Developing a Bed and Breakfast Business Plan Part 1

Michigan State University Extension
Tourism Educational Materials - 33420035
06/06/02

Developing a Bed and Breakfast Business Plan Part 1

Source: Publishing State: Illinois
ID: NCR273
Authors: Buchanan, Robert; Espeseth, Robert
Year: 1991

Robert D. Buchanan
Extension Specialist, Restaurant,
Hotel and Institutional Management
Purdue University

Robert D. Espeseth
Coordinator, Illinois-Indiana Sea Grant
Program Recreation Specialist,
University of Illinois Cooperative
Extension Service

Contents

Introduction
Step One - Consult Professionals with Expertise
Related to the Bed and Breakfast Business

Step Two - Analyze Yourself and Your Family

Step Three - Develop the B & B Concept

Step Four - Determine and Research Your Market

Step Five - Forecast Sales Revenue
http://www.msue.msu.edu/msue/imp/modtd/33420136.html

Step Six - Choose a Location and a Building

Step Seven - Develop a Marketing Plan

Step Eight - Furnishing Your B & B

Step Nine - Develop an Organizational and Operational
Plan

Step Ten - Develop a Plan to Meet Laws and
Regulations

Step Eleven - Develop an Insurance Plan
http://www.msue.msu.edu/msue/imp/modtd/33420137.html

Step Twelve - Develop a Financial Plan

Step Thirteen - Complete the Business Plan

Appendix A - Bed and Breakfast Business References
http://www.msue.msu.edu/msue/imp/modtd/33420138.html

Appendix B - List of Important Sources of
Information for Prospective Bed and Breakfast Hosts

Appendix C - A Guide: When a B&B Is Not a B&B

Appendix D - Determining Personal Goals

Appendix E - Housing and Family Responsibilities
Associated with Owning a Bed and Breakfast Business

Appendix F - A Sample Bed and Breakfast Concept

Appendix G - Types of Visitor Attractions

Appendix H - Marketing Worksheet

Appendix I - Amenities Checklist
http://www.msue.msu.edu/msue/imp/modtd/33420139.html

Appendix J - Bed and Breakfast Guest Studies

Appendix K - Questions to Answer When Choosing a
Location and a Building

Appendix L - Ideas for Continental Breakfasts

Appendix M - Which Form of Business Organization
Is Best for Me?

Appendix N - Planning for a Tax Audit

Appendix O - Example of a Projected Profit and Loss
Statement

Appendix P - B & B Start-up Costs

Appendix Q - Sample Chart of Accounts

Appendix R - Examples of B & B Related Zoning
Ordinances

Introduction

Although Bed and Breakfasts have been firmly established
in Europe for years, they were introduced in the United
States in the late 1960s. There are now more than 20,000 B
& Bs, up from about 2,000 in 1979. A sign of a maturing
industry is the increasing average number of rooms per
property, increasing occupancy rates, and increasing
number of associations and support services; i.e.,
national, state, and regional associations setting
standards (see Appendix B). There are now professional
newsletters, travel publications, guidebooks, and vendors
catering to small lodges.

The rewards of being a Bed and Breakfast host(1) include
meeting people, adding income, gaining independence and an
enjoyable way of life, and perhaps, restoring an
old building. The business can give you great satisfaction
as it grows into a valuable investment. As a host, your
personality, distinctive and personalized hospitality,
standards of excellence, and creative marketing can make a
significant difference.

WHAT IS A B&B?(2)

There is a wide variety of B&B accommodations available.
In categorizing the different types of B&Bs, the American
Bed and Breakfast Association looks primarily at the use
of the entire building and its relation to the B&B
activity that occurs there. The association believes this
approach is consistent with the way insurance
underwriters, legislators, code enforcers, and regulatory
bodies are discussing and dealing with B&B issues.
Differentiating between the different types of B&Bs
remains one of the most important issues for the B&B
industry as more legislation is being written to oversee
its growth. The following definitions are used by the
American Bed & Breakfast Association in its dealings with
all public and private organizations and individuals:

B&B Homestay: A private, owner-occupied residence in which
the frequency and volume of B&B visitors are incident to
the primary use of the building as a private residence.
One to five guest rooms are made available to transient
visitors and provide supplemental income for hosts.
Breakfast is the only meal served and is included in the
charge for the room. A review of current B&B zoning laws
indicates that the majority of B&B Homestays continue to
be unregulated or allowed primarily under zoning
provisions for "Customary Home Occupations," subjecting
them to outdoor sign restrictions; health, fire, and
building code restrictions; and restrictions on the number
of employees deemed necessary to protect residential
neighborhoods from encroachment by business activities.

