Starting a bar is an exciting venture that blends a passion for hospitality and mixology with sharp business savvy. The industry pulls in tens of billions of dollars annually, fueled by a steady demand for social hubs, whether for after-work drinks, weekend nightlife, or catching the big game.
This guide will take you through the practical steps of validating your concept, securing funding, obtaining the right licenses, and selecting a location to help you launch a successful bar business in the U.S.
Step 1: Validate your concept and plan your budget
Market and competitor analysis
Start by analyzing foot traffic at potential locations during different times. Visit on a Tuesday evening and a Saturday night. Also, review local demographic data from your city’s planning department website to understand your potential customer base.
Look at what nearby bars offer. You can use resources like Nielsen CGA for high-level industry reports. For direct competitor insights, study their menus, pricing, and customer reviews on platforms like Yelp or Google Maps.
A frequent misstep is creating a concept that is too similar to established bars. Your analysis should reveal a specific gap. Perhaps the area lacks a quiet cocktail lounge or a sports bar with a great food menu.
Budgeting your startup costs
With your concept refined, you can map out your finances. Startup costs for a bar vary widely based on location and size, but you can expect a range from $100,000 to over $350,000. Here is a typical breakdown.
- Liquor License: $3,000 - $15,000+ (varies greatly by state and city)
- Initial Inventory: $10,000 - $25,000
- Renovations and Design: $50,000 - $200,000+
- Furniture and Equipment: $20,000 - $60,000
Many new owners underestimate renovation expenses. It is a good idea to get at least three quotes from contractors and add a 15-20% contingency fund to your total budget. This buffer handles unexpected issues without derailing your launch.
Here are 3 immediate steps to take:
- Spend one week observing foot traffic and competitor activity in your target neighborhood.
- Create a detailed profile of two direct competitors, noting their strengths and weaknesses.
- Draft a preliminary budget that includes a 20% contingency fund for unexpected costs.
Step 2: Secure your legal structure and licenses
Choose your business entity
Most bar owners form a Limited Liability Company (LLC). This structure protects your personal assets from business debts and legal issues. Profits pass through to your personal tax return, which simplifies filing compared to a corporation that has more complex tax rules.
Navigate the licensing maze
With your LLC formed, you can tackle licensing. You will need approvals at the federal, state, and local levels. The process can be lengthy, so it is smart to begin at least six months before you plan to open your doors.
Federally, you must register with the Alcohol and Tobacco Tax and Trade Bureau (TTB). Your main focus, however, will be your state’s Alcohol Beverage Control (ABC) board. This agency issues the actual liquor license, which is often the most significant hurdle.
Many new owners are surprised by the timeline and cost for the state license. It can range from $3,000 to over $100,000 depending on your state and license type (e.g., beer and wine vs. full liquor). Processing can take 4-8 months.
Finally, you will need local permits. These typically include:
- A city or county business license
- A health permit from the local health department
- A certificate of occupancy to ensure building safety
Here are 4 immediate steps to take:
- Decide on an LLC structure and file the paperwork with your Secretary of State.
- Visit your state’s ABC board website to find license types and application forms.
- Start your federal registration with the TTB online.
- Contact your city’s planning department for a list of required local permits.
Step 3: Set up your insurance and manage risk
With your legal structure in place, you can now protect your investment. Your two most important policies are general liability and liquor liability. The latter covers claims related to intoxicated patrons, a specific risk for bars that many new owners underestimate.
You should look for coverage of at least $1 million per occurrence and $2 million aggregate. Annual premiums for a combined liability package typically run from $3,000 to $7,500, depending on your bar’s size and sales volume.
You will also need property insurance to cover your building and equipment against fire or theft. If you have staff, workers’ compensation is mandatory in nearly every state. It covers medical bills and lost wages for employee injuries.
Choose a specialized insurance provider
Work with an agent who understands the bar industry. Generalist agents may not secure the right coverage, especially for unique risks like assault and battery claims. Consider providers like Insureon, The Hartford, or the Food Liability Insurance Program (FLIP) to get started with quotes.
Here are 4 immediate steps to take:
- Request quotes for a $1M/$2M general and liquor liability policy.
- Confirm your state’s workers’ compensation requirements.
- Contact an insurance broker who specializes in the hospitality industry.
- Ask about specific assault and battery coverage within your liability options.
Step 4: Select your location and equipment
Find the right space
Aim for a space between 1,500 and 3,500 square feet. This size accommodates a bar, seating, and back-of-house operations. Check that the property has commercial zoning that allows for a tavern or restaurant with a liquor license. Your city’s planning department can confirm this.
When you find a spot, negotiate the lease terms. You might want to ask for a Tenant Improvement (TI) allowance. This is money from the landlord to help pay for your build-out. Also, secure a long-term lease of 5-10 years with options to renew.
A mistake some new owners make is to accept a short lease. This can expose you to a large rent hike just as your bar becomes popular. Lock in your rate to protect your future profitability.
Purchase your equipment
With your location secured, you can buy your equipment. Focus on durable, commercial-grade items. You can find new and used gear from suppliers like WebstaurantStore or local restaurant supply depots. Here is what you can expect to spend on major items.
- POS System: $1,200 - $5,000
- Commercial Ice Machine: $2,000 - $6,000
- Draft Beer System: $3,000 - $8,000+
- Glassware and Bar Tools: $1,500 - $4,000
When it comes to alcohol, you will work with distributors. They often have minimum order requirements, so start with a focused inventory. You can always expand your selection later.
Here are 4 immediate steps to take:
- Research commercial zoning laws in two target neighborhoods.
- Ask a commercial real estate agent for a sample lease to review.
- Create a list of necessary equipment and get quotes from two suppliers.
- Contact a local beverage distributor to understand their ordering process.
Step 5: Set up your payment processing
Your bar needs a fast, reliable way to handle payments. Most customers use cards, so your system must process transactions quickly during a Friday night rush. You should look for a solution that lets you open, manage, and split tabs with ease.
Many payment providers charge between 2.5% and 3.5% per transaction, plus hardware and monthly fees. A mistake some new owners make is signing a long-term contract for a bulky system they do not fully need, which locks them into high costs.
For bars that need to accept payments on-site or on-the-go, JIM offers a streamlined solution. With JIM, you can accept debit, credit, and digital wallets directly through your smartphone—just tap and done. It is a simple way to begin without complex hardware.
At just 1.99% per transaction with no hidden costs, it is particularly useful to take payments in an outdoor seating area or for a cover charge at the door. This rate is often lower than the typical 2.5% to 3.5% you might find with other systems.
Getting started is straightforward:
- Get Started: Download the JIM app for iOS.
- Make a Sale: Type the sales amount, hit sell, and ask your customer to tap their card or device on your phone.
- Access Funds: Your money is available right on your JIM card as soon as the sale is done—no waiting for bank transfers.
Here are 3 immediate steps to take:
- Compare the transaction fees of two traditional payment systems with the 1.99% rate from JIM.
- List your specific payment needs, such as tab management and outdoor service.
- Download the JIM app to explore its features on your phone.
Step 6: Secure funding and manage your finances
Explore funding options
With your budget in hand, you can approach lenders. The Small Business Administration (SBA) 7(a) loan is a popular choice. Lenders typically want to see a 20-30% owner investment. Loans can range from $50,000 to over $350,000 with interest rates often a few points above prime.
Your business plan is your main sales document for a loan. It must include detailed three-year financial projections. Some new owners fail to secure funds because their projections are not well-researched. Lenders need to see you have done your homework.
Calculate your working capital
You will need a cash reserve to cover the first six months of operation. This working capital pays for rent, payroll, and inventory before your revenue becomes consistent. A safe target is between $50,000 and $100,000, depending on your bar’s scale.
A frequent misstep is to spend the entire loan on the build-out, which leaves no cash for operations. You should set aside your working capital first. This ensures you can weather a slow opening period without financial stress.
Here are 3 immediate steps to take:
- Draft three-year financial projections for your business plan.
- Research the requirements for an SBA 7(a) loan on the official website.
- Calculate six months of operating expenses to set your working capital goal.
Step 7: Hire your team and set up operations
Build your core team
Your staff is the face of your business. For a small bar, you will need a bartender to serve guests and a barback to keep everything stocked. You might also hire a bar manager to handle scheduling and inventory. Expect to pay bartenders around $15 per hour plus tips.
Many new owners learn the hard way that an untrained bartender can be a liability. Ensure your staff has state-required alcohol server training, such as a TIPS or ServSafe Alcohol certification. This protects your license and shows you run a professional operation.
Streamline daily management
To manage shifts without headaches, you can use scheduling software like 7shifts or Homebase. These platforms help you build schedules, track hours, and communicate with your team from one place. They are built for the fast pace of hospitality.
As you plan, aim to keep labor costs between 25% and 35% of your total revenue. This is a healthy benchmark for profitability in the bar industry. Exceeding this range can quickly eat into your profits, so monitor it closely as you grow.
Here are 4 immediate steps to take:
- Draft job descriptions for a bartender and a barback with clear responsibilities.
- Check your state’s ABC board website for mandatory alcohol server certifications.
- Explore scheduling software like 7shifts or Homebase to see which fits your needs.
- Set a target labor cost of 30% within your financial projections.
Step 8: Market your bar and attract customers
Establish your digital storefront
Start with a Google Business Profile. Upload high-quality photos of your interior, drinks, and food. Encourage early customers to leave reviews, as this directly impacts your local search ranking. This is your digital front door.
Next, create an Instagram account to showcase your bar’s personality. Post daily specials, behind-the-scenes content, and event announcements. A consistent posting schedule, perhaps three to five times a week, keeps your audience engaged.
Launch opening week promotions
A well-planned happy hour is a classic for a reason. You could offer it from 4-6 PM on weekdays with $2 off draft beers and well drinks. This attracts the after-work crowd and builds regulars.
Consider hosting events like a weekly trivia night or live acoustic music. Some owners make the mistake of not tracking event success. A simple way to measure this is to ask patrons at the door how they heard about you.
For paid ads, a local Facebook campaign targeting users within a 5-mile radius can be effective. Aim for a customer acquisition cost (CAC) under $25 for your initial campaigns. This helps you manage your marketing spend wisely.
Here are 4 immediate steps to take:
- Set up and fully populate your Google Business Profile with photos.
- Plan your first week’s happy hour specials and prices.
- Contact a local trivia host or musician to inquire about rates.
- Outline a simple Facebook ad campaign targeting your local area.
Step 9: Price your menu for profit
Calculate your pour cost
Your pour cost is the percentage of a drink’s price that covers the cost of its ingredients. The industry standard is 18-24%. To find it, divide the cost of goods sold (COGS) by the revenue from that item. This metric shows you exactly how profitable each drink is.
For example, if a 750ml bottle of whiskey costs you $30 and has 25 one-ounce pours, each pour costs $1.20. If you sell that drink for $8, your pour cost is 15%. Many new owners forget to factor in waste, so add 5-10% to your COGS for spillage.
Set your menu prices
With your costs clear, you can set prices. A common strategy is to apply a standard markup. Aim for a 400-500% markup on liquor and wine, and around 300% on draft beer. A beer keg that costs you $1.50 per pint could sell for $6.
Also, analyze menus from three to four direct competitors. You do not have to match their prices, but you should know where you stand. Some owners make the mistake of pricing too low to compete, which can hurt their brand perception and profitability.
Here are 4 immediate steps to take:
- Calculate the pour cost for your top five liquors and five draft beers.
- Analyze the drink menus and prices of three direct competitors.
- Set initial prices for your core menu using a 400% liquor markup.
- Add a 5% waste allowance to your cost calculations for all drinks.
Step 10: Maintain quality and scale your operations
Maintain quality standards
Consistency is what builds a loyal customer base. You should track your pour cost variance monthly. A figure below 2% shows your bartenders pour accurately and waste is low. This is a key indicator of operational health.
Also, keep a close eye on customer feedback. You can monitor your Google and Yelp reviews weekly. Aim to maintain at least a 4.5-star average rating. Respond to all reviews, both positive and negative, to show you value customer input.
Plan for growth
With your quality consistent, you can think about expansion. Many owners get this timing wrong because they rely on feelings instead of data. You should consider hiring more staff when your bartenders regularly serve over 75 guests per shift.
When you are at 90% capacity every Friday and Saturday for three straight months, it might be time to expand your space or open a second location. To fund this, you could reinvest 10-15% of your net profits back into the business.
Software like BevSpot or Craftable can help manage this growth. These platforms integrate with your POS to automate inventory tracking and ordering, which saves significant time as you scale.
Here are 4 immediate steps to take:
- Set a target pour cost variance of under 2% for your monthly reports.
- Monitor your Google and Yelp ratings weekly to maintain a 4.5-star average.
- Define your hiring trigger, such as when a bartender serves over 75 guests per shift.
- Research inventory management software like BevSpot or Craftable.
Opening a bar is a journey of many steps, from licenses to location. Remember, the heart of your business will be the atmosphere you create. People come for drinks but stay for the community. You have the blueprint, now go build your local landmark.
As you manage your new space, a simple payment setup helps. JIM turns your phone into a card reader with a flat 1.99% fee, no extra hardware needed. It keeps transactions smooth so you can focus on your guests. Download JIM to get started.
