You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple step guide to starting your nightclub. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
STEP 1: Plan your Business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How long it will take you to break even?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a nightclub?
If you are starting on a limited budget the best way to get going is to make a deal with an existing nightclub as a “promoter” that gives you a certain night per month (or per week if it gets popular), to hold a special event at the club. The club may charge a minimum bar cost that you must pay for the night, so you can lose money if nobody shows up, but this is a modest way to see if you can attract a crowd for your party ideas.
If you cannot attract a crowd for one night at an existing club, you may need to rethink your ability to be in this business.
The second best way is to buy an existing club that is already successful. For this opportunity you will pay at least 10 times the annual profits to buy the club, not counting the costs of the real estate if it is included.
If you are going to start a new club the costs vary widely depending on where it is. A modest neighborhood club could be around $100,000 for the fixtures, supplies, and equipment needed to get started. Other clubs, like the biggest ones in New York, cost tens of millions of dollars to open.
The basic equipment needed is:
- Refrigerator(s) - $1,000 stand-alone style to $10,000 walk-in style
- Freezer(s) - $2,000 stand-alone style to $20,000 walk-in style
- Bottle Cooler(s) - $1,000 each
- Bar Cooler(s) - $1,5000 each
- Under-bar sink(s) - $900 each
- Draft beer equipment - $500 for each station
- Soda making equipment - $300 for each pouring station
- Ice Machine(s) - $2,500 each
- Glass racks and speed rails - $200 each
- Glass washing machine(s) - $1,400 each
- Bar Blender(s) - $250 each
- Glassware in various sizes - $25 per 24 glasses
- Bar ($4,000 to $10,000)
- Bar stools - $75 each
- Bar lighting - $1,000
- Bar supplies – Utensils, Condiments etc. $300
- Soda, beer, and liquor stock inventory - $10,000 to $50,000 (replaced daily as used)
Read our nightclub purchasing guide to learn about the materials and equipment you'll need to start a nightclub, how much to budget, and where to make purchases.
What are the ongoing expenses for a nightclub?
The ongoing expenses are the labor costs, food costs (if food is offered), beverage costs, rent, utilities, marketing, and insurance.
Who is the target market?
The best customers are the ones who have lots of money and do not mind spending it on a wild night out. A handful of these big spenders can make a club very profitable. Attracting famous people is very good because they attract others.
How does a nightclub make money?
Selling drinks, possibly food, charging for admission, and, where possible, for special seating and/or special services offered to the customers. These special services can be anything from “lap dances” at strip clubs to bottle service (customers buy a full bottle of liquor to be exclusively served to them for a special price) at VIP tables in the best spots right next to the entertainment.
How much can you charge customers?
Drinks sell at the lowest prices of $1 per glass for cheap beer or a shot of cheap liquor up to hundreds of dollars for a bottle of fine wine, expensive champagne, and “top-shelf” alcohol. In the main American cities, the average drink sale is $2.50 for a beer and $5.00 for liquor drinks. Blended drinks sell for around $10.00 each.
The key is to manage the “PC,” which stand for the percentage of cost. The lower the PC the more profits for the club. The typical PCs according to nightclub.com are, 17% for liquor, 23 to 25% for bottled beer, 21% to 22% for draft beer, 30% for wine, and 6% to 8% for sodas. The average PC is 21%. Based on the average, if the customer pays $3 for a drink the PC of 21% means that the contents to make that drink must cost $0.63 or less for the operations of the nightclub to normally make a profit.
The cover charge to enter a club can be a modest $5 to $10 per person with this money used to help pay the bands and/or the DJ. It can be much higher for special clubs like strip clubs that charge a $25+ entry fee and even higher for special live music/performance events, which sell out due to the limited seating/capacity.
How much profit can a nightclub make?
A typical smaller club will make its owner $1,000 to $5,000 per week ($50,000 to $250,000 per year). A large metropolitan club can make $50,000 profit in a single night.
How can you make your business more profitable?
Make it more popular and host a variety of events as well as get into some of the sideline businesses that are club related, such as:
- Comedy Night: Hosting comedian(s) is an additional source of revenue if you charge for tickets.
- Live Music: Getting famous bands to play in smaller venues and charge premium tickets prices to see them in an intimate setting is a great way to make money.
- Open Mike/ Karaoke Night – Allow the customers to provide the entertainment.
- Private Parties – Rent the nightclub out or part of it for private parties.
- Record Audio and Video of the Bands Performance – Offer live recording services to bands that perform at the club.
- Live Radio Shows – Associate with a local radio station and produce a live radio show.
What will you name your business?
Choosing the right name is very important. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your nightclub is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
For most small businesses forming an LLC is a great option, but if you still want to weigh all your options check our our article, What Structure Should I Choose for My Business?
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
State & Local Business Licensing Requirements
Several state and local licenses will be needed to operate a nightclub.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
For more information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
In order to play music in a nightclub, permission must be acquired from the composer or license holder. Typically, it is possible to obtain a “blanket” license allowing a businesses to play music owned by a large catalog of artists and recording studios. Such licenses can be obtained from Performance Rights Organizations, such as ASCAP and BMI.
