In For A Penny In For A Pint: How To Make A Bar Profitable
Running a bar is a concept that is often more complex in reality than many predict. With an endless stream of moving pieces to account for and the average bar running a profit margin of between 10% and 15%, it can be a difficult business to balance.
In its simplest form, when considering how to make a bar profitable, it comes down to two simple factors: increasing revenue and reducing expenses. However, accomplishing these two branches of success is easier said than done.
For this guide, our specialist bar consultants covered some of the ways you can help make your bar more profitable without having to start from scratch.
Select Your Menu Strategically
It may sound obvious, but strategically selecting and pricing the food and drink in your bar menu is an absolute must for improving profit margins. As with all hospitality optimisation strategies, there are a number of factors that can be taken into consideration for this:
Properly Calculate the Margins
Implementing a restaurant pricing strategy begins with accurate profit margins for each item. And higher prices are not necessarily a recipe for higher profits. Using a Cost of Goods Sold (GOGS) formula, combined with a detailed sales report is a good place to start.
By cross-referencing the figures you can accurately determine which of your bar’s offerings – whether it be drink or food – is driving the most profit. Once you have carried this out, use this as a guide for which items on the menu need their prices raised, which can be lowered and which would be better off removed from the menu entirely.
However, restaurant pricing factors don’t stop there. With the myriad of factors that have to be taken into consideration, from evolving customer demographics to brand positioning, ensuring that you regularly carry out this exercise is extremely important.
Looking to make your bar more profitable? Get in touch with our experts and book a free consultation
Item Cost the Menu
Item costing is the practice of including ingredients on your menu that will bring the most profit. This, in turn, helps top better inform profit margin calculations, as per above.
The perfect example for this is cocktails. By mapping out the prices for exact measurements of spirits, mixers and garnishes gives you an accurate overview of your menu to the penny. Using this information, subtly play with the ingredient measurements to see if there is a more profitable recipe available.
Some may worry whether this may affect the flavour or integrity of a cocktail. However, if done properly there will be no detriment to the taste or the experience, but a potentially significant change in profit margin without raising the price of the drink.
Keep the Menu Small
An extensive menu can cause issues for your bar for a number of reasons. Firstly, by keeping your menu small, you are reducing the need to buy extra – often niche – stock or ingredients that commonly end up gathering dust in the cellar. This isn’t to say that you shouldn’t include an obscure ale or extravagant special dish on your bar menu. Just choose wisely and keep a strong backbone of popular choices to balance the menu.
Plus, unless your bar is specialist, most customers don’t want to spend half an hour pondering over an extensive menu. Keeping it brief will help keep the customer happy, reduce serving time and have people returning time and again.
Include More Affordable Options
Not only is keeping your menu succinct smart, but if you are serving food in your establishment then including more affordable options is an effective means of making more money. Remember, affordability does not mean a lack of quality. Select dishes that are not only affordable but also fuss-free, helping you maximise gross profit without sacrificing flavour and ingenuity.
If you are looking to expand your bar’s menu, why not look at our Recipe Store – a selection of dishes designed around the need to help with production and focus on what is really required while keeping in line with the standards and style of your venue.
Set Up A Tax Plan
One obvious way of saving costs in your bar is keeping taxes to a minimum. In order to save as much as you can on taxes, you should have a plan in place that outlines exactly how much you should be paying and when you should be paying it.
The plan should incorporate everything from monthly and annual billing to payroll to taxation of products to potential benefits and exemptions. By having all of this lined out in front of you as you head into each new financial year, you can ensure that you won’t be losing money unnecessarily through paying fees that shouldn’t necessarily apply to you. Soliciting the help of a specialist hospitality accountant is a smart move to make sure that you don’t miss anything.
Utilise the Right Marketing Channels
Getting the right exposure is everything when it comes to running a profitable bar. It doesn’t matter if you run your operations perfectly, if too few people are aware of your existence then you won’t succeed. Running successful marketing campaigns are the best means of increasing footfall and helping increase revenue.
This can include anything from promotions on particular evenings to running social media campaigns to working with affiliates. Innovation is key here in order for you to stand out and make yourself heard. But keeping your target market firmly in mind is of paramount importance.
For example, social media campaigns and classic promotions like 2 for 1 on cocktails are more likely to bring in a younger crowd. However, the likes of a free bottle of wine with dinner is more likely to resonate with an older audience.
It is also important to remember to never neglect your regulars. Return customers are a source of consistent income for any bar, so ensuring that they are well looked after pays dividends.
It is also of paramount importance that marketing activity such as promotions and their cost are taken into consideration to ensure the effect of the business is quantified and all agree that the effect on the business is worth it. This could be a short term drop in margins for longer term gains or a significant immediate increase in top line sales. Data collected during promotions can be key in monitoring the success of a strategy and what to repeat or discard.
Changing tact is important when it comes to making your bar more profitable, but knowing exactly how to do so is easier said than done. At The Engine Room we specialise in offering an commercial view of your bar, building a financial plan that is bespoke to your unique needs. We help formulate a strategy for your venue to help increase profitability and then stay by your side to help see it through.
If you would like advice on how to make your bar more profitable or would like experienced advice on another element of your hospitality business, get in touch with our team.