B&B Inn: A commercially licensed business operated in a
building that primarily provides overnight accommodations
to the public even though the owner may live on the
premises. Guest rooms for a B&B Inn range from a minimum
of four to a maximum of 20, although some believe the
range is more like 5 to 25 rooms. Breakfast is the only
meal served and is included in the room charge. The
business is salable to a new owner, and is subject to all
local, state, and federal regulations.

Country Inn: A commercially licensed establishment
primarily known for its cuisine that is removed from
planned, commercial areas and generally accessible for
patronage only by automobile. Overnight accommodations are
available and a full-service restaurant provides breakfast
and dinner to overnight guests and/or the public. The
number of guest rooms usually ranges from a minimum of
four to a maximum of 20, although a number of Country Inns
have more than 20 guest rooms. The business is salable to
a new owner, and is subject to all local, state, and
federal regulations.

Small or historic hotels are also recognized as a part of
Bed and Breakfast accommodations. They are frequently
thought of as establishments with twenty or more rooms
that provide the service and privacy of a hotel in the
setting of an inn with some individual attention from a
host. The State of Michigan defines their historic hotels
as 11 "at least fifty years old and associated with events
or persons of significance in contributing to the broad
patterns of history." Many embody the distinctive
characteristics of a type, period, or method of
construction in architecture. Most are located in historic
districts and all have twenty-one or more rentable rooms.
If breakfast is not included in the room price, it cannot
be a true Bed and Breakfast.

Although all prospective B&B hosts should find much of the
information in this book useful, it is designed primarily
for someone planning to operate a B&B inn as a full-time
business for profit. Whether you generate a reasonable
profit will depend on many variables. The primary variable
will be your monthly overhead and debt payments and annual
number of room nights sold. Other variables will include
number of rooms, occupancy rate, seasonality of your
location, start-up and improvement costs, advertising
expenses, owner/host wage level, and your own profit
goals. A five-room B&B inn completely free of debt with no
hourly wage taken out by the owner, may generate a profit
with 20 percent occupancy, while an eight-room operation
with high monthly debt payments may not turn a profit at
65 percent occupancy. A 1988 study by The Professional
Association of International Innkeepers(3) indicated that
most B&B inns needed at least five to six rooms to reach
the break-even point before debt service and at least six
to seven guest rooms to reach the break-even point after
debt service. The study also revealed that average B&B
owners devoted more than 74 hours a week to the daily
running of a five to ten room inn.

The B&B Business Plan

The Business Plan is a comprehensive analysis of the
details surrounding the creation or expansion of a Bed and
Breakfast business. It transforms ideas and concepts into
a working operation. It requires you to decide what to do,
how to do it, when to do it, the resources needed to do it
and how to obtain them, how and when financial
requirements will be met and what to expect. By completing
a business plan, you can take an objective look at your
proposed B&B to identify areas of strength, weakness, and
opportunity early; pinpoint needs and problems you might
otherwise overlook; and plan how best to achieve your
business goals.

The Business Plan will help you determine your goals and
organize a strategy to meet them. The plan will help you
evaluate and decide whether or not to open a Bed and
Breakfast. The plan will:

* Determine if the B&B is worth your time and money.

* Improve the probability of success by avoiding a
business venture doomed to fail.

* Provide carefully thought-out steps to achieve goals
for opening the business. (People who succeed are the ones
who know the most about what they are doing.)

* Help you consider alternatives and reduce or eliminate
difficulties and mistakes before they occur.

* Provide an efficient, effective tool to use in
communicating with your attorney, accountant, insurance
agent, banker, zoning board, partner, and others.

* Serve as a management tool for continuous evaluation
and monthly and yearly refinement.

The planning process presented in this book is in a series
of 13 steps that enable you to carefully analyze the
prospects for success on paper before investing time and
money in a B&B. The suggested outline is flexible so you
can tailor it to your own needs. Use the flow chart
(Figure 1.) to help guide you through the development of
the Business Plan. As you can see, some steps should be
carried out simultaneously.

The Business Plan is a fluid working document and an
evolving process. Information gathered during later steps
may alter the thinking and conclusions developed during
the early planning stages. A change in one step or segment
because of new data, information contacts resources,
valued opinions, etc., may interrelate with several other
steps and must be integrated into these segments.

When developing a business plan, it is important to keep
complete notes with each step, documenting all facts,
backing all assumptions, and giving authority for all
opinions.

