Starting a bed and breakfast can be very profitable. With proper planning, execution and hard work, you can enjoy great success. Below you will learn the keys to launching a successful bed and breakfast.
Importantly, a critical step in starting a bed and breakfast business is to complete your business plan. To help you out, you should download Growthink’s Ultimate Business Plan Template here.
14 Steps To Start a Bed and Breakfast:
- Choose the Name for Your Bed and Breakfast
- Determine the Type of Bed and Breakfast You Will Launch
- Develop Your Bed and Breakfast Business Plan
- Choose the Legal Structure for Your Bed and Breakfast
- Secure Startup Funding for Your Bed and Breakfast (If Needed)
- Secure a Location for Your Business
- Register Your Bed and Breakfast
- Open a Business Bank Account
- Get a Business Credit Card
- Get the Required Business Licenses and Permits
- Get Business Insurance for Your Bed and Breakfast
- Buy or Lease the Right Bed and Breakfast Equipment
- Develop Your Bed and Breakfast Marketing Materials
- Purchase and Setup the Software Needed to Run Your Bed and Breakfast
- Open for Business
1. Choose the Name for Your Bed and Breakfast
The first step to starting a bed and breakfast is to choose your business’ name.
This is a very important choice since your company name is your brand and will last for the lifetime of your business. Ideally you choose a name that is meaningful and memorable. Here are some tips for choosing a name for your bed and breakfast:
- Make sure the name is available. Check your desired name against trademark databases and your state’s list of registered business names to see if it’s available. Also check to see if a suitable domain name is available.
- Keep it simple. The best names are usually ones that are easy to remember, pronounce and spell.
- Think about marketing. Come up with a name that reflects the desired brand and/or focus of your bed and breakfast.
2. Determine the Type of Bed and Breakfast You Will Launch
The next step is to determine the type of bed and breakfast you will launch. The four main types of bed and breakfast businesses are:
- Traditional Bed and Breakfast: A traditional bed and breakfast is a private home that offers rooms, meals, and other amenities to paying guests.
- Boutique Hotel: This type of bed and breakfast focuses on upscale accommodations in desirable locations such as beachfronts or ski resorts.
- Vacation Rentals: This type of bed and breakfast involves renting out entire homes or apartments on short-term leases.
- Online Bed and Breakfast: This type of bed and breakfast involves offering online reservations, promoting rooms via websites, social media and other digital marketing platforms.
3. Develop Your Bed and Breakfast Business Plan
One of the most important steps in starting a bed and breakfast is to develop your business plan. The process of creating your plan ensures that you fully understand your market and your business strategy. The plan also provides you with a roadmap to follow and if needed, to present to funding sources to raise capital for your business.
Your bed and breakfast business plan should include the following sections:
- Executive Summary – this section should summarize your entire business plan so readers can quickly understand the key details of your bed and breakfast.
- Company Overview – this section tells the reader about the history of your bed and breakfast and what type of bed and breakfast you operate. For example, are you a traditional bed and breakfast, a boutique hotel, or a vacation rental?
- Industry Analysis – here you will document key information about the bed and breakfast industry. Conduct market research and document how big the industry is and what trends are affecting it.
- Customer Analysis – in this section, you will document who your ideal or target customers are and their demographics. For example, how old are they? Where do they live? What do they find important when purchasing services like the ones you will offer?
- Competitive Analysis – here you will document the key direct and indirect competitors you will face and how you will build competitive advantage.
- Marketing Plan – your marketing plan should address the 4Ps: Product, Price, Promotions and Place.
- Product: Determine and document what services you will offer
- Prices: Document the prices of your services
- Place: Where will your business be located and how will that location help you increase sales?
- Promotions: What promotional methods will you use to attract customers to your bed and breakfast? For example, you might decide to use pay-per-click advertising, public relations, search engine optimization and/or social media marketing.
- Operations Plan – here you will determine the key processes you will need to run your day-to-day operations. You will also determine your staffing needs. Finally, in this section of your plan, you will create a projected growth timeline showing the milestones you hope to achieve in the coming years.
- Management Team – this section details the background of your company’s management team.
- Financial Plan – finally, the financial plan answers questions including the following:
- What startup costs will you incur?
- How will your bed and breakfast make money?
- What are your projected sales and expenses for the next five years?
- Do you need to raise funding to launch your business?
4. Choose the Legal Structure for Your Bed and Breakfast
Next you need to choose a legal structure for your bed and breakfast and register it and your business name with the Secretary of State in each state where you operate your business.
