From Irish pubs to pool dives to sports bars and cocktail lounges, the bar industry is as vast and diverse as the millions of consumers it serves. However, all bars have two things in common: They all serve alcoholic beverages, and perhaps more importantly, they provide a setting for people to meet and socialize. The social rewards of owning a bar are attractive, but potential investors should make no mistake: Running a successful bar business requires more than a gregarious personality.
NuWire picked the brains of two bar owners: one, the owner of a neighborhood pub that had been previously owned, and the other, owner of a chic lounge and gallery built from scratch. Both owners have had to overcome significant challenges in getting established and both take satisfaction in owning their own businesses.
Both owners also tend to sleep much less than the average person.
The art of a bar business makeover
Kate, who preferred not to disclose her last name, owns Kate’s Pub in the laid-back Seattle neighborhood of Wallingford. The bar is a cozy hangout with classic pub décor, comfortable seating, a projector screen showing sports games and pool tables. The pub’s menu offers happy hour and late night fare in addition to normal dinner service.
Work experience in a bar is recommended for investors acquiring or starting one
In addition, the experienced bar staff is friendly and efficient; a single member of the bar staff sometimes tends to all the pub’s patrons at certain times of the day.
“This place has always felt like home, like family [to me],” Kate said. “And that’s how I want the customers to feel....We’ve always tried to make this feel like everyone’s home away from home.”
Kate acquired the pub more than two years ago. Prior to that, she worked as part of the bar staff for six years under the pub’s previous owner.
When the previous owner decided to sell, “he approached me first,” she said. Kate, who was at 27 years old at the time, embraced the opportunity and agreed to a seller-financed arrangement for a term of five years. She is now three years away from completely paying off her loan.
“Nobody has a wad of cash to buy out immediately, so often the old owner carries a note—like a bank—over the course of the payoff period,” she said.
One of the major challenges in transferring ownership was the question of how to retain clientele while asserting herself as the new owner.
“We knew that the number one way to keep old customers was to make sure they knew the staff they loved was still here,” she said.
So she simply changed the business name to Kate’s Pub and used name recognition as a strategy to keep regular patrons coming. The change in business name indicated the change in ownership; nevertheless, Kate has frequently dealt with old-fashioned perceptions as the new business owner.
“[Many people] assume that if you’re a young girl, you have somebody else bankrolling your affair,” she said. “And it’s not the case [for me].”
The biggest challenge has been regulating cash flow and all the “paper-pushing” that comes with business ownership, Kate said.
“Everything in this industry costs a lot of money,” she said. State excise taxes in Washington, for instance, are substantial and licensed businesses are required to pay them from the backend every month, she said. Additional business expenditures, such as labor, groceries, remodeling and signage, require constant attention, and the work of keeping the business alive can be overwhelming.
The bar business is a way of life and demands certain sacrifices from owners
“When they say that most bars close in their first [or second] year...I can see why; it’s so much work, it’s so many hours, and you’re so stressed about cash flow,” she said.
Kate described her time commitment as “giant.” She doesn’t get a paycheck anymore and has essentially taken a pay cut because of the sheer amount of hours she is working.
As a mother of three children and a youth sports coach, “I just don’t sleep,” she said.
Pub owernship isn’t for everyone; most people probably aren’t capable of working on a schedule like Kate’s. Anyone who aspires to own a bar needs to be “really driven,” she said, and willing to sacrifice luxuries such as time, a social life, energy and money.
“It’s so self-sacrificing....My family anchors me to it, because I can’t fail for them,” she said.
For Kate, the sacrifices are worth the rewards. The young supermom takes pride in her business and has found the sense of ownership over every business detail, “down to the last roll of toilet paper,” to be the most rewarding aspect of her work.
“I was never meant to work for anyone but myself,” she said. (For more information on women as small business owners, see our previous article on Women in Business.)
The art of starting a bar from scratch
Erik Guttridge, owner and director of Grey Gallery and Lounge in the bustling Capitol Hill neighborhood of Seattle, opened his business last January. Calling on his artistic background, Guttridge envisioned a business and created it completely from scratch.
