Running a pub can be very rewarding. “At the top end, a very successful lease can make up to six figures [a year]. I would probably say that most pubs make a mid-range net profit. When you factor in the free accommodation this becomes very attractive,” says John Walker, deputy director of the British Institute of Innkeepers (BII).
However, he adds: “At the bottom end, there are lots of pubs struggling to make a profit.”
You therefore need to manage your accounts as closely as your cellar.
Obviously, a small pub with little passing trade will enjoy a lot less business than one on a main road, or a country pub in a picturesque village.
As a rule of thumb, the BII suggests the net profit should be around 20%-25% of turnover.
If your pub is simply too small and business too slow to generate the kind of income you need at this rate, you may need to look very carefully at your business plans. Real financial security can only come from a healthy business.
Do you need to reinvest?
Unless your pub is one of the fortunate few that are busy for as long as you want to keep the doors open, those plans should probably include some positive changes. Food – both lunchtime and evening – has become a major source of income for many pubs. Events and themed evenings could help bring in trade too.
Your premises might also benefit from a refit.
The challenge is that all these changes demand investment. Some, like a new kitchen, could demand a great deal of it. Getting the funding you need to make the most of your business could be a real problem.
Finding a funding solution
Why should raising money be a problem for a business with assets and a sound business plan?
Simply put, as a pub landlord, you represent an unattractive proposition to many lenders. Problems across the licensed trade have meant that many traditional providers of business funding simply won’t want to talk to you.
The sympathetic bank manager has gone the way of the pint of mild. Your business may simply not be generating enough money to justify the risk from the bank’s perspective.
But it’s not all doom and gloom. There are many other forms of business finance.
Rangewell have an online service designed to first help you find the type of funding that matches your needs, and then select the most competitive quote from over 300 lenders.
The service is free with no obligation. So if you are thinking about investing in your business to give yourself some financial security, it could be a very good place to start.
Next essential read: three reasons to get a commercial property to buy a pub.