A lot of people wonder what the advantages of buying an existing B&B are. That’s easy to answer – MONEY!
When you buy an established business, you have the opportunity to start making money right away. In addition, based on past performance, you will have a good idea of how much money you will be able to make.
It is also easier to get financing from lenders when you have a business with a proven track record – you are providing actual profit and loss records rather than rough estimates, and there’s a clear history of sales to point to.
Other benefits include:
- Revenue/bookings are guaranteed
- You will have a good idea of peak and slow seasons and your cash flow
- The property will be in compliance with zoning and regulations and should come with all the permits required
- The B&B’s reputation is established and marketing programs should be in place
- Systems and suppliers are in place
- You have the opportunity to start improving and growing the business as soon as you take over
There are drawbacks:
- Your original investment might be more than if you started from scratch
- There may not be a suitable property for sale where you want to be located within your timeframe
- It will take time to implement changes – to the décor, type of guest, prices, etc
- Everything may not be in as good repair as it appeared when you viewed the property, leading to unexpected expenses
- Not all guests will choose to return, as it was their relationship with the previous owners that kept them returning in the past
It is important to do your homework to ensure that you buy the right bed and breakfast business for you – and that you pay a fair price for it.
How do you do that?
The first step is to get clear on what type of B&B will suit you best – based on location, the size of the property and the type of lifestyle you wish to lead while owning it.
Next, you need to do your research.
Make sure that:
- Learn what the price range is you can afford by discussing your situation with a mortgage broker or financial institution
- The location you choose can provide the all the things you are looking for
- There are enough people coming to the area that require accommodation (and want to stay in a B&B)
- All the amenities that you and your guests desire – restaurants, shops and other activities – are close by
When you are ready to start viewing bed and breakfast properties:
- Find a realtor who understands the local market and businesses
- Try to view the properties without the owner around
- Stay incognito as a paying guest in the B&Bs that really interest you to view how the business works.
- Does the house flow the way you would want it to?
- Are the other guests people you would like to entertain?
- What little details didn’t you see during the viewing?
- Try to find out why the owners are selling and who they think would be suitable owners
When you are ready to move forward with an offer:
- Put together a business plan based on whatever financial information you can get from the owners (expect things like taxes, utility costs, gross revenue, etc.)
- Consider how the current owners connections and expertise impact on the success of the business
- Ask (but you may not receive until an offer is made) the last 3 years of financial statements for the business
- Have an accountant review your business plan and the financial statements for the existing business
- Work with a mortgage broker (if required) to secure loans
- Draft your sales offer – and include a clause for training and mentoring by the current owner
- Have a lawyer review the sales contract
- Present your offer and be prepared to negotiate some points
If you are ready to make the move, you now have a step-by-step plan for purchasing your dream bed and breakfast – visualize your dream B&B, analyze the properties to make sure you find the one that will work for you and finalize your purchase!
However, if you would like more help and support to make sure you find the B&B for you, check out how the Design Your Dream Bed and Breakfast System will put you in the driver’s seat!