Start an airbnb business by following these 10 steps:
You have found the perfect business idea, and now you are ready to take the next step. There is more to starting a business than just registering it with the state. We have put together this simple guide to starting your airbnb business. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
Check out our How to Start a Business page.
STEP 1: Plan your business
A clear plan is essential for success as an entrepreneur. It will help you map out the specifics of your business and discover some unknowns. A few important topics to consider are:
- What are the startup and ongoing costs?
- Who is your target market?
- How much can you charge customers?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening an airbnb business?
Because you’re renting out your own space(s), much of the costs involved will be maintenance and necessary upgrades. Cleaning supplies and amenities for guests will also be a relatively inexpensive cost, depending on what you offer. Airbnb also charges some fees to the renter and customer.
Business costs include:
- Guest service fee: Guests are charged 6%-12% fee, through Airbnb, whenever they reserve a space.
- Renter service fee: The renter is charged 3% fee any time a space is rented through their site. This is subtracted from the reservation subtotal.
- Security deposit: This charge is a deposit from the customer to you to cover any damages, repairs or lost items, such as keys.
- If you offer amenities, such as coffee, tea, or snacks, you’ll need to replenish after each guest.
- Any new or used furniture to add to the comfort of your guest’s stay will also fluctuate, depending on necessity.
What are the ongoing expenses for an airbnb business?
Regularly re-stocking amenities in your rental(s) and periodically updating towels and linens will constitute a portion of your expenses. Any repairs, cleaning services, or maintenance fees will be incurred, as needed.
Who is the target market?
Typical customers for Airbnb spaces are looking for a more personal touch than a hotel/motel. They may also be looking for a space in an area which doesn’t have hotels available. Most customers are looking for a brief stay, usually between 2 and 5 days. For renters who offer their entire home, the clientele may be groups staying for special events, such as business trips or seminars, large sporting events, or music/concert events in the area.
How does an airbnb business make money?
Airbnb renters make money through the rental of rooms in their house or the whole house. Renters will pay a daily rental fee. Some renters may choose to charge different rates for weekdays and weekends or for extended stays versus a few days.
How much can you charge customers?
Rental rates vary, depending on the size of the rental and the location. Most rates are comparable to hotel rates in the area, but you will need to conduct some market research to determine what the appropriate rates are for your area.
How much profit can an airbnb business make?
Your Airbnb business will generate profit, based on the number of customer rentals. For instance, a customer rental, booked three times a week at a rate of $100 per booking would generate $16,000 net, annually. The rental rates can fluctuate considerably, depending on the location, so check out comparable rentals in your area, when string pricing.
How can you make your business more profitable?
An Airbnb business makes its money off of the renter’s reputation and customer reviews. Therefore, interacting with customers is a must. Return customers and long-term customers can be a great bonus, once you’re established as a valued renter. Remember to keep your rental updated and the photos on your page should be updated to reflect the positive attributes of your rental. Finally, take advantage of social media and market yourself in your own spaces. Reaching customers and having them return is key to a successful business.
What will you name your business?
Choosing the right name is important and challenging. If you don’t already have a name in mind, visit our How to Name a Business guide or get help brainstorming a name with our Airbnb Business Name Generator
When registering a business name, we recommend researching your business name by checking:
- Your state's business records
- Federal and state trademark records
- Social media platforms
- Web domain availability.
It's very important to secure your domain name before someone else does.
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC or corporation protects you from being held personally liable if your airbnb business is sued.
Form Your LLC
Read our Guide to Form Your Own LLC
Recommended: You will need to elect a registered agent for your LLC. LLC formation packages usually include a free year of registered agent services. You can choose to hire a registered agent or act as your own.
STEP 3: Register for taxes
You will need to register for a variety of state and federal taxes before you can open for business.
In order to register for taxes you will need to apply for an EIN. It's really easy and free!
You can acquire your EIN for free through the IRS website, via fax, or by mail. If you would like to learn more about EINs and how they can benefit your LLC, read our article, What is an EIN?.
Small Business Taxes
Depending on which business structure you choose, you might have different options for how your business will be taxed. For example, some LLCs could benefit from being taxed as an S corporation (S corp).
You can learn more about small business taxes in these guides:
There are specific state taxes that might apply to your business. Learn more about state sales tax and franchise taxes in our state sales tax guides.
STEP 4: Open a business bank account & credit card
Using dedicated business banking and credit accounts is essential for personal asset protection.
When your personal and business accounts are mixed, your personal assets (your home, car, and other valuables) are at risk in the event your business is sued. In business law, this is referred to as piercing your corporate veil.
Additionally, learning how to build business credit can help you get credit cards and other financing in your business's name (instead of yours), better interest rates, higher lines of credit, and more.
Open a business bank account
- This separates your personal assets from your company's assets, which is necessary for personal asset protection.
- It also makes accounting and tax filing easier.
