How to start a bed and breakfast business
Thinking about running a B&B or earning money on Airbnb or renting out a room? Here's our Startups guide to help you make your bed then lie in it...
Key areas to consider when starting a B&B (or airbnb) business are:
What skills are required to start a B&B – Who is starting a B&B suited to?
Tourism is big business in the UK. Even during a recession, UK destinations do well as more people choose to stay within the British Isles for their holidays. With the Olympics fast approaching you may be considering getting yourself in on the action sooner rather than later. According to a report by Deloitte, tourism was worth over £115m to the UK economy in 2009, and a high proportion of this figure is attributable to domestic spend. According to VisitBritain, British residents took 126 million trips across the UK and Ireland in 2009, spending nearly £22m in the process.
Bed and breakfasts are ideally placed to capitalise on domestic tourism footfall, and the industry is currently in excellent health. The Bed and Breakfast Association claims Britain’s B&Bs generate total revenue of £2bn per year; the B&B industry is currently 28% larger than budget hotels sector, and 35% of the size of Britain’s overall hotel sector.
If you like the idea of really being at home with your business, then running a B&B could be perfect for you. From a guest’s perspective, a well-run B&B can be more comfortable and more local than a hotel, offering homely surroundings and a relaxed atmosphere. They can be a home-from-home and a welcome respite for weary travellers.
A B&B is different from a hotel in that it’s generally more basic. You will offer a bed for your guests to sleep in, and a full breakfast before they check out. No gyms, no health spas and no concierge service. Of course you may provide some other basic facilities such as access to television but the main ethos behind the traditional B&B is that it’s not the kind of accommodation you expect the guests to spend much time in. It’s somewhere to sleep and have breakfast before setting off for a business meeting or exploration of the local tourist attractions. Most guests are aware of this, and are quite content with a more basic level of service as long as their accommodation is clean, tidy and functional.
Given that you are effectively opening your home to strangers, you are blurring the edges between your business and your home life so you need to be confident and happy with the arrangement. To a certain extent, it’s a creative profession: you have to enjoy cooking and making your accommodation as pleasant and welcoming as possible. It’s also something of a lifestyle business, a job that many people will undertake with their partners or perhaps later in life.
It may be worth considering seeing if you can get a Start Up Loan (external partner site, link opens in a new tab) to help you with financing, and mentoring to start this business idea. You'll also need to think about registering your business, either as a sole trader or as a company - if a company, then Smarta Formations (external partner site, link opens in a new tab) are an organisation that can help you set up.
To run a successful B&B you have to be a real ‘people person,’ especially if your guests are sharing some of your own space, such as the lounge or dining room.
David Weston, chief executive of the Bed and Breakfast Association says: “You’ve got to consider if you’re the right type of person to run a B&B because you’re allowing strangers to come into your home. You also need to be someone who pays attention to detail, is house proud and keeps the place welcoming. If you’re not very neat and tidy it’s probably not a good business to get in to.”
However, if you do have the characteristics listed above you could find it’s the perfect way to make a living or supplement your income. Christine Williams, owner of the Drifters Lodge in Buckinghamshire and a recent BusinessLink advisor, says:
“I’m rushed off my feet and working harder than I ever did in my life, but it’s a wonderful way to make a living. While I’m not the mistress of my own time in the way I thought I’d be, I don’t mind because I love it.”
Rules and regulation for a B&B business
You don’t need a specific licence or qualification to open or run a B&B but there are areas of law you need to be aware of. It’s important to bear in mind fire regulations from the outset as you will need to carry out a Fire Risk Assessment and may have to make some adjustments to the property as a result.
Before you put any concrete plans in place, it’s best to consult with your local authority planning office. If your prospective B&B is situated in a tourist hotbed, it’s highly likely the local authority will have a tourism plan, and they may take a dim view if you attempt to start your hotel outside the designated tourist area; it’s prudent to check this at the outset, rather than waste thousands of pounds on a project which the local authority will never permit.
Furthermore, all extensions or significant alterations to your property need to be done by the book so make sure you have the appropriate planning permission from the local authority and adhere to building regulations before you start any work. Thankfully, you can apply for planning approval and building approval at the same time, so there’s no need to go back and forth.
You may also need to apply to your local planning office for a change of use of your property if you’re planning to have more than three guest rooms, or don’t plan to live at the B&B yourself. This can take several weeks to be processed so it’s important you make sure it’s one of your top priorities if it applies to your business.
As running a B&B involves serving food you will need to follow rules on food safety. It’s worth getting the environmental health officer round to inspect your kitchen very early on in the planning process as you may find you need to make some alterations which could affect your budget. David Weston recommends doing a food hygiene course which can be completed within a day or two. You can also obtain most of the information you need from the Food Standards Agency.
Depending on what kind of B&B you plan to run, there may also be some licences you need to apply for in order to provide certain services such as serving alcohol, playing music or providing a television in 15 or more rooms used by paying guests.
The big one you need to remember is registering with HMRC for tax purposes. You can run the business as a sole trader, which means you wouldn’t have to register as a limited company or open a separate business account. However, you must register as self-employed within 100 days of starting to trade, and you will need to keep meticulous records of all business-related income and outgoings.
Running a home-based business also requires a range of insurance covers – explore the policies you may need for a home-based business here.
Researching your market
You may be planning on giving up your existing career, moving to a picturesque location and starting your B&B. If this is the case you’ll have a choice when it comes to location. You can research the tourism trade in that industry and find out what leisure and business travel demand is like.
However, it may be the case that you simply want to rent out a few rooms in your existing home. Even so, it’s still just as important to consider all the factors mentioned above. Except instead of helping you decide where to locate your B&B, this research will tell you if there is even a demand for such a service where your home is. If there isn’t, you have to face facts, you’ll either need to move somewhere where this type of business is sustainable, or give up the dream.
“Just because you fall in love with a location it doesn’t mean there’s demand there,” warns David Weston of the Bed and Breakfast Association. “If it’s extremely rural or remote you need to be careful. If you go somewhere with lots of B&Bs like Bath or Bournemouth, you could argue there’s tonnes of competition, but that also means there’s huge demand. It’s about getting the balance right.”
Weston says it’s also important to evaluate what kind of amenities are within range and warns against locating your B&B somewhere that doesn’t have a few places to eat within walking distance as not everyone wants to drive.
Don’t automatically rule out an area just because it’s not popular with tourists however. Christine Williams, who runs the Drifters Lodge, says that although her B&B isn’t located in a tourist hotspot, she gets a lot of business during the week from people on business trips, and at the weekends from people visiting nearby family.
Talk to other B&B owners in the area and find out what kind of occupancy levels they have. If others in the area are struggling, warning bells should be going off in your head.
The type of B&B you start should also fit the location. You need to think long and hard from the outset about whether you want your offering to be a luxury retreat, with high quality décor, facilities and design, or a more basic value proposition. Bear in mind that business travellers will have different requirements, almost certainly demanding internet access and often in need of a desk or quiet place to work within the residence.
Consider too the size of the property you’ll need. Think about this when deciding how much income you need to generate from the number of rooms you let out, but you also have to remember your own space.
Weston advises keeping a living area or lounge that’s just for you and separate form the one the guests use. “People often overlook the fact that other people will be in their home. You need to consider if this is something you’ll be happy with.”
Costs to start a B&B
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 (you may find it helpful to download our free business plan template).
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.”
Potential earnings from running a B&B
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.
An average day running a B&B
Christine Williams who runs the Drifters Lodge gives an example of an average day running her three bedroom B&B:
“I get up at 7am and start to prepare breakfast. Once that’s done I usually have a chat with the guests and then clear the breakfast things up. Next job is to service the bedrooms, and then the laundry and ironing takes me up until about 12-1pm.
“I try to take a break in the afternoon and generally get 2-3 hours to myself. Then at about 4pm I check all the bedrooms before the guests arrive which is usually between 4-7pm. About once a week I’ll go through my accounts, do a check on stock and go through any emails.
“You must block out time in your diary for yourself. It’s very hard to take a day off so holidays have to be planned well in advance. This can be a very tiring job so you need to plan breaks and not move them.
“For anybody that works at home, especially if you work on your own, it can be quite isolating. You can be so busy that time whizzes by and before you even realise it, you haven’t been out of the door for a couple of days, much less had any social interaction. That’s something you need to watch out for because it’s easy to let the time get away from you and forget about your own peace of mind.”
Useful contacts for a B&B business
Visit Britain www.visitbritian.co.uk 020 7578 1000
Tourism Alliance www.tourismalliance.com 020 7395 8246
Performing Rights Society www.prsformusic.com 020 7580 5544