Start a bed and breakfast by following these 9 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 step guide to starting your bed and breakfast. These steps will ensure that your new business is well planned out, registered properly and legally compliant.
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 long it will take you to break even?
- What will you name your business?
Luckily we have done a lot of this research for you.
What are the costs involved in opening a bed and breakfast?
The startup costs for a bed and breakfast are significant. The largest expense, by far, is the price of purchasing a property.
BedandBreakfast.com maintains a list of established bed and breakfasts for sale. The inventory obviously changes, but there regularly are places for sale for anywhere between $200,000 and $5 million. Some of the factors that affect price include the condition of the building, the size of the property, the location of the property, and how established the business is. Most business owners need to take out a mortgage to pay for a property.
Alternatively, business owners can purchase any large house and turn it into a B&B. Old mansions and farmhouses are especially promising properties, as they usually have character and plenty of rooms. The price for a property can range anywhere from thousands for a run-down structure, to millions for a beautiful building in a great location.
Business owners who purchase a property that’s not already a bed and breakfast will have to furnish and decorate it. Other startup costs (which are small compared to the other expenses) include licenses, insurance, and breakfast-making supplies.
What are the ongoing expenses for a bed and breakfast?
The biggest ongoing expenses for a bed and breakfast business include mortgage payments, taxes, insurance, and property repairs. Other expenses include utility costs, cooking supplies, and any licensing fees.
Who is the target market?
An ideal customer is someone who travels a lot, usually for pleasure, and has discretionary income. Vacationers are more likely to spring for the intimate setting of a bed and breakfast than business travelers are. People need a decent amount of discretionary income in order to afford the rates of a bed and breakfast, which are often higher than a comparable hotel or motel.
How does a bed and breakfast make money?
A bed and breakfast makes money by charging guests for their lodging, which includes breakfast. Guests may be charged by the night, week or month.
How much can you charge customers?
The going rates for a room at a bed and breakfast vary quite a bit, with most charging between $75 and $400 per night. Location, amenities, and season all affect these rates. Business owners should research the going rates at different times of the year in the area where they’re considering starting a B&B, to see how much they might be able to charge.
How much profit can a bed and breakfast make?
A bed and breakfast business’ profitability depends on the number of rooms it has, how much it charges per night, and its occupancy rate. Total profit potential varies greatly.
As an example, assume a bed and breakfast has five rooms that have an average rate of $125 per night. If all rooms were booked every night of the year, the bed and breakfast would have an annual revenue of $228,125.
Few bed and breakfasts are booked every night of the year, though. About Travel reports that the average B&B has an occupancy rate just a little higher than 50%. At a 50% occupancy rate, the bed and breakfast in this example could expect a year’s revenue to be closer to $114,063.
From this figure, all operating expenses must be subtracted. This includes all building costs and utility costs, which can be substantial.
How can you make your business more profitable?
A bed and breakfast can increase its profitability by offering special packages for guests, and by opening its meals up to the community. Some guests will be willing to pay a bit extra for anniversary, honeymoon, or holiday packages. Additionally, letting people who aren’t guests dine at your B&B provides an additional revenue stream and, potentially, lets a bed and breakfast use its kitchen and dining facilities to offer lunch and dinner.
What will you name your business?
Choosing the right name is very important. We recommend checking if the business name you choose is available as a web domain and securing it early so no one else can take it.
After registering a domain name, consider setting up a professional email account (@yourcompany.com). Google's G Suite offers a business email service that comes with other useful tools, including word processing, spreadsheets, and more. Try it for free
STEP 2: Form a legal entity
Establishing a legal business entity such as an LLC prevents you from being personally liable if your bed and breakfast is sued. There are many business structures to choose from including: Corporations, LLC's, and DBA's.
You should also consider using a registered agent service to help protect your privacy and stay compliant.
For most small businesses forming an LLC is a great option, but if you still want to weigh all your options check our our article, What Structure Should I Choose for My Business?
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?.
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.
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.
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
Certain state permits and licenses may be needed to operate a bed and breakfast. Learn more about licensing requirements in your state by visiting the Small Business Administration’s reference to state licenses and permits.
Food establishments are randomly inspected by the local health department on a regular basis. These inspections will check for compliance with local health laws, typically related to prevention of food contamination.
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.
Regulations for bed and breakfast businesses are typically enforced locally. This means that licenses must be acquired within the business owner’s county, city, village, or township. Typically, license requirements will be dependent upon the size of the bed and breakfast, as will the nature of fire and health department inspections, which will likely need to be conducted regularly.
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.