Food and Liquor Licensing
If you sell food, you will need licensing from a local health department, which will require your business to pass a health inspection.
In addition, food establishments are randomly inspected by the local health department on a regular basis. These inspections will check for compliance with local health laws, typically related to prevention of food contamination.
To sell alcohol at a bar, a liquor license will be required. The type of license that must be obtained will vary depending on the kind of liquor you intend to serve, whether or not you intend to sell food, the percentage of your sales that will come from alcohol vs. food, the average amount of people that will be served per night, the bar’s closing time, and whether or not consumers will be allowed to take their alcohol to-go. Licenses will also vary by state and individual state pages should be referenced during the application process.
More information on obtaining a liquor license can be found here
Certificate of Occupancy
A nightclub business is always run out of a physical location. Businesses operating out of a physical location typically require a Certificate of Occupancy (CO). A CO confirms that all building codes, zoning laws and government regulations have been met.
- If you plan to lease a location:
- It is generally the landlord’s responsibility to obtain a CO.
- Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a nightclub business.
- After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
- If you plan to purchase or build a location:
- You will be responsible for obtaining a valid CO from a local government authority.
- Review all building codes and zoning requirements for you business’ location to ensure your Nightclub business will be in compliance and able to obtain a CO.
STEP 7: Get Business Insurance
Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
How to promote & market a nightclub
The best promotion is word-of-mouth. Have successful events at the nightclub and everyone will tell their friends. Local advertising is modestly effective, such as putting up flyers. Internet marketing works for some clubs in tourist areas. Handing out cards and having others do this is very effective. These cards offer discounts, free drinks, free early entry, two-for-one specials, VIP treatment (no entry lines), and other incentives for people to come to a club.
For example, the Las Vegas strip is jam-packed with people handing out cards to the tourists that pass by. In Las Vegas, this type of marketing effort is oversaturated, but in other markets, these invitation cards work extremely well.
Recommended: Get started with local advertising for your business with a $300 credit from Yelp.
How to keep customers coming back
A cover may be modest on regular nights and it may not start until a certain time such as after 10 p.m. This means the customers that come early enough get in free. Putting on special events with famous bands is a way to attract attention. It is good to have the club located in the music scene area of the city, such as those areas found in Atlanta, the live music scene in Austin, Texas or Nashville, Tennessee.
Retaining customers is about treating people so special that they always feel like VIPs and then they will come back again and again. It is important to treat regular customers well, remember their names if they come back and if they return frequently give them the VIP treatment. This special treatment can be things like free drinks and invitations to exclusive private areas of the club that the general public is not allowed to enter.
STEP 9: Establish your Web Presence
A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Start A Nightclub In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
A nightclub business is for people who do not mind hard work, yet also want to have fun.
It can be very lucrative depending on the club’s size, its location, and its popularity. Nightclub owners have to be “night” people. This means they like staying up all night and sleeping in the day. They also need to be very popular and know many other people who are able to attract customers to their club.
What happens during a typical day at a nightclub?
Getting out of bed after a wild night is the hardest part. As a nightclub owner, you will need to be awake during some of the regular business hours to take care of the things that normally happen only during the daytime, such as ordering supplies, making bank deposits, and getting change from the bank.
Your main job is to find trustworthy people to help you and then watch them very carefully to prevent stealing. You will find this very difficult to do because there are dozens of way people will steal from the club and it is the owner’s job to catch them and replace with, hopefully, a more honest person.
If you have a good club manager to run the operations who does not take more than his or her fair (and agreed upon) share, then you will be able to enjoy this business. Your other main job is to promote the club. Most night club owners become somewhat famous in the city where the club is located because they go around town constantly inviting people to come to their club. At the club, they are often the life of the party. This sounds great to some people; however, you need to have a super-human stamina to party every night, which is what is required for this business.
What are some skills and experiences that will help you build a successful nightclub?
If you are a gregarious person and are always throwing parties at your house, which cause the police to be called because there are too many people, the nightclub business is a perfect way to start a business from this crowd and reduce the trouble from the police showing up at your home.
What is the growth potential for a nightclub?
Fortunes have been made (and lost) in the nightclub business. A nightclub can be a simple place that caters to a niche target market, such as a modest nightclub on the outskirts of a small rural town or a nightclub can be a multi-million dollar extravaganza in the heart of New York City or at the most popular hotel/casinos in Las Vegas that cater to the rich and famous party-goers, such as the Palms (where Paris Hilton and many Hollywood stars hang out) and others.
TRUiC's YouTube Channel
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One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
How and when to build a team
It is impossible to run a nightclub alone. You will need to start with an experienced team and likely will have to “poach” some of your best staff from other clubs. Anyone that is a good worker and also has lots of friends that follow them where they go clubbing is a perfect type of person to hire as a club ambassador to help bring people to the club.
Read our nightclub hiring guide to learn about the different roles a nightclub typically fills, how much to budget for employee salaries, and how to build your team exactly how you want it.