How to Tell if a Bar for Sale is a Good Investment
Reports show that there are more than 70,000 bars and nightclubs in the U.S. This proves that if you’re dreaming of owning a bar, you’re in excellent company. When you’re ready to make your dream become a reality, you have two options. You can launch a bar from the ground up. You can also purchase an existing bar that is for sale. But how do you know if a bar for sale is a good investment? Here’s a checklist of things to consider.
The location of a bar often determines whether it is a worthwhile investment. Although plenty of bars off-the-beaten paths have proven to be a sound investment, the majority will prove to underperform. A bar for sale in an area with good pedestrian and vehicular traffic is likelier to succeed. To that end, bars near employment hubs or mixed-use commercial/residential areas often have a built-in clientele. However, it is important to note that a built-in customer base is not enough to keep a bar thriving. You’ll need excellent management to ensure your bar eventually becomes a sound investment.
The infrastructure of a bar you’re considering buying can have a dramatic impact on your ability to turn a profit sooner rather than later. Buying a bar only to find out that you need to replace the HVAC system, the plumbing, the roof, the coolers, and other key components can set you back significantly. This does not mean that a bar for sale that needs cosmetic work is not a worthwhile investment. But you should have a clear understanding of what you’ll need to invest in immediately before you agree to buy a bar for sale.
Existing Lease Agreement
Unless you’re buying a bar and the building it is housed in, you’ll want to do a thorough review of the existing lease. How long are you locked in at the current rate? What if any, maximum increases should you expect in the next five or ten years?
Buying a bar for sale without reviewing its current licenses is risky. The last thing you need as a new bar owner is to find out that your new bar has an expired liquor license or that your staff isn’t licensed to serve alcohol. Before agreeing to buy a bar for sale, ensure that your business broker has confirmed that all licenses are up to date.
Current Documented Sales
If you encounter a seller who claims that the business is much more profitable than it appears on paper, proceed with extreme caution. When working to determine if a particular bar will be a promising investment, you should rely exclusively on reported sales.
A bar that offers obvious growth potential is a bar that may be an excellent investment. For example, a long-established bar located near new construction of housing or mixed-use spaces can offer the benefits of a built-in clientele, and unlimited opportunities to create more loyal customers.
Bars Can Provide Incredible ROI
In addition to being a great deal of fun, becoming a bar owner can bring in a lot of money. Indeed, alcohol may be marked up as much as 500%, netting owners a legitimate windfall. Gross profit margins may reach 80%. However, before investing in a bar, particularly for the first time, be sure you understand how costly it will be to run. The time and money invested into a bar are both going to be significant.
Get Help Finding a Bar for Sale in Oregon
Northwest Business Sales and Appraisals is a longstanding business broker specializing in food and beverage business purchases and sales in Oregon. For a confidential consultation, contact us today at 541-968-2728.