followings and lower rates.
Focus on USPs
Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your bar meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.
Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your bar business could be:
The best local beers at your new neighborhood bar
Half-price happy hour every day from 4 to 6
Fine wines and delicious tapas
You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a bar business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in bars for years and can offer invaluable insight and industry connections.
The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in bars. You’ll probably generate new customers or find companies with which you could establish a partnership.
Step 12: Build Your Team
If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a bar business include:
Bartenders – make and serve drinks
Servers – serve food and drinks to tables
General Manager – scheduling, ordering, accounting
Marketing Lead – SEO strategies, social media
At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need.
Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent.
Step 13: Run a Bar – Start Making Money!
For many, owning a bar is living the dream — working in a fun environment socializing all day. Now that bars are back, it’s a great time to get in on a thriving industry. If you’ve got a creative concept and a passion for pleasing people, you could open your own bar and build it into the next Cheers!
Now that you know what it takes, it’s time to launch your bar and soon toast your own success.
Bar Business FAQs
How profitable is a bar?
Bars can be very profitable, with good margins. The keys are to create a unique concept, make it a fun environment, and provide outstanding customer service.
How should I price drinks in my bar?
Prices for drinks vary. A beer might sell for $6 to $9, wine for $8 – $12 a glass, and fancy cocktails could cost up to $20. Check prices in your area to make sure you’re competitive.
Is owning a bar hard?
Owning and operating a bar can be a costly venture, as it involves covering rent, staff salaries, and unexpected expenses. Additionally, bar owners often work long hours that can extend into the late nights and weekends, including public holidays. Moreover, the bar industry is highly competitive, with a saturated market that presents numerous challenges.
Why do most bars fail?
There are many reasons why bars can fail, but here are some of the most common factors that contribute to bar failure: lack of funds, poor location, over-reliance on alcohol sales, and mismanagement.
How do I attract customers to my bar?
To attract customers to your bar, create an inviting ambiance, offer unique and signature drinks, provide exceptional customer service, host special events and promotions, and utilize online platforms and social media for promotion.
What type of bar is most profitable?
The profitability of a bar depends on factors such as location, target audience, concept, and management. Different types of bars can be profitable based on local market demand and competition.
How can I build a diverse and enticing drink menu for my customers?
To build a diverse and enticing drink menu, cater to different preferences, consider seasonal and local ingredients, balance classic and innovative recipes, provide options for different occasions, and seek customer feedback for continuous improvement.