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Advantages of Buying an Established Bar or Night Club Compared to Building One From Scratch
Many of us have dreamt of owning our own bar, club or restaurant. In reality, only the brave will take the leap and make it happen.
So, for the brave ones out there getting ready to take a leap of faith and invest into your dream bar or club, you need to consider whether to purchase an established business or build one from scratch.
Here are a few major advantages in purchasing an existing bar or club
- You can often purchase an existing business significantly less than what is required for a new start up. Quite often inexperienced operators will spend hundreds of thousands or even millions of dollars establishing a beautiful venue. However, they underestimate the work involved and that it can take many years to see a return on their investment.
- Less financial risk, especially if you’re buying an existing business that is profitable.
- You can usually walk in on the day of settlement and start trading opposed to all the red tape you need to go through with a new venue.
- Financing is quite often easier. With the tough lending criteria at present, buying a business with decent trading history will be assessed more favorably by the majority of lenders.
- You have an opportunity to capitalise on the existing customer base of the bar or club you are purchasing. Especially if you are purchasing a reasonably successful establishment with a great reputation.
- If the lease is assigned, the rent can be significantly less than a new lease. It is also very difficult in popular destinations to find suitable locations. Finding suitable locations and negotiating leases can often take many months, and this hard work has been already taken care of when purchasing an established venue.
- If purchasing a going concern business, (a business that is profitable), you have positive cash flow immediately!
Disadvantages in purchasing an existing bar or club
- With an assets purchase, (a business that is not profitable, or marginally profitable, and needs a new concept), the poor reputation of the prior business can often carry over with the new owner and take months to rectify a new image to the public.
- There is often greater maintenance and repair costs due to the age of the physical assets.
- A brand new bar or club projects a fresh new image to the market and attracts more interest initially, but this is not always the case.
In my opinion, it is more advantageous to buy an existing bar or club versus developing a new concept from scratch. Most importantly, the risk factor is greatly minimised. Often an established business just requires tweaking or a new management structure to drive the profitability.
Article written by Dustin Slypen
Business Broker - LINK Brisbane
M: 0425 121 788