FIGURE 1. FLOW CHART

Step 5 Step 8 Step 9
Forecast Furnishing Develop an
Sales Your B&B Organizational
Revenue and Operational
Plan
(same time as Step 12)

Step 1 Step 2 Step 3 Step 4
Consult
Professionals Analyze Develop Determine
with Yourself the B&B and research
Expertise and Your Concept Your Market
Related Family (same
to the B&B time as
Business Step 6)

Step 7 Step 10 Step 12 Step 13
Develop a Develop a Develop a Complete
Marketing Plan to Meet Financial the Business
Plan Laws and Plan Plan
(same time Regulations (same
as Step 11) time as
Steps 9
and 11)

Step 6 Step 11
Choose a Develop an
Location and a Insurance
Building Plan
(Same time as (Same time as
Step 3) Step 7)

Goals

At the conclusion of each step, you need to determine
which goals are short range (12 months or less), and which
require long-range planning (more than one year). Some
examples of long-range goals are to provide an
unforgettable guest visit, to meet strong competition, to
be market minded, to have an enjoyable livelihood to
provide a needed service in the community, and to earn the
status of a desirable community member. Some examples of
short-range goals are: to develop an award-winning
brochure by a particular date, to establish a list of
approved suppliers by a specific date, and to obtain a 25
percent occupancy by the end of the first year.

Goals and the best way to obtain them need to be
established for each of the thirteen steps. For each step
you should:

* List the goals of that section in descending order of
importance.

* List the objectives to be accomplished to achieve the
goals.

* Layout in precise detail the steps (best ways) to
accomplish each goal and objective. Fix the time and
responsibility.

* Separate the goals into short-term and long-term lists.

Several creative minds reviewed the original printing of
this bullet and sent comments, suggestions, and materials
that helped shape this final product. We would like to
thank the following people for their contributions.
Charles Hillestad, real estate law and small business
specialist at the law firm of Scheid & Horlbech in Denver,
Colorado, and owner of the award-winning Queen Anne Inn
located in Clements Historic District of downtown Denver;
Pat Hardy Co-director, Professional Association of
Innkeepers International; and Rollin Cooper, Director,
Recreation Resources Center University of Wisconsin at
Madison.

____________________
(1) The host, or the person who has contact with the
guests, is usually the owner of the Bed and Breakfast
business. However, the host may also be someone hired by
the owner to operate the B&B. In this publication, the
term "host" is used generally to signify the owner as
well.

(2) Appendix C, "A Guide: When a B&B is not a B&B" by
Charles Hissestad, provides definitions of several related
categories.

(3) "Bed & Breakfast/Country Inn Industry Survey and
Analysis" 1988 "The Professional Association of
International Innkeepers, Santa Barbara, California.

STEP ONE

Consult Professionals with Expertise Related to the Bed &
Breakfast Business

Depending on your personal situation the following may be
some of the advantages to owning and operating a B&B:
being your own boss, integrating family and work
responsibility, starting a business in your own home with
relatively low expenses (otherwise the openings can run
very high---between $50 and $150 per square foot),
reducing personal living costs, eliminating transportation
costs and time to get to work, possibly having tax
advantages, enjoying a variety of daily tasks and a casual
way of life, and having leisure time during scheduled
closed times.

Some of the disadvantages may include: working hours (14
to 16 hour days, often doing menial tasks); little
opportunity to delegate; concern about privacy and quality
family time; competition with chain hotels and motels;
growing competition from other B&Bs; possible local
resentment toward tourists; and uncontrollable factors
such as weather, road repairs, gasoline availability and
price, taxes, changing laws and regulations, inflation,
interest rates, and increasing government intervention.

You can gain insight into the advantages and disadvantages
of entering the B&B business, and obtain valuable
information by talking with nearby B&B hosts, or even
helping to operate their B&Bs for a few days. Attending
apprentice programs, one day overview workshops, and to
and three-day seminars may help you decide whether to
enter the B&B business.(1)

To help with several major segments of your business plan
and with your decision about whether or not to open a B&B,
consult a specialist---an accountant, a lawyer, a banker,
an insurance agent or broker, or a hospitality consultant.
The fees of such professionals are high, perhaps more than
$100 per hour, or a fixed fee from $100 to $15,000
depending on your requirements. However, their knowledge
may spare you considerable hardship. Their judgement is by
no means flawless, yet they reduce the odds of making the
wrong choice.

You can reduce the gaps in your knowledge and experience
and increase your chance of success by relying on other
people's experience. The following resources will cost you
no more than time and a phone call or travel expenses for
a personal appointment:

* County Extension and Sea Grant Offices, B&B
Organizations, and hotel/restaurant or small business
specialists.

* National, State, regional, or local B&B associations.

* Chamber of Commerce, Regional Planning Commissions
and Councils, and other tourist organizations.

* Small Business Administration: Counselors, Workshops,
SCORE (Service Corp of Retired Executives), and ACE
(Active Corp of Executives).

* Small Business Development/New Venture Centers
(Federal & State).

