Starting a Bed & Breakfast Business

GETTING STARTED

Are you thinking about converting your home into a Bed & Breakfast (B&B) business? There are several reasons why people choose to open a B&B --- supplemental income, restoration of a historic residence, preservation of a family home or farm, tax benefits. Whatever your reason, there are many issues that you need to think about and plan for just as you would for any business venture.

Do I Have What It Takes?

First and foremost, do you or more importantly does your family have what it takes to own and operate a B&B? Sit down with all family members and discuss the answers to the following questions:

  • Does the family enjoy meeting, talking, and interacting with people?
  • Is the family trusting of others?
  • Is the family comfortable with having and entertaining strangers in the home?
  • Is the family comfortable with all types of people from different cultures and socioeconomic backgrounds?
  • Is the family calm and relaxed around children?
  • Does the family mind giving up their privacy?
  • Does the family like to cook, clean, and keep the home neat?
If the answers to these questions are an enthusiastic "yes," then you and your family might prove to be successful B&B owners-operators. If the response is less than positive, you should reconsider opening a B&B.

It is important to understand that unless you are located in a popular tourist destination area and have more than just a couple of rooms to book, it will be difficult to make much money in a B&B business venture. From a financial standpoint, it may be necessary to consider additional ways to generate revenue from your B&B. There are other typical ways to add-on income from your B&B, these include opening a full scale restaurant in the facility that is open to the public for lunch and/or dinner; catering events on and/or off premises; renting facility for special events (such as receptions, retreats, etc.); and selling retail products (such as specialty food products, soaps/lotions, candles, T-shirts, etc.).

What Will It Cost?

The initial cost of going into a business is your start-up costs. It usually ends up costing a lot more than you first anticipate, that is why it is so important to actually put a pencil and paper to it --- so you will have an accurate picture of the amount of money you will need to get started. Costs to consider may include the following:

  • renovations (electrical, plumbing, kitchen, landscaping, fixtures, security system, etc.)

  • interior decoration (painting, wallpapering, furniture, lighting, etc.)

  • linens (bed and table)

  • towels

  • dishes and utensils

  • smoke and carbon monoxide detectors, fire extinguishers, and other emergency equipment

  • signage

  • promotion and advertising (brochures, ads, etc.)

  • permits and licenses (MS Business Registration, local privilege or business license, and MS food service permit)

  • insurance (liability, medical, property, workers comp, etc.)

  • telephone and answering service/machine

  • office equipment and supplies (front desk, computer, copier, fax machine, etc.)

  • reservation service(s)
Your start-up list may include more or less depending on your facility. The bottom line is that you need to know what the 'bottom line' is in terms of the dollars it will take to get the business started.

Do I Need Any Special Permits/Licenses?

Early in the planning process, check the local zoning, fire safety codes, and business permit requirements you must comply with at the appropriate agencies. At the state level you will need to complete a Mississippi Business Registration Application (FORM 70-001-00-1), which can be obtained from the Mississippi State Tax Commission (601/923-7000); obtain a MS Food Service Permit (not all B&B's must have this --- you need to check to see if you do or don't); and complete Food Safety Certification. At the federal level you will need an Employer's Identification Number (EIN) if you have one employee or more. Contact the IRS to obtain a federal EIN (telephone 800/829-3676).

It is also important that you understand at the front end, all of your tax obligations as a self-employed business owner and employer. The IRS resources listed below will assist you with this.

OPERATING PLAN

Once you have made the decision to open a Bed & Breakfast (B&B), it is essential that you develop an operating plan for the business to insure that it will run smoothly. Included in the operating plan are guidelines and procedures for handling the day-to-day operation of the business, including policies and procedures, finances, facility maintenance, food preparation/service, and guest relations.

Policies and Procedure

Reservations --- The telephone is the lifeline to your business because this is the primary way customers will make contact with your B&B. It is important that the telephone lines are kept open and that someone is available to answer questions and take reservations. If this is going to create a family problem, it may be necessary to install a separate telephone line for the business. In the event that no one is at home to answer calls, an answering machine with a professional sounding message needs to be activated. Calls should be returned promptly.

