When it comes down to investigating why restaurants or bars don’t survive the first few years of opening, finances is almost always the main reason or part of it. There’s no single business that doesn’t require resources to set up, no matter how little.

The bulk of success lies in managing resources well and finance is indeed a valuable resource that can make or mar any business. Most restaurant or bar business starts off on a good note until all the problems of bad management and financial woes crop up.

This makes them die a natural death before they have even started. But really, restaurant and bars are among the top businesses with the highest rate of failure.

Having a successful restaurant or bar is not impossible if you can avoid the following five financial mistakes restaurants and bars make:

1. Spending the capital on trivial things 

Your capital includes all your resources, particularly the financial resource you invest in the restaurant or bar.

The  capital is very important and an equally important point is spending it wisely. If you do not have enough capital, borrowing the right amount of capital is essential.

Whether it is borrowed or invested it does not really matter. If you spend it on trivial things such as expensive furnishings or hiring more staff than you need it can burn through quick. Careful planning on how to go about spending the capital cannot be overemphasized.  Before making capital expenditures you determing what sort of return you can expect from that purchase.  Is the $10,000 chandelier going to bring in more customers? Maybe if it is an overall fit with your asthetic, but you better have a plan before you buy it.

If you start off with huge capital and shrewdness doesn’t go into dispensing it, both business and capital go down the drain.

2. Not pricing your restaurant menu properly 

This is one major aspect of managing a restaurant most people don’t take into account. Or they just copy the pricing of their competition not paying close attention to their own unique financial situation.

This mostly happens when you don’t have a financial strategy in place. pricing your menu the right way requires you to put the cost of food preparation (from buying to placing it before a customer), payroll and rent into consideration.

Pricing your menu is not a one-time thing, it must be done on a continous basis because prices change. Many restaurant and countless bars have closed doors due to poor menu pricing.

Putting this into consideration can make you avoid the most fatal financial pitfall.

3. Not maintaining good accounting practices

For every business, a sound bookkeeping practices would let you know when you are running a profit or loss.

As a restaurant owner or manager, you shouldn’t leave the running of the restaurant to staff without establishing a record-keeping habit. That way you can keep track of profit and loss by just looking at the financial records, and be able to tell if you are able buy the things you need, pay employees and still have some extra money left.

If you can only do two out of the three things, then you know you should be looking for ways to save costs.

Most restaurants and bars that keep a sound financial account of all the money coming and going out of their account are able to keep track of profit and loss margin.

It also helps to detect theft from a fraudulent manager or bad staff management. Usually, a company that keeps a healthy financial record can almost run on its own, without the interference of the owner, which is a vital ingredient for expansion.

Once a good financial system has been established, the business runs like a well-oiled machine.

4. Not keeping an inventory

If you are the type that just buys food items you might need without checking first, chances are you might have an excess which would tie up cash and lead to excess spoilage.

It’s best to buy just enough of the things you need at a time but every owner knows that is not possible.  There will be waste and spoilage, that is the reality, but proper inventory procedures and analytics will help minimize that.

When you take stock of what you have, you know what needs to be bought without spending money unnecessarily and goes hand in hand with proper food costing.

It’s advisable to take at minimum a weekly inventory of products you have, so you don’t end up ordering too many products. A daily inventory is ideal but a weekly check would should be the bare minimum.

5. Properly staffing

Employee wages are the other half of your prime costs, but can bankrupt and business just as fast.  You need to properly schedule and hire the correct number of staff.  You won’t keep good employees if they keep getting cut early and don’t make enough money.   You will have poor customer satisfaction and slow turnover if you are understaffed for the demand.

A well thought out and analytically driven scheduling system is a must.  It can help your GM  the correct staffing decisions keeping you, your employees and customers satisfied.


Managing a restaurant is no joke; it takes a lot of effort and attention. In any business, it’s best to always stay in tune with changing trends such as faster service, the use of technology (which constantly changes by the way) and great customer service. There is really nothing new in the restaurant and bar business, the only things that keep customers coming back are great customer service and great food.