Seek out consultants held in high esteem in the community
by small business owners and the hospitality industry. The
best sources of names are usually other small business
entrepreneurs who are both experienced and successful. As
such, they are in the best position to offer honest
opinions about the skills, interests, and availability of
consultants. Examine their work, interview some of their
clients, and discuss their fees and the scope of their
work. The experts' knowledge needs to be accompanied by a
reasonable match in personal chemistry.

Goals of Step One:

1. Determine the major reasons you want to own/operate
a B&B.

2. Determine exactly what you want to learn (what you
need to know).

3. Identify the sources of information you need to gain
insight about the B&B business operation. List in
descending order of importance.

4. List what you want to find out from each resource.

5. Lay out, in precise detail, the steps (best ways) to
accumulate essential information from each resource.
__________________________
(1) Information about apprentice programs may be obtained
by writing to:
Margaret Lobenstine,
Wild Wood Inn,
121 Church Street,
Ware, Massachusetts 01082

Carl Glassman,
the Inn School,
Wedgewood Inn,
111 West Bridge,
Hope, Pennsylvania 18938

Charles Hillestad,
2151 Tremont Place,
Denver, Colorado 80205

Pat Hardy,
Bed and Breakfast Innkeepers Guild,
P.O. Box 96710,
Santa Barbara, California 93190.

Also check the classified advertisements of Inn Times, Inn
Review, Country Inns and Innsider, B&B newsletters such as
Innkeeping and Inn Business Review; and the paperback
books about starting a B&B. For more information about
workshops and seminars, contact your County Cooperative
Extension Service, American Bed and Breakfast Association,
and Professional Association of Innkeepers International.

STEP TWO

Analyze Yourself and Your Family

Evaluating yourself as a B&B host is an important task.
You need to 1) analyze your strengths and weaknesses, 2)
prioritize your short-term and long-term personal and
business goals, and 3) carefully examine whether you have
the necessary technical and business skills.

Begin by assessing your strengths and weaknesses. Think
about how these characteristics pertain to the B&B
business and be honest with yourself---most people find it
hard to recognize their own shortcomings.

Be sure to base the pros and cons of entering the B&B
business on your own, personal goals and philosophy. Take
the time to explore your specific goals and determine
whether owning and operating a Bed and Breakfast would
accomplish what you desire. You should also set personal
goals for two, five, and ten years from now. Then decide
whether operating a B&B will help you meet those
objectives. Consult Appendix D, "Determining Personal
Goals," when you do this exercise.

To help determine whether you would enjoy the B&B
profession, carefully complete the following
questionnaire:

Would you be able to:
* Provide old-fashioned hospitality and courtesy?

* Combine business sense and business experience with
common sense?

* Wear many hats, and change them often and quickly?

* Repeat answers enthusiastically to the same questions
hundreds of times a year?

* Go the extra mile to provide an unforgettable guest
visit?

* Enjoy a variety of people?

* Provide all types of people with a wonderful and
unique experience?

* Find a way to talk to someone with whom you have a
conflict without alienating that person?

* Plan menus; purchase, prepare, and serve food; and
follow health department standards?

* Be your own boss, do what is necessary to accomplish
the job and enjoy a challenge, and work well under
pressure?

* Work long hours in varied and demanding situations
with frequent interruptions?

* Organize your time for work, finances, and family?

* Plan, make many decisions, learn from experience, and
change your behavior accordingly?

* Obtain and follow the advice of experts?

* Become proficient in bookkeeping and accounting?

* Develop and monitor a budget, and understand financial
statements and tax benefits?

* Develop brochures, advertisements, promotional
materials, and media relations?

* Talk on the phone, take and record reservations, check
customers in, show guests to rooms, and receive payments
for your service?

* Clean bedrooms and bathrooms, do laundry, make beds,
provide amenities, decorate, landscape, and do building
maintenance?

If you answered yes to a majority of these questions, you
would be well-suited for the B&B profession.

Next, evaluate your inventory of skills and interests.
Sort out your own skills and the skills of your
partner(s). Determine how you and your partner(s) will
overcome any deficiencies you may have in skills that are
necessary to operate a B&B. Decide how important these
factors are to the success of the business. Keep in mind
that an abundance of skills in one category will not
necessarily make up for a deficiency in another. Success
is most probable when you (and/or your partner) rate high
in each of the categories.

The successful entrepreneur is often an overachiever---
healthy, energetic, confident, open to reasonable risk,
industrious, goal-oriented, accountable, innovative, and
technically competent. Being your own boss means meeting
customer demands, working long hours, providing necessary
government reports, and coping with uncontrollable
economic conditions.

Discussions between groups of small business owners
revealed 10 common challenges they faced.(1)

1. Knowing your business
2. Knowing the basics of business management
3. Having the proper attitude
4. Having adequate capital
5. Managing finances effectively
6. Managing time efficiently
7. Managing people
8. Satisfying customers by providing high quality
9. Knowing how to compete
10. Coping with regulations and paperwork

In the hospitality industry you must show your desire to
accommodate. Your primary job will be to satisfy your
guests' needs. Simply providing a clean room and a good
breakfast will not be enough to make your guest feel that
your B&B is special. Only through a genuine interest in
customers and a commitment to making their lodging
experience unique, can you create the atmosphere that your
B&B will need to develop a regular clientele and to secure
bookings from favorable referrals. To help you decide
whether to enter the B&B business, you may want to
consult the U.S. Small Business Administration's
"Checklist for Going Into Business" (see Appendix A).
Essentials for survival in small businesses include:
1) capitalizing on strengths and compensating for
weaknesses,

2) recognizing problems and limitations, and

3) building on natural strengths.

The proper frame of mind, realistic expectations and
strong personal commitment to your B&B are at least as
important to success as industry knowledge (accounting and
bookkeeping, food preparation and sanitation, financial
management, marketing, hosting, housekeeping, etc.)
Finding something that you love, that has the potential of
being successful, something that you passionately enjoy
doing, will contribute much to your success. The love of
doing it is necessary to withstand the long hours and
pressures of starting and managing your B&B. Long hours
and a variety of tasks require good time management
skills. Referring back to the business plan will help you
set priorities and ensure that you spend time most
efficiently. The ability to adjust to many variables is
paramount to increase revenue, reduce costs, and
effectively serve guests.

Research by Dun and Bradstreet clearly indicates that
business failures result primarily from incompetence.
Following are the reasons for business failure (in
decreasing order) that apply to B&Bs:

1. Inadequate sales
2. Competitive weakness
3. Heavy operating expenses
4. Poor location
5. Excessive fixed costs and debt
6. Other problems indicating poor judgment

Hillestad (see Appendix C) adds these factors:

* Excessive optimism
* Inadequate planning
* Misuse of time
* Poor marketing
* Confusion of business and personal relationship
* Burn out
* Downplaying the need for experience

Determine How the B&B Will Affect Your Family

Another important consideration is how the B&B will fit
into your family life. You should carefully consider the
feelings and attitudes as well as ages and work styles of
each family member and try to anticipate family tension
and personal impact that the business may cause. You and
your family should discuss how your time will be divided
between the business, the family, community functions, and
leisure activities. It will be important to establish
areas of the house for family only, and to define rules
for using the kitchen and the telephone, both of which
will be important to the business.

Also, if family members plan to help with the business,
you will need to assign responsibilities (see "Housing and
Family Responsibilities Associated with Owning a Bed and
Breakfast Business," Appendix E), decide how much each
member will interact with guests, and determine how
definite the distinction will be between family and
business relationships.(Vis. E) By addressing these types
of concerns before you open, you will be able to avoid
tensions, resentment, and misunderstandings among family
members later. Also, assess the effect of support or
disenchantment of friends and neighbors on yourself,
spouse, and children (loss of playmates, etc.). Remember
that friends and neighbors can cause conflict.

Goals of Step Two:

1. Determine your strengths (what you like to do
passionately) and how you will capitalize on these items.

2. Determine your weaknesses, limitations, what you
absolutely do not like to do, and how you will overcome
these factors.

3. Determine how to gain an indepth knowledge of the B&B
industry.

4. Determine how to learn the basics of managing a B&B,
such as the principles of accounting, hosting, financial
management, marketing, housekeeping, food preparation, and
planning for the future.

5. Examine your frame of mind, expectations, and personal
commitment.

6. Determine your short-term and long-term goals (see
Appendices D and E)
* personal goals
* family goals
* family B&B responsibilities
* goals for friends and neighbors
(Vis. E)

7. Determine how you will set time priorities.

___________________________
(1) 1989 Dun and Bradstreet.

STEP THREE

Develop the B&B Concept

This step should be completed in two phases. The first
phase is to define, describe, and evaluate the concept
that best fits your strengths, interests, customer needs,
and your home. The concept should also be closely related
to the community tourism thrust and location of your
potential customers but differentiated from the
competition. The second phase is to redefine your concept
after completing all the steps in the business plan.

The B&B concept is a combination of ideas that form the
foundation of a unique, customer-satisfying experience.
First, state in a few sentences the major features or
attractions of each concept component. This will help you
visualize your business in relation to your market segment
and your competition. The reader should be able to
"experience" the B&B and feel as if he or she were
actually there. The description should appeal to the
emotions as well as the senses. Explain the unique touches
that will distinguish your B&B from others. Describe
intangible appeals, like charm, ambience, quaintness, and
atmosphere. Give reasons why customers will spread
favorable comments.

