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  • #987433
    Sellty
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    *** My thread seemed to of got eaten by an internet black hole and doesn’t appear in the ‘Starting a Business’ forums so I’m reposting this. Please don’t kill me admins ***

    Hello everyone!

    So my husband has this brilliant idea of running a Bourbon Bar with American style food in Perth and while the idea is sound I’m concerned that no bank or investor is going to give us a loan/seed money because we are essentially broke and have no experience in the industry. We are living on the bare bones of our bottoms as a family of 4 and we have only 2 assests; 2 fully paid off cars. We rent, we owe $4k to my parents, we have no savings, but apart from that we have no debt. I’ve done a credit check on both of us and even after my husband got a $30k tax debt in his 20’s our credit rating is positive. While that is good, we really only have about $50 spare at the end of the week after paying all the things (rent, food, loan repayment to parents, health insurance, etc).

    I’ve read every single book in my local library about business (no really, I have) and when they talk about getting start-up capital they assume that you have an asset you can borrow the business loan against, namely your house or investments. The books that say you don’t need much to start a business assume you are running an work-from-home online business where all you need is a website and an email address or that you can borrow money from family and friends. After the GFC I don’t see how lending from family and friends who are equally struggling to make ends meet is really a good idea. There’s no book that tells me how to get a loan/seed money when you are middle class poor.

    So in short, I’m concerned that my husband is never going to get a loan/seed money because they’ll take one look at our finances and his lack of experience and run the other way. Any advice on how you can start a business when you are kinda broke?

    #1162674
    MH08
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    Hi Sellty and welcome!

    It seems you’re in the perfect position to start a business because no matter what happens you will only be in the same position as before without much sacrifice apart from being away from family during the process.

    What I can tell you in the mind as a investor myself, if the business plan is sound and I can see you have no other option but to push yourself to the next level and get this business off the ground then other investors will see this.

    Also don’t take into consideration (not all of it anyway) in what business books and seminar spruikers tell you on how you can start a business with a pigeon and piece of paper without the pen because it’s simply not true in the real world, that’s if your starting a technology company which is the stereotype of entrepreneur this days, sad really, even then it’s not true starting with $100, bring on the reality TV show proving this works ;).

    If I were you, go to investors instead of banks, people that have to much money in there SMSF and are willing to invest or even goto a friend that owns a successful restaurant or HNWI (High Net Worth Individual) willing to hear you out, network, network and network at events that have HNWI’s there and when your there don’t even pitch your idea, get to know them first, you will be far more successful if they get to know you as a person and become a friend. I actually dislike people that pitch me, it’s like you know, before at least having dinner.

    But what your starting will immediately have heavy costs, supply of beverages, food, refrigeration (and problems with it), licensing should only be between $500 to $2000 depending on hours and volume, you also have to really understand your market and get to know distributors very well (like myself) on who supply the beverage industry, the difference from suppliers varies massively and this will either break you or make you believe it not.

    [What ever business you take over, do not buy there stock, not matter how good you think it is, it’s probably the biggest waste of money in buying in any business in the hospitality industry].

    The business plan will have to contain very credible information on costs involved and who are the suppliers, sundry costs, food costs and essentially the idea (they have to feel excited about it), to capture the minds of investors you have to be an absolute professional and know your business from the inside out, create relationships with all your suppliers, go meet them at their warehousing they will walk you through there showrooms, but don’t be rattled what they say, a lot of suppliers out there make it out like they are the only ones supplying it, that’s not true, some of sales team are guilty of this at times, competition is more then cut-throat, it’s cut your body in half :).

    To bypass this issue contact the company of the alcohol you wish to buy directly to find the actual distributor, they can only give you the best price, this will be difficult because you may have to go through each bottle but overall you will come ahead providing that you did this to your investors, it’s an extra step to show you really want this and they will be grateful if you went through 200 bottles just to find the licences distributor, they want to see very handwork, because the invested amount needs to work just as hard.

