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Maintenance is a requirement. Upkeep has to be done, it is part of owning a B&B. (I am saying this to everyone as well as myself as we pour it all back into the house again any time we think we are moving ahead a little). Renovations and repair can wipe out a couple years of revenue.
 
Well, I have to ask the obvious question now.... if no one is making a living at this, are you doing it b/c you live in the house and it's a great write-off? There are far too many B&Bs to say this isn't a profitable business.
I, occasionally, buy a rent house knowing I'll only break-even, because I think the property is a good investment. I want to do more than break-even with a B&B, especially if I'm going to put my blood, sweat and tears into it.
I can't use the current owners bookings (for 2010) as a good guide b/c she just lived there and took bookings when they called. (She also let her sister live there, too) She didn't actively promote the business (due to personal stuff).
Fortunately, she is good at what she does and the B&Bs rep has not suffered, it just lost it's momentum..
Gingerbread Latte said:
Well, I have to ask the obvious question now.... if no one is making a living at this, are you doing it b/c you live in the house and it's a great write-off? There are far too many B&Bs to say this isn't a profitable business.
We make a living. We'd never get rich doing it, but we live comfortably. Not trying to send kids to college, and we already have a retirement fund from our corporate lives - we are making enough to bridge the gap. Our first two years, we didn't show a profit because a) we had been lied to about the income of the inn and b) we decided to upgrade the house and amenities to build the business faster, so we had some capital expenditures. But we came into it expecting some of that and had a year's worth of operating expenses in the bank as a cushion. And I was finishing up some of my consulting contracts the first 18 months we were here, so we had some extra income.
It's not impossible to have a decent business. Our revenue is up 50% from our first year. And in this recession, we still have this job and we've had our two best years in the business. The portion of the mortgage that goes to our space is way lower than any rent I would pay to live in this town, for nice owner's quarters in a nice house. We drive nice cars but nothing fancy and both are more than 8 years old. We don't take fancy vacations but we get away. Family emergencies are always a problem - but honestly, they were when I was in the corporate world. I don't think I could ever go back to the corporate world happily.
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Thank you! Thank you!
Hubs has a good job, I have a very flexible part-time job. Our 2 kids are in college (they keep changing their majors....eeekkk)
I'm not concerned with having to live completely on the B&B income, but if I'm going to do it, I want to be successful. (I also know the difference in making money and showing a profit for tax reasons, so I'm not worried about that.)
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I know people that have made comfortable incomes from buying turnkey B&Bs that are 6 rooms or more. I know people that have made very comfortable incomes on 10 rooms up. I also know people that have made quite a bit of money with start up properties when they sold them - most before the current economic turndown.
I know folks with small B&Bs that can pay their home's expenses from what they make on the B&B and that's pretty much it. There has to be supplemental income of some sort to get by.
If you have an impressive mortgage and no guests, you'll have problems. If the property requires more money for maintenance or improvements than anticipated, you'll have problems. Whatever you do, don't underestimate the amount of money that you need to have in reserve for emergencies or unexpected repairs.
You have to know your location and market. You have to know what's happening in the hospitality and lodging industry for your region. You have to know your competition. You have to know how to handle your own business. It's a long day's work........
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Thanks Samster, I think that's what's making me nervous. I know and am very comfortable with the home RENTAL market in my city. I wouldn't hesitate to buy another rent house if the price was right.
I'm having trouble getting hard facts about this industry b/c everyone operates their B&B differently (in my area.) One couple owns 3 B&Bs, markets them well and have a high occupancy rate. Others take ressies only 'on season' and don't worry about year round, they just enjoy living in their house. Obviously, I intend to market mine for profit. I've run what little numbers I have and would not be comfortable with less than 50% capacity. I don't even know if that's reasonable for my area.
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Gingerbread Latte said:
Thanks Samster, I think that's what's making me nervous. I know and am very comfortable with the home RENTAL market in my city. I wouldn't hesitate to buy another rent house if the price was right.
I'm having trouble getting hard facts about this industry b/c everyone operates their B&B differently (in my area.) One couple owns 3 B&Bs, markets them well and have a high occupancy rate. Others take ressies only 'on season' and don't worry about year round, they just enjoy living in their house. Obviously, I intend to market mine for profit. I've run what little numbers I have and would not be comfortable with less than 50% capacity. I don't even know if that's reasonable for my area.
Go to the state and find out what the tax revenue from lodging is from your town. Understand how many rooms are available in your town and what the rates are. If it's not spelled out anywhere else, you can do the math to figure out what the occupancy rate is. Generally speaking, occ in B&B's is far lower than hotels. Hotels are generally in the 70-75% range and B&B's are generally in the 40-45% range, to be profitable. All of it depends on location, competition and other variables.
I could be profitable if I quit making renovations!
Keep in mind that occupancy is not all. We had a very good year last year but did not have high occupancy rates. We had higher prices.
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Alibi Ike said:
Keep in mind that occupancy is not all. We had a very good year last year but did not have high occupancy rates. We had higher prices.
Ain't that the truth. In 2006, we had over 50% occupancy. In 2009-2010, it was closer to 45%, but our ADR has jumped about $30 since 2006 due to steady rate increases. This year we plan to hold our rates and work on increasing the occupancy more, but the experience for us has been that the revenue jumps have come from upping our rates rather than upping our occupancy.
 
