Sunday, July 02, 2006

Calculations

This initial investment 250 thousand is called “key money” in Thailand. Actually, this means you rent the bar from the land lord, but you buy the right to rent (and run) the bar from the previous owner. Naturally, you can sell it the same way.

Comparing with the same type of bars around us we discovered that the asked price was quite good. The seller was a Thai lady who had been running the bar for some six months. As she told, the key money for her was 400 thousand. Why did she want to sell the bar? Apparently, she was a little bit disappointed about this business, maybe she needed money, who knows. Bar owners in the neighborhood told me, that the lady was just too lazy, nothing else.

The monthly rent was set on 20 thousand baht and there was an additional charge for one year contract, 100 thousand.

Additionally, we should pay almost 20 thousand every year for various licences.

It means, for the first year running we will pay 610 thousand altogether. Ok, if we consider that we can get the key money back if selling the bar in the future, the initial investment is 360 thousand.

The regular expenses include salary for the staff. If we have six ladies and a cashier in work every day, we have to pay for each people 3000 baht every month. This is the normal salary in beer bars. It means 252 thousand in a year.

Electricity costs some 2000 baht per month, thus roughly 24’000 baht a year.

Together with the initial payments it makes 636 thousand. Adding unseen expenses, various improvements etc, we can see something around 700…800 thousand baht expenses for one year i. g. 60 thousand for every month approximately.

The profit from selling one beer is around 40 baht.In case of liquors the profit may be a little higher, but most of the customers prefer beer.

If we want to get 800 thousand in one year, we need to get at least 2000 every single day. We can get this amount if we sell 50 beers every day. The bar is open from 5 p.m. until 3 a.m., 10 hours. It means the customers should order minimum of 5 drinks in every hour. It seems to be very reasonable, isn’t it?

Theoretically, yes, but what about practice? Let’s see.

2 comments:

Meister said...

Best of luck with the bar Tõnn Sarv. 2000b doesnt sound like much, and if your as close to walking street as you say. It shouldn't be difficult to recoupe.

Anonymous said...

Excellent blog. Very interesting stuff. I just got back after a month in Pattaya. Must have walked right by your bar. Next time I'm there (based in Japan now) I'll stop by and say hello. Good luck with the business!