Our original plan was to buy an existing B&B and profit from the reputation, client base and revenue stream that an existing business provides. We looked at just a few operating Inns before we came to the realization that it was just not going to be a possibility for us.
Firstly, none of the existing Inns really coincided with my vision. Not one grabbed me by the heart and said “This is It, This is THE ONE“!. I really couldn’t see myself in any of them. Either the rooms were too small or the in-room bathrooms were poorly done or they had unsatisfactory Innkeepers Quarters. Far and away the biggest reason we didn’t consider any of them? MONEY of course! Most existing Inns are horrifically expensive and almost none show revenues enough to make their own mortgage payments.
All kinds of scenarios ran through my head, all with the same hideous conclusions…mortgage payments not getting made and good credit falling by the wayside. What’s even worse is the fact that B&B’s take forever to sell. What if we hated it and decided to sell, and the Inn sat on the market forever…draining us financially and emotionally? Start-up seemed the way to go. This way we could buy a regular house, make it the type of place we wanted. As an added bonus, if it didn’t work out for any reason, we could still afford to live there by just working one job each. Hubs still works and I quit my job after year three. What a circus that was, with both of us working!
We looked at several places in our home part of the state. Most didn’t have enough bathrooms or personal space, or room to add any. Some houses were perfect, but were in areas that would not have the visitor draw we’d need.
We kept coming back again and again to this place. The house was gorgeous, needed mostly cosmetic work and had been on the market at a reasonable price for almost two years. The location seemed great, but most importantly? The house fairly screamed at me “I’m the One, I’m Perfect - Buy Me”!
We looked at the house no less than four times…with my mom, with our contractor, with anyone who would voice an opinion. Finally, the Realtor stopped coming with us and would just let the patient homeowners know we were coming AGAIN.
My mother swears that the house was on the market so long because it was waiting for us. We bought it in the summer of 2002 and opened for our first guest on Memorial Weekend of 2003. Best decision I ever made and I would not hesitate to do another start-up if I had to do it over again....and you never know!.
Our research and explorations revealed many of the same factors LB mentioned, so I'll try to limit the redundancy. Don't worry there was enough dissimilar stuff that might also be helpful.
No one has mentioned their basic financial criteria and while fully acknowIedging the privacy aspect, I think some details without exposing ourselves too much are really important for the discussion to mean anything.
We confined our searches to mostly B&Bs with 4-6 guest rooms, at least five years of existence, maximum purchase price of $750k to allow for a minimum 20% down and enough capital in reserve to make foreseen improvements/repairs and one year's worth of cash flow in the event of getting zero guests the first year.
That requirement may have been too pessimistic with buying an existing business, but that was our comfort zone. We considered it a cushion to fall back on if the documented repeat guests didn't indeed come back, already booked reservations never materialized, new guests weren't added and repairs or improvements took longer or forced closure for any length of time.
We all get a certain number of cancellations per year. Without the knowledge of what those numbers are as an incoming owner because they might not show on the books, there is no protection for a new owner from word getting out about the sale and getting a massive wave of cancellations just from uncertainty or anxiety about he new ownership.
I provide this info only for context and please spare me the judgements on the dollar figures or relative value we should of expected for that kind of dough.
There were very existing properties that "spoke" to us as LB described. We just couldn't picture ourselves in many of them even just for financial motivations, which were never at the top of our list.
Of course we want to be profitable and thrive financially, but we saw very few instances where that was even remotely a possibility for a variety of reasons. The biggest were location, ease of accessibility and distance to cities capable of providing the core guests. Major upfront infrastructural costs in repairs and improvements and financial history of the business weighed heavily for many properties we looked at.
I'd would say in 95% or more of the B&Bs we inquired about and received sales packets about, asking price outpaced any established business model calculators we researched compared to income even when verified.
Most properties had deferred maintenance and repair issues. The basic furnishings, linens, towels, computer equipment, kitchen equipment, innkeeper living quarters, etc. left much to be desired.
Nearly all properties were listed as "turn-key" but we rarely stepped in a property that we felt in our heart of hearts that we could get tossed a set of keys, guest list, etc. and "run with it" as is.
Also, the lists of items leaving with the previous owners was usually huge and essentially was all the good art, furniture, tools, etc. This despite nearly all of the purchases of these items being written off on taxes as expenses or depreciations. This aspect was a major turn off!
Another was the "transition" period between owners and any included "training" or "support" being offered. In many cases, owners expected a limbo period before their new house was ready, relocation plans were finalized, divorces settled on, etc.
There was also the "separation" anxiety issue where a few owners wanted to stay on and work for us for some period of time in order to ease out of their "labor of love". It was usually couched in language about helping to introduce us to their repeat guests and make sure we were doing everything right.
The few times we encountered stuff like that, we ran from the property ASAP.
The last thing we considered was age, style of innkeeping approach and formality differences. Most of the properties we looked at were being sold by folks looking to retire and were quite elderly. When asked, the typical guest was in thesame age bracket.
Starting this process at the ages of 39, we had a lot of anxiety about how a couple of "young, energetic whipper snappers" would be received.
Many were just too formal for us to wrap our vision of the kind of place we wanted to offer around. It became apparent that it could become an exercise in spending all this time undoing, remolding and rebranding versuses from the ground up like we've done. and with great risks attached to a couple of hard working, blue collar type's life savings.