Thanks! I'll check into the S-corp. My rentals are in an LLC, but that doesn't really equate to what I'm doing here. (It's mainly for protection)
I'm beginning to get frustrated that my atty doesn't know enough about tax law (He's the best REI atty in town, though) and my accountant can't really advise on legal issues, so I'm running back and forth. CPA did mention the S-corp, but said it was a lot of paperwork. He kept saying you have a draw a 'reasonable' salary. Then proceeded to tell me I won't be making money. I'm a tad confused, but will figure it out.
Thanks again for the insight..
The other part about setting up as a corporation rather than a sole prop is to give yourself (you personally) a little distance from the biz. If someone sues, they sue the biz first.
We're set up as tenants in an apt owned by the biz. We need tenant's insurance, so keep that in mind.
I'll have to agree with your acct- you won't make enough money to worry about taxes.
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whatchutalkingabout_smile.gif
Anybody.... please tell me you make SOME money.....
Haha ~ Apparently, I've committed myself to a business with no days off and no income?
tounge_smile.gif

(/tongue-in-cheek font)
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We were in business 2 years, became the #1 B&B here, and made no money. I never paid myself a salary. My part-time housekeeper made more money than I did. My dh was employed full-time outside the business which made it possible through the slow times. We would have probably made some profit in our 3rd year in business.
Friend of mine did a lease to purchase a very large established inn and had to put quite a bit of money into it for improvements and for City requirements (that were not enforced on the prior owners) and they had staff to pay because it was so large. They got out after a year because of a family situation. It will take them at least another year to pay off all the operating debt that they incurred in just one year (for a total of 3 years to pay of that debt with a big monthly payment). That doesn't include their initial investment that went down the tubes. The occupancy was not accurate. The inn consultants gave them bad advice. They were smart people that let their heart guide a business decision based on bad information. Not the first time that's happened in this business.
This is not meant to be a Debbie Downer post. Just some facts to help you. Make sure that the financials work for whatever situation you want to get out of it. Some people are happy to have this type of business for a myriad of reasons that don't include a large income. Just make sure that you have all your facts.
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Samster said:
We were in business 2 years, became the #1 B&B here, and made no money. I never paid myself a salary. My part-time housekeeper made more money than I did.
Hmm sounds just like ME!!!
 
Maintenance is a requirement. Upkeep has to be done, it is part of owning a B&B. (I am saying this to everyone as well as myself as we pour it all back into the house again any time we think we are moving ahead a little). Renovations and repair can wipe out a couple years of revenue..
There's the prep for the 'quick' sale. No quibbling because everything is done.
 
I am in the UK so some things are different but isn't there anywhere you can get figures like these from? ie tourist numbers and so on? to have a better idea. Also can you build links with local businesses ie local corporate rates? and one of the most important things to do is every guest you have make sure you have their email address and why there are here as this is a vital part of your marketing ie they came for Columbus day do a mailing "Looking for something to do on.." also remember every jigger is after your money and will try to sell you all sorts of advertising and marketing crap dont fall for "everyone else does this" and do nothing you cannot directly measure the results of. that's my advice.
I bought a turn key that was run very badly (ie owner used to check people in remotely via mobile from the pub) and we got a good price for that reason as we knew we could do a lot better. Figures of occupancy were never provided and if they had a clue what they were I would die of shock. They also used half the building for themselves so over the next 5 years we have added 4 bedrooms which has added to turnover (potential to expand is another thing to look at) and to do it didn't even cost that much as the first one was the master bedroom with ensuite so cost about $500 to get into action. Getting in the other 3 ensuites was more tricky. It is all about marketing.
 
I am in the UK so some things are different but isn't there anywhere you can get figures like these from? ie tourist numbers and so on? to have a better idea. Also can you build links with local businesses ie local corporate rates? and one of the most important things to do is every guest you have make sure you have their email address and why there are here as this is a vital part of your marketing ie they came for Columbus day do a mailing "Looking for something to do on.." also remember every jigger is after your money and will try to sell you all sorts of advertising and marketing crap dont fall for "everyone else does this" and do nothing you cannot directly measure the results of. that's my advice.
I bought a turn key that was run very badly (ie owner used to check people in remotely via mobile from the pub) and we got a good price for that reason as we knew we could do a lot better. Figures of occupancy were never provided and if they had a clue what they were I would die of shock. They also used half the building for themselves so over the next 5 years we have added 4 bedrooms which has added to turnover (potential to expand is another thing to look at) and to do it didn't even cost that much as the first one was the master bedroom with ensuite so cost about $500 to get into action. Getting in the other 3 ensuites was more tricky. It is all about marketing..
(ie owner used to check people in remotely via mobile from the pub)
I have got to get one of those smartphones!
 
The published occ rates for our town do not separate B&Bs from hotels. But, I will be going to the tax commission this week and hopefully they will tell me, since they are the ones keeping up with the numbers. They divide establishments at 6 or more rooms, which have to pay an EXTRA tax, so maybe I can get some fairly accurate numbers.
My research of the other B&Bs in town show most are under 6 rooms (and now I know why) so if tax people will give me the info, I should have better numbers to work with.
Current owner's prices are competitive, so I won't be adjusting those right now. The house is in excellent structural shape, but needs cosmetic TLC. I will have to do that quickly. Sept - Dec is our ON season, but there's always something going on here, upgrades/maintenance needs to be done fast.
 
The published occ rates for our town do not separate B&Bs from hotels. But, I will be going to the tax commission this week and hopefully they will tell me, since they are the ones keeping up with the numbers. They divide establishments at 6 or more rooms, which have to pay an EXTRA tax, so maybe I can get some fairly accurate numbers.
My research of the other B&Bs in town show most are under 6 rooms (and now I know why) so if tax people will give me the info, I should have better numbers to work with.
Current owner's prices are competitive, so I won't be adjusting those right now. The house is in excellent structural shape, but needs cosmetic TLC. I will have to do that quickly. Sept - Dec is our ON season, but there's always something going on here, upgrades/maintenance needs to be done fast..
Be sure to have marketing money to put into a good website. It should be a high priority. What is the website like now? Online reservations? Professional pictures?
 
The published occ rates for our town do not separate B&Bs from hotels. But, I will be going to the tax commission this week and hopefully they will tell me, since they are the ones keeping up with the numbers. They divide establishments at 6 or more rooms, which have to pay an EXTRA tax, so maybe I can get some fairly accurate numbers.
My research of the other B&Bs in town show most are under 6 rooms (and now I know why) so if tax people will give me the info, I should have better numbers to work with.
Current owner's prices are competitive, so I won't be adjusting those right now. The house is in excellent structural shape, but needs cosmetic TLC. I will have to do that quickly. Sept - Dec is our ON season, but there's always something going on here, upgrades/maintenance needs to be done fast..
Gingerbread Latte said:
Current owner's prices are competitive, so I won't be adjusting those right now.
Overall competitive or just prices that you can see online? Do you know exactly what they have for amenities? Are they offering things your place is not at the same price point (or vice versa)?
It's not just about the price, it's also what you get for the price. You should go stay at the competition overnight and see how they do things without telling them who you are. Oh, wait, you said you're local, right? You probably can't get away with that then.
 
The published occ rates for our town do not separate B&Bs from hotels. But, I will be going to the tax commission this week and hopefully they will tell me, since they are the ones keeping up with the numbers. They divide establishments at 6 or more rooms, which have to pay an EXTRA tax, so maybe I can get some fairly accurate numbers.
My research of the other B&Bs in town show most are under 6 rooms (and now I know why) so if tax people will give me the info, I should have better numbers to work with.
Current owner's prices are competitive, so I won't be adjusting those right now. The house is in excellent structural shape, but needs cosmetic TLC. I will have to do that quickly. Sept - Dec is our ON season, but there's always something going on here, upgrades/maintenance needs to be done fast..
Be sure to have marketing money to put into a good website. It should be a high priority. What is the website like now? Online reservations? Professional pictures?
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Website has online ressies and good pics. I don't particularly care for the look, but it's good, manageable and flows nicely. It's a little too fru-fru / Victorian for my tastes. I want true Southern, but that's just a matter of changing the background and buttons.
Current owner uses Webervations, but I think I'm going to investigate ResKey, just from the good reviews on here.
 
