The following guest post is by Susan Poole, B&B coach and innkeeper of 40 Bay Street Bed and Breakfast, an Ontario B&B.
Over the years of working with many bed and breakfast owners, I have found that most owners fall under one of two categories. The first are the owners who run their bed and breakfast like a hobby; the others are people who want to own a bed and breakfast business.
Neither type is wrong, and typically, the reason both want to own a bed and breakfast tends to be the same--they love to meet new people, cook, and entertain. A guest staying at one or the other would not know the difference. It’s the outcomes at the end of the year that reveals the difference. A hobbyist owns a bed and breakfast because they love what they do; the other in order to make money doing something they love.
To determine which type you want to be, ask yourself the following questions:
1. Have I/am I planning to discuss this idea with my financial adviser?
2. Have I/am I planning to make inquiries about accountants and the income tax implications of owning a business?
3. Have I/am I planning to speak to a lawyer about the options for setting up my business?
4. Do/will I have a business plan?
If you answered no and have no intentions of following up on those tasks, then I would respectfully suggest that you fall into the hobbyist category. You will reap the benefits of your bed and breakfast by the wonderful people that come your way, and may or may not break even financially at the end of the day, depending on the amount of money you choose to invest into marketing your B&B.
If you have answered yes to the majority of those questions, then you are definitely not a hobbyist. However, a word of warning: a business plan is essential for every business owner, whether you plan on seeking financing or not. A business plan is essentially a road map for how you will start and run your bed and breakfast for the first couple of years. It is also a marker for you to compare your original ideas with the reality of the marketplace, such as who your customer is and what that customer is looking for.
There are specific topics a bed and breakfast business plan contains:
• Description of the bed and breakfast business, including a physical description of the property, number of rooms and long- and short-term goals for the business.
• Products and services you will be offering. For instance, will you only be offering bed and breakfast? Are you planning to work with local partners to provide other services, such as a spa? Gift shop? Restaurant? Etc.
• An overview of the industry. What are the trends for the bed and breakfast industry? Try to create an understanding not just from the B&B point of view, but also who typically stays at B&Bs. What are travel trends that influence where and how people stay? Think national, state and regionally when collecting your data. BedandBreakfast.com conducts traveler surveys twice a year, and The Professional Association of Innkeepers International often has great data on trends.
• The competition. Don’t limit yourself to just other B&Bs. Anywhere people can stay is potential competition for you. (As an example, the region where my B&B is located recently released a study that said 52% of visitors to the area stayed in campgrounds and/or RVs).
• A marketing plan. This will not only help in getting the word out about your bed and breakfast, but it will help you create your budget, provide an understanding of how technology will impact on how you market your business, and serve as a tool to monitor where your investments in marketing pay off the most in the future.
• Information about the owners/management. Figure out all the skills, talents and expertise you have to offer your business. Are there things you’re lacking? Is it something you can learn? Is it something you will have to hire someone to do for you? Again, not only will it help you plan your budget, but help you determine how vulnerable your bed and breakfast might be from a business point of view.
• What are the issues that could impact the business? Think not only internally, i.e. if you get sick or if something breaks, but also externally. There are always things that you can prepare for, but may not be able to influence, like the weather, gas prices, or the economy.
• A risk analysis. The most common analysis is called a SWOT: Strengths, Weaknesses, Opportunities and Threats. Strengths and weaknesses tend to reflect the internal workings of the business, while opportunities and threats are from the outside of the business. This exercise is great in helping you identify the issues that may impact on your business.
• The implementation plan, which is commonly overlooked. However, having your implementation plan in writing helps you to stay on track and keep to your timeline. It is also a great tool to use when planning your budget, as it identifies what expenditures you will be making and when.
• The financial plan is the most crucial component of your bed and breakfast business plan. It typically contains a balance sheet (your net worth), a projected annualized profit and loss statement, and three years worth of monthly cash flow statements. Cash flow statements show when monies are coming in and being spent. Since most B&Bs have cyclical income, cash flows are the key to making sure your business stays afloat in the first few years.
Creating a business is a lot of work, but will pay off in the long run. It increases you chances of success by:
• Identifying potential risks that may occur
• Organizing budgets and timelines to keep you on track
• Getting an excellent understanding of how to manage your money
About the author: "How to turn your passions into a thriving bed and breakfast business" system,how much income they can create, how much work it will be and what the risks are for them.