Hidden costs of buying a Bed & BreakfastMany people dream about owning a bed and breakfast business. For those who take the leap, buy a B&B and are successful, the gains can be significant: the opportunity to live in a nice house in a desirable location; the flexibility of being your own boss; the joy of not commuting; and a potentially healthy return on your investment.

However, buying and running a bed and breakfast business involves costs that many who are new to the industry fail to take into consideration – often with disastrous consequences.

Considerations for Buying a Bed & Breakfast Business

If you’re serious about buying a b&b, the hard work begins before you even sign the contract. In particular, you’ll need to satisfy yourself that the numbers stack up.

The following list highlights some of the costs associated with buying and running a bed and breakfast that you need to be aware of:

1. High start-up costs

Bed and breakfast businesses are something of an anomaly in that the purchase price is often considerably higher than the business turnover. This is, of course, because of the high cost of buying property which, in this case, will serve as your home as well as your business premises.

However, unless you’re lucky enough to be a cash purchaser, the high start-up cost means you’ll need help with financing your purchase. You’ll also have the added complexity of finding a lender who will arrange a mortgage that combines residential and commercial use.

2. Property costs

Whether the property you wish to buy is freehold or leasehold, you will incur costs associated with making relevant land registry and local planning searches. These are required to confirm legal title and to flag any potential issues such as third party rights of way, access restrictions or planning or environmental problems.

If the property is leasehold, you will additionally be expected to stump up (or at least share with the seller) the landlord’s legal costs associated with the transfer, as well as pay a rent deposit.

3. The cost of professional advice

Buying a bed and breakfast is more complex than a standard conveyance of a residential property. The commercial aspects of the transaction require thorough investigation to make sure any hidden issues or liabilities are uncovered before you commit to buy. The legal structure of your deal could also have significant future tax implications. It pays, then, to seek advice from experienced business solicitors at an early stage in the process so you can avoid making costly mistakes.

Choosing solicitors with experience of buying and selling bed and breakfast businesses will ensure all aspects of your transaction – both commercial and property – are dealt with efficiently and in your best interests. Some solicitors, like Truelegal, also offer a fixed fee service, making it easier to manage your finances.

4. The cost of compliance

Whilst you don’t need a particular qualification to own and run a B&B, the industry is regulated. Complying with provisions relating to fire safety, food and hygiene standards, and disabled access, for example, is compulsory. The work required to meet or implement these required standards could prove costly.

5. Specialist insurance

You’ll need to take out and maintain adequate public liability insurance for your bed and breakfast business, as well as buildings and contents insurance. This can be expensive so you’ll need to shop around for the best price.

6. Maintenance

Don’t underestimate the amount of wear and tear on your B&B property. You’ll need to factor in funds for regular decoration and for dealing with inevitable issues such as blocked sinks and repairs to heating systems, appliances and furniture.

7. Supplies

From cleaning materials to bed linen and from groceries to shampoo and toiletries, a B&B business relies on a steady stream of supplies to maintain the necessary standard of service.

8. Utility bills

Utilities, including telephone, heating, lighting and water can be a significant cost for a B&B business. Your guests are not likely to be as prudent as you are when it comes to saving energy.

9. Tax

The UK’s VAT registration threshold (above which persons making taxable supplies are required to register and account for VAT) is currently set at £85,000 until April 2020. Many smaller B&Bs have to undertake careful tax planning to calculate whether increasing their occupancy rates, or number of rooms, is worth triggering the VAT threshold.

There are, however, some tax advantages to owning a B&B business: a proportion of your personal expenses may be treated as business expenses where they can’t be separated, eg, maintenance, supplies and utility bills etc.

10. Web hosting

Some smaller bed and breakfast businesses do still manage without a website but they’re in the minority. They also miss out on the massive chunk of prospective guests who research and book their holiday accommodation online.

If you’re buying an existing B&B business, it may already have an established website that you agree with the seller will transfer to you on completion, saving you the cost of having one designed from scratch. However, you’ll still have to pay for web hosting and, potentially, for modifications or improvements to the site.

11. Advertising

The bed and breakfast industry is a competitive market and some form of advertising will be essential to attract new guests. Whether it’s online or printed directories, online pay per click advertising, a radio jingle, or more traditional print advertising in a regional magazine or tourist office brochure, you’ll need to spend some money to spread the word.

12. Additional help

Running a bed and breakfast can be hugely labour intensive. From cleaning rooms, laundering and changing bed linen, to shopping for groceries and supplies, or cooking, serving and washing up, you’ll have plenty to keep you busy. And don’t forget the time required for marketing, responding to booking enquiries and keeping on top of the book-keeping.

If your B&B has several rooms and you want any chance of a life beyond the confines of your home, you’d be well advised to take on some additional support, whether that be appointing a cleaner or a book-keeper, or paying for professional laundering services.

13. Personal cost

Last, but not least, if you’re planning on buying a bed and breakfast, it’s important not to forