Evaluating the B&B Business Value

From “Ask Kit!”:

Q: We are looking at a B&B to buy and wondered how to evaluate the business end of it. We have talked to an appraiser on the house and land.

A: Your question is addressed in the blog. If you want more specific pricing information hiring a professional is worthwhile. There are B&B brokers around the country who can help you. Evaluating a sale price is a service I offer as well. Pricing a B&B is usually handled as a package deal, meaning that the real estate and business are priced together. But if you want just the business value, my services address that issue.

4 thoughts on “Evaluating the B&B Business Value”

  1. A B&B we’re researching appears to fit our wants for location, size and potential for growth. However, in researching customer reviews online, the reviews are not stellar, mostly regarding the current owner’s attitude and the service. Although some reviews are very good, it’s about 60% bad. However, the broker states the occupancy rate is about 50%, which I read to mean between 40% – 50%, tending toward the lower end.
    The B&B is located in an area with few lodging opportunities but high visitation/tourism, and the potential for creating a destination B&B is very good.
    When negotiating the purchase price, how much influence would these reviews have on negotiation /reducing what the owners are asking? It’s been on the market for about a year and has been discounted about $100K in that time.
    To get out from under what appears to be a poor reputation, I’m thinking we would need to change the name and engage in a serious campaign to regain a favorable reputation, requiring more money for marketing than would probably be needed for a B&B with good reviews.
    Is there a guideline, other than a third party appraisal, that would help us judge what the “reputation value” of this B&B is?

  2. It seems to me you know what the reputation value is because of the seemingly low occupancy rate and reviews. I feel the purchase price should be based on the present income and be turnkey at that price.
    I think you don’t need to change the name for this inn. In fact I think you would be losing some business if you did. However, if you feel strongly about it you might consider something like changing it from “The Old Inn” to “The Old Inn at Sagetown” and over time drop “The Old Town” and call it “The Sagetown Inn”.

  3. Thanks. I’m considering the name change based upon the negative online reviews and their “persistence” in the marketplace. The reviews can’t be deleted and if we were to take over, those comments would no longer be valid but still be able to influence someone considering a stay with us. People searching for the inn and seeing those reviews would have incorrect information and the potential is real for us to lose bookings as a result.
    I suppose we could try to post to those sites announcing the new ownership and improvements. I just know the internet too well and how people use it to think that would be enough, however.
    I do understand that a name change would be similar to starting a brand new B&B from scratch, with all the attending expenses.
    A gradual name change might be the way to go, as you suggested.

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