Below are the five most common legal structures:
1) Sole proprietorship
A sole proprietorship is a business entity in which the owner of the bed and breakfast and the business are the same legal person. The owner of a sole proprietorship is responsible for all debts and obligations of the business. There are no formalities required to establish a sole proprietorship, and it is easy to set up and operate. The main advantage of a sole proprietorship is that it is simple and inexpensive to establish. The main disadvantage is that the owner is liable for all debts and obligations of the business.
2) Partnerships
A partnership is a legal structure that is popular among small businesses. It is an agreement between two or more people who want to start a bed and breakfast together. The partners share in the profits and losses of the business.
The advantages of a partnership are that it is easy to set up, and the partners share in the profits and losses of the business. The disadvantages of a partnership are that the partners are jointly liable for the debts of the business, and disagreements between partners can be difficult to resolve.
3) Limited Liability Company (LLC)
A limited liability company, or LLC, is a type of business entity that provides limited liability to its owners. This means that the owners of an LLC are not personally responsible for the debts and liabilities of the business. The advantages of an LLC for a bed and breakfast include flexibility in management, pass-through taxation (avoids double taxation as explained below), and limited personal liability. The disadvantages of an LLC include lack of availability in some states and self-employment taxes.
4) C Corporation
A C Corporation is a business entity that is separate from its owners. It has its own tax ID and can have shareholders. The main advantage of a C Corporation for a bed and breakfast is that it offers limited liability to its owners. This means that the owners are not personally responsible for the debts and liabilities of the business. The disadvantage is that C Corporations are subject to double taxation. This means that the corporation pays taxes on its profits, and the shareholders also pay taxes on their dividends.
5) S Corporation
An S Corporation is a type of corporation that provides its owners with limited liability protection and allows them to pass their business income through to their personal income tax returns, thus avoiding double taxation. There are several limitations on S Corporations including the number of shareholders they can have among others.
Once you register your bed and breakfast, your state will send you your official “Articles of Incorporation.” You will need this among other documentation when establishing your banking account (see below). We recommend that you consult an attorney in determining which legal structure is best suited for your company.
5. Secure Startup Funding for Your Bed and Breakfast (If Needed)
In developing your bed and breakfast business plan, you might have determined that you need to raise funding to launch your business.
If so, the main sources of funding for a bed and breakfast to consider are personal savings, family and friends, credit card financing, bank loans, crowdfunding and angel investors. Angel investors are individuals who provide capital to early-stage businesses. Angel investors typically will invest in a bed and breakfast that they believe has high potential for growth.
6. Secure a Location for Your Business
Having the right space can be important for your bed and breakfast. You will need to consider several factors when deciding on a location. These include the size of the property, proximity to tourist attractions, traffic in the area, type of neighborhood, availability of parking, access to public transportation and zoning laws. You will also need to consider the cost of purchasing or leasing a space, as well as any renovations that might be needed.
To find the right space, consider:
- Driving around to find the right areas while looking for “for lease” signs
- Contacting a commercial real estate agent
- Doing commercial real estate searches online
- Telling others about your needs and seeing if someone in your network has a connection that can help you find the right space
7. Register Your Bed and Breakfast with the IRS
Next, you need to register your business with the Internal Revenue Service (IRS) which will result in the IRS issuing you an Employer Identification Number (EIN).
Most banks will require you to have an EIN in order to open up an account. In addition, in order to hire employees, you will need an EIN since that is how the IRS tracks your payroll tax payments.
Note that if you are a sole proprietor without employees, you generally do not need to get an EIN. Rather, you would use your social security number (instead of your EIN) as your taxpayer identification number.
8. Open a Business Bank Account
It is important to establish a bank account in your bed and breakfast business name. This process is fairly simple and involves the following steps:
- Identify and contact the bank you want to use
- Gather and present the required documents (generally include your company’s Articles of Incorporation, driver’s license or passport, and proof of address)
- Complete the bank’s application form and provide all relevant information
- Meet with a banker to discuss your business needs and establish a relationship with them
9. Get a Business Credit Card
You should get a business credit card for your bed and breakfast to help you separate personal and business expenses.
You can either apply for a business credit card through your bank or apply for one through a credit card company.
When you’re applying for a business credit card, you’ll need to provide some information about your business. This includes the name of your business, the address of your business, and the type of business you’re running. You’ll also need to provide some information about yourself, including your name, Social Security number, and date of birth.