Recommended: Read our Best Banks for Small Business review to find the best national bank, credit union, business-loan friendly banks, one with many brick-and-mortar locations, and more.
Open net-30 accounts
When it comes to establishing your business credit, net-30 vendors are considered the way to go. The term "net-30," which is popular among vendors, refers to a business credit arrangement where the company pays the vendor within 30 days of receiving goods or services.
Net-30 credit terms are often used for businesses that need to obtain inventory quickly but do not have the cash on hand.
Besides establishing business relationships with vendors, net-30 credit accounts get reported to the major business credit bureaus (Dun & Bradstreet, Experian Business, and Equifax Business Credit). This is how businesses build business credit so they can qualify for credit cards and other lines of credit.
Recommended: Read our guide on the best net-30 vendors so you can start building business credit now, so you never have to worry about cash flow in the future. Keep in mind that poor cash flow is the #1 reason businesses fail!
Get a business credit card
- This helps you separate personal and business expenses by putting your business' expenses all in one place.
- It also builds your company's credit history, which can be useful to raise money and investment later on.
STEP 5: Set up business accounting
Recording your various expenses and sources of income is critical to understanding the financial performance of your business. Keeping accurate and detailed accounts also greatly simplifies your annual tax filing.
STEP 6: Obtain necessary permits and licenses
Failure to acquire necessary permits and licenses can result in hefty fines, or even cause your business to be shut down.
State & Local Business Licensing Requirements
Many states and cities have their own zoning laws that may require you to obtain a license or pay a fee before being able to legally put your residence up for short-term rentals. Learn more about licensing requirements in your state by visiting SBA’s reference to state licenses and permits.
Most businesses are required to collect sales tax on the goods or services they provide. To learn more about how sales tax will affect your business, read our article, Sales Tax for Small Businesses.
For more information about local licenses and permits:
- Check with your town, city or county clerk’s office
- Get assistance from one of the local associations listed in US Small Business Associations directory of local business resources.
STEP 7: Get business insurance
Just as with licenses and permits, your business needs insurance in order to operate safely and lawfully. Business Insurance protects your company’s financial wellbeing in the event of a covered loss.
There are several types of insurance policies created for different types of businesses with different risks. If you’re unsure of the types of risks that your business may face, begin with General Liability Insurance. This is the most common coverage that small businesses need, so it’s a great place to start for your business.
Learn more about General Liability Insurance.
Another notable insurance policy that many businesses need is Workers’ Compensation Insurance. If your business will have employees, it’s a good chance that your state will require you to carry Workers' Compensation Coverage.
STEP 8: Define your brand
Your brand is what your company stands for, as well as how your business is perceived by the public. A strong brand will help your business stand out from competitors.
If you aren't feeling confident about designing your small business logo, then check out our Design Guides for Beginners, we'll give you helpful tips and advice for creating the best unique logo for your business.
How to promote & market an airbnb business
Since Airbnb’s site is responsible for listings and bookings, much of your marketing and promotion will come from positive customer reviews. Word of mouth is still a very powerful marketing tool, especially in this business. Keep tabs on what works for other renters and customers through customer reviews and adjust to renter needs or wants, as applicable. You have to be flexible to customer needs, especially when building your reputation.
Many Airbnb entrepreneurs have found the power of social media to be one of their best marketing tools. Tweets, links to business pages, and activity within the Airbnb site itself will help generate more interest in your listings. And, as mentioned before, make sure your booking calendar is up-to-date and you’re regularly communicating with your customers. Keeping abreast of your rentals and reviews will keep you on the front line for more customers.
How to keep customers coming back
Attracting and retaining customers all has to do with the customer experience. Make your rental attractive, furnished, and as professional feeling as possible. Ask customers for opinions and ideas for making future stays more comfortable. And if there is a problem, be attentive and quick to solve it. Your reputation will be the biggest retainers for customers.
Still unsure about what kind of business you want to start? Check out the latest Small Business Trends to help inspire you.
STEP 9: Create your business website
After defining your brand and creating your logo the next step is to create a website for your business.
While creating a website is an essential step, some may fear that it’s out of their reach because they don’t have any website-building experience. While this may have been a reasonable fear back in 2015, web technology has seen huge advancements in the past few years that makes the lives of small business owners much simpler.
Here are the main reasons why you shouldn’t delay building your website:
- All legitimate businesses have websites - full stop. The size or industry of your business does not matter when it comes to getting your business online.
- Social media accounts like Facebook pages or LinkedIn business profiles are not a replacement for a business website that you own.
- Website builder tools like the GoDaddy Website Builder have made creating a basic website extremely simple. You don’t need to hire a web developer or designer to create a website that you can be proud of.
Using our website building guides, the process will be simple and painless and shouldn’t take you any longer than 2-3 hours to complete.
