Costs and earnings
How much you spend on setting up your bed and breakfast is really dependent on what kind of condition the property is in and how much work you need to do in terms of alterations. Take into account that you will need to install a decent fire alarm system and may have to make changes to your kitchen to conform with basic food hygiene requirements. Christine Williams said she didn’t have to spend too much as her and her husband had already made quite a few alterations, including making all the guest bedrooms en-suite, a few years earlier.
The bathroom issue is an important one. “Expectations are going up all the time,” says David Weston of the Bed and Breakfast Association. “People expect things like en-suite bathrooms even for cheap prices.”
You should also factor in the cost of any new furniture you need to buy. Tired old mattresses just won’t cut it, and while furnishings don’t have to be the latest designer offerings, everything in the guest rooms should be in good condition and maintained to a high standard. Room TVs and other entertainment, as well as tea and coffee making facilities also need to be added to the calculations in your business plan.
The look, feel, and level of service you offer will also determine your marketing strategy, and this is something you need to pay particular attention to even during the research stage. You can be running the most beautiful, quaint and charming B&B in the country, but if nobody knows about it, it’s doomed to failure.
Some kind of web presence is essential, but if all you want is a basic ‘shop window’ site, you don’t need to spend much, if any, cash on it. There are several free or low cost website options available. For more information on these check out our setting up a website channel. Get some quotations for the cost of advertising in directories or listings magazines too, as these can be really useful methods of driving customers to you.
“I signed up to Visit Britain for an annual fee,” says Williams. “It’s a lot of money but it’s worth it. They send a ‘mystery shopper’ inspector round once a year and then give you a rating.”
It's also advisable to meet local pub and restaurant owners, and suggest mutually beneficial deals; you might promise to recommend them, and vice versa, or team up with your fellow hospitality entrepreneurs for discounts and package deals. But, if you are going to team up with a nearby boozer or eatery, make sure your prospective partner is reputable; if you give a visitor a bad recommendation, your own reputation will suffer.
Of course, if you’re buying an entire new property then your costs are going to be substantially higher. If you’re taking out a mortgage on the premises you need to be realistic about your potential earnings. Do your sums, cross reference them with your research on similar businesses in the area, and then do them again! You cannot underestimate the importance of getting your estimated income as accurate as possible, otherwise you may find you’re not earning enough to pay back your mortgage, let alone make a living from it.
David Weston suggests working out average earnings for various levels of occupancy and seeing what level you need to maintain to cover your costs. “If you can survive on an occupancy rate of 30-40% then that’s very encouraging. However, if your budgeting says you need 80% occupancy just to break even, then it’s worrying and you need to rethink your approach.”
In terms of exactly what you can earn depends on a number of factors including location, the amount you can reasonably charge, whether or not you need to employ staff, how much is required for marketing and whether you have significant costs to pay on the property, such as a mortgage. Weston says there is no standard profit margin or rule, as it’s just too dependent on variables.
However, as an example, Williams’ Drifters Lodge has a total of three guest rooms. Taking into account running costs she says it’s fairly easy to make a profit margin of around 50-60%. “I’ve done about £4,000 in revenue in July but in December/January it can drop to £1,500. There are B&B owners who’ve given up because they can’t make a living, even with 10 rooms. It has a lot to do with costs like mortgages and rent.” Williams, who does not employ anyone else, says it’s a lot of hard work for that level of income but it’s worth it because she enjoys it so much.