Expert Article: Nothing Good Happens After Midnight, Or So It Goes

Nothing Good Happens After Midnight, Or So It Goes

Behind the Curtains of Opening and Managing a Nightclub

Ridiculous as it may sound, some people party for a living. And I’m not talking about office or retirement parties - I mean free flow champagne, world class DJ’s, and famous celebrities kind of partying. Surely this must be the dream job and the ideal career...right? Such is the privileged life of a club owner, but the reality of opening and running a club is much more complicated and prone to failure than people may think. 

 

As someone with experience opening and owning a nightclub in Hong Kong, I'd like to pull the curtains aside to show you what goes on behind the scenes. Let me walk you through each step I took to illustrate the secret workings of this business: from the early stages of conceptualization, to development, and finally operation. 

 

A Concept That Can Sell Itself

The very first thing you should do is formulate a unique concept. This is important because people tend to forget that nightclubs are just like any other business. All that matters at the end of the day are the numbers, and all businesses are susceptible to go under. In fact, roughly 80% of clubs shut down within their first year of operation (Binlot). It should be clear by now, but an idea that can help differentiate your business is essential. As a result, this step must necessarily precede the development stage. This is what I call the conceptualization phase. 

One way to start is by finding gaps and unfulfilled needs in the market. My research (and personal experience) shows that the clubbing scene had mostly become stagnant in Hong Kong. Specifically, there was no difference between partying at one club and the next. A study by Mintel, a market research company, states “bars and restaurants must work harder than ever to provide customers with a unique drinking experience”. Particularly, there is a growing desire among millennials to find “instagramable” locations (Mintel). This lack of innovation and creativity among clubs presented opportunities for me to pursue. 

For inspiration, I looked at proven European nightclubs such as Cirque Le Soir and Toy Room. The common thread is that these clubs are themed (check out the pictures below to see what I’m talking about). It sounds weird, but people buy into themes because the experience is fresh. Imagine, 10 shots into the night and who wouldn’t want to take selfies with 7 foot clowns or life-sized teddy bears. In the same vein, I wanted to bring a themed element into the clubbing scene in Hong Kong. 

 

 

Money, Money, Money

Great, we’re past the conceptualization phase, we think we have a winning model at hand, now what? To say the least, we need money. This typically means getting funding from outside investors through a seed offering. But it’s not really just about the money. Bringing the right investors onboard could be the difference between the project’s survival or downfall. Don’t believe me? Noel Ashman, the former owner of NA in Manhattan, once said that the disagreements among the club’s investors ultimately led to the club’s closing within a year of operation (Rose). 

Aside from how much money they are willing to contribute, the factors below are also key things to consider when choosing investors:

• Their Professional Network
• Their Social Network
• Whether they share a common vision and goal

Note, if costs were more than expected and the company runs out of cash, you may need to do subsequent rounds of funding by repeating the process above.

Now that we have our investors and the money at hand, we must budget properly for interior design, marketing, renovations, licensing, inventory, hiring a music team, staff, and so on. For me, this process of building something tangible is exciting. Not only do you see the dream slowly become reality, but you also meet a lot of talented people who buy into your idea and are willing to be a part its story. 

 

People Management

The club is ready to go and business is doing well. What’s left to do? A lot, actually. The operation phase is indefinitely long (or at least as long as the business is alive), and it’s one where even I am still trying to learn and grow from day by day. One thing that is extremely important, as you will discover from being on the ground and interacting with people, is that relationship building with customers is everything. All things equal, your relationship with a client may be enough to sway their decision to book a table at your club versus a competitor. For you, this is a non-stop process of trying to attract and build relationships with new clientele while maintaining established ones.    

Marquee nightclub is a notable case study that reveals the importance of this relationship. According to the authors, “Managing customer relationship was one of the many important factors that made Marquee different”. This helped Marquee appeal to different crowds, from “jet-setters who are frequently traveling, to a ‘regular’ who would come weekly- spending an average of $600 on a table.” (Elberse et al.). Today, Marquee is one of the largest and most profitable chain of nightclubs in the world. 

Operating a successful business, no matter what industry it may be, is all about building and maintaining relationships with stakeholders. These are not just customers, but also people like your investors, DJ’s, staff, business partners, and so forth. Honing your soft skills and people management abilities are a must in order to survive. 

Bringing It Home

 

The decision to invest in a nightclub is one that carries a lot of weight, but often driven by the wrong reasons. Ego clouds our judgement when people see an opportunity to flaunt instead of profit. Vanity and clout overshadows rational decision-making when people crave the image but not the work. Such projects rarely succeed. Hopefully, this article has, at the very least, convinced you that it takes much more than a dark room, loud music, and cheap alcohol to succeed. Who knows, perhaps you’ve decided to open up your own nightclub after reading the article. When you do, and we become business partners, then you could thank me for writing this piece.

 

 

Citations

Binlot, Ann. “Richie Akiva, The King Of New York Nightlife, Ushers In A New Era Of Wellness.” Forbes, Forbes Magazine, 10 Sept. 2019, www.forbes.com/sites/abinlot/2019/09/10/richie-akiva-the-king-of-new-york-nightlife-ushers-in-a-new-era-of-wellness/.

Elberse, Anita, et al. “Marquee: Reinventing the Business of Nightlife.” Harvard Business Publishing Education, 3 Sept. 2013, hbsp.harvard.edu/product/514028-PDF-ENG.

Mintel. “Younger Millennials Are the Stay-at-Home Generation.” Mintel, Mintel, 11 June 2018, www.mintel.com/press-centre/food-and-drink/the-stay-at-home-generation-28-of-younger-millennials-drink-at-home-because-it-takes-too-much-effort-to-go-out.

Rose, Lacey. “Nightclub Business: More Ego Trip than Profit?” NBCNews.com, NBCUniversal News Group, 25 Aug. 2006, www.nbcnews.com/id/14487574/ns/business-forbes_com/t/nightclub-business-more-ego-trip-profit/.