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Expert Answers to Biz Questions

Listen in! Pick up some expert advice to a reader's question that we selected from CyberSchmooz.

color business bar

The Biz Question

We're two college kids with little money to start a business with our own money, but we feel that our idea will be a big hit. We want to open up a non-alcoholic nightclub in our town. There are no other non-alcoholic clubs within a 60-mile radius; however, there are 38 alcohol bars in our town. We've asked a few people if they thought it was a good idea and they thought it would be and also said that they would go. Our questions, though, are: How do we go about getting started? Will the bank give us a loan? Do you think this is a good idea? Will it make money? Please help us.

BJ & Kris

Answer from our Guest Expert Jim Chesky of Jim Chesky & Associates, Marketing Communications

Dear BJ & Kris,

Wow! You two must love to tackle tough tasks. The idea of having your own club is an exciting one, and non-alcohol clubs, like non-smoking clubs, are gaining in popularity as people realize that alcohol and cigarettes aren't the only key ingredients for having a fun time. However, your business idea comes with its own set of challenges and pitfalls.

The first of which is don't let the bright lights and glamour of having your own nightclub overpower your business sense. To make this biz recipe succeed, focus on the nuts-and-bolts aspect of your business and not all the glitz.

How Do You Get Started?

Do your marketing homework. Many clubs don't make it because they never found a market. So, ask yourselves some basic, yet very important questions, like--

  • Who's your market?
  • What's your target age group?
  • How are people going to use your club to enhance their social lives?

Think about what hook you're going to use to get people to come to your club.

  • Will they come to your club to meet people? To dance? To hear music?
  • Are you trying for a real nightclub, serving food and soft drinks, or just soft drinks and coffee?
  • Or are we talking about a coffee house that's open late at night and has some live entertainment?
  • Will it also offer non-smoking amenities?

By the way, what age group are you going to cater to? If you're talking college age (18-23) and not younger teens (13-17), make sure you have enough of a market available to make your club succeed. Your local colleges and school districts can tell you their enrollment totals.

If you're going after that teenagers crowd, consider earlier hours for younger kids, with later hours for older ones. Consider setting limits on ages, curfews, dress codes, gang colors, etc.

Next, do a business plan. This means figuring how much money you'll need to beg, borrow and steal to open your doors and keep them open. How many people will have to come to your club, and how much will they have to spend for you to break even each night you are open? Be realistic. (Remember all the nights you went out and nursed one drink all night long?) Expenses like paying a band, staff salaries, rent, equipment leases, insurance, utilities, licensing fees have to be covered. The SBA has oodles of publications on doing a business plan. Use the SBA shamelessly; their website (www.sba.gov) is a great starting point.

I'm not even going to get into partnership problems. I'm going to assume you'll take the time to agree on ground rules for working together, hiring staff, backing each other up with employee discipline, 86ing rowdy customers, who'll work what shifts doing what work. Sometimes, it's what left unsaid that causes the most problems with partners. So think about getting a partnership agreement written up soon to hammer out the "minor" details, such as your partnership type and if you'll incorporate or not.

Will the bank give us a loan?

No.

They'll loan you money, but only to the extent that you could get a personal loan and can demonstrate with or without income from the club you can and will repay the loan. Even then, you'll probably need collateral.

Let's be more creative. Start by talking to your suppliers. You may be surprised how much help you can find with equipment loans, good advice, and promotional money and product to get you started. Talk to community organizations. I knew a non-alcohol club that received money from a couple churches because the club promised to have a free teen dance each Friday night and have it chaperoned by church members. This particular item may not be right for you, but you get the idea. (For more financing leads, drop by Idea Cafe's Financing Your Business section.)

A Good Idea for a Good Idea

Speaking of ideas, here's one. Pre-sell a particular night in advance to a sponsor. The sponsor gets to reach its target audience, and you get an audience-building, bottom-line contributing, event 4 nights a week. (You probably wouldn't sell out Friday or Saturday night.)

Who would you sell to?

Radio stations, record companies, soft drink bottlers, clothing manufactures, and depending on how badly I want to hire the grads from your college, employment recruiting firms might buy several nights. Try anybody who wants to target your audience. Remember, the reason you're doing this is to guarantee cash flow for your club, so sell out the next 13 weeks if you can!

Here's an example. Mountain Dew sponsors a radical night where people are invited to participate in an indoor triathlon. (Remember, all this stuff has to take place inside your club.) The first 100 get in free, contest entrants get Mountain Dew T-shirts, win six packs of Mountain Dew, trophies, etc.-- all supplied by Mountain Dew.

Okay, there's a lot more we could talk about, but this is enough for you to chew on for now. Creating the perfect nightclub is an exciting challenge. A hot club, like a hot restaurant, may seem like they were created with magic, but it's really hard work that makes it happen.

Good Luck!

Jim Chesky

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