Certificate of Occupancy
To operate a bed and breakfast business, it is be necessary to obtain a Certificate of Occupancy (CO). A CO confirms that all building codes, zoning laws and government regulations have been met.
- If you plan to lease a location:
- It is generally the landlord’s responsibility to obtain a CO.
- Before leasing, confirm that your landlord has or can obtain a valid CO that is applicable to a bed and breakfast business.
- After a major renovation, a new CO often needs to be issued. If your place of business will be renovated before opening, it is recommended to include language in your lease agreement stating that lease payments will not commence until a valid CO is issued.
- If you plan to purchase or build a location for your business:
- You will be responsible for obtaining a valid CO from a local government authority.
- Review all building codes and zoning requirements for your business’ location to ensure your business will be in compliance and able to obtain a CO.
STEP 7: Get Business Insurance
Insurance is highly recommended for all business owners. If you hire employees, workers compensation insurance may be a legal requirement in your state.
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.
How to promote & market a bed and breakfast
A bed and breakfast’s main customer base is travelers, so marketing efforts should be focused on where vacationers look for lodging information. At a minimum, a business should have a website and social media pages. Getting listed on bed and breakfast websites, and offering bookings on sites that feature hotel deals, can help attract guests.
Encouraging guests who stay to leave reviews on sites like Yelp and TripAdvisor will show prospective guests that a bed and breakfast offers comfortable lodging and excellent service.
Recommended: Get started with local advertising for your business with a $300 credit from Yelp.
How to keep customers coming back
A bed and breakfast business can make itself stand apart by offering a truly unique lodging experience. This may be accomplished by choosing a property that has excellent views or a prime location. You can also convert a less naturally enticing space into a genuine attraction by decorating with antiques from a particular time and place, or by specializing in a particular type of cooking (e.g. Parisian breakfasts or organic meals).
STEP 9: Establish your Web Presence
A business website allows customers to learn more about your company and the products or services you offer. You can also use social media to attract new clients or customers.
Start A Bed and Breakfast 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?
Anyone who enjoys hosting others may be well-suited for owning a bed and breakfast business, because guests come to B&Bs for a level of hospitality that hotels and motels don’t provide. Business owners should like talking with people, cooking meals, and making guests feel comfortable.
Business owners should have a flexible schedule, so they can meet guests during the day, and take care of any issues that arise at night. Additionally, they should plan on working anytime the bed and breakfast is open, which for a typical B&B is every day. They don’t usually close down for holidays because these are busy travel times, but some bed and breakfast owners take several weeks, sometimes even a month or more, off during the slow season.
What happens during a typical day at a bed and breakfast?
Much of the work involved in running a bed and breakfast business revolves around looking after guests. Daily duties include welcoming incoming guests, cooking breakfast in the morning, checking guests out, and cleaning rooms after guests leave. While someone should always be on call and available, midday and late-night hours usually require little work.
What are some skills and experiences that will help you build a successful bed and breakfast?
A successful bed and breakfast business owner should know how to decorate rooms so they’re welcoming, and also be able to cook a good breakfast. Business owners who don’t have an eye for interior decorating should ask a friend or family member for help. (Saying thank you to a friend with a free night’s lodging costs much less than hiring an interior decorator.)
Business owners who don’t have an eye for interior decorating should ask a friend or family member for help. Saying thank you to a friend with a free night’s lodging costs much less than hiring an interior decorator.
Owners can get breakfast recipe ideas online, from sites like Pinterest and food blogs. Owners who don’t know how to cook at all can learn by consulting well-known cookbooks, such as The Joy of Cooking. For more hands-on help, owners can enroll in local cooking classes or hire a local chef as a consultant for a day.
It’s also helpful if owners know how to perform routine building maintenance and make basic repairs. Being able to take care of minor building issues will save a business from hiring a professional to fix everything.
What is the growth potential for a bed and breakfast?
A bed and breakfast business usually has one location. Thus, a bed and breakfast’s growth potential is typically limited by the number of rooms in the building. Most have at least four or five rooms for guests, and some have a dozen or more.
A few successful bed and breakfasts expand by purchasing a second, nearby property for guests to stay in. This is relatively uncommon, though. It’s also difficult to plan for, because you have no control over when nearby buildings come up for sale.
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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.
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.
How and when to build a team
Many bed and breakfast businesses are run by one person or a couple. Some bed and breakfasts hire an employee or two. Even large ones, however, keep a fairly small staff.
Read our bed and breakfast hiring guide to learn about the different roles a bed and breakfast typically fills, how much to budget for employee salaries, and how to build your team exactly how you want it.