    A little more information, from experience in supplying beverage and alcohol industry our account sizes are things of legends but we know they don’t go broke, but on the other hand a retail bar with food is a whole different story, make sure you research other businesses that have attempted what your beginning and understand what brought them down, this will give you a clearer insight to not follow that direction. Also if your not the party type or cheery type to organise big events and I’m not talking about the family BBQ because your potato salad is excellent you may have to outsource an events planning company to provide this, another thing, I’m not sure if you know this but bars are very faceless organisations, where in one time you could say you met the owner of a club or bar? Hmm.. Something to think about.

    Cheers, all the best.

    #1162675
    Sellty
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    Thanks for the info! That’s a whole lot better than ‘no it can’t be done’ which is what I was kinda expecting. Looks like I need to research everything!

    #1162676
    Anonymous
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    Hi Sellty,

    It’s not strictly relevant to your question about capital, but you might be interested to know that whenever people join the forum asking about starting a cafe, bar or restaurant without having had any hospitality experience, the resounding answer from the people around here who know the industry well is always, ‘Go and get a job in the industry first’.

    It might be something to think about while you’re figuring out the next step.

    Good luck,
    Jayne

    #1162677
    Sellty
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    So if my husband wants to run a bar he should get a job as what exactly? Please don’t think I’m asking this question with attitude or sass because I’m not! I’m just wondering where exactly he should start because there are so many jobs in hospitality. Bar tender? Bar manager? Serving wench? He does have the man boobs to pull that off >.<

    #1162678
    Prom N
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    Hi Sellty

    I agree with Jayne. It’s exactly the same as what my Dad use to tell me before starting a business. If you want to open a small bar .. go work in a small bar. Choose the best one you can find!

    However, they might require you some experience in hospitality but once you in you will be able to learn the process from the inside out. Ask around for how things work :) Observe how they manage their business and staffs.

    Good luck!

    Prom.

    #1162679
    MH08
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    I don’t think you would need to work in a bar, because bars are pretty simple it’s more the core principals of owning a food and bar business that you would have to know. Maybe get advice from a bar and restaurant owner that wouldn’t a competitor.

    The core is parts would be, Menu (advice from a chef), range of alcohol (which you can sit at a bar write everything down). The chef is the core of everything restaurant/cafe, if they aren’t any good then it will follow in your food, research bar food such the menus, gourmet burgers, chips, salads and other commodity items, it’s usually food that has very high margins to compensate for bottles broken, the cost of a broken vodka bottle hurts.

    Management if you don’t have the time, allocate at least $75k to $100K for a bar manager and then staff, which would probably be yourselves at the start.

    If you acquire CCA products or Schweppes understand that when your new, you will need to pay COD and if you miss the run it will be next week or next run when you get your stock. This will go for all your stock because distributors are well aware that people go broke fast and every body in the distribution game will know your business, if you don’t pay or late paying, don’t know how to order all that. Depending on your bar size, don’t be surprised that filling it will cost anywhere between $7.5k to $15K alone, alcohol for bars is usually bought by the box and current price wholesale for Belevedere Vodka is $63.00 with 12 in box. Moet Chandon GOLD is around $147 per unit (excluding GST of course), box will have 12, this bottle retails for around $400 per unit.

    Decent size bars in Sydney order anywhere around $30K to $70K per month on alcohol, without soft drinks or food, this will depend how busy you are. To give you a comparison, Zeta bar in Sydney orders $120K per month.

    Don’t be shocked if you don’t make significant margins on beer unless it’s on tap, cases cost around $41 to $47 even from a supplier, sometimes they have specials where it’s $37 or blended with their own brands.

    Watch all the dates on your stock, thats key when ordering and just incase you don’t over order. You will also need a very good inventory management system plus POS to secure customers transactions that are managed by a swipe card entry so you can manage how much alcohol is sold. The reason is because one of your employees may have friends come to drink and not charge them.

    Find a good accountant that can be on call all the time (I have one), to provide price breaks and understand reimbursements from suppliers, because you can lose out heaps if you don’t understand how they work.

    Pull all the price lists from every supplier you need, call them up, speak to the reps and visit their showrooms though be careful of products you may have never heard of before, they usually create their own lines and offset beer cheaper so you will buy it.

