Although aspiring innkeepers may want to race right out of the gate and into an inn, never forget that the search for (and purchase of) the perfect bed and breakfast will not be a sprint, but a marathon. I’ve detailed some stages of the race in So You Want To Own A B&B?, but now I’d like to touch on the fabled business plan, that essential document you’ll create to assure lenders or investors you’re ready to go – and the numbers prove it.
Just as an architect works with blueprints, aspiring innkeepers will work with a business plan to lay out methodically and in encyclopedic detail where you are, where you plan to go, and how you plan to get there. With a little research you can find books and online sites that offer templates that explain the style and content of quality business plans. If you’re not comfortable tackling this on your own, another source is lodging management consultants. And don’t forget that many innkeepers entered the field with business backgrounds and may be willing to coach you on preparing your own plan.
As you consider which route to follow, understand that, when complete, a typical B&B Business Plan delves into seven essential sections containing numerous sub-categories that usually fill about 20 pages of data.
Naturally, there are variables and your final plan may follow a different outline, but familiarize yourself with the thumbnail elements of these stages.
We’ll assume this is a start-up operation.
1. Executive Summary
On a single page, clearly and concisely explain what your inn will be like and what market you will serve. You’ll go into detail later, but show how you will be different – and better – than the competition. If there is no competition in the area, explain why a B&B is needed. Also, encapsulate the financials: Projected sales, cash flow, return on investment, and the capital you’ll need to get started.2. Business Description
Using real research and backing it up with facts and footnotes, spell out the history of bed and breakfasts in general and where the industry is expected to go. Let the lender know if you’re doing this alone, with a spouse or partners, and what each person will bring to the business and how this individual and collective experience and other factors will translate into a profit-making inn.3. Market Strategies
What is the environment that surrounds your inn? How many people live in area? Is there a thriving tourist market? What are the prospects for future growth? While you look at these figures, detail how you plan to attract your target market. Fine-tune your rates to sell rooms, estimate your advertising expenses, and define how you’ll differentiate yourself from the competition.4. Competitive Analysis
This is your chance to highlight your vision and creativity. Take note of how your unique skills and talents can help surpass the strength of successful inns by improving upon the services they offer – or not.5. Design and Development Plan
From where the money comes from to how revenues will eventually sustain the inn (and its owners), this is when you examine your projections and lay out the steps to get there. Your first twelve months may focus on establishing a social media following and service standards that will ensure repeat guests. Your five-year plan may include new rooms or cabins. Remember: Each goal you set should include the process you’ll take to reach it along with the time and expense it will take to achieve it, from materials and contractor costs to the risks involved if those improvements fail.6. Operations and Management Plans
Now you get to plan how to run your inn week after week. Will you have a full-time staff? Are they seasonal help or year-round employees? How much will you get paid? How will you cover fixed overhead expenses such as your mortgage, utilities, professional and civic memberships, cable television and wi-fi? What about variable expenses such as the cost of landscaping, maintenance, special promotions, and grocery shopping for a houseful of guests? There are hundreds of hidden expenses. Try to uncover as many as you can and know just how you’ll pay for them.7. Financial Components
Wrap up your business plan by making your case with three crucial reports: Income, balance sheet, and cash flow statements. Together, they’ll tell the lender you have a viable plan for your bed and breakfast and – thanks to your research– you’ve proven that this will be a self-sustaining and profitable business.- - Income statement: Based on projected revenue and expenses, confirms how you will generate cash. Create monthly statements for your first year, quarterly statements for year two, and annual statements afterward.
- - Cash Flow Statement: In a nutshell, where will your money come from, who is it owed to, when will it go out, how much is left, and where is the next influx of cash coming from? Spell this out and you’ll have a good idea if you’ll stay afloat or if you’ll have to explore other sources of income.
- - The Balance Sheet: Developed from data you’ve offered in the business plan and summarizing your financial information, this segment will detail your assets (cash on hand, accounts receivable, inventory, etc.), liabilities (accounts payable, taxes, mortgage, etc.), and equity (the difference between total assets and total liabilities) also known as ‘the bottom line’. If you’re in the black, good for you!
That’s it – except for one last thing. Even if you really, really, really, really want that inn, if your business plan doesn’t support your case, don’t turn it in!
This may be the most expensive investment you’ll ever make. If you really want to live your dream as an innkeeper, a well-researched and honest business plan can help you avoid a financial nightmare.
Related Features
- • As you contemplate all of the details that will go into your business plan, take a look at the About feature on the array of issues to consider as your dream takes shape. That’s at Tips For Aspiring Innkeepers.
- • To see how two innkeepers used their business background to create a B&B that’s enjoyed more than twenty years of success, visit The 1898 Waverly Inn.
- • For a few cost-effective ways to stand out in the crowd, visit Stand Out: Bring Attention To Your B&B.