The published occ rates for our town do not separate B&Bs from hotels. But, I will be going to the tax commission this week and hopefully they will tell me, since they are the ones keeping up with the numbers. They divide establishments at 6 or more rooms, which have to pay an EXTRA tax, so maybe I can get some fairly accurate numbers.
My research of the other B&Bs in town show most are under 6 rooms (and now I know why) so if tax people will give me the info, I should have better numbers to work with.
Current owner's prices are competitive, so I won't be adjusting those right now. The house is in excellent structural shape, but needs cosmetic TLC. I will have to do that quickly. Sept - Dec is our ON season, but there's always something going on here, upgrades/maintenance needs to be done fast..
Gingerbread Latte said:
Current owner's prices are competitive, so I won't be adjusting those right now.
Overall competitive or just prices that you can see online? Do you know exactly what they have for amenities? Are they offering things your place is not at the same price point (or vice versa)?
It's not just about the price, it's also what you get for the price. You should go stay at the competition overnight and see how they do things without telling them who you are. Oh, wait, you said you're local, right? You probably can't get away with that then.
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Actually, I probably could get away with it.
wink_smile.gif
I'm still in negotiations for my B&B and only a few close friends know about it.
Hubs & I could do a Valentine weekend.....hmmmm...... good idea!
 
The published occ rates for our town do not separate B&Bs from hotels. But, I will be going to the tax commission this week and hopefully they will tell me, since they are the ones keeping up with the numbers. They divide establishments at 6 or more rooms, which have to pay an EXTRA tax, so maybe I can get some fairly accurate numbers.
My research of the other B&Bs in town show most are under 6 rooms (and now I know why) so if tax people will give me the info, I should have better numbers to work with.
Current owner's prices are competitive, so I won't be adjusting those right now. The house is in excellent structural shape, but needs cosmetic TLC. I will have to do that quickly. Sept - Dec is our ON season, but there's always something going on here, upgrades/maintenance needs to be done fast..
Be sure to have marketing money to put into a good website. It should be a high priority. What is the website like now? Online reservations? Professional pictures?
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Website has online ressies and good pics. I don't particularly care for the look, but it's good, manageable and flows nicely. It's a little too fru-fru / Victorian for my tastes. I want true Southern, but that's just a matter of changing the background and buttons.
Current owner uses Webervations, but I think I'm going to investigate ResKey, just from the good reviews on here.
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What directories are they listed on? How are the google organic listings on your key words for your area? In a google search box type: link:www.(domainnameofbedandbreakfast).com and it will give you a good indication of the links coming into the site. You can also do a google search using just the domain name and see what listings show up.
You should do these searches for the local competition also and see how they compare. Getting listed on numerous directories can cost a bundle. There are numerous threads here discussing the use of directories and how to choose the best for you and your area. Not all directories are worth it.
 
I would definately ask what ties in with your accountant as many in the uk offer bout $600 off a year if you use the same as them.
Also take a look at the competitions web sites etc and make notes what are they offereng? packages etc facilities and services ie tours stabling and what is most important what are they not offering that you could do? or do cheaper and or for free ie wi-fi?
 
I would definately ask what ties in with your accountant as many in the uk offer bout $600 off a year if you use the same as them.
Also take a look at the competitions web sites etc and make notes what are they offereng? packages etc facilities and services ie tours stabling and what is most important what are they not offering that you could do? or do cheaper and or for free ie wi-fi?.
I have combed the competition's sites, it seems we're all doing the same thing, There are 4 that I consider higher-end than mine. They are owned by a couple who have gobs of money and really know what they're doing. (That's WHY they have gobs...) The furnishings, down to the light bulbs are incredible. I can't compete on that level right now, but will go in that direction.
They have great PR too. People in town who have never set foot in the homes talk about how wonderful the properties are. They do not allow smoking, children or pets... I may consider the pets, I have 1 downstairs bdrm and a guest cottage that would be appropriate. Other than that, the difference is location (I have a killer location) and style (which is personal anyway)
My website needs to be better, it's okay, but not stunning. I know I can hold my own... well, outside of the economy and the fact that I'm a newbie
whatchutalkingabout_smile.gif

