The self-examination you should do before proceeding with an inn purchase is best done through educational opportunities like seminars, consulting, conferences, books and eBooks. You can’t really do too much exploration and contemplating before getting into the B&B industry. It’s a fantastic career and lifestyle, but it’s not for everyone. And some people that would be great innkeepers don’t have the resources to do it “properly”. Lots of education will help you determine if innkeeping is the right career and lifestyle for your situation.
One question I hear a lot from potential B&B buyers is, “Why is that innkeeper selling?” — an excellent question indeed. Most often the reasons include things like:
- innkeeping isn’t the right business for them
- they don’t:
- have enough money
- like people
- want to work that hard
- or their desired lifestyle isn’t compatible with innkeeping
Sometimes it’s a matter of changing interests in life or life-changing events. And sometimes it’s just a matter of it being time to move on to something else. One innkeeper I know was so determined to buy a truly wonderful inn that reality was ignored, no education pursued, and no self-introspection was tackled. The buyer worked at the inn for several months before the sale concluded, a wise tack (and one you would expect to tell the buyer if this was truly the right step for them), but it was not until several days after the deal closed that reality set in. The buyer realized that without the seller there the inn was lots of work and too hard for the buyer. The inn went back on the market almost immediately after the buyer took possession. Ouch!
Another buyer took a class, conducted lots of research and proceeded with buying a B&B, even though the pieces weren’t falling into place. That innkeeper realized golf wasn’t going to be a daily part of life, that operating a B&B with that many rooms was too hard for one person and there wasn’t enough money to hire someone, and that the owner’s quarters were inadequate. The B&B went back on the several months after the buyer gained ownership.
In both cases the dream was too big for reality to get beyond. A B&B inn is a big purchase and shouldn’t be approached lightly or casually. Innkeeping is demanding work, hard work at times, and requires a steady cash flow. To tend to guests to their satisfaction you need to be willing to put them first during “office hours”, be it you or staff that’s catering to them. The innkeepers who put their lifestyle before the inn suffer from low occupancy rates and the consequential low income. If this is a business, it has to be treated seriously and with respect, not shrugged off as an annoying pest.
One set of innkeepers wanted to get out of the city rat-race, work together, and start their family. A B&B seemed like the ideal business for them to allow their dream to be met. Because they needed the cash flow before their B&B inn became self-sufficient they kept their jobs outside the inn, meaning they didn’t have much time together because one worked the inn while the other worked outside, and vice versa. When they did have time together they socialized with friends and watched movies, almost ignoring their guests. They never did build much guest loyalty or create a strong cash flow before leaving the industry. These innkeepers never took classes, never did really explore their personalities in regards to innkeeping, nor did they understand what innkeeping would mean to their family life. Do your homework! Don’t make expensive mistakes.
Here are the first ten of the thirty questions to ask yourself about getting into innkeeping. You’ll get the other twenty in following ezines.
- Do I need an agent?
Yes! And you want an experienced one. If you have the luxury of finding a B&B Broker the most important question to ask is how many inns have you sold in the last three years. Not every part of the U.S. has B&B Brokers, so you don’t have the luxury of choosing between them. If you can’t work with a B&B Broker, consider hiring a B&B Specialist (broker or consultant) to at least consult with you through the process).
- How much money do I have to invest in this project?
You should anticipate at least 30 percent down, even up to 50 percent if the project is shaky enough. Yes, I know you see ads for loans with 10 percent down, but the requirements for those loans are so steep that very few people qualify for them. I’ve only seen one or two innkeepers qualify for that type of loan — I’ve seen lots of buyers turned down. In addition to the down payment for your loan you need money for closing costs. You probably want money for re-marketing and putting “your touch” on things at the inn.
I’ve known innkeepers who had the down payment and closing costs but not the re-marketing money; they struggled with turning the inn into their business, as opposed to running someone else’s B&B business. Don’t go into this business under capitalized!
- How much cushion do I have/want?