    Also don’t fall for the free box deals, they do this to provide volume, they make it sound like you get boxes free at a cheaper rate (once dividing the free boxes) but you will be forced to outlay more funds.

    The free box prices divided by the paid boxes can be further negotiated by 15%, once you know the price push for the same price without the volume they say they “won’t do that deal”, just say you going with another supplier and they’ll jump.

    Hope this helps, if not work for a bar but think about it? You’ll work in the bar but everything can be seen from outside, just watch they do, because the bar of the business is exposed the entire time.

    P.S

    If there are any Johnny Walker Blue fans out there, the bottle retails for $220+/-? It wholesales for $83.00. ;)

    Also make sure that refrigeration and ice machines are always working, failure from these units can be catastrophic to the business. Silverchef provide financing for kitchens.

    #1162680
    Tony Manto
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    I agree that you need to get industry experience, before going down this road. It might be the best idea in the world, but without the right execution your chances of failure is very high. There are business people out here called business angels that invest in business ideas. You should create a business plan, including figures, location, images and marketing strategies. Think about how they presell homes and investment apartments, often it’s all done with models, pictures and a good business pitch.

    #1162681
    Sellty
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    Thanks for everyones advice on getting into the industry! It helps because I’m finding it hard getting info on how one exactly goes about opening and running a bar. If you have any books or online resources you could point me to that would be great!

    Back to my original question though, say I go to the banks/investors with a solid business plan, marketing stats and finance figures and I still have zero savings and zero equity, would they laugh and tell us to come back when we have some savings or equity? or would they happily lend us money? I’m asking because most people seem to have savings or equity to borrow against for a business loan and I haven’t really heard anything about people who have nothing get a loan. I guess I’m looking for a broke underdog success story.

    PS. I know I could go to angel investors but I want to try the ol’ fashioned way via business loan with the bank and see if we can manage our own money well before playing with someone elses.

    #1162682
    Dave Gillen – Former FS Concierge
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    Hi Sellty,

    I would never say impossible, but consider that the bank wants assurances. That’s why they want to hold your house or assets as a guarantee, and that’s why they want to see that you have industry or business experience – to give them the confidence they’ll get their money back.

    Now considering you don’t have these things, if there is an answer it will lie in what else you can offer that says this business is almost guaranteed to succeed. So be honest with yourself about whether or how you can guarantee success of the business and repayment of the loan.

    If no luck, just keep in mind that there are more ways than ever to start a business with no or little capital. The bar and grill might not be one of them, but maybe you start another business as a way to reach your larger goal. What is it exactly about the Bourbon Bar that you have a pasion for?

    Maybe you could start a mobile catering biz that does ribs for parties, or ribs and bourbon tasting for bucks nights. Once you have a business with cash flow you have more options, and if it’s well aligned with your larger goal, then you’re more likely to get a loan or investment.

    Read a book called the $100 startup to get more comfortable with the idea of starting a business with no money.

    Good luck!

    Dave

    #1162683
    LucasArthur
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    Sellty, post: 188508 wrote:
    Back to my original question though, say I go to the banks/investors with a solid business plan, marketing stats and finance figures and I still have zero savings and zero equity, would they laugh and tell us to come back when we have some savings or equity? or would they happily lend us money? I’m asking because most people seem to have savings or equity to borrow against for a business loan and I haven’t really heard anything about people who have nothing get a loan. I guess I’m looking for a broke underdog success story.

    Ok, i rarely come into this sort of post as its not my expertise.. although if you want the honest to gods truth about going to a bank and not having any of the following (that you mention) such as savings, equity in a home or assets (cars are not really assets because they are not income derivative nor appreciating in value) a bank will suggest that it would not be ideal in applying for a business loan. This is there polite way of saying WE CAN NOT HELP YOU..

