A bed and breakfast (B&B) can earn you a great living with some businesses taking in £70,000 a year, but there are various points you need to consider to buying one successfully. There are pitfalls to avoid and steps to take to ensure it is a stress-free experience.
The market is there for your taking and here are six key steps to follow to make sure you go about buying a B&B prosperously.
1. What’s included?
It’s important that you know exactly what is included in the buying price.
- What furniture, fixtures and fittings are available?
- How many staff members are employed and on what salary?
- What are the premise details?
- Is there any living accommodation?
The last thing you want is to purchase a business at the top of your budget and then realise none of the furnishings are included. You’ll have an empty B&B with no more money!
2. Why was it sold?
What is the logic for selling the business? There will be a reason that it has come onto the market and this information is telling.
Is it for financial circumstances, family reasons or does it require a big investment? It’s essential to know why it’s being sold to save your own back.
3. Do your research
If the business has been active and running, do your research. When was it established, what is its turnover, is the business active and what about the tenure? If the turnover is undisclosed, why is this?
You need to establish the business’s previous success and know it inside and out before you purchase it.
Have you taken into account the off-peak season into your budget? It may be that due to locality or seasonality, there are certain times of the year that bring in zero revenue. By processing this into your business plan, you can budget your yearly finances accordingly and bypass early bankruptcy or administration.
4. Size up the competition
Are there any competitor B&B’s in the local area?
This is a common pitfall overlooked when starting up a B&B accommodation. If there are neighbouring businesses, what is your USP? Do you have more rooms, do you offer more competitive rates, do you have free Wi-Fi?
Size up the competition BEFORE you purchase the business because otherwise you could end up being a small fish in a very big pond and put simply, the sharks will eat you alive.
5. Legal obligations
Do you know what legal obligations you have to adhere to and have in place prior to buying? For example, you need to meet the requirements of the food hygiene legislation (Regulation (EC) No 852/2004 and the Food Hygiene (England) Regulations 2006)?
We advise you to speak to the development control officers in your local council’s department of planning services prior to starting a B&B business.
Your go-to resources for health and legislation in the industry is the Health and Safety Executive although local authority health departments can help.
Also, don’t forget to contact your local fire station to ensure the correct fire precautions are in place, and register as a food business with the local environmental health department.
6. Legality 101
As well as staying abreast of health and safety, there are also other key elements in terms of legality that you need to be aware of including:
- insurance and liability
- terms and conditions e.g. bookings, deposits, cancellations, property damage etc.
- misbehaving guests (although the police are really your best bet)
- small claims.
Any owner of commercial property will need cover for public liability and loss of rent but in particular to B&Bs, your insurance should cover internal fixtures and fittings.
It’s not really necessary for you to have professional indemnity insurance as you aren’t really giving advice, services or designs to a client, however employer’s liability Insurance is required to cover your staff.
There are various companies that offer a consolidated B&B insurance that are specific to guest houses including: i4me, Hodgson Insurance Services, Intasure and larger companies like Compare The Market, and Confused.com.
Make sure you check this every year and that you’re sufficiently covered.
So there you have six key steps to buying a B&B successfully. Follow these to the letter T and good luck with your new venture!
Gareth Smyth is managing director of business transfer agent and business broker Hilton Smythe.