You should develop some type of reservation system that works best for your B&B. When a reservation request is received (by telephone, mail, or e-mail), if the date(s) are available, a reservation form should be completed. Customers need to be advised that reservations will be confirmed only with a deposit (by credit card, check, or money order). Once the deposit is received, written confirmation should be forwarded to the customer (by mail, e-mail, or fax). The confirmation should include information regarding your cancellation/refund policy. It is also nice to send directions and/or map to the B&B along with the confirmation, especially if it is in an out-of-the way location. Some B&B's will also include a brochure outlining guest services, check-in/check-out times, final payment, meal times, local tourist information, and any other information that guests need to know about ahead of time.

House Rules --- Since B&B's generally operate in a more intimate manner and in closer proximity to the family, it is important that guests know what is and what is not acceptable to you. You and your family need to set guidelines for the following and communicate those guidelines in an effective, yet tactful manner to your guests:

  • Pets (yours and theirs)
  • Telephone usage
  • Kitchen privileges
  • Use of television/radio
  • Smoking restrictions
  • Laundry privileges
  • Use of alcoholic beverages
  • Keys
  • Children (yours and theirs)
  • Use of home and grounds
  • Visitors
  • Parking
  • Etc.

Finances

Keeping track of the financial health of your business is essential to its long-term survival. Begin by implementing a good record keeping system. There are many excellent small business record keeping software packages on the market. Using computer technology to manage your business finances will save you a lot of time and money. However, the "old fashioned way" of keeping records by hand in a ledger will work just as well. The bottom line is --- implement some type of system and stick with it!

A good system will help you keep up with your operating expenses, which begin the day you open for business. These expenses include maintenance, utilities, office supplies, food & beverage, salary, wages and employee benefits, mortgage, licenses/permits, advertising/promotion, professional services (attorney, accountant), insurance, reservation service/travel agent fees, association dues, guest supplies, etc. From your records, you should be able to determine a figure for your average monthly operating expenses. You should then compare this figure to the revenue generated from your business to assess the financial health of the business on a regular basis.

Your record keeping system should also help you determine the taxes you must pay (employee, income, etc.). Refer to the IRS tax information resources listed below for more detailed information on business taxation.

Facility Maintenance

Research has shown that first impressions are indeed lasting impressions. The overall appearance of your B&B inside and outside is important. It should be neat, clean, and inviting --- it should make a guest excited to be there and want to come back again! Housekeeping standards should be implemented for guest bedrooms and bathrooms, as well as for the rest of the home.

Food Preparation/Service

Remember that "breakfast" is an integral part of a B&B, therefore is deserves special attention. Your food plan should be well thought out and cover every detail of the meal including types of food (continental or full), food presentation, serving location (kitchen, dining room, in bed, terrace, etc.), table setting (dishes, utensils, linens, fresh flowers, etc.), serving hours, special diet requests, and cleanliness of preparation and serving areas. If meals in addition to breakfast are served, the same attention to detail is required. Be creative in the planning and serving of your meals --- delight your guests, don't disappoint them!

[NOTE: Depending on your particular business, you may need to obtain a Mississippi Food Service Permit (not all B&B's must have this --- you need to check to see if you do or don't); and may need to complete a Food Safety Certification course.]

Guest Relations

The keyword here is provide your guests with the "extras." The majority of people who stay in B&B's rather than motels or hotels do so because they want something special --- not the same old thing. It should begin the moment they arrive and follow through until the time they depart --- your guests should be made to feel extra special. Many B&B's charge room rates well above the going rate for nearby motels or hotels --- if you charge more, your guests will expect more and it is up to you to provide the extra service they are seeking. Some extras to think about:

  • Airport transportation
  • Antique furnishings
  • Baby stroller
  • Bath products (salts, bubbles, soaks)
  • Bathrobe
  • Beach/pool towels
  • Bicycle
  • Books/videos
  • Candy
  • Clothes brush
  • Computer
  • Cotton balls
  • Down comforter/pillows
  • Extension cord
  • Fax machine
  • Fishing gear
  • Flowers
  • Fruit basket
  • Games
  • Hair dryer/curling iron
  • Hair products (shampoo, conditioner, spray)
  • Hand lotion
  • Mail service
  • Maps
  • Mineral water
  • Mouthwash
  • Nail polish remover
  • Newspapers
  • Photocopying
  • Picnic basket
  • Rain poncho
  • Safety pins
  • Sewing kit
  • Shower cap
  • Slippers
  • Soaps
  • Stationary/postcards
  • Sunscreen
  • Swimming pool
  • Television/VCR
  • Tooth brush/paste
  • Tourist information
  • Umbrella
  • Wheelchair

Follow-up is important to future business. Have a guest evaluation card in each room to be filled out before they leave or simply ask them about their stay --- What did they like the most? What could be done better next time? Send a postcard or personal note to their home a couple of weeks after each guest's stay, thanking them for their business and inviting them back.

MARKETING

Two of the biggest mistakes new business owners often make are 1) thinking that everyone will want to buy what they are selling, and 2) thinking that their product will sell itself. A good marketing plan will help eliminate both mistakes. The key elements of marketing are knowing the product and/or service you are selling, identifying the market or target customer, and then promoting/and advertising to that target customer so they will buy the product and/or service --- and in this case the product and/or service is your B&B.

Knowing Your Product/Service

In a B&B business you are primarily selling lodging or overnight accommodations. However, there are other ways to add-on income from your B&B, these include opening a full scale restaurant in the facility that is open to the public for lunch and/or dinner; catering events on and/or off premises; renting facility for special events (such as receptions, retreats, etc.); and selling retail products (such as specialty food products, soaps/lotions, candles, T-shirts, etc.). These add-ons become part of what you are selling. It is important to understand exactly what you are selling and in most cases it is much more than just a single item.

Identifying Your Market

The customers' needs and wants are very important to the entrepreneur who wants to be successful in the marketplace. But first, you have to "know thy customer and know thy customer well! A good place to start is with your marketing plan, and a good place to start your marketing plan is with the answers to the following questions:

  • Are the trends right?
    Are you located in a vacation destination spot?
    Are you a convenient travel stop for business travelers?
    Are you located in a rural area with no or limited local lodging accommodations?

  • Is the idea realistic?
    Can you operate a B&B the way you want to and make enough money at it to keep it going?
    Can the family cope with this type of business?

  • Would it be worth it if the business succeeds?
    What are your expectations from your B&B --- part time supplemental income or a full time job and income?
    Are you ready and able to handle success and all the work that comes along with it?

  • Who is the customer?
    Individuals, retired couples, business travelers, groups, vacationers, honeymooners?
    What is the primary age group - young adults, middle-agers, senior citizens?
    What is income level - B&Bs that provide special services often cater to higher income levels, while others cater to the budget conscience?

  • Where is the market?
    Where do they live - where are they coming from to stay at your B&B?

  • How many people will actually purchase?
    Are there enough potential customers out there that even would consider staying at a B&B in your location?

  • How many people will purchase product from you?
    How many of these people will stay at your B&B?
    What makes your B&B better than the competition --- what gives your business the competitive edge?

Promoting and Advertising Your Business

In order to bring customers into your business, they have to know you exist. Creating public awareness and demand for your product or service involves a commitment to promoting and advertising it. A brochure about your B&B will be the single most important promotional tool you can use to build awareness of your operation.

The brochure needs to be well done. It does not have to be expensive, but it must be good. If you do not have a good working knowledge of the elements of art and principles of design, then you may need to hire a graphic artist to do it for you. The brochure can be distributed locally to chambers of commerce, restaurants, convention/visitors bureaus, Mississippi Welcome Centers, airports, etc. In some cases you may need to distribute the brochure to similar locations and to B&Bs in adjacent states.

Additional methods to consider for promoting your B&B include:

  • Building strong credibility within the community. Many guests are referred by people living in your area. Local residents and businesses like to recommend places that are an asset or a unique feature of the community.