The concept should describe six components to provide a
composite picture of your B&B. Describe each component by
moving from a general idea to a more detailed description
of your proposed B&B:

- Explain exactly what you are selling, such as a special
travel experience, host personality, personal touch,
romance, privacy, luxury, or history. Explain exactly what
business you are in and why it will be profitable and
continue to grow. Describe what your business will be like
in five years. Explain your standards, appraisal methods
of reaching those standards, and commitment to quality in
hospitality, service, food preparation and sanitation,
housekeeping, safety, maintenance, and groundskeeping.

- Formulate a preliminary guest profile including such
demographic information as age, education, and geographic
location of guests. (See Appendix J.)

- Facilities:
* Define exterior physical features:
architecture,renovation (anticipated or completed), theme,
decor, colors, predominant features, outdoor furnishings
such as picnic tables and grills, view, lawn, landscaping,
recreation areas, garden trails, pond/stream, woodland,
etc.

* Define interior features: public space, furniture,
style, size, distinctive features of the bedrooms;
bathroom features such as number of baths that are private
and whether they have special shower heads, thick towels,
etc.; breakfast areas, menu, method of service, and time
of service; other features such as porches or patios,
fireplaces, and meeting rooms; favorable equipment
features such as individual temperature controls,
refrigerator space, and noise reduction features and
overall comfort, safety, cleanliness, and housekeeping of
the interior.

- Assistance and hospitality:
* Explain how thinking begins and ends with the
customer---how staff attitudes, manner of serving guests,
and personalization of service will make guests feel like
welcome VIPs. Explain how the staff and service will sell
and promote the B&B. Describe the staff dress and grooming
and how it relates to the theme and image of the B&B.
Describe how the telephone will be used as a goodwill
ambassador.

* Tell what amenities or physic items or articles will
be given to guests such as special soaps, food trays or
baskets, flowers, departing gifts, etc.

* List the unique services or objects that the host and
staff will provide for the benefit of the guest such as a
tour of the house and grounds, afternoon tea, use of the
telephone, tour arrangements, bed turn-down service,
laundry service, credit card acceptance, and 24-hour
message-taking service. Also describe the assistance
provided to the guest on local activities, menus, maps,
etc.

* Describe activities that will be offered, including
inside entertainment such as games, TV, books, and
hosts' hobbies; activities on the grounds such as
outdoor cooking, horseshoes, or badminton and nearby
attractions such as restaurants, shops, and recreation and
entertainment centers.

- Consider the unique, support features of your location
and neighborhood like nearby tourist attractions and
demand generators.

- Business aspects:
* Describe your experience or related experience in the
hospitality industry.

* Decide on your B&B's opening date, degree of
seasonality, hours of check-in and check-out, breakfast
hours, etc.

* Describe what you learned from other B&B operators that
you put into practice.

* Define policies that affect the B&B image and customer
preference, such as smoking, alcohol, children, and pets.

* Describe the price structure and how it relates to the
competition, perceived price to value ratio, and to the
image of the B&B.

* Relate the name of the B&B to the logo, theme, image of
the business, and the community or area.

* Tell what amenities might be provided in the future and
how they will contribute to the success of the B&B.

Hillestad (Appendix C) thinks of the concept as a
four-legged stool with one leg being the architecture,
decor, and amenities, another being service and
hospitality, the third being food, and the fourth being
location. His point is that if one leg is weak, the other
three better be very strong. The stool cannot stand if two
or more of the legs are weak.

Determine whether the component parts fit together and
complement each other. Is each part compatible with the
overall concept? Is the concept compatible with the market
segment you are trying to attract? At this point, you
should evaluate how your concept fits your strengths and
customer interest in staying at your B&B. Be sure your
concept answers these questions about your proposed B&B:
Why will customers want to stay in my B&B rather than the
competition's? What is unique or different about my B&B?
What will my B&B provide for my customers? How will I
generate satisfied customers? Why will customers feel they
obtained more than expected? Why will my concept succeed?

Goals of Step Three:

1. Tell who your customers are, what your B&B's major
features and attractions are, where your business will be
located, how you will operate the business, and why you
are in this business.

2. State exactly what you are selling.

3. Describe the strong points of your B&B.

4. Describe anticipated customer expectations and how to
meet them.

STEP FOUR

Determine and Research and Your Market

The key to marketing in the B&B industry today is
understanding that there is no one consumer. Comprehending
this concept, understanding the needs of the consumers,
knowing the segmentation of your market, and selecting the
best ways to reach your consumer are what marketing
research is all about.