STEP 10: Set up your business phone system
Getting a phone set up for your business is one of the best ways to help keep your personal life and business life separate and private. That’s not the only benefit; it also helps you make your business more automated, gives your business legitimacy, and makes it easier for potential customers to find and contact you.
There are many services available to entrepreneurs who want to set up a business phone system. We’ve reviewed the top companies and rated them based on price, features, and ease of use.
Recommended: Find the best phone system for your business; check out our review of the Best Business Phone Systems 2021.
Start An Airbnb Business In Your State
Select your state below for an in-depth guide on completing each of these steps in your home state.
Is this Business Right For You?
An Airbnb is a great way to add some extra income, especially if you have unused rooms or lots of space in your house. You will have guests staying in your home, so you should be comfortable talking and interacting with guests. Some homeowners, who travel often, will also rent out their homes when they are out of town. This allows them to receive income and have someone watching their home when they’re not around.
Want to know if you are cut out to be an entrepreneur?
Take our Entrepreneurship Quiz to find out!
What happens during a typical day at an airbnb business?
Airbnb businesses are very popular right now, so demand is fairly high. Once you are registered with Airbnb and have listed your space, you will begin to see requests from potential renters. Your job will be to manage the rental requests, interact with potential customers, and make your rental space as hospitable and customer ready as possible.
- Advertise your space through your pictures and descriptions on the Airbnb site.
- Be detailed in your listing and discuss all of the pros (and potential cons) of your space.
- Take clear pictures which show off the space, yet also let customers know exactly what to expect.
- Research surrounding rentals to learn what customers like and don’t like. Read the reviews, as well, and understand your customer base.
- Clean the space regularly and update with modern amenities, whenever needed.
- List nearby attractions, events, and activities for potential renters.
You want to be a good host, yet unobtrusive at the same time. By explaining much of the particulars up front, you will have given your guests much of the information they need before they arrive. Once they are staying, be available, yet respectful of the renters and rental space.
What are some skills and experiences that will help you build a successful airbnb business?
To be a successful renter of Airbnb spaces, you should be a personable individual, who is comfortable interacting with others. If you have any experience in the hotel, service, or even retail industries, the Airbnb business may be a good fit. You should also be adept at balancing your finances and resources, pertaining to the rentals. It would also prove beneficial if you were able to perform handyman services around the house, in order to make minor repairs or upgrades, without paying an outside source. Photography and writing skills will also come into play, as your description and accompanying photos will be your advertisement for your rental space.
What is the growth potential for an airbnb business?
Airbnb rentals are fairly popular currently and seem to be gaining popularity daily. Many renters have moved to Airbnb rentals over the traditional tenant/landlord situations. The profits for Airbnb rentals are larger than annual/semiannual rental agreements and the wear and tear of the space is often significantly diminished.
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Take the Next Step
Find a business mentor
One of the greatest resources an entrepreneur can have is quality mentorship. As you start planning your business, connect with a free business resource near you to get the help you need.
Having a support network in place to turn to during tough times is a major factor of success for new business owners.
Learn from other business owners
Want to learn more about starting a business from entrepreneurs themselves? Visit Startup Savant’s startup founder series to gain entrepreneurial insights, lessons, and advice from founders themselves.
Resources to Help Women in Business
There are many resources out there specifically for women entrepreneurs. We’ve gathered necessary and useful information to help you succeed both professionally and personally:
If you’re a woman looking for some guidance in entrepreneurship, check out this great new series Women in Business created by the women of our partner Startup Savant.
What are some insider tips for jump starting an airbnb business?
Getting started in the Airbnb business is fairly easy. Managing customers is the real trick. Here are some pro tips from successful Airbnb entrepreneurs:
- Keep your rental space clean and renter-ready at all times. This includes the outside of your home. Appearance rates high in customer satisfaction.
- Offer amenities which enhance the customer’s experience.
- Provide information about local attractions to help show off your region and promote return visits.
- Respond to customer inquiries regularly. Your response rate will tell Airbnb you’re interacting with the customers and will build up your customer satisfaction stats.
- Maintain a good acceptance rate and always have an up-to-date booking calendar. The acceptance rate refers to how many bookings you regularly accept. The calendar helps potential customers to determine when your space is available. Both of these customer features will help streamline the process. Happy customers leave happy reviews.
- Make your rates competitive, yet fair. The lowest price isn’t always the best, so do your research to determine an average price for similar rooms/rentals in your area.
- When in doubt, refer to Airbnb’s help center. An extensive and growing database of related information for customers and renters.
How and when to build a team
Much of the team for an Airbnb will be yourself and possibly a few other family members, friends, or professionals, such as plumbers or electricians. Some Airbnb renters also hire cleaning services to tidy up after a customer has vacated. If you decide to take on multiple properties, you may want to delegate a chain of command, in case you are not available or in the area. Have emergency contacts for your renters, so any problems can be solved quickly and efficiently.