How much money can you make owning a bed and breakfast business?

After wanting to know what the pros and cons of owning a bed and breakfast are, the number 2 question I get asked is:  How much money can I make?  Can I make enough to live on?  How big does the B&B have to be to make a living from it?

The bad news is no one can answer that question for you.   The good news is there are ways to calculate some ball park figures.

Here’s the calculation you need to create:

Personal costs + B&B running costs + BB startup/maintenance costs = 1 +                   # Guest nights x room rate

This exercise will be much easier for you if you are considering using your current property as the B&B, or purchasing an existing bed and breakfast business.  If you are looking to move and start up from scratch, don’t make the common mistake that many people do – they assume that if you are moving to a smaller town, your costs will be lower – quite often it is the opposite!  The cost to provide the services is divided by a smaller population and goods cost more because of added transportation costs..

Personal costs

• include things like gifts, grooming, vacations, car, life/health insurance, savings plans, groceries, and your portion of the B&B costs .(If you need some help thinking of all the things to be included, take a look at your credit card statements and cheque books.)

Don’t forget to subtract any income that you will have from these costs – whether it is money from retirement income, full or part time jobs outside the B&B, etc.

B&B running costs are divided into two categories:

• Fixed expenses which are costs that don’t change if you have guests staying or not (such as mortgage, taxes, utilities, B&B insurance, advertising etc.) and

• Variable expenses are costs that will be impacted by the number and presence of guests (such as food and cleaning expenses).  (I use $10.00/guest/night)

You will also need to calculate the amount of floor space that you are using strictly for personal use vs. B&B use as a percentage.  If there are some areas that are used jointly (i.e. kitchen and laundry rooms) I recommend you split the floor space evenly between the two.  You will then need to apply the percentages to the fixed costs to establish what can be written off potentially as a business cost, versus personal costs.

 B&B start-up and maintenance costs

• these are all the non-food and cleaning supplies required to run and maintain the bed and breakfast.  Wear and tear on everything is much higher in a busy bed and breakfast, so while the first year’s start-up costs might be more, don’t forget to include a generous maintenance budget for future years.

# Guest nights

• this does not refer to the number of nights you will be open for business, but rather, how many nights will people actually be staying at your bed and breakfast? (To get some idea, check the dates on availability calendars of local B&Bs, talk to the owners and others involved in the local accommodation sectors.)

I recommend that you always half the number of nights you are projecting for the first two years, as most B&Bs take 3 – 5 years to get well established.

Room rate

• in order to determine what a realistic room rate is, you need to do some research.  Look at what competitors (I would suggest you check hotels, motels and other B&Bs) are offering in the way of amenities – i.e. bathrooms, location, other key features and find out which ones are similar to you.

• Having narrowed down the field, you can now take a look at what they charge and determine what your potential room rate could be.

Generally, people don’t own a bed and breakfast business to make money.  Rather, they enjoy the lifestyle it offers and the write-offs you get on your income tax for the business portion of your expenses, and then hope to make money off the sale of the business when they turn around to sell it.

Can you make a living owning a bed and breakfast?  I do.  But, you may not want my lifestyle, or you might be at a very different spot in your life.  The key thing to keep in mind if you need to make money from a bed and breakfast is that it is a business, and needs to be treated like one.  That means you have to invest in the B&B continually, and specifically with ongoing web site updates and advertising and be ready to learn and expand your business skills.