The nightclub business is a high-risk and short lifespan business that continues to attract horde of entrepreneurs. It is an expensive venture with a high mortality rate; yet the attraction of a nightclub business continues to lure many startup entrepreneurs.
The nightclub business is tough, made even more difficult by today’s demanding and fickle marketplace. What is hot today maybe gone two years from now. Some are not even lucky to be open in six-months; others stay open but run consistently in the red. The nightclub business is too risky to learn by trial-and error – you may find that your funds have dwindled before you even have the chance to rectify your mistake.
Key Elements of a Nightclub Business
Nightclubs typically appeal to the following major market segments – the single professionals, young adults, tourists and business travelers, and college students. The most successful nightclubs are those that are able to attract multiple customer segments and provide crossover appeal.
The key elements of the Nightclub’s concept are as follows:
Entertainment and Fun
Nightclubs have long been the purveyor of fun and entertainment in the evenings. The types of entertainment often provided by nightclub businesses include live bands, live national acts, DJ/Emcees, theme-based parties, and for the lower end, jukebox/coin-operated systems. Entertainment also includes gaming facilities such as pool table, darts, video games or pinball machines. Some nightclubs, particularly in Asian countries, even provide special rooms for karaoke singing.
Distinctive design features
The right décor spells the difference between a filled-to-the-brim nightspot and an empty one. The décor embodies the concept of the nightclub. It will set the tone as to the type of the club, clientele it is after, and even the menu. A mahogany and leather designed club maybe targeted to upper class patrons, while a mirror-and-smoke designed club may be after the young, hip and dance aficionados. Many clubs are also going for the high-tech look with video screens, as well as state-of-the-art lighting and lasers.
Layout of the Nightclub
A growing number of nightclubs are targeting various audiences, which requires different rooms and layout in the club. A nightclub can have an elaborate dance floor in the center with a DJ booth. Spectator seating are also provided that can accommodate anywhere from 30 to 500 guests depending on the size of the club. Many clubs also offer private party seating such as cordoned-off VIP areas or private rooms intended for special events. Nightclubs also have bars and dining room areas for those who prefer a more relaxing atmosphere.
Location is extremely crucial to the success of a nightclub. It should be located in a place where huge traffic of potential nightclub goers is located. A nightclub located beside a church may attract a smaller clientele than one located besides a hip bar. Also check out the presence of competition in the area, and whether the location may be able to absorb the addition of another nightclub.
Quality of service is a critical ingredient of every nightclub. Customers demand attention and friendly service, while feeling safe and protected inside your premises. If you want your club to be known for the quality of its service, you need to have an adequate-to-high ratio of service personnel to customers (1 service personnel to every 35 customers, or even better). You must also provide continuous training to your staff with regards to customer management and relationships.
Food quality is also an important ingredient to the success of a nightclub. You can offer a simple menu with traditional bar appetizers such as nachos or wings while customers drink, dance or simply enjoy themselves. Some nightclubs even go as far as offering food similar to that found in conventional dining establishments.
Start-up Requirements of a Nightclub Business
Any new business requires extensive start-up operations, more so for a nightclub business where investments can be sizeable. You will need to collect demographic information to ensure that your target market matches with the demographic profile of your location, especially if you are investing in a building (constructing your own building and not just leasing).
You also need to understand and fulfill all the licensing and regulatory requirements. Be prepared to devote considerable time (and money) to getting the licenses you need. Getting a liquor license is often a very lengthy paperwork process. You need to have all your financial and development plans in order. Check with your government or county licensing offices; some will help walk you through the process.
Above all, you need to be able to provide comprehensive financial data if you want to invite and convince investors your nightclub business is a good idea. Getting financing for a nightclub business will be very difficult. For one, it is a very, very risky venture. Even if you consider your nightclub concept as “hot”, this is one business that banks normally shun, or are extremely conservative in their lending approach. If you are to be successful, you are going to have to prove a number of things to them:
That you have successful experience in this field. You need to show to banks, other lending institutions and even potential investors that you have a strong management team in place that knows how to operate and run a nightclub business profitably. If you have limited or no experience, then find someone who has strong credentials and bring them on board.
Banks may bankroll your business, but you will need to provide a significant amount of your own equity (may range from 35% to 50%). Plus, you will need sufficiently strong personal guarantees.
Unfortunately for those looking for free money, grant monies whether from federal or private organizations are not available for this type of business.
For more information on the nightclub business, read: the following books:
- The Professional Bar & Beverage Manager’s Handbook: How to Open and Operate a Financially Successful Bar, Tavern, and Nightclub With Companion CD-ROM
- How to Setup and Operate a Successful Nightclub: An Entrepreneur’s Guide to Running a Profitable Club Operation
- Start Your Own Bar and Club (StartUp Series)
- Running a Bar For Dummies
- How to Become a Nightclub Promoter
- Start-up Costs and Marketing a Nightclub Business
- How to Succeed in the Nightclub Business
- Finding the Right Location for Your Small Business
- How to Raise Money to Finance a Franchise
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