Nightclubs | A business where 20% continue to make 80% of the money

Why 20% of entertainment venues continue to capture 80% of the money

One question that is posed to me and most notably when in consultation with current venue operators is why some nightclubs are always be busy, no matter how much others in the same area struggle to sustain one to two nights of profitable business.

For many, this is perceived as one big mystery or statistical anomaly of sorts, but I assure you, it's not. These venues are often nestled in an area encompassing a range of other nightclub entertainment offerings.

They're often full earlier in the evening and the party gets off the ground well before midnight. Lineups have been observed as early as 9:00 PM. These venues also seem impervious to the competitive tactics of the surrounding players. And many continue to pose the question why Why WHY!! Why are they so damm busy all the time!! How can they defy the laws of social venue mechanics!

I'll try to shed some perspective here, albeit in rather elementary perspective. If you doubt my explanation, please go and observe one of these venues (if you know of one) after reading this document. Have a close look at a number of the key issues I discuss here. You may find that what was once a mystery is now perceived with a little more clarity.

Nightclubs, bars, lounges, and other types of social entertainment venues fall into two basic categories:

The 80% that struggle with an ill conceived understanding of social entertainment product. These are the ones that proceed with a get lucky type of approach through a mishmash of promos, gimmicks, and endless other antics in hopes of filling a room with profitable, loyal guests. They generally reside amongst several other venues; all of which copy and recycle everything from music, DJ's, promoters, cheap booze specials, and other ideas from each other.

The general perception amongst this group is that the small, conventional demographic of 21, to 24 modest spending consumers are all that exist, so all must share. So typically... On Thursdays, venue 1 is busy… Fridays is venue 2's night, and on Saturday's, venue 3 gets its turn. Moderate to fair traffic can be expected during the off-nights for the other venues.

Despite an explosion in divorce rates, separation rates, many putting off marriage into their early 30's, and an aging population, this majority group of operators appear completely oblivious to this dramatic shift in demographic landscape.

The remaining 15 to 20% of entertainment operators display a very different picture. Mysteriously, many of these operations are consistently busy and VERY profitable. Most will sustain 3 very good nights a week or more, and do not appear to struggle to do so. Ever more interesting is the fact that very little screaming, yelling, and other sorts of hype-based antics are observed within these operations, yet they manage to sustain consistency in both volume traffic flow and profitability.

These rooms do not necessarily encompass millions in sound, lighting, and state of the art décor themes, nor do they desperately seek out outside services to fill their rooms. They don't fiddle with cheap booze specials and do not need to plead for business through freebies and gimmicks.

These entertainment offerings generally draw a diverse demographic, both from an age and stature perspective. Unlike the college kid special, these venues sport a more sophisticated social environment, but not pretentious. Service is top notch and professional, as the result of stringent hiring policies and "properly" trained staff.

These venues are not always 20,000 square foot giants, but midsize 5,000 upwards to 8,000 SF rooms. A strong focus is placed first on looking well beyond the conventional (here today, gone tomorrow) nightclub goer. More focus is placed on the highly diverse demographic of the 21st century and most notably the more profitable middle, to upper middle class stature.

From an operations perspective, these venues are highly focused on creating the ultimate socially interactive experience. More intellectual resources are invested into syncing with the mindset of the customer, as opposed to bombarding them with a barrage of lights, over crowded rooms, and obnoxious music content. The final result is unique offering, which attracts a premium consumer, as opposed to yet another lower shelf drinking hole, which sits on the block with the other 10.

These venues maintain consistent revenue performance over the long term, as opposed to being up one week and down the next three. Competition is not usually a huge factor for these rooms, as they're few and far between.

In essence, these 20% of operators make 80% of the money and largely because they proceed with a defined plan, as opposed to the many that are sold on the idea that opening a nightclub is something anyone can do, just as long as they have a great idea. Education exists for a very good reason and if it really didn't matter, then anyone could become a doctor, lawyer, engineer, or other skilled professional merely by 'thinking' they could.

There was a time when anyone with a grade 6 education could open a club and stand the chance of making a little money. That was 20-years ago... Things have changed considerably since that time and as hundreds of failed operations continue to discover each year.

One way or the other, you need to educate yourself. You're not getting around it… You're not evading it.. And giving complete control of your nightclub to outside sources that encourage you to sit and look dumb while they rake in the bucks for you should be considered the fastest way to chapter 11. There's no such thing as easy money, irrespective of the many who portray the social entertainment business in this light.

If you can grasp that, then your odds of raising venture capital, to launching a successful operation has just increased dramatically. Get it right the first time!