  • Making local residents aware that you are offering bed and breakfast. This can be an excellent source of referral business, particularly in smaller communities.

  • Supporting community programs. Become a member of the chamber of commerce, better business bureau, local merchant association, and the nearest convention/visitors bureau.

  • Working with community, regional and state support groups to develop tourism. Help develop promotional literature on the history, seasonal events, and unique features of your community. Be sure to contact the tourism organization in your area and the Mississippi Division of Tourism. The Mississippi Division of Tourism produces a statewide listing of B&Bs in Mississippi.

  • Working with the Mississippi Welcome Centers. Supply each Welcome Center with your brochures. Each center is capable of making reservations for you. Contact Rosie Herron-Williams at 601/358-3297 for information about this program.

  • Working through the local press. Send regular news releases to area newspapers and radio and television stations. Consider hiring a freelance writer to develop articles for submission to regional newspapers. Some newspapers have a weekly calendar and tourism section that lists the area's accommodations. Some regional and local papers may wish to do a human-interest feature about your facility, which will provide free local publicity.

  • Contacting companies and manufacturing plants in your area to make them aware that you are in business and can provide quality accommodations for incoming business travelers.

  • Cooperating with area businesses. Call on local business people, especially restaurant managers, plant managers, personnel directors, stores, purchasing agents, real estate salespeople, gas stations and convenience stores. See if they will stock your brochures, as well. Local word of-mouth referrals are a very solid way to attract guests at little or no cost.

  • Contacting private citizens and community leaders. Read the local newspaper carefully and make personal calls to local people holding family reunions, weddings, confirmations, and other events where out-of-town guests may be involved. Send out letters of congratulation concerning awards, promotions and accomplishments to keep your business profile high among community leaders.

  • Participating in community events. Keep abreast of activities and events in the community, particularly where these activities generate visitor traffic.

  • Answering inquiries promptly. People who make inquiries are your most promising potential customers. Such inquiries should be answered promptly, and with the information requested.

  • Developing a logo for your B&B. Use the logo on such things as business cards, brochures, stationary, T-shirts, "give-aways" or complimentary gifts, signage, matchbooks, pens and pencils, advertisements, etc.

Advertising can be an effective promotional tool. It should be used in support of other promotional efforts and not stand-alone. The traditional ways of advertising may be beneficial to your B&B --- newspaper, magazine, radio, television, direct mail, outdoor signs, Internet, and word-of-mouth. You will need to assess the situation and determine what form or forms of advertising will be most beneficial to your B&B. The key to advertising is to spend your advertising dollars on the most effective way to reach your target customer.

Other Considerations

Other avenues to consider include:

  • Listing your B&B in a B&B guidebook. Check bookstores for guidebooks, there are many.
  • Participating in the Mississippi Division of Tourism online Mississippi B&B listings. Contact Diana O'Tool at 601/359-3297 for information.
  • Listing with a reservation service organization (RSO). You can obtain a current listing of RSOs from The American Bed and Breakfast Association, 1407 Huguenot Road, P O Box 1387, Midlothian, VA 23113, telephone 800/769-2468.
  • Contacting travel agents in nearby large cities like New Orleans, Memphis, Birmingham, etc.
  • Listing in the yellow pages of the telephone directory.

RESOURCES

Mississippi Bed & Breakfast Association
Mr. Loren Ouart, President
601/437-2843

How to Open a Bed and Breakfast in Your Home (free publication)
Mississippi Development Authority - Division of Tourism
Diana O'Tool
601/359-3297

Mississippi Tour Guide (free publication - listing of B&B's in MS)
Mississippi Development Authority - Division of Tourism
Cheryl Eley
601/359-3297

Reporting Requirements for Mississippi Small Businesses
Request a copy of Mississippi from the Mississippi Development Authority (601/359-3593), or access it online.

IRS Tax Information
IRS Publication 533 - Self-Employment Tax
IRS Publication 334 - Tax Guide for Small Business
IRS Publication 587 - Business Use of Your Home
IRS Publication 535 - Business Expenses

Basic Business Start-Up Guide
Mississippi State University Extension Service

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