A given group of consumers can be divided into market
segments, or specific (limited) groups of people with
similar needs and wants, such as travelers for 1)
pleasure, 2) business, 3) special occasions or events, 4)
visits to friends or family, 5) specialty market (such as
school teachers, foreign travelers), and 6) weekend or
weekday market segments.

Market research involves learning who your competition is,
establishing your market segment, developing the strength
of your B&B so that your market will notice and want it,
pricing it right, and telling your market that it is
available. Marketing research serves two functions: It
develops new knowledge about your B&B, especiallY about
how customers will see it compared to other accommodation
alternatives, and it provides information for decision
making. Researching the market usually involves
systematically gathering information, analyzing the data
to find out what it means, and developing implications.
Ask yourself, "What does it tell me to do, or not to do?"

Marketing research is customer and prospective customer
oriented and should answer the following questions:

* Why will/do customers come to my B&B?
* Why won't/don't they come?
* Why don't they come more often?
* Where do they come from?
* Who is my average customer (age, sex, education, income,
occupation, purpose of travel, etc.)?
* How does my B&B differ from the competition?

A study of your market will help you examine your B&B's
location in relation to the economic environment,
proximity to events and attractions that could generate
business, and the current and future demand for rooms. The
study will help you determine whether a proposed B&B has
market potential and estimate the occupancy rate for your
B&B.(1)

To obtain the information necessary to analyze your
market, you may need to consult lodging operators,
community business people, the personnel and purchasing
departments of local companies, merchant associations, the
county's Cooperative Extension director, Sea Grant Marine
Extension personnel, city planning commissioners, real
estate developers, bankers, and city government officials.
You should also contact such state and local agencies as
the Chamber of Commerce, economic development commissions,
planning agencies, and convention, visitors, and tourist
development bureaus. Many areas have economic development
offices where you can find current, statistical data
regarding the economy, building activity, sales trends,
and community services of a specific area. Other resources
to tap include local B&B hosts, regional, state, and
national B&B associations, and regional reservation
service organizations (RSOs).

Many state tourism and development offices have
considerable information about travelers, such as their
income, age, location, education level, etc. Some states
have departments, bureaus, or university divisions that
collect and chart demographic data by the state and
county. The Small Business Administration (SBA) consulting
arm called "SCORE" (consisting of retired executives)
might also be able to help in your market research
project.

The Department of Commerce oversees the research and
distribution of economic information. Their Survey of
Current Business and census bureau reports population
statistics and other changes in the nation's economy.
Don't overlook the Superintendent of Documents, U.S.
Printing Office, Washington D.C. 20402, which offers
books, reports, and government documents on a variety of
subjects.

The marketing worksheet in Appendix H (Vis. H)will help
you identify and research your market. Fill in the
worksheet as you analyze aspects of your B&B. The result
of your analysis, recorded on the worksheet, will form the
basis of the marketing plan that you will develop in Step
Seven. Consider the following points as you complete the
marketing worksheet:

* Determine what you are selling, taking into account
the type of B&B and area. For example, decide whether
you are marketing a unique experience, a personal service,
a friendly atmosphere, a good location, an opportunity to
meet new people, or an area of scenic beauty.

* Evaluate your community. Assess the quality and
availability of resources (facilities, services, staff,
and image). Consider how the tourist attractions in the
area might affect your market potential and how your B&B
might better attract overnight guests. Take into account
the following types of attractions:

- Natural features such as lakes, beaches, streams,
forests, wildflowers, foliage, scenic valleys, rugged
terrain areas, and caves, nature preserves, and state
parks.

- Historic sites such as historic homes, old mills, round
barns, Indian burial grounds, monuments, memorials,
birthplaces of famous people, and exhibitions of
old-fashioned lifestyles.

- Annual or seasonal events such as flea markets, craft
fairs, festivals, pageants, outdoor art shows, community
theater productions, and sporting events.

- Recreational areas such as zoos, parks, amusement parks,
museums, and botanical gardens.

- Recreational facilities such as health spas, racquetball
courts, golf courses, tennis courts, swimming pools,
bicycling and hiking trails, and skiing areas.

- Restaurants and shopping areas.

- Nighttime entertainment such as theaters, comedy houses,
nightclubs, and concert halls.

* Evaluate the advantages and disadvantages of your B&B.
Take into account the following aspects of your B&B and
determine whether they would be considered advantages or
disadvantages by your target market:

- Determine the uniqueness of your B&B. Consider unusual
features such as a collection of paintings, antiques, a
library, or an exceptional view. Also consider services
and amenities such as brushing snow off cars, providing
coffee and a newspaper with personal wake-up calls,
placing flowers in the room or chocolates on the bed
pillows, and 24-hour answering and fax service. (For a
more complete listing of amenities see Appendix I.)