 
I would definately ask what ties in with your accountant as many in the uk offer bout $600 off a year if you use the same as them.
Also take a look at the competitions web sites etc and make notes what are they offereng? packages etc facilities and services ie tours stabling and what is most important what are they not offering that you could do? or do cheaper and or for free ie wi-fi?.
I have combed the competition's sites, it seems we're all doing the same thing, There are 4 that I consider higher-end than mine. They are owned by a couple who have gobs of money and really know what they're doing. (That's WHY they have gobs...) The furnishings, down to the light bulbs are incredible. I can't compete on that level right now, but will go in that direction.
They have great PR too. People in town who have never set foot in the homes talk about how wonderful the properties are. They do not allow smoking, children or pets... I may consider the pets, I have 1 downstairs bdrm and a guest cottage that would be appropriate. Other than that, the difference is location (I have a killer location) and style (which is personal anyway)
My website needs to be better, it's okay, but not stunning. I know I can hold my own... well, outside of the economy and the fact that I'm a newbie
whatchutalkingabout_smile.gif

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Sometimes what the are doing or not doing is only a small thing and some times it is a case of keeping your eyes and ears open. For example I had a call for a group booking for two dates one in May and one in June who are comming for York Races (this is a world famous racing event that is like the Grand National Huge) so all the places in York double their prices and do a two night minimum so as the next nearest town we get the overflow (about 20,000 people go per race) so am working through with the dates and bobbing up prices a bit as we are just about full with racing people for two dates already.
Some of doing well is about luck but a lot is also keeping your ear to the ground and making the most off opportunities as they occur. I am only kicking myself that i didn't think of this sooner.
Also take a good look at their trip adviser and online revews for strenghts and weaknesses.
 
I would definately ask what ties in with your accountant as many in the uk offer bout $600 off a year if you use the same as them.
Also take a look at the competitions web sites etc and make notes what are they offereng? packages etc facilities and services ie tours stabling and what is most important what are they not offering that you could do? or do cheaper and or for free ie wi-fi?.
I have combed the competition's sites, it seems we're all doing the same thing, There are 4 that I consider higher-end than mine. They are owned by a couple who have gobs of money and really know what they're doing. (That's WHY they have gobs...) The furnishings, down to the light bulbs are incredible. I can't compete on that level right now, but will go in that direction.
They have great PR too. People in town who have never set foot in the homes talk about how wonderful the properties are. They do not allow smoking, children or pets... I may consider the pets, I have 1 downstairs bdrm and a guest cottage that would be appropriate. Other than that, the difference is location (I have a killer location) and style (which is personal anyway)
My website needs to be better, it's okay, but not stunning. I know I can hold my own... well, outside of the economy and the fact that I'm a newbie
whatchutalkingabout_smile.gif

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GL - You can't really tell sometimes about the "rack rate" prices on the web site of other B&Bs. We have a B&B here that deeply discounts their rooms at the whim of the owner. Also, they are constantly changing their rates in their booking engine but not on the website, and still discount. So, be careful on using that as your guideline. Price your rooms for the amenities, location, and all of the other competition (including hotels) and then adjust if you need to.
 
also just noticed there is a book on amazon about B&B accounting I am not saying you should try and do it yourself but it never hurts to have more info.
Internal Revenue Service Audit Protection and Survival Guide: Bed and Breakfasts (IRS audit protection and survival guide series) [Hardcover][/h1]
 
also just noticed there is a book on amazon about B&B accounting I am not saying you should try and do it yourself but it never hurts to have more info.
Internal Revenue Service Audit Protection and Survival Guide: Bed and Breakfasts (IRS audit protection and survival guide series) [Hardcover][/h1].
Since DH is working on taxes now, I clicked over to Amazon to give this a look-see. There has been one review written for the book and I'm afraid it's not encouraging:
If your looking for an extensive reprinting of 1995 tax forms and instructions, or a handy glossary of definitions such as "Internal Revenue Service", "Deed", "Will" and even the always confusing multi-syllabic "Representative", you'll find it here in spades. Of the 284 pages in the book, the first 111 is full of boilerplate advice that you might get free from the IRS, the remaining 173 pages is reprints of IRS forms, their instructions, and the glossary.
 
also just noticed there is a book on amazon about B&B accounting I am not saying you should try and do it yourself but it never hurts to have more info.
Internal Revenue Service Audit Protection and Survival Guide: Bed and Breakfasts (IRS audit protection and survival guide series) [Hardcover][/h1].
Since DH is working on taxes now, I clicked over to Amazon to give this a look-see. There has been one review written for the book and I'm afraid it's not encouraging:
If your looking for an extensive reprinting of 1995 tax forms and instructions, or a handy glossary of definitions such as "Internal Revenue Service", "Deed", "Will" and even the always confusing multi-syllabic "Representative", you'll find it here in spades. Of the 284 pages in the book, the first 111 is full of boilerplate advice that you might get free from the IRS, the remaining 173 pages is reprints of IRS forms, their instructions, and the glossary.
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Sometimes finding it all in one place is good. But not if it's from 1995!
 
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