6 Steps to Opening a Bed and Breakfast
If you’ve ever stayed at a bed and breakfast before, you know it isn’t your typical hotel or Airbnb experience. B&Bs deliver a level of folksy charm and personal attention you just can’t find anywhere else, which is probably why people love them so much.
If you’re wondering how to start a bed and breakfast, we get it. It can feel like the ideal business venture for entrepreneurs who love playing host. It’s also worth mentioning that industry sales as of 2018 reached $1.4 billion, according to market research firm Kentley Insights.
But like anything else, it pays to do your homework before jumping in headfirst. Being successful requires a lot more than cooking up tasty food and entertaining guests. From finding the best locale and drafting a business plan to securing funding and booking your first reservation—here’s a step-by-step guide for opening a bed and breakfast.
1. Find the Right Location for Your Bed and Breakfast
Investing in an area that’s already saturated with hotels and bed and breakfast options means walking into thick competition from the get-go. Take some time to thoroughly evaluate the market while keeping your vision in mind. What features are important to you in a property?
Maybe you’re looking for a lot of open space and an area to put a fire pit outside on cool winter nights. Others might be on the hunt for multiple indoor common areas where guests can connect and get to know one another. Do bed and breakfasts like these already exist in your area? If not, you may have identified a hole in the market that you’re uniquely qualified to fill.
It isn’t likely that you’ll stumble upon an area that’s completely devoid of other hotels—but hotels aren’t B&Bs. Before committing to a property, think about what will make you different from the competition. Your marketing plan (more on this in a bit) should help you bring that vision to life.
2. Come up With a Business Plan
Once you’ve clarified your vision, it’s time to get down to business. Drafting a business plan doesn’t have to be an intimidating task. Think of it as your plan of attack for getting your bed and breakfast off the ground. Once it’s polished, it could also play an important role in securing funding.
Now is the time to dig into the details. The more problems you can anticipate and address now, the less likely you are to run into hiccups down the road. In this way, your business plan is almost like a dry run. In addition to your executive summary and mission statement, it makes sense to explore the following points.
- Market analysis: Remember the research we mentioned above? Your plan should outline key findings like your main competitors, your target audience, and your ideas for standing out from the pack.
- Practical details: Starting a bed and breakfast isn’t a generic business venture. Flesh out details that are unique to the industry. Will you be hiring a property manager to handle maintenance and repairs? Similarly, do you plan on managing the staff yourself? From cooking to housekeeping to facilitating guest reservations, outline the things you’re comfortable delegating to others. Planning to do it all yourself is a recipe for burnout.
- Financial specifics: Startup costs go hand in hand with opening a bed and breakfast. You’ll need to finance the property itself, along with home appliances and furniture. Assuming there won’t be any renovations, you’ll also need to factor in everything from utility costs to employee wages to the landscaping bill. Your business plan is the place to outline how you anticipate funding it all. It may be a mix of personal savings and a small business loan. (We’ll explore funding options shortly.)
3. Register Your Bed and Breakfast
After coming up with a name and business plan for your bed and breakfast, it’s time to choose the right business entity. This simply refers to the way you’ll be structuring the business. A limited liability company (LLC) is worth considering since it provides some level of legal protection and is pretty simple to set up and maintain.
Those who act as sole proprietors are personally liable for business debts and obligations—not so with an LLC. It’s essentially considered a separate legal entity, so your personal assets are better protected. Instead of the LLC paying income taxes, profits and losses both pass through your own tax returns.
Of course, if you’re unsure which entity type is best for your B&B, consult with a business attorney before making your final decision.
Secure an Employee Identification Number (EIN)
An EIN, or business tax ID number, is assigned by the IRS and used when filing your income tax return and payroll tax return. An EIN also comes into play when applying for funding or opening a business bank account. Applying for one is free of charge and a legal requirement for bed and breakfasts that have employees on their payroll (which you most likely will). An added perk is that it helps keep your business and personal finances separate from one another.
Apply for the Necessary Licenses and Permits
The specific permits and licenses you’ll need when starting a bed and breakfast all depend on your local and state regulations. Check out your local business licensing agency to clarify the details in your area. In addition to getting the proper business license, you’ll need to research the state and city health and safety regulations around food handling and serving alcohol, for example.
The same goes for understanding local building codes, parking regulations, and zoning ordinances. You’ll likely need a merchant account to process credit card payments, as well. Overlooking these details could derail your plans pretty quickly. It’s a lot to digest, but the SBA’s small business resource search tool can help bring your area’s business requirements into focus.
4. Get Insurance for Your Bed and Breakfast
Business insurance is a vital part of starting a bed and breakfast. The reality is that opening your doors to guests also opens the door to risk. If your business is involved in a lawsuit, accident, or disaster, insurance will offer legal and financial protection. Small business insurance comes in all shapes and sizes. Here are a few different types that should be on your radar when asking yourself how to start a bed and breakfast.
|Type of Insurance||What It Covers|
General liability insurance
Specific losses your bed and breakfast causes a vendor, customer, or other company
Commercial property insurance
Everything from weather-related property damage to theft, fire, and vandalism
Claims stemming from work-related injuries
Provides cash benefits equal to a portion of employee wages following a job loss
Provides cash benefits equal to a portion of employee wages following an injury or illness
5. Secure Funding
Like any other type of small business, opening a bed and breakfast requires funding to get up and running—and to continue growing over the long term. The good news here is that there are plenty of business loans for bed and breakfasts to consider.
Of course, SBA loans are a frontrunner given their high borrowing ceilings, generally low interest rates, and long repayment timelines. Another benefit is that you can use them for any business purpose, from buying real estate to purchasing equipment (and pretty much anything in between). If you need less than $50,000 of capital and also have a strong business plan and good credit, an SBA microloan is another solid option.
If you don’t qualify for an SBA loan, don’t throw in the towel just yet. A business term loan, which is delivered as a lump sum of capital, could be a viable alternative. (FYI, repayment terms tend to be shorter, and you may get stuck with a higher interest rate.)
And for any new business, we recommend a good business credit card—one with a 0% introductory APR offer can help you make some larger purchases and pay them off, interest-free, gradually.
6. Get Your Marketing Plan up and Running
The best bed and breakfast in town won’t get far if the rooms are empty. Attracting guests—and increasing the likelihood of word-of-mouth referrals—has everything to do with your marketing strategy. Creating a plan that has some muscle behind it comes down to understanding the industry.
Attending trade shows, joining professional organizations, and making connections within the industry are great ways to learn the business. The Association of Lodging Professionals is a good place to start.
A strong marketing strategy is also one that understands its customers. What kinds of guests are you hoping to bring into your bed and breakfast? It’s an important question because the way you market to retirees is going to be different from how you appeal to young families. Highlight the things that make your B&B different from all others, and deliver that message to the masses using a variety of marketing channels. This is the best way to build your brand identity within your community and beyond.
The Final Word
Opening a bed and breakfast isn’t a get-rich-quick endeavor. More often than not, folks who charge ahead do so because they’re genuinely excited to interact with guests, connect with new people, and build a business that touches their community in a positive way. In other words, they’re all in.
Like starting any business, it requires more than just passion. Doing your research and planning ahead can go far in giving your bed and breakfast the best chance for success.
- MarketResearch.com. “2019 Bed-and-Breakfast Inns Market Research Report”