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Comment by waterlesscloud | Hacker News Reader

My parents bought an existing bar back in 1993, held it for 3 years and sold it in 1996. I managed it for them while completing my CS degree.

Licensing is a complex topic that varies considerably by location. By state, and then by county or municipality.

Overhead can be relatively low, depending on what you have in mind. You need some basic infrastructure- ice machine, coolers, CO2 systems, etc. Insurance is a bit different for a bar than other businesses, obviously, but not too bad. Inventory is a low cost compared to your cash flow, as is labor since pretty much everyone will be minimum wage plus tips. Maintenance isn't too bad.

Basically a well-run bar is a license to print money. You sell drinks for several multiples of your cost of goods.

Most bars I knew of that had trouble had it due to owners that didn't know what they were doing, at all, in terms of business, or more commonly had a drinking/substance problem.

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I own a retail business and I'm surprised you left out rent in your list of overhead costs.

You can start in a crap location and gradually build up a loyal customer base. That's cheap and can eventually be lucrative if you're really good at service and marketing, but in many ways you're fighting against the tide - you're inconvenient to your customers and easily forgotten.

A well-run bar in a good location will surely bring in good revenue, but the rent will almost inevitably be expensive as well.

I did leave out rent. In our case it was a fairly big number, but we had a fairly large, rambling building. But it was still small compared to our cash flow.

I'd also say that bars are far, far less location-sensitive than retail. You can get away with a bar being a little off the beaten path, and if you're smart, you make that part of the appeal. That works well with a semi-vice industry...

I do want to add this-

We tried to open a nightclub a couple years into owning the bar, and we failed miserably. A nightclub is a whole different beast from a bar.

I think the three main reasons we failed were

1- We spent too little money on it. There are clubs, notably the really underground dance clubs, that can get away with being a dark room with a good sound/light system and nothing else. Pretty much any other kind fo club needs to spend a fair amount on decor.

2- The space was too small. Related to the above. Again, maybe an underground club gets away with small spaces, but most need a large space with lots of nooks and crannies.

3- We had no clue how to market a nightclub. A bar needs to feel like it's apart from the world, a sort of refuge in a way, but a club needs to have some sort of aura in addition to that. That's a complicated thing to build up, and we didn't know how and we didn't put in the effort to learn.

An opportunity came up near the end of the bar run to buy what had been one of the mega-nightclubs in town in the 70s-80s. It had gone through several failed iterations in the decade since, and was going for a relatively cheap price. The deal never solidified, and in the end it's probably a good thing it didn't. Someone could have revived the mystique, I think, but it couldn't have been us.

A few things to note after having run a club night a while back:

1) We actually managed to go as cheap as possible with our venture. The scene that we were targeting, Gothic/Industrial, is already a hard to come by group of people compared to the larger genres out there, and we even had competition on the same night; however without large decor changes, or even spending more than $500 on opening night, we were able to make a decent enough of a profit. I think marketing may be the key factor here.

2) The space we found was very small - in fact it was a hard to locate bar that was looking for something to take over their Saturday nights. One of the issues we had with the bar owner was decor, which in the end had to be left untouched - thus our Goth/Industrial night took place in a Caribbean/Tiki style bar.

3) In regards to marketing a nightclub - as previously mentioned by mschwar99, social butterfly types are a great asset here. By getting promoters to hand out flyers (stamped with their promotion id/name, and the promoters targeting very obvious members of our target scene) you can get a good amount of patrons in. By presenting the flyers, the customers will get free entrance, and the actual promoters get a cut based on the amount of patrons they bring in. Your promoters will work extra hard to get the word out as it's purely commission based work at that point.

Sadly, in our case, the reasons we failed were mostly attributed to the NYC smoking ban in bars, the incorrect cross streets being printed on our flyers, as well as midterms taking up the time of our customers.

This is a little rosy. Some issues with bars include: (1) 90% of your revenue comes from two nights a week; (2) Given all the cash, employee theft is a real problem; (3) Lose-it-all liability. Think about all the ways drunks can die/seriously injure themselves... and about how you'll get blamed every time. I'm not saying it wouldn't be a good investment, but it's hardly a license to print money.

1- Our revenue was a little more spread out than that. We did certain promotions that boosted us on otherwise off night- Wednesday was about 80% of Friday, and Sunday was our biggest night of the week. It just took a little planning. 2- Yes, which is why I made a good manager, being blood related to the owners. And the employees were watched carefully. 3- I can't recall hearing of a bar losing it all in liability unless they were extremely irresponsible.

Can you provide details of what type of promotions you implemented, specifically Sunday?

Wednesday and Sunday we had live acts, essentially house bands who built a following just by being a routine as much as anything else. Common tactic, and it works. Wed. night we paid them about $100 each and Sun. about $150 each. We made many times that in additional revenue.

Friday and Saturday nights we had a live DJ for a few hours a night for atmosphere, but I honestly don't think it mattered much one way or the other. People would have showed up anyway.

We tried boosting Mon/Tues night, but nothing made any difference at all on Monday, and the difference on Tuesday didn't cover the costs. We pretty much considered Monday the paying-your-dues night, and had fun amongst ourselves and the handful of regulars and closed at midnight (vs about 2 am on other nights).

One thing about the non-fri/sat nights, there's a definite trend of "them that's gots, gets" in the bar scenes on those nights. People go where people are, so it's not a linear function on those nights, it's discontinuous. Once you have a crowd, you get a crowd. Weekends are different, there's crowds everywhere.

No ASCAP shakedowns?

Yeah, there was. I remember acting outraged and complaining loudly to them about it, then paying what was really a tiny fee anyway.

We hold user group sessions (Java and Siebel) at a local bar/restaurant on Monday evenings. It's great for us as it's nice and quiet. It may not be a huge boost to their revenue, but it is consistent. It may be worth looking into encouraging that type of activity on your dead Mondays.

I'm curious -- Why did your parents sell the bar after just three years?

Same reason they bought it, an opportunity too good to pass up presented itself. They bought the bar because the previous owner got himself into trouble with the IRS and had to raise cash in a matter of weeks. So they got a deal. They sold when a well-heeled regular customer of the bar offered them considerably more than anyone else would have. Besides, I was about to graduate college and they would have had to have been more hands-on then. They also had used the contacts they made in the bar industry to set up a network of ATMs that generated a good deal of cash floow with very little work. They make good money from that network to this day.

This story makes me happy. There is opportunity out there.

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