The seven deadly sins of running a bar

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Some of the pitfalls to avoid when running a bar from Alex Littner, managing director of Boost Capital, a specialist in financing in the hospitality sector

What makes a winning bar? Good atmosphere, a well-poured drink, and a friendly server are a start. But the reality of running a bar is tough. There’s the struggle to win alcohol sales – and customers – away from the supermarkets; beer duty eating into profits; and the constant need to keep up with fashion, and the competition. Also, bar owners can make their own working lives harder through some errors more common – and damaging to business – than many realise.

1) Juggling numbers, not selling drinks
Having a good head for numbers is an asset behind a bar, but a good business man or woman will know when to delegate or bring in expert help. Often, it falls to the bar owner to order stock, look after the cellar, handle staff issues and wages, oversee marketing, close and cash up, and do the banking. Getting bogged down in the minutiae of company finances, as well as keeping business going, is more than most bosses can manage. A good accountant with experience of the licensed trade is essential. He or she will free up your time to do the real job, as well as acting as a business advisor.
Nevertheless, the person with their name above the door must understand cashflow and financial planning. Bars typically have a strong cashflow, causing some owners to think short-term, fail to budget for the future, or take into account seasonal dips in business. It’s vital to anticipate unexpected expenses, such as repairs or upgrades to furniture and fixtures. If the business can’t cover such things, have a back-up plan, be that bank financing, a bridging loan from a short-term lender, such as Boost Capital, or asset finance for new equipment. Equally, know what to do if cash dries up. The rise of alternative finance in recent years has opened up more options – good news since many in the trade were denied conventional funding in the past.

2) Neglecting training
One in three beer drinkers wouldn’t return to a pub or bar that served a poor quality pint, according to Cask Marque, the independent organisation that trains cellarmen, bar staff, and licensees. Consumers are ever more critical – and vocal – in a digital age, and while the bar industry has a high staff turnover, it’s not an excuse to neglect training your team properly. Quality of the product is all. Give employees a thorough induction into how the whole bar works, ensuring things run smoothly, and the customer receives a great product and experience.
Even if you run a rigorous in-house training system, invest in accredited, outside tuition, too. It is time out of the business, and can cost money, but training should pay dividends when satisfied customers return, or tell their friends about the welcome they received. We’ve helped a number of bar businesses pay for training, and the results can be impressive for their bottom line.

3) Not keeping the menu fresh

If you’re building up food sales alongside your drinks offering, that ingredients should be literally fresh goes without saying. Customers are increasingly discriminating about what appears on their plate, whether it’s wanting fewer additives, or locally-sourced produce. Many are also influenced by fashion, attracted by new flavours – South American cuisine is predicted to be big in 2016, for example – and growing trends, such as a greater use of technology when ordering.
The challenge for the person designing the menu is to strike a balance between the classic and the novel. Don’t ignore the layout of the menu itself. Professor David Foskett, head of the London School of Hospitality and Tourism, recommends weighing up the popularity of dishes against their gross profit cash contribution, identifying the “stars” – the most popular and highest margin items – and placing them most prominently. Next come so-called plough horses, dishes that sell, though not as profitably as the top category. “Puzzles” are odd items that may not be popular, but attract some, so merit inclusion. The “dogs” of the menu don’t sell or make money, so remove them. Once you’ve done research into what customers want, order, and how much they spend, you’ll know how to pitch your offering.

4) Setting the wrong tone
Ambience really matters, and even casual drinkers want to be in clean, attractive surroundings. When did you last decorate or revamp your premises? Investing in bar furniture, creating a better layout, or going for a new colour scheme could attract unexpected customer interest. A local bar may be an institution, but it still needs to move with the times.
Equally, small things can make a big difference to first impressions. Music playing loudly – or not at all – can both be a big turn-off, and too bright lighting can be unwelcoming to would-be customers. Take an objective look at the fabric of the venue, and imagine seeing it with fresh eyes. You may be forced to admit it’s time for a makeover.

5) Bad design = bad service
Sometimes, not spending money on a business costs money – a poorly designed kitchen is the prime example. Bars with old-fashioned, badly converted food preparation areas can result in disorganised, sluggish orders, which can have a serious effect on customer service. We’ve worked with many hospitality businesses that have borrowed to improve kitchen facilities, extend dining space, or redesign their bar to increase sales. It really works, and can have a big impact on revenue and profit.

6) Health and safety ready?
It’s the bane of some business owners’ lives, but it exists for a reason – health and safety. A modern bar should be up-to-date with all the Health and Safety Executive’s requirements, though a surprising number fall short. It’s not just about minimising the risk of slips, falls, and trips for both customers and staff, but preventing employees from developing work-related conditions, such as back pain or dermatitis, and even regulating temperature and ventilation in the workplace. Again, a revamp of your premises is a chance to give customers a better overall experience, boost the business’s profits, as well as improve the safety and wellbeing of your staff.

7) Valuing customers – old and new
Finally, amid any business owner’s perennial search for new custom, don’t forget the regulars you already have. It’s often said it costs five times more to win a customer than to retain one. I doubt this is an exact calculation, but the message is right – keep the loyalty of those who already value your business. The best outcome is ensuring your bar is fresh, relevant, and busy, attracting new clientele, while keeping the old guard happy. If you can manage that, you really will have a winning formula.

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