You should have at least one year’s worth of operating expenses available to the business. This issue may be the biggest business crusher around. If you don’t have a year’s worth of cushion you will always struggle, and when something happens to impede your business you’ll drown. You just never know what can happen. I’ve seen health issues sink innkeepers who didn’t have enough cushion to weather “the storm”. 9/11 and the 2001 recession hurt innkeepers across the country, causing many to sell when they wouldn’t have otherwise or to actually lose their inn to foreclosure. If your cushion is too small then large, surprise maintenance issues can be the business’s death. And, if you haven’t done your homework and bought a B&B in a low-tourism area, you need more than one year’s operating expenses for cushion and will not survive if you don’t.
- Do I have other sources of income to cover any negative cash flow or unexpected expenses?
This is related to the operating-expense cushion discussed above, yet different. This issue relates to buying an inn in a soft tourist market or during a soft economic time and you know you will need help covering expenses for years to come, if not always. Maybe you have decided this is a hobby or part-time business; that’s a scenario where an outside income is necessary. I’ve known of innkeepers who had a strong business in a strong tourist area but still needed additional income because they created such a luxurious guest experience that the extra income was mandatory for a few years. When the outside income earner lost the job they depended on, the cushion came into service. Be conservative in your income projections and optimistic in your expenses (in other words, figure you’ll earn less than you anticipate and spend more than you anticipate).
- Have I balanced my heart with my head?
Buying a B&B is both a business and personal decision. Not only does the business have to make financial sense, but it also has to feel right. You have to ask if this is a place you want to live. I find that for most clients, this issue requires the most amount of debate.
- What do I want in and from the community?
You will have specific needs and desires for what the community provides to you. Consider what your needs in doctors/medical are, do you know what forms of entertainment you want, the kind of educational opportunities you seek, and the support options — like mechanics, grocers, hair salons, or office supply stores — you need.
- What owner’s quarters needs to I have; size, proximity to the inn, privacy?
Typically, innkeepers live in substandard conditions. I am seeing a healthy trend toward living in nicer, more spacious quarters than even five and ten years ago, but there are still too many innkeepers who don’t give themselves enough privacy or space. I know innkeepers who have lived in “one of the guestrooms”, the kitchen, a closet, in finished basements, in unfinished attics, and even in a tent (granted the tent was a short-term situation, but it still had to take its toll on the innkeeper).
Some innkeepers opt to not live on the B&B grounds, sometimes moving away after having lived in substandard conditions. That can be a viable way to maintain your sanity, but be careful of what your absence does to the energy of the B&B. I can generally feel the difference between owner occupied properties and those properties where the owner lives away. If I can feel it your guests can feel it too, and that can negatively impact business. It can also affect the resale value and “curb appeal” of the B&B when you are ready to sell.
- How much luxury do you need to be comfortable?
We are all different in how we react to your living conditions. Some need very little to be comfortable while others need wide open spaces filled with nice furniture and fixtures. Some can handle a garden-level apartment while others barely survive with a small, luxurious house. There is no right or wrong in your needs. Be aware that more luxurious living needs are an expense that doesn’t have an income stream to support it. Your sanity level is reason enough to have more luxurious quarters, even if they don’t produce income and increase your costs; a therapist will cost you if you don’t take care of your living situation to your satisfaction.
- Other than basic living expenses — room, utilities, insurance, education — how much money do I need to live on? Car, clothes, travel, food, kids educational expenses?
I’ve seen people expect the inn to net for them what they are accustomed to in their present lives. That kind of income stream could happen, it’s just unlikely. Don’t forget as you analyze your living needs that your basic living expenses — room, utilities, insurance, and some board — are covered by the inn. Balance your optimism for what the inn can earn and your needs outside basic living expenses.
- Am I a 24/7 person?
No, no one should be, and you shouldn’t be either. But you need to be prepared for that eventuality. It is crucial that you make the time and space for yourself, but there will be days staff doesn’t show up and you have to do it all. Hopefully you have designed back-up systems for that eventuality so you don’t have to wear all the hats, but even back-up systems fail. Just don’t allow the inn to run your life.
There is lots to think about on the path to becoming an innkeeper. Even with taking classes, reading books, participating in forums, and attending conferences there is a need for you to ask yourself these sorts of questions.
More question ideas can be found in any of my ebooks.