Once you’ve been approved for a business credit card, you’ll be able to use it to make purchases for your business. You can also use it to build your credit history which could be very important in securing loans and getting credit lines for your business in the future.
10. Get the Required Business Licenses and Permits
Every state, county and city has different business license and permit requirements. In general, a bed and breakfast needs:
- General business licenses
- Food service permits, including health department inspections and Food Handler Certifications
- Alcoholic beverage permits (if you plan to sell alcoholic beverages)
- Building and zoning permits
Nearly all states, counties and/or cities have license requirements including:
- Sales Tax License or Seller’s Permit: for selling products
- Fire Department Approval: a process by which the local fire department reviews and approves the installation of a fire alarm system.
Depending on the type of bed and breakfast you launch, you will have to obtain the necessary state, county and/or city licenses.
11. Get Business Insurance for Your Bed and Breakfast
Business insurance will cover any potential liabilities that may arise from running the business, such as general liability, professional liability, property damage, or product liability.
Other business insurance policies that you should consider for your bed and breakfast include:
- Auto insurance: If a vehicle is used in your business, this type of insurance will cover if a vehicle is damaged or stolen.
- Workers’ compensation insurance: If you have employees, this type of policy works with your general liability policy to protect against workplace injuries and accidents. It also covers medical expenses and lost wages.
- Commercial property insurance: This covers damage to your property caused by fire, theft, or vandalism.
- Business interruption insurance: This covers lost income and expenses if your business is forced to close due to a covered event.
Find an insurance agent, tell them about your business and its needs, and they will recommend policies that fit those needs.
12. Buy or Lease the Right Bed and Breakfast Equipment
The equipment you will need for your bed and breakfast depends on the type of lodging you offer. If you are running a traditional bed and breakfast, you may need furniture, towels, linens, dishes, glasses, kitchen utensils and appliances.
If you plan to offer luxury services such as spa treatments or health classes, then you will need to invest in additional equipment such as massage tables, exercise machines, and saunas.
You should also consider investing in technology for your business that could make it easier for guests to book rooms and pay their bills. Examples of this include a website, POS system, and online booking platform.
13. Develop Your Bed and Breakfast Marketing Materials
Marketing materials will be required to attract and retain customers to your bed and breakfast.
The key marketing materials you will need are as follows:
- Logo: Spend some time developing a good logo for your bed and breakfast. Your logo will be printed on company stationery, business cards, marketing materials and so forth. The right logo can increase customer trust and awareness of your brand.
- Website: Likewise, a professional bed and breakfast website provides potential customers with information about the services you offer, your company’s history, and contact information. Importantly, remember that the look and feel of your website will affect how customers perceive you.
- Social Media Accounts: establish social media accounts in your company’s name. Accounts on Facebook, Twitter, LinkedIn and/or other social media networks will help customers and others find and interact with your bed and breakfast.
14. Purchase and Setup the Software Needed to Run Your Bed and Breakfast
The software you need to run your bed and breakfast will depend on the size and scope of your business. For most bed and breakfasts, you should consider investing in a property management system (PMS). A PMS allows you to manage bookings, reservations, customer contact information, finances and more.
Most bed and breakfasts need accounting software and customer relationship management (CRM) software.
While there are many different software options available, some of the most popular programs for accounting include QuickBooks and Xero. Some of the most popular CRM programs include Salesforce, and Zoho.
Research the software that best suits your needs, purchase it, and set it up.
15. Open for Business
You are now ready to open your bed and breakfast. If you followed the steps above, you should be in a great position to build a successful business. Below are answers to frequently asked questions that might further help you.
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How to Start a Bed and Breakfast FAQs
Is it hard to start a bed and breakfast?
Starting a bed and breakfast can be time-consuming and expensive. However, with the right planning and preparation, it can also be immensely rewarding.
If you follow the steps above, you should be able to start your bed and breakfast without too much difficulty.
How can I start a bed and breakfast with no experience?
Yes, it is possible to start a bed and breakfast with no prior experience in the hospitality industry.
You should begin by researching what type of B&B will best suit your needs and the needs of your customers. Once you have chosen a business model, you must build a strong foundation for your business through careful planning, market research, investment, and marketing.
Once you have a few clients, you can then start marketing your business more aggressively.
What type of bed and breakfast is most profitable?
The type of bed and breakfast that is most profitable will depend on your specific business model. Generally speaking, boutique bed and breakfasts tend to be more profitable than regular B&Bs as they offer a unique experience and can charge higher prices.
