What to Consider Before Buying a Bar

Purchasing a Providence or Boston-area business is a serious decision with many factors to consider, especially if you’re interested in buying a bar in Boston or Providence. Being a barkeep isn’t just about creating craft cocktails and knocking back a few rounds with your friends. It’s hard work in a competitive industry. But it can be a lucrative endeavor if you know what you’re doing. According to the Distilled Spirits Council, a national trade association, in the U.S., the distilled spirits industry generates about $100 billion in economic activity every year.

Is Buying a Bar Right for You?

If you’re a first-time buyer, be aware that purchasing a business is much different than other investments like houses or cars. Here are few things to consider before buying a bar in Boston and the surrounding areas.

Market Share

In most places, including the Boston area, competition is tough for bars. Not only are bars competing against other bars, but they are also competing with other forms of entertainment.

Before buying a bar in Boston or Providence, research the local market. If the bar is within proximity to lots of other pubs and taverns, you’ll want to consider this before finalizing the sale. If the nearness to similar establishments doesn’t put you off, you’ll need to develop a strong marketing plan to stand out from the crowd. Is your location surround by beer pubs and sports bars? Differentiate your bar by creating a nightclub or cocktail lounge atmosphere.

Type of Sale

Bar equipment, including coolers, ice machines, and draft beer systems, can cost owners a pretty penny. So, it is important to determine what the sale is comprised of during negotiations.

To evaluate the bar’s financial details, begin by asking whether the building is owned or leased. If the current owner purchased the building, ask if they are willing to sell the real estate. Is the current owner merely renting the space? You’ll need to review the lease agreement and conditions for transferring the lease.

Next, you’ll need to establish whether the transaction is a stock or asset sale. With asset sales, the seller retains responsibility for the liabilities and sells only certain assets. In a stock sale, the deal consists of the entire legal entity. A stock sale incorporates the interests, assets, and liabilities of the bar, as well as the shares of company stock.

At this point in the buying process, it is advisable to hire a professional business broker to help you navigate the terms of the agreement, and make sure you’re getting your money’s worth.

Valuations

Even before taking equipment costs into consideration, entering the bar industry can be pricey. The failure rate for bars is high, and because of that, some desperate bar owners may be willing to take a low offer just to get out of the business. Regardless, you’ll want to ask how they arrived at their asking price. Businesses are usually either priced by a formal valuation or with a Professional Broker Opinion of Value (BOV).

Verifying how the asking price was reached will give you a better sense of bargaining power. If the current owner landed on the asking price without a professional valuation, you could bet that the price is negotiable.

Contact Sunbelt of Boston & Providence to learn more about buying a bar and to find a Providence or Boston-area bar for sale. Our advisors can find the right bar for you and guide you through the entire negotiation and acquisition process.