    Why? just so you look at it from there side, a lending institution is taking a risk in lending money and they want assurances of the loan GUARANTEED to be repaid.. There is no ifs or buts, they want to know YOU WILL BE ABLE TO PAY IT.. this means they want to see:
    a: solid savings ability
    b: hurt money (or capital to start) as they DO NOT WANT TO TAKE 100% of the risk
    c: Assets of some sort so they know you are good with money
    d: INDUSTRY EXPERIENCE

    All the above parameters go positively towards applying for a business loan (any loan really) and more so in business. Lending to a business that can go belly up for any number of reasons, such as poor management, economy etc etc is highly volatile and again the banks want assurances (as opposed to lending on a home that they can onsell to cover costs and lending etc)…

    Not trying to kill your hubbies dreams although you need to be on the right path first. As others have said, grab some industry experience to see if you EVEN LIKE the industry, the hours, the people., the customer service etc etc.

    One point i have not read, or overlooked, is not only the fact you may want 100% lending to get into the business then there will be the first few months operating expenses til the business kicks off (if you were in melbourne i would support you as sounds awesome, personally :) ) such as wages, stock, insurances, lease, etc etc etc…

    This is a massive undertaking, and you are doing lots of due diligence by the sounds of if although i strongly believe that a bank will want:
    1. Savings
    2. Large portion of start up coming from you/hubby
    3. Industry experience

    In short, they want HURT MONEY.. they basically want you to feel the pain more than them if the business goes belly up (financially of course)… They will also want to see your past few years Tax Returns which will need to be very healthy.. this is like a fall back scenario if you had to get a wage to pay debts back, although i am not sure you would get this far at this stage..

    Allow me to say though, i am not trying to sound negative just answer your question… Lending ALWAYS needs to favour the lender, not the borrower and i think by even asking this question you may already know (or have a strong inkling) as to the answer..

    Cheers
    Jason

    ps.. sincerely i LOVE THE IDEA.. id hit a restaurant bar like that a few times a week :)

    Jason Ramage | Lucas Arthur Pty Ltd | E: [email protected]   P: 61 3 8324 0344    M: 61 412 244 888
    #1162684
    Sellty
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    That’s a fantastic idea, start a smaller biz to get some assets and to get into the industry, thanks for the advice!

    I have read $100 Startup, if you look in the fine print on the bottom of one of the pages it says the average start-up cost for all the people Chris interviewed is an average of $600. Not that I mind, I still love that book!

    @ SimplyReplica; thanks for telling me the harsh truth, that’s exactly the answer I was looking for

    #1162685
    LucasArthur
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    Hi Sellty,

    NP, although the most important thing i could say to you right now is to NOT LET this post kill you or your hubbies dreams.. Although it may not be a resounding positive response to lending and the likes it may just be a ‘lil’ roadblock that you need to overcome.. Maybe it may take a little longer to get to the point of launching your ideas, although this will also give you time to gain more experience and refine your idea…

    Its never too late, its never a resounding no it is just a turn you were not expecting (or might have been in this case) and adds a little to the timeline that you may not have been expecting.

    Push on, learn more, adapt, grow the idea and research i guess.

    All the best.

    Jason

    Jason Ramage | Lucas Arthur Pty Ltd | E: [email protected]   P: 61 3 8324 0344    M: 61 412 244 888
    #1162686
    Steve the Bartender
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    MH08, post: 188291 wrote:
    I don’t think you would need to work in a bar, because bars are pretty simple

    Not everyone has what it takes to work in a bar and provide efficient service with a smile 24/7. It does take skill and training despite what a lot of people think – there is a big difference between a bartender with no experience and a good bartender that will continue to keep guests happy and coming back for more.

    I think the advice of getting bar/restaurant experience is a MUST. It would be tough getting a managers role immediately without prior experience – apply for a bar or waiter/waitress positon and get the necessary experience so that you can do it right.

    #1162687
    MH08
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    SimplyReplica is spot on with the bank, to put in perspective in what he’s telling you, the banks only asset is you and your savings (or how well you do it).

    $100 dollar start-up, that’s actually funny even with the average of $600.

    Let’s see;

    • Business Registration $120+/-.
    • Consulting (Accountant, Solicitor etc) – $200 to $350.
    • Time off work? – $XXX.XX.
    • Shoe string marketing (facebook, twitter, friends etc) – $150.
    • Domain Registrations – $5 – $15
    • Email Registration – $15 – $30
    • Travel (Fuel, maintenance) – $200.00
    • Sundry – (costs that are incurred personally to you).

    Adds up fast.

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