Here’s what not to do when you’re opening a new bar

Sven Almenning is back and joined by Amber Almenning for this one — here’s the mistakes you are going to want to avoid making when you open your bar.

Story by Sven and Amber Almenning

Okay, so we’re nearing the end of my little column on how to open your own bar here in Australian Bartender. So far we have covered topics such as rent negotiations, how to brief builders and designers, as well as forecasting and supplier negotiations. Most of the topics so far are the kind of things I have felt that our lives as bartenders and service staff may not have properly prepared us for when we go to open our first venue.

This column is a bit different as rather than diving into the detail of one specific topic I wanted to highlight a few potential ‘pot holes’ that are worth looking out for. Some of these I have fallen into myself (mother f***ing payroll tax), others we have discovered along the way thanks to the help and advice of people who simply are better at this stuff that we are.

In the end, I see myself as a bartender, more than a businessman, and as such the following few headlines are all things that I have had to learn about after starting my own business.

This story is also a bit different in that it is co-written by my amazing wife and business partner Amber Almenning as in truth she is the one who manages and deals with most of these things in our business:

Payroll Tax

Let’s start with the worst tax burden in Australia: The payroll tax. This incredibly daft piece of legislation which was introduced as a Federal tax in 1941. In short payroll tax feels a lot like an additional punishment or disincentive for employers to employ people. 

The way it works is that once you hit a certain level of wage cost for your business you have to start paying a percentage of your wages as payroll tax. This tax does not take into account whether or not your business is profitable or not. And, as wages tend to be the biggest expense for us hospitality operators the payroll tax can add up to quite a significant amount.

Each state has their own thresholds, and their own level of tax. In NSW, I believe the threshold is $750,000 and the tax itself is 5.45%. In Victoria the threshold is $575,00 and the tax rate is 4.85%. (Check out www.payrolltax.gov.au for more information on this)

In addition to feeling like punishment for being a good employer, Payroll Tax tends to play havoc with businesses as you are expanding. If you are opening your second venue for instance, the government gives zero f**ks that this might be an independent business operating separately
to the previous. They will most likely group them, and then hit you with payroll tax should your combined wages be over the limit… And let’s face it if you’re in Melbourne or Sydney two venues will most likely put you over even if
the first did not.

A number of hospitality ventures have ended up in liquidation because of it, so beware….

General Accounting

I hate harping on about the accounting side of the business, as this is my least favourite place to play, but again, be aware of the many pitfalls of not taking this seriously. 

Business Activity Statements (BAS) are something that quite often will trip up young operators. Your accountant should be on top of these, but they don’t manage your actual bank balance or your day to day purchases and it’s easy – especially in the early days – to forget that the money in your bank does not actually all belong to you, or your business.

You can be set up to lodge your BAS monthly, quarterly or annually (the ATO will have the final say in how often you need to pay yours) and includes fun things such as your GST bill, and your PAYG (the tax on your staff’s wages). This one’s easy to forget. When you pay your staff – you have only paid out their net amount. The after-tax amount. You still need to pay the government the tax that you have withheld on their behalf. Managing this may not come easy at first, and there are many a venue owner who have had to go take up additional loans or seek extended credits with supplier in order to meet BAS obligations.

On top of this as well is your staff’s Super. This is a highly regulated area, and it is 100% on the employer to ensure that all payments and records are calculated and managed correctly. There are far too many stories of hospitality operators who have not paid their staff’s super, and just because a lot of hospitality workers are young and may not understand how important this will be to them down the line, does not make it OK to fail in this area. Make it your practice to ALWAYS pay Super and you won’t get caught out owing your staff money you may not be able to pay down the line.

HINT: a great tool here is the ATO portal. Make sure your accountants have given you access to your ATO portal so you can log in at any time and see what you owe. This will help you manage your cash flow in times when cash is tight.

Indemnity Insurance

I know right, the bad news just keeps coming. More expenses. When you sign your lease you’ll be asked to prove you have a public liability insurance, and as you have some cool and expensive stuff in your venue you’ll probably remember to get a contents insurance.

What many forget however is indemnity insurance. In short this protects you, as the director, if your staff do something – say stab a customer – that you have no influence over. This is very important.

Work Cover
This is another expense that’s easy to forget until you have your first claim. Should any of your staff hurt themselves at work; cut themselves on a meat slicer, slip on wet floor, etc, you will be up for the medical costs… If you have work cover, not only will the medical costs be covered, but also a portion of the staff’s salary while they are out of action.

Not having Work-Cover is literally a disaster waiting to happen.

Pay rates and other responsibilities as an employer:

Just because you pay your staff in accordance with what you got paid at your previous venue, does not mean you are doing the right thing. A great number of hospitality venues are simply not meeting the award rates for their staff. 

Some fail to do this simply because they are ignorant of the laws and just don’t know any better. Others try to get away with it in order to save cash, or just don’t care enough about their employees. Try not to be either. Investigate what your obligations are to your staff and make sure you are following the law.

The guidelines for pay rates in hospitality are out-dated and convoluted, however there is a lot of help to be found on the FairWork website or with companies such as Workforce Guardian.

I don’t think there are many businesses out there who intentionally try to shaft their staff on their wages, but the system is complicated and so it’s important that you as the employer learn to find your way through and that you pay your staff properly.

In closing:

Congratulations If you’ve made it this far. Not the most exciting reading, I know, but as I have personally been bitten by some of these I thought it was important to cover it all. The good part is that once you have gotten all your shakers in a row and you have taken out the right insurances, implemented the right processes etc, these things become quite easy to manage and you can go back to focussing on the fun stuff: MAKING YOUR VENUE AWESOME!  

Good luck & much love,
Sven and Amber.

• Sven Almenning is the founder of Eau De Vie and the Speakeasy Group as well as online hospitality training platform Ananas. He was Bartender Magazine’s recipient for the Outstanding Contribution Award in 2009 and has been in the top 5 of Bartender Magazine’s bi annual Most Influential List every year. 

• Please note the advice given in this article is general in nature and not to be considered specific legal or financial advice and isn’t a substitute for professional advice.

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