At White Stone Brokers, nothing excites us more than assisting our clients with their dream of owning a hospitality property. Working with new innkeepers to find the property they have been dreaming about is one of the true joys of this business. After consulting with many first-time owners over the years, we’ve discovered common mistakes when buying a bed and breakfast for the uninitiated to avoid.
If you are overly prepared and have checked all the boxes, go out and find that dream property and be sure to contact our b&b consulting and brokering team along the way to see how our team of experts can help you. If not, we recommend a quick read-through below culled from industry experts and innkeepers/owners with years of experience.
Mistake #1: Not Researching The Area
Perform ample research before you visit an area to discover if the region has a robust tourism market. What drives the economy and how is your potential property positioned? What does the competitive landscape look like? Are you going to work twice as hard to stay ahead of the inn down the street? Or, if this is such a great market, why are there so few lodging options? Once you schedule an in-person visit, don’t just pop in for a few hours. Stay in the area for at least a few days. Act like a tourist, but also act like a local. Check out the top attractions, eat at nearby restaurants, and see what other businesses exist in the area. Visit the grocery stores and see what facilities exist. If possible, meet with tourism, town, and county officials. How remote is the area and does it feel like there is a labor market to pull from? Make sure this is the right location for you to grow your business and launch a new chapter.
Mistake #2: Not Getting to Know The Property
Since buying a lodging property allows access prior to closing, discover all you can by asking the right questions. Is the property on sewer or septic, well or town water, gas or oil? When were the major systems last upgraded? What are the zoning restrictions? What are possible hidden expenses in purchasing, operating, or expanding? Will the utility of the property and grounds serve your current vision and future revenue goals? We highly recommend securing a professional team focused on boutique hospitality to evaluate the property and business. From an inspector to a business consultant, get expert help to understand the condition of the physical property, financials, etc…
Mistake #3: Not Having The Money
This seems like a no-brainer but many prospective buyers chase their dream of owning a lodging property without paying attention to how costs add up and how much their “dream property” could cost them. Being under-capitalized can cause immediate issues when unexpected large expenses arise. Also, overpaying for your ‘ideal property” can put you in a difficult financial position before you have the chance to grow. Work with a professional who has hospitality financing experience, so you know precisely how much capital you need to successfully navigate a sale and weather any economic storms that blow your way.
Mistake #4: Getting Hung Up On a Dream
While the rewards of inn ownership are plentiful, there are numerous hardships that often accompany this dream. Depending on the property you purchase and the staff you can afford, you will likely need to get your hands dirty. Don’t get too emotionally attached to the “Hallmark Vision” of what you have in your mind vs. recognizing a business opportunity. If you have never worked in hospitality, consider shadowing an innkeeper for at least a week before diving into the deep end. This is first and foremost a business, not an episode of Newhart!
Mistake #5: Know The Brand You Are Buying
Before your settle on a property, research its history to discover the sentiments of past guests. Read the property reviews across all online sources. You need to know what you are buying and the challenges you may face. Take off the rose-colored glasses. How seasonal is the business and how profitable is the bed and breakfast? How old is the website and other systems and tools you are inheriting? Ask questions and make sure to confirm anything that is legal or financial with the properly authorized officials. Consider the alignment of your passions with your business plan so the property you seek fulfills them. You need to be able to speak authentically with first-hand knowledge of the features of the property and the locality you choose.
Mistake #6: Not Educating Yourself in Hospitality
While there is nothing quite like getting thrown in the deep end and forced to make breakfast for 20 guests on your first day, there is a lot to learn from those who came before you. You have a perceived way you want things done, the previous owners had their method but there are always a myriad of ways to approach the fine art of hospitality. A trusted advisor in the hospitality industry likes to say, “Education, education, education is as important as location, location, location!” How many years did you spend educating yourself for your first career? We highly recommend taking an innkeeping seminar from a hospitality expert who knows the ropes. You can also attend local, state, or national conferences to start making connections with other innkeepers and industry professionals before you take the reins at your property. Use resources from established institutions including The Association of Lodging Professionals to help start you on your journey.
We hope Part 1 will prepare you in your quest and help you avoid the most common mistakes when buying a bed and breakfast we see people make. We have a lot more to cover, so stay tuned for Part 2 of this series with advice on what to expect when you take over the reins
