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JunieBJones (JBJ)

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If you were looking at purchasing a Bed and Breakfast, what reports would you appreciate having upfront?
Example: Month by month room rentals and income. Add ons and special events. Tax Returns for 3 years. Expenses broken down annually or month by month (ie cable tv, utilities, taxes, fees etc)
After you signed the contract/agreement - what reports would you find handy?
A list of all directories, a referral report from those directories with search words for google, when taxes come due (this was huge for us, we never had them all come due in DEC!! We were unprepared for that when we bought this place), etc Directories that did not pan out - ie lanier bb.
Anything else you can think of? When we sell this B&B we want it to succeed and want to arm the new owners with as much useful and helpful info as we can. Thanks all.
 

Morticia

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After signing additional info...a list of all utilities AND the account numbers so you can transfer ownership easily. Some won't let you do that, but others will. But you do want to transfer the phone number!
 

SecondAct

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Status of permits/licenses, whether they can be transferred or need to be reapplied for, contact information for local agencies.
 

swirt

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Tax Returns for 3 years
This is a question I'm dealing with right now. I am wondering if Sales and occupancy tax records are enough (and hoping they are).
I'm hesitant to include Income tax returns for a few reasons:
1) We are running the B&B as a DBA so the taxes include other income from other jobs.
2) Depending on how your tax person figures in mortgage and other long lasting items that get ammortized over a longer period of time, even a business that is pretty successful can show only a small profit that is pretty far out of alignment with how much revenue the business actually brings in. Business savvy people will understand this, but I fear that many aspiring B&B owners may not.
 

JunieBJones (JBJ)

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Swirt, the SBA loans require them. Just an fyi. Signed copies of them for three years. We are in the same boat, we have income from other jobs as well, but the business income is clear on the tax return as is the loss...
Your second point as well, I will explain that we write off as much as possible and take as many deductions as we can. I hope they will see that and not think we are a clunker. Sure we can not claim all these things to look totally successful, but this is for the IRS eyes, not really anyone elses.
I want to express this to aspirings as well, you don't want to show a huge profit, you want to pay as little taxes as possible. We live in our businesses so the biggest benny of all is being able to write off stuff in our every day lives, like cable, electric (at least a good chucnk of it) etc.
 

JunieBJones (JBJ)

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Swirt I agree, as I don't want to disclose ALL of our income, as our other jobs should be private and confidential. I will use that statement first. So I will see what I can do about that as well...I hope it comes up sooner rather than later.
 

swirt

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Swirt, the SBA loans require them. Just an fyi. Signed copies of them for three years. We are in the same boat, we have income from other jobs as well, but the business income is clear on the tax return as is the loss...
Your second point as well, I will explain that we write off as much as possible and take as many deductions as we can. I hope they will see that and not think we are a clunker. Sure we can not claim all these things to look totally successful, but this is for the IRS eyes, not really anyone elses.
I want to express this to aspirings as well, you don't want to show a huge profit, you want to pay as little taxes as possible. We live in our businesses so the biggest benny of all is being able to write off stuff in our every day lives, like cable, electric (at least a good chucnk of it) etc..
Swirt, the SBA loans require them. Just an fyi.
That's good to know. My understanding is that it probably won't play a role with us because of our size. I spoke with a pretty reputable person in the realm of B&B sales and was told that Business loans are rarely attainable for a B&B with only three rooms (unless they have a rare 6 digit gross), and because much of our sale value is based in the land/location that the business loans would be unattainable.
 

JunieBJones (JBJ)

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Swirt, the SBA loans require them. Just an fyi. Signed copies of them for three years. We are in the same boat, we have income from other jobs as well, but the business income is clear on the tax return as is the loss...
Your second point as well, I will explain that we write off as much as possible and take as many deductions as we can. I hope they will see that and not think we are a clunker. Sure we can not claim all these things to look totally successful, but this is for the IRS eyes, not really anyone elses.
I want to express this to aspirings as well, you don't want to show a huge profit, you want to pay as little taxes as possible. We live in our businesses so the biggest benny of all is being able to write off stuff in our every day lives, like cable, electric (at least a good chucnk of it) etc..
Swirt, the SBA loans require them. Just an fyi.
That's good to know. My understanding is that it probably won't play a role with us because of our size. I spoke with a pretty reputable person in the realm of B&B sales and was told that Business loans are rarely attainable for a B&B with only three rooms (unless they have a rare 6 digit gross), and because much of our sale value is based in the land/location that the business loans would be unattainable.
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swirt said:
Swirt, the SBA loans require them. Just an fyi.
That's good to know. My understanding is that it probably won't play a role with us because of our size. I spoke with a pretty reputable person in the realm of B&B sales and was told that Business loans are rarely attainable for a B&B with only three rooms (unless they have a rare 6 digit gross), and because much of our sale value is based in the land/location that the business loans would be unattainable.
SBA was very difficult for us, we went with a business loan with our local bank here. Since they have had us on the books, that would be the one I would recommend again.
 

gillumhouse

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I also have utility records of gas, electricity, water & sewer month by month raw data (no taxes added in ) so it shows how many units were used and what was paid for those units.
 

Morticia

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Swirt I agree, as I don't want to disclose ALL of our income, as our other jobs should be private and confidential. I will use that statement first. So I will see what I can do about that as well...I hope it comes up sooner rather than later..
I do know a place that sold without the tax returns for exactly the reason you're saying...secondary income the owners did not want to disclose. My feeling on that is the buyer must have a trackable statement of actual revenue for the biz. You know from experience that too many people fudge the books when selling.
Hubs looked at a place for sale that had $135,000 stated gross revenue, 85% year round occupancy and a $175/night room rate with 6 rooms. Do the math. Either they skimmed $200k off the top, really only charged $72/night or they're really only open for 5 months not 12.
Stuff like this is why every bank we spoke with told us we had to have the tax returns for at least 3 years, preferably 5. They wouldn't talk to us without seeing that. They wouldn't take accounting records, checkbook registers or even signed P&L statements. Federal tax returns and that was it. Everything else was gravy.
 

SeeBen21

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JunieBJones (JBJ) said:
If you were looking at purchasing a Bed and Breakfast, what reports would you appreciate having upfront?
Example: Month by month room rentals and income. Add ons and special events. Tax Returns for 3 years. Expenses broken down annually or month by month (ie cable tv, utilities, taxes, fees etc)
Looking from an aspiring point of view:
They should do a financial analysis of the place with following content/points.
Reconstruction Profit & Loss for at least 3 years.
Everyone who was doing some research on the B&B business should know it
is unlikely you will find a B&B who is doing a big profit. It’s clear; you try to push as much costs towards the business as possible.
Occupancy and Revenue figures for at least 3 year.
yearly or even better monthly (part of the table below)
If your ave. occupancy is over the ave. occupancy rate from the PAII study for your area I would mention it. If it’s below I wouldn’t. Let them figure out on there own.
Base on this information they can make a projection for the 1st year.
Here is a table with the costs split in different categories as well as the revenue and occupancy. If you can provide this figures by month its totally great and any aspiring should be really happy to get it for calculations.
Sales & Occupancy
[/td] [/tr] Rooms available
[/td] [/tr] Room Nights Available
[/td] [/tr] Room Nights Sold
[/td] [/tr] Occupancy %
[/td] [/tr] Average Daily Rate (ADR)
[/td] [/tr]
[/td] [/tr] Revenue
[/td] [/tr] Rooms
[/td] [/tr] Other Income
[/td] [/tr] Total Revenue
[/td] [/tr]
[/td] [/tr] Cost of Goods/Services
[/td] [/tr] Salary & Wages
[/td] [/tr] Employee Benefits & Taxes
[/td] [/tr] Towels & Linens
[/td] [/tr] Room & Housekeeping supplies
[/td] [/tr] Total Cost of Goods Sold
[/td] [/tr] Gross Profit
[/td] [/tr]
[/td] [/tr] Other Operating Expenses
[/td] [/tr] Advertising & Promotion
[/td] [/tr] Bank Fees
[/td] [/tr] Business Taxes & Licenses
[/td] [/tr] Dues & Subscriptions
[/td] [/tr] F & B Breakfast
[/td] [/tr] Insurance
[/td] [/tr] Legal & Accounting
[/td] [/tr] Miscellaneous
[/td] [/tr] Office Supplies & Postage
[/td] [/tr] Outside Services
[/td] [/tr] Repairs & Maintenance
[/td] [/tr] Telephone
[/td] [/tr] Utilities
[/td] [/tr] Total Operating Expenses
[/td] [/tr] Total Expenses
[/td] [/tr] Net Operating Income (Loss)
[/td] [/tr] [/table]
Also part of the financial analysis and a job for the aspiring are
Market/Location Analysis
Competitors Analysis
So this are the information’s / figures I want to see. Based on this they can start to make a general Business Analysis like break even, split of fixed and variable costs, marginal return and so on.
JunieBJones (JBJ) said:


After you signed the contract/agreement - what reports would you find handy?
A list of all directories, a referral report from those directories with search words for google, when taxes come due (this was huge for us, we never had them all come due in DEC!! We were unprepared for that when we bought this place), etc Directories that did not pan out - ie lanier bb.
Anything else you can think of? When we sell this B&B we want it to succeed and want to arm the new owners with as much useful and helpful info as we can. Thanks all.
Coming from the Marketing side I would like to know something of your guest database.
How many guest do you have in the database
Do you have CRM information’s like mailing address and email
How many repeat guests do you have
As well as available which type of guests do you have.
Vacation guests (stay one week or longer)
Business traveler/guests
Weekend guests
Perhaps also some reporting/tracking from your website.
Ok i guess this is enough.
 

Morticia

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The other thing I wanted to mention was that when we were looking a lot of stuff was not disclosed. And everyone we talked to said that was fair. So, if you want to replace towels, fine, but that's not going to show up on any expense report. Ditto the mortgage. Ditto the laundry service, the housekeeper's wages, the lawn service, the webmaster.
When we asked why we were told, 'You'll do things your own way, these are expenses the PO's incurred that you might not so we don't take those into account.'
Even food expenses were taken out because we might choose to upgrade or downgrade the food service. (Definitely an upgrade!)
So, only the basics were included.
 

muirford

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The other thing I wanted to mention was that when we were looking a lot of stuff was not disclosed. And everyone we talked to said that was fair. So, if you want to replace towels, fine, but that's not going to show up on any expense report. Ditto the mortgage. Ditto the laundry service, the housekeeper's wages, the lawn service, the webmaster.
When we asked why we were told, 'You'll do things your own way, these are expenses the PO's incurred that you might not so we don't take those into account.'
Even food expenses were taken out because we might choose to upgrade or downgrade the food service. (Definitely an upgrade!)
So, only the basics were included..
Bree said:
Ditto the laundry service, the housekeeper's wages, the lawn service, the webmaster.
When we asked why we were told, 'You'll do things your own way, these are expenses the PO's incurred that you might not so we don't take those into account.'
That's interesting. We disclosed all that information to a potential buyer. Their broker discounted the value of the business by all those costs, even though we said you could choose to run the business differently and take a lot more out of the gross revenue. Mortgage is different - that should be out so that the buyers can figure out what level of debt service will be supported by the business and then compare that to the price.
The tax returns don't always show the true picture, either. We were shown tax returns filed by the individual that turned out to be different by a third (and not to our benefit) than what the town tax records showed for revenue. The town's were closer to our experience but we weren't able to obtain them until after the closing. We didn't think to check those since we got the tax returns. And the broker we were using at the time didn't suggest verifying the revenue some way other than the tax returns. Caveat emptor.
 

Samster

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When I was looking, I wanted to know things like how old the linens were. That's a big outlay if you have to replace them!
 

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