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General Thoughts on Buying a B&B

July 13, 2008

by Kit Cassingham

Buying a bed and breakfast is more involved than buying a home. And the formula isn't a rigid one, it's flexible or variable. That is part of what makes this transaction challenging -- knowing how to balance and weigh the different elements that comprise a good B&B purchase.

There is more to buying a B&B than how much money the inn makes or what the occupancy rate is. Your dream should be supported, your goals honored, and your personal situation considered. The business and lifestyle of B&B innkeeping is complex so your search should be comprehensive, not superficial. Pay attention to at least these issues so you can make the wisest decision possible. Your heart and your brain both need to be involved in this process.

I have three bits of advice for you as you look for your B&B:


  1. Know how much of your purchase decision is business and how much is personal -- and understand the ramification of your decision. An experienced B&B consultant is critical here to help you understand the difference.

  2. Buying a B&B is the flip-side of selling one -- today you are buying but tomorrow you will be selling and the same rules apply today as they will tomorrow.

  3. Listen to the experts you hire to guide you -- they are your voice of reason.


As you find possible B&Bs, you must carefully examine four areas to help you determine their strength, and your interest:


  1. Cash flow

  2. Maintenance

  3. Business

  4. Growth potential


These four points should impact the purchase price of the inn; not your heart. These are the basic elements of a bed and breakfast's value (the same elements a lender will consider when you apply for a mortgage), but there are some circumstances that will help justify a higher price than you might see at first blush.

I had a client years ago who found the right property -- location, size, price and condition. But the price was high for the cash flow. We studied the property and realized she couldn't build the property for the price the inn was on the market for, nor could she buy a similar property and renovate it to be what she wanted for that price. When the seller had renovated the old hotel all of the modern conveniences were installed -- new plumbing and wiring, TV/cable, and phone. The inn was furnished to suit the buyer's needs, and it already had a clientele. She bought the property and learned that it had been mismanaged and there was actually a lot of business to be enjoyed.

In another story, some buyers wanted to buy a beautiful property in a popular location. The price was just right for the income the inn produced. The maintenance was good and the business was strong. But, there wasn't growth potential. The buyers wouldn't have been able to improve their income because there was extra land with the property to add buildings to, no adjacent property to eventually buy for more guestrooms or associated rooms, the occupancy was high for the region, and the room rates were at the top too. They would have done fine with the purchase of that inn, but they wouldn't have done great -- which is a good business decision.

It's important to listen to your heart and your brain when deciding to buy a bed and breakfast. Though you may want a specific look to your B&B, that may have to be developed through time to get the right situation. You want a country look but the inn is presently decorated in a southwestern style? If all other elements are good, live with the existing style and redecorate a room at a time until you have the look and feel you want and relate too. Taking that approach lets the inn's success, not your loan, pay for the modifications.

After you buy your inn, go slowly in making changes to the decor and the operations. Learn what the sellers did and why before modifying things. There may be very good reasons for why things were the way they were that only time will show you and help you understand. You may have better ways of operating and decorating, but only time will tell that.

And my final thought for this newsletter is that buying an existing B&B is the smarter business decision than starting from scratch, much less building. But sometimes you feel you just don't have a choice. In that case, make sure your business plan is in order and that you have the resources to support you during renovation or construction and through the five years of operation as you build you business to the point it will support you.




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