Good Businesses to Start

Starting a Bed and Breakfast

Bed and breakfasts are popular startup concepts for new business owners. Unfortunately, many inexperienced entrepreneurs don't realize the challenges that come with starting a bed and breakfast.

At first glance, a bed and breakfast would seem to be a fairly idyllic business startup choice.

Serene country landscapes, logs burning in the fireplace, the smell of fresh-roasted coffee wafting through the air . . . It sounds like a great way to make a living as a small business owner.

Each year, thousands of aspiring entrepreneurs plunge into the world of bed and breakfast ownership based on a similar set of assumptions. Many base their business model on converting an existing residence into an inn without considering the costs associated with a retrofit or the realities of bed and breakfast ownership. Others buy existing bed and breakfasts with visions of dollar signs in their heads, only to be disappointed later when the business struggles to break even.

Like any other type of business, a bed and breakfast requires the right combination of expertise and expectations. Although you can find bed and breakfasts that gross millions each year, countless more never achieve profitability. Here are some of the things you'll need to consider if starting a bed and breakfast is on your radar.

  • Lifestyle vs. business. New innkeepers may not be prepared for the strenuous demands of bed and breakfast ownership. In a typical small business, owners can go home after a long day at the office. In a bed and breakfast, your home and your business may be the same place. Aspiring startup owners need to understand that a bed and breakfast is both a business and a lifestyle.
  • Low income. Bed and breakfasts tend to be low-income businesses. Owners may turn a small amount of profit and some of their normal living expenses may be covered by the business. But for a successful bed and breakfast, the real financial payoff comes when the business is sold.
  • Average occupancy. A bed and breakfast business lives and dies by its average occupancy rate. The average bed and breakfast runs at approximately a 50% occupancy rate and you'll have to engage in aggressive marketing to hit that figure. Unless you're working from a proven track record, don't incorporate anything above 50% occupancy into your business plan.
  • Startup capital. You'll need to address a range of issues including zoning, staffing, and more before you open your doors for business. But all of those issues are irrelevant if you lack adequate capital to get the business off the ground. Capital requirements vary based on whether you're buying an existing B&B or starting from scratch. However, expect lenders to require a significant down payment (i.e. more than a residential mortgage) for a bed and breakfast, even if it will serve as your primary residence.

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