However, the success of any B&B largely depends on its location, customer service, and marketing strategy. It’s important to research different bed and breakfast models before deciding which one is the most suitable for your business.
How much does it cost to start a bed and breakfast?
The startup costs of bed and breakfasts can vary widely depending on the size, location, and type of business. Generally speaking, you should expect to spend anywhere from a few thousand dollars for basic furnishings up to tens of thousands of dollars for renovations or purchasing an existing property.
The total amount ranges between $10,000 and $100,000. Additionally, you will need to factor in the cost of marketing and advertising, as well as legal fees.
What are the ongoing expenses for a bed and breakfast?
The ongoing expenses of a bed and breakfast will vary depending on the size of your business. Generally speaking, you should expect to pay for utilities, insurance, marketing, staff wages, and more. Additionally, you may need to purchase supplies or hire contractors as needed.
Overall, the total monthly cost ranges between $1000 and $5000, but this will depend on your specific expenses.
How does a bed and breakfast make money?
How does a bed and breakfast make money? Most bed and breakfasts generate income through the sale of accommodation, food, drinks, and other services. Depending on your business model, you may also offer additional attractions like entertainment, activities, or guided tours.
Revenue can also be generated through things like special events or catering services. Finally, you should consider exploring ways to monetize your bed and breakfast online, such as with a website or social media marketing.
Is owning a bed and breakfast profitable?
Yes, owning a bed and breakfast can be very profitable.
By implementing strategies such as upselling, marketing your business online, and offering unique experiences, you can increase your chances of success. Additionally, by providing outstanding customer service.
The profitability of a bed and breakfast will vary depending on the specific industry, geographical location, and other factors. However, there are a few things you can do to increase the chances of your bed and breakfast being profitable.
Some of the key things you can do to make your bed and breakfast more profitable include:
- Narrowing your focus to a specific niche market. This will allow you to become an expert in a specific area, and clients will be more likely to trust your advice and recommendations.
- Offering add-on services that complement your main offering. For example, if you're a marketing consultant, you could offer to manage clients' social media or design campaigns in addition to your core offering.
- Taking time to understand the needs of your target market.
- Optimizing your website for SEO to increase online visibility. This will allow you to attract the right kind of client to your business, who are actively searching for a consultant in your niche market.
- Signing up for Google AdWords or Facebook Advertising if appropriate, to target potential clients on their own platforms.
- Creating a unique selling proposition. Be clear about what you can do that other consultants in your niche market cannot, and communicate this to potential clients.
- Building references from clients who are willing to recommend you to their friends. This is more valuable than testimonials on your website, as it builds social proof in the eyes of potential clients that you offer great value for money.
- Investing in training in order to keep up with industry trends, and increase your knowledge about your niche market.
- Providing outstanding client service
Why do bed and breakfasts fail?
There are several reasons a bed and breakfast can fail, including poor customer service, lack of marketing or advertising, pricing too high for the market, inadequate or outdated facilities, or not offering something unique.
One of the main reasons that bed and breakfasts fail is a lack of planning. This can include not having a detailed business plan, not doing research on the industry, and not targeting the right customers.
Another reason is a lack of marketing and sales skills. This can include not creating a sales process and not have a clear and strong value proposition.
The last main reason is a lack of financial management skills. This can include not having a realistic budget, not tracking expenses, and not investing in the business.
Who are key players in the bed and breakfast market?
The bed and breakfast market is made up of a variety of different players, including small businesses, large enterprises, and even individuals.
Some of the key players in the market include:
- The Cliffside Inn, a small family-run bed and breakfast in Maine
- The Grand Hotel of New York City, a large hotel chain that offers bed and breakfast accommodations
- Airbnb, an online marketplace for those looking to rent out their spare rooms or entire homes on a short-term basis Individuals who rent out their own homes as bed and breakfasts
However, there are many other players in your specific target market, and it is important to research the market to identify the key players that may have the most direct influence on the success of your business.
How much should I charge for my bed and breakfast services?
Bed and breakfast fees can vary depending on the type of bed and breakfast services being offered, as well as the size and scope of the project.
However, some common bed and breakfast fees include:
- Room rates, which are based on the size and amenities of the room
- Cleaning fees, which may be charged either per night or per week
- Breakfast charges, which can range from a set fee for each guest to a la carte pricing for each meal or snack that is served
- Additional service fees, such as laundry services or concierge services
The best way to determine the right fee for your bed and breakfast services is to research the rates of similar businesses in your industry, and to also consider the value that you will be providing to the client.
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