The structural design of Grey is divided into two sections: an exhibition space to showcase and sell art with a special lounge area stretching from the storefront’s glass façade to the elegant walnut counter at back, and a lofted area upstairs. The décor and lighting are subdued and clean; the experienced staff is well dressed and courteous. Overall, the vibe of the business is striking.
Upon conceiving the idea for his business several years ago, “I thought I was maybe the first person to ever think of it,” he said.
In his research, however, he found a similar business in San Francisco that had been established for more than 10 years. Rather than feeling disappointment, knowing a successful precedent existed was “very encouraging,” he said.
To say that starting a business from scratch requires substantial financial assets is probably a gross understatement, and Guttridge knew what it would take to make his vision a reality.
“I sold my house to do this,” he said.
The house had originally been bought as his nest egg. In 1999, Guttridge “could see the housing market going crazy” and bought the biggest house he could afford, he said. After remodeling the house to be as appealing as possible and residing there for several years, he sold his house last May for a high return on his investment. He is now reinvesting that money into his business.
Guttridge also said he borrowed some money from family, but didn’t obtain any financing from a traditional lender. He didn’t want the stress of owing money for the rest of his life, he said.
Financing himself also has a “much better tax structure,” because paying himself a percentage back for the loan also becomes his income, he said.
Finding the right commercial space for his business took more than a year. Although he didn’t find exactly what he was looking for, he thinks the space he ended up with is even better than what he had originally planned.
The biggest advantage of starting a business from scratch is having complete control over the process, but additional creative control translates to additional workload. Building the space, for instance, was a six-month undertaking. Guttridge spearheaded every aspect of getting his business established, from designing the space to acting as a general contractor and even doing some of the finish work himself.
“It was very important to me that this type of space came out as envisioned,” he said.
In addition to the huge volume of work, problems with contractors occasionally stalled progress.
“I had one electrician that held [up] my project for at least three weeks, [which just] bleeds cash dry,” he said.
Making the business profitable has been a constant learning process for Guttridge, one that requires innovation and flexibility. He has been paying close attention to business trends and listening to feedback from patrons and is taking steps to cut back on aspects that aren’t working, such as the early morning coffee business, and is adding aspects that are in demand, such as a lunch service, he said.
In addition to handling financial exposure, an owner is vulnerable to the fact that he or she doesn’t know how the end product will be received. So far, the response from Grey customers has been overwhelmingly positive, Guttridge said.
Behind the bar at Grey; image courtesy of Laura Totten
“This business is very personal to me,” he said. “I probably take it a little bit too hard when negative energy comes my way, but...it’s only a handful of people and I’m very thankful for that.”
Guttridge emphasized his desire to create a community around the space, a community that is “un-pretentious,” that appreciates art, fine drinks and the pleasure of company.
“It really comes down to people,” he said. “People supporting us, us supporting them, and that’s been the most rewarding aspect of this business for me.”
General tips for running a bar
According to both owners, the most important ingredients for running a good business are basically the same: hiring the right staff, understanding their markets and working hard around the clock.
The ideal staff not only has experience but also cares about the success of the business.
Kate feels “so lucky” to have a bar staff she really trusts, she said.
For Guttridge, having a solid staff that is excited about being part of the overall effort of the business has been “paramount,” he said.
In terms of knowing her market, Kate values the repeated patronage of her regulars but also understands the importance of attracting new business as people move in and out of the neighborhood.
“Old bar owners get so comfortable with their [regular] customers, they don’t realize that [new customers] are their next meal ticket,” she said. “The only way to keep a neighborhood pub in business in the neighborhood, and [it] changes.”
Guttridge has also found the right niche for his business.
“Seattle is really a wonderful community that supports locally-owned business,” he said. “I grew up in Florida and I don’t think this [business] would really fly [there].”
Above all else, it seems that running a bar requires an inexhaustible supply of perseverance.
“Be ready to work long hours, find good staff that you trust and work your butt off,” Kate said. “And don’t give up.”