- Make an honest appraisal of your B&B. Consider the
location and road network, the home and its condition,
your abilities as a host, quality of service, pricing,
design, facilities, and overall image of your B&B.
Determine which aspects would be considered advantages and
which would be considered drawbacks.

- Evaluate your operating policies. Consider your policies
on smoking, pets, children, and alcohol, and whether your
target market would perceive these policies as advantages
or disadvantages.

- Evaluate the potential of a specialty market such as
foreign travelers, school teachers, retired farmers,
singles, handicapped individuals, etc.

- Evaluate the competition. Consider your competition's
location, facilities, promotional themes and messages,
type of customers attracted, and prices. Note anything
unusual about their policies, services, and community
status. Find out the visitor statistics and occupancy
rates in the area.

* Determine business factors that attract people to the
community. Consider the area's manufacturing or
agricultural business activity, conferences and
conventions, hotels and motels, hospitals, nursing homes,
colleges and universities, and retail stores.

An analysis of the elements listed in this section will
provide a listing of the strengths and weaknesses of your
proposed B&B, which you will use in Step Seven, "Develop a
Marketing Plan," to improve the Attractiveness of your B&B
and take advantage of your situation. Appendix J compares
the results of a Michigan and Minnesota B&B guest study
completed in 1988. This information may be used as a guide
until you have obtained specific information for your B&B
area.

Goals of Step Four:

1. Determine travel/tourist growth trends regionally
and locally.

2. Divide the market into segments: tourists, businesses,
group meetings, package tours, special occasions, visits
to family and friends, specialty markets, etc.

3. Make an honest appraisal of your location, architecture
and decor, landscaping, house condition, services, and
prices.

4. List attractions in your community that draw or could
draw customers.

5. List all the strengths and weaknesses of your B&B.

6. Examine the competition by location, facilities,
prices, and anything unusual about their policies,
services, and community status.

7. From the information gathered, list problems and
opportunities.

8. Set precise goals to:
- improve the image of your B&B
- establish an occupancy rate for the first three years
- increase weekday business
- increase off-season volume

9.Develop a series of strategies in the form of specific
recommendations and weigh in terms of cost, effectiveness,
and ultimate benefit (return).
_____________________
(1) See
"The Inn Business,"
Canadian Government Publishing Center,
Supply Service Canada,
Ottawa, Canada, K1A059.

"Marketing of Hospitality Services, Food, Travel, and
Lodging" by W.J.E. Crissy, Robert J. Boewadt, and Dante M.
Laudadlo, published by the Educational Institute of the
American Hotel and Motel Association, East Lansing,
Michigan.

Developing a Bed and Breakfast Business Plan Part 1

Source: Publishing State: Illinois
ID: NCR273
Authors: Buchanan, Robert; Espeseth, Robert
Year: 1991

Programs and activities of the Cooperative Extension
Service are available to all potential clientele without
regard to race, color, sex, national origin, or handicap.

In cooperation with NCR Educational Materials Project.

Issued in furtherance of Cooperative Extension work, Acts
of May 8 and June 30, 1914, in cooperation with the U.S.
Department of Agriculture. DONALD L. UCHTMANN, Director,
Cooperative Extension Service, University of Illinois at
Urbana-Champaign.

The Cooperative Extension Service provides equal
opportunities in programs and employment.

Published in part by the Illinois-Indiana Sea Grant
Program with funding from the National Oceanic and
Atmospheric Administration, U.S. Department of Commerce.

This work is a result of research sponsored by NOAA,
National Sea Grant College Program, Department of
Commerce, under Grant NA 89AA-D-SGO58. The U.S.
Government is authorized to produce and distribute
reprints for governmental purposes notwithstanding any
copyright notation that may appear hereon.

This publication resulted from the activities of the Great
Lakes Sea Grant Network, which is comprised of
university-based programs in Illinois-Indiana, Michigan,
Minnesota. New York, Ohio, and Wisconsin.

Editor: Stephanie Hearn
Designer: Krista Sunderland

Developing a Bed and Breakfast Business Plan

Robert D. Buchanan
Extension Specialist, Restaurant,
Hotel and Institutional Management
Purdue University

Robert D. Espeseth
Coordinator, Illinois-Indiana Sea Grant
Program Recreation Specialist,
University of Illinois Cooperative
Extension Service

North Central Regional Extension Publications are subject
to peer review and prepared as a part of the Cooperative
Extension activities of the 13 land-grant universities of
the 12 North Central States, in cooperation with the
Extension Service - U.S. Department of Agriculture,
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IL-IN-SG-E-91-6

5M April 1991

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