Developing a Bed & Breakfast Business Plan
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❧ Developing a Bed & Breakfast Business Plan ❧ North Central Regional Extension Publication 273 Developing a Bed & Breakfast Business Plan Robert D. Buchanan Robert D. Espeseth Extension Specialist, Restaurant, Coordinator, Illinois-Indiana Sea Hotel and Institutional Management Grant Program Recreation Specialist Purdue University University of Illinois Cooperative Extension Service Programs and activities of the Cooperative Extension Service are available to all potential North Central Regional Extension Publications are subject to peer review and prepared as a clientele without regard to race, color, sex, part of the Cooperative Extension activities of the 13 land-grant universities of the 12 North national origin, religion, or disability. Central States, in cooperation with the Extension Service—U.S. Department of Agriculture, Washington, D.C. The following states cooperated in making this publication available. In cooperation with NCR Educational Materials Project. * University of Illinois North Dakota State University Issued in furtherance of Cooperative Extension Ag. Publications Office Extension Communications work, Acts of May 8 and June 30, 1914, in 69 Mumford Hall Box 5655, Morrill Hall cooperation with the U.S. Department of 1301 W. Gregory Drive Fargo, ND 58105-5655 Agriculture and Cooperative Extension Urbana, IL 61801 (701) 237-7881 Services of Illinois, Indiana, Iowa, Kansas, (217) 333-2007 Michigan, Minnesota, Nebraska, North The Ohio State University Dakota, Ohio, South Dakota, and Wisconsin. Purdue University Publications Office DONALD L. UCHTMANN, Director, Publications Mailing Room 385 Kottman Hall Cooperative Extension Service, University of 301 S. Second St. 2021 Coffey Rd. Illinois at Urbana-Champaign. West Lafayette, IN 47901-1232 Columbus, OH 43210-1044 The Illinois Cooperative Extension Service (317) 494-6795 (614) 292-1607 provides equal opportunities in programs and employment. Iowa State University South Dakota State University Publications Distribution Ag. Comm. Center, Box 2231 Published in part by the Illinois-Indiana Sea Printing & Pub. Bldg. Brookings, SD 57007 Grant program with funding from the Ames, IA 50011-3171 (605) 688-5628 National Oceanic and Atmospheric Adminis- (515) 294-5247 tration, U.S. Department of Commerce. University of Wisconsin This work is a result of research sponsored by University of Minnesota Ag. Bulletin, Rm. 245 NOAA, National Sea Grant College Program, Distribution Center 30 N. Murray St. Department of Commerce, under Grant NA 20 Coffey Hall Madison, WI 53715-2609 89AA-D-SG058. The U.S. Government is 1420 Eckles Ave. (608) 262-3346 authorized to produce and distribute reprints St. Paul, MN 55108-6069 for governmental purposes notwithstanding (612) 625-8173 For copies of this and other North Central any copyright notation that may appear Regional Extension Publications, write to hereon. University of Nebraska Publications Office, Cooperative Extension This publication resulted from the activities of IANR Service, in care of the university listed above the Great Lakes Sea Grant Network, which is Comm. and Computing Services for your state. If the office does not have comprised of university-based programs in Lincoln, NE 68583 copies or if your state is not listed above, Illinois-Indiana, Michigan, Minnesota, New (402) 472-3023 contact the publishing state as specified. York, Ohio, and Wisconsin. IL-IN-SG-E-91-6 / 5M–4-91–77826–SH / * Editor: Stephanie Hearn Publishing State 3.5M–12-94–86566–FW Designer: Krista Sunderland Contents 1 .................................................................. Introduction 5 .................................................................. Step One Consult Professionals with Expertise Related to the Bed and Breakfast Business 7 .................................................................. Step Two Analyze Yourself and Your Family 10 ................................................................ Step Three Develop the B&B Concept 12 ................................................................ Step Four Determine and Research Your Market 15 ................................................................ Step Five Forecast Sales Revenue 17 ................................................................ Step Six Choose a Location and a Building 19 ................................................................ Step Seven Develop a Marketing Plan 27 ................................................................ Step Eight Furnishing Your B&B 29 ................................................................ Step Nine Develop an Organizational and Operational Plan 32 ................................................................ Step Ten Develop a Plan to Meet Laws and Regulations 35 ................................................................ Step Eleven Develop an Insurance Plan 38 ................................................................ Step Twelve Develop a Financial Plan 44 ................................................................ Step Thirteen Complete the Business Plan 47 ................................................................ Appendix A Bed and Breakfast Business References 60 ................................................................ Appendix B List of Important Sources of Information for Prospective Bed and Breakfast Hosts 62 ................................................................ Appendix C A Guide: When a B&B Is Not a B&B 64 ................................................................ Appendix D Determining Personal Goals 66 ................................................................ Appendix E Housing and Family Responsibilities Associated with Owning a Bed and Breakfast Business 67 ................................................................ Appendix F A Sample Bed and Breakfast Concept 69 ................................................................ Appendix G Types of Visitor Attractions 70 ................................................................ Appendix H Marketing Worksheet 74 ................................................................ Appendix I Amenities Checklist 76 ................................................................ Appendix J Bed and Breakfast Guest Studies 78 ................................................................ Appendix K Questions to Answer When Choosing a Location and a Building 80 ................................................................ Appendix L Ideas for Continental Breakfasts 82 ................................................................ Appendix M Which Form of Business Organization Is Best for Me? 84 ................................................................ Appendix N Planning for a Tax Audit 86 ................................................................ Appendix O Example of a Projected Profit and Loss Statement 88 ................................................................ Appendix P B&B Start-Up Costs 90 ................................................................ Appendix Q Sample Chart of Accounts 92 ................................................................ Appendix R Examples of B&B-Related Zoning Ordinances Introduction Although Bed and Breakfasts have been firmly established in Europe for years, they were introduced in the United States in the late 1960s. There are now more than 20,000 B&Bs, up from about 2,000 in 1979. A sign of a maturing industry is the increasing average number of rooms per property, increasing occupancy rates, and increasing number of associations and support services; i.e., national, state, and regional associations setting standards (see Appendix B). There are now professional newsletters, travel publications, guidebooks, and vendors catering to small lodges. The rewards of being a Bed and Breakfast host1 include meeting people, adding income, gaining independence and an enjoyable way of life, and perhaps, restoring an old building. The business can give you great satisfaction as it grows into a valuable investment. As a host, your personality, distinctive and personalized hospitality, standards of excellence, and creative marketing can make a significant difference. What Is a B&B?2 There is a wide variety of B&B accommodations available. In categorizing the different types of B&Bs, the American Bed and Breakfast Association looks primarily at the use of the entire building and its relation to the B&B activity that occurs there. The association believes this approach is consistent with the way insurance underwrit- ers, legislators, code enforcers, and regulatory bodies are discussing and dealing with B&B issues. Differentiating between the different types of B&Bs remains one of the most important issues for the B&B industry as more legislation is being written to oversee its growth. The following definitions are used by the American Bed & Breakfast Association in its dealings with all public and private organizations and individuals: B&B Homestay: A private, owner-occupied residence in which the frequency and volume of B&B visitors are incidental to the primary use of the building as a private residence. One to five guest rooms are made available to transient visitors and provide supplemental income for hosts. Breakfast is the only meal served and is included in the charge for the room. A review of current B&B zoning laws indicates that the majority of B&B Homestays continue to be unregulated or allowed primarily under zoning provisions for “Customary Home Occupations,” subjecting them to outdoor sign restrictions;