5 Things Bars Have Taught Us About Business

A screeching ring pierces an otherwise silent 4:30 a.m Sunday morning. Dan rolls over and sees his then-wife, Mel, groggily hit accept on her iPhone. She listens to one side of a conversation that escalates quickly. Then she hangs up.

“What was that about?” Dan asks, hoping to turn over and go back to sleep.

“That was Josh. He’s freaking out,” she says. “A guy was just shot right outside our bar.”

It’s August of 2009, and they’re two months in as bar owners. Welcome to the business.

Probably everyone who’s ever enjoyed a night out in a popular bar has entertained this fleeting thought: “Wouldn’t it be fun to own a bar?” Just as anyone who has had an idea for a new product has entertained the notion of creating a new startup. These two seemingly unrelated dreams (nightmares?) have a lot more in common than you’d think.

We’ve been crazy enough to own and work at both startups and bars, and after years of experience, we’ve come to this conclusion: Bars are startups on steroids. Bar owners and their employees fight and scrap for every last customer, desperately trying to survive the day the way a startup tries to survive for the quarter. That makes bars a fantastic (and fun!) learning tool and microcosm for anyone who wants to learn how a business really works.

We know a fair share about bars and business. Dan co-founded interactive design firms Hard Candy Shell and Charming Robot, and has helped launch and re-launch products with dozens of brands you know, including Hulu, Saturday Night Live, Billboard and Gawker. More to the point, he’s also owned two NYC bars, Destination and Fool’s Gold, making him the industry insider for this article.

Bob is a business journalist who’s written two New York Times best sellers. He’s also a musician who plays about 100 bar gigs every year. He’s the outside observer. From behind a drum kit he’s seen bars and businesses thrive and fail because they’ve hit or missed some basic things.

Together, we think we’ve found a series of principles you can apply to your business, or your life. (You can read more about them on our new blog BarStoolMBA.com). These principles apply whether you are running a business or work for someone who does. Here are five highlights.

1. The Experience Is Your Brand

The concept of the bar should be clear: dive, cocktail, sports, lounge, tavern, pub, etc. And there should be a reason for this place to exist where it is. When Dan opened Destination, he found the location before he knew the concept. To refine what exactly his group was going to create, he looked around to see who the competition was.

Within two blocks, there were about 12 other bars: a great craft beer spot, a sports bar, an Irish Pub, a small German place, a couple of late night clubs, and two super divey bars, where the regulars lined up at 8 a.m. for their daily fix of well whiskey and PBRs. But there wasn’t a real neighborhood joint. That was the opening. He had to create a space that immediately evoked friendliness, warmth and comfort, so from the moment someone peeped into the windows, they knew they were welcome.

This isn’t done easily (or everyone would do it), and every detail matters. There should be a reason for everything and why it exists where it does: Think, “Why those particular tables or stools?”

This is clearly demonstrated with the exploding flat-screen TV phenomenon. Often bars will put in TVs everywhere, just to make sure they can show sports, believing that will draw a crowd. But what if the screens don’t fit your concept? What if you’re an intimate wine bar or high-end cocktail bar? Then people become confused, and the screens become distracting.

Many times, this impulsive, nonsensical design is the result of copycatting. We see copycatting with interactive design clients all the time; it comes from a place of fear. A few years ago, every project we worked on (no matter the industry) started with a client asking us to design their homepage to look like Pinterest. When we’d ask why, they’d inevitably say, “Pinterest has a ton of users, so we should use their design, so we do too.” This, of course, didn’t take into account that Pinterest had a specific audience, and their design had a specific purpose that doesn’t work for everyone.

It’s really challenging to take a stand with any product experience because it’s easy to just stick with the status quo or to copycat. But in a world where competition is so fierce, and customers have so many choices, you either stick to your guns or stick your head out to get chopped off.

2. The Power of the Well-Timed Free Gift

The single hardest thing for any business to do is get someone to walk in the door — literally, or virtually. But the second hardest thing is to get that someone to stay there.

Every business has this “stay a while” problem, but bars solved it long ago with the “buyback.” The free drink. The term suggests that the institution of the bar somehow extends some kind of formal credit to the drinker for buying X amount of drinks. And, in fact, some bars do operate on a strict three-to-one formula, with free drinks entered into the point of sale systems and inventory carefully tracked. (Other bars are restricted or prohibited entirely by state laws when it comes to giving away free drinks, so it’s a good idea to know which ones apply in your area.) But it’s far better when bartenders have wide discretion to offer that free drink at just the right moment: right when a customer is about to leave.

When treated to a free drink….The patron, now staring at a full glass, smiles wryly. Maybe they offer mild protest. But in a moment, their shoulders relax, the coat stays put on the chair, and they’re in for another drink. And almost certainly, another two — because almost no one leaves after getting a free drink.

Here’s a digital world example: when Dan worked on Hulu, the question came up of what happens when a user searches for a show that Hulu didn’t have. Normal business logic would suggest you just tell people you don’t have that show and suggest “similar” shows that the user clearly isn’t looking for. Think — “You searched for ‘Lost’. We don’t have that, but here are some other Sci-Fi shows you might enjoy: ‘Star Trek’, ‘Buck Rogers’, ‘Lost in Space’.”

Nothing about the message is helpful or delightful to the user.

Instead, Hulu bucked the trend of keeping people on its site no matter what and told users, “Sorry, we don’t have ‘Lost’, but you can go watch it at ABC.com.” The goal was to inspire loyalty, and make sure Hulu was top of mind whenever consumers thought of watching any show online. It worked.

3. Everyone Will Steal From You

Cash. Theft. Trust. Dishonesty. Disloyalty. Disrespect. Fairness. Unpaid labor. So many big notions arise from small, everyday bar transactions. With so much cash changing hands so quickly, bars are ripe for theft. But let’s face it , almost all workplaces are. Woe to the bar owner — or any manager — who is ignorant of all these dynamics.

But “stealing” is hard to define. Taking a pen from the supply closet isn’t stealing; taking a laptop is. But what about doing side gigs on company time? Or what about on personal time but using company equipment? And don’t forget, making employees work extra without paying them is “stealing,” too — and may even be stealing, without the quotes, depending on applicable labor laws.

Stealing — or should we say “stealing” — very simply finds its roots in team satisfaction.

Keeping employees happy is not a hard thing. Most of the time the unhappiness comes from a lack of respect: respect of that person’s time, knowledge, experience or just them as a person.

Set expectations for a standard workday (we all have to work late sometimes), encourage people to take vacation, listen to their ideas thoughtfully and honestly, give constructive feedback, compliment people’s good work. The good will you create will live on and protect the business, even after employees move on.

4. The Loneliness Business

Most people’s motivations are pretty primal. After they have food, water and shelter, they want connection. Yes, they want a new television, or a pair of shoes, or a ride, or a piece of software or a beer. But they really want a bridge — a bridge to other people. They want love. Or at least like. Lots and lots of like.

Sell someone a thing, and they’ll drop you the moment they find that thing somewhere else. Solve someone’s “like” problem, someone’s loneliness problem, and you don’t just have a customer, you have a connection.

This is most obvious in bars, of course. Bars don’t sell liquor; they sell social lubricant. Bud Light tastes the same everywhere. And it’s about 90% cheaper to drink it alone in the basement. But (most) people would rather pay $6 for glass of the stuff … and a chance at getting some likes. That means if your patron is getting only beer at your bar, they’ll be bar hopping to somewhere else pretty shortly. The difference between “one-and-done” and a whole night of fun could be as simple as a cheery hello and just a few likes.

On the other hand, some companies and industries suffer from reverse goodwill. Unless you’ve been living under a rock, you know that people tend to hate their cable companies so much that cord-cutting has become the new mortgage burning.

Companies that forget about the importance of connection are ripe for disruption. Yes, Uber is cheap and convenient. But Uber has risen to power so quickly in large part because many people really hate taxis, and often for good reason. Lots of people have a story of getting taken for a ride.

Treat your friends like that, and you’re going to be lonely. Treat your customers like that, and your balance sheet is going to get pretty lonely, too.

5. The Fixer

Every bar owner faces an incredible moment, usually within a few weeks of opening. After fretting over every last detail — the napkin holders, the beer taps, the aprons that staff wear — a customer sh***s all over the bathroom. Literally all over it. And someone has to clean it up.

Here’s the thing: You probably don’t have any employees who are sitting around doing nothing. All of them have assigned tasks for the day, and all of those tasks are probably essential. But you know what? Your bar is coming to a grinding halt if that bathroom is unusable.

One thing we see often in bars (and delis and restaurants) is that they function well when someone — usually an on-the-ball manager or owner — floats around and is available to fix crises as they arise. A credit card malfunction. A difficult customer. A wrong food order. A disgusting bathroom. Whatever. On the other hand, whenever a place has cut personnel so close to the bone that everyone is busy all the time, a single “exception condition” grinds the place to a halt and pisses off everyone: the customers, the employees. Most important, it makes people at the back of the line walk out and not spend money.

Again, if every person in the place is busy every second, no one is available to put out the fire. But places that obsessively control employee costs miss out on this simple opportunity cost equation: that $15-an-hour you save is lost through one lost sale.

The Fixer is a bit like the Microsoft Program Manager concept. Part boss, part secretary, 100% devoted to clearing a path for employees to do what they were hired to do. Problem Solver. Fixer. If you don’t have a fixer, we promise, things will break and your business will lose business very quickly.

[Editor’s Note: Business debts, including business credit cards, can wind up hurting your personal credit, since many lenders require a personal guarantee before they’ll award financing. You can see if any of your business debts are affecting your credit by viewing two of your credit scores for free each month on Credit.com.]

This story is an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its partners.

Image: zoranm