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In the liquor industry, your overhead costs make up the majority of your liabilities. Everything you stock on your shelves is money that is tied up until it sells, and even the shelves themselves and the building they sit in are expenses you need to pay attention to. Unfortunately, these things are all the cost of doing business, so there is only so much you can do to reduce or eliminate these burdens. The good news is that there are a few tricks of the trade that will help your keep your costs as low as possible while ensuring you have everything you need to make big profits. Here are 5 ways to cut bar expenses to help you improve your bottom line.
Renegotiate Your Lease or Rental Terms
Whether it’s a result of the recent recession or your neighborhood is changing in size or demographics, a noticeable decline in business isn’t usually confined to one specific industry. Typically, if one local business is feeling the pinch, all of the other local businesses are experiencing something similar. The good news is that you can take advantage of that situation and get someone to help share the burden by renegotiating your lease or rental terms on your building. Simply approach the property owner with a proposition to see if you can get a lower monthly rate rather than having to board up the windows. Chances are they’d rather you pay a little less than vacate for good, or at least they may extend your lease at the current rate so you can save money on the backend.
Watch Your Staff Perks Closely
Though it is an industry standard to give your staff certain perks such as a discounted meal each day they work, you need to make sure this policy isn’t being exploited. The idea is to have your employees pay just slightly over cost so they get a good deal while you still make a tiny bit of money. However, many employees abuse this privilege and either don’t pay for their meals or receive much larger portions than are appropriate. Though you must offer these perks to attract the best talent, enforcing your policies is vital to ensure it doesn’t cut into your profits.
Watch Your Inventory
One of the first things you should have done when you opened your bar is to put theft and shrinkage controls in place. If you haven’t done that yet, then chances are you’ve already lost a bunch of profit and need to get on your game. You need to keep tabs on everything from employee theft to product delivery shortages to stay profitable, as well as knowing what items may be trending and what items make you the most money. Without controls in place, you are flying blind and have no idea how profitable each drink you sell actually is.
Deal With Your Suppliers
If you’re looking to sell more of a specific product, your supplier will likely be on board to sell more too. The bar business has a “trickle up” effect, meaning the supplier hurts more than an individual bar if sales start to slow. Whether you are looking to make a deal with a liquor distributor or the company that supplies your bottle sparklers to increase your margins, there is almost always a way to make it happen. It may involve buying a slightly larger quantity of a given item, but that commitment should come with a much lower cost so you can market those items at a huge discount.
Order Wisely
Though a good price on a certain type of liquor if you order a huge quantity may seem like a good idea, you need to consider how quickly you can flip it and the amount of storage space it will take up. Most bars only have a certain amount of space available for back stock, so you need to make sure that you’re using it for your most popular items. The best method is to keep only the quantities on hand that you need for a specific type of liquor and order larger quantities of your most popular spirits to increase your margins. That way, you’re maximizing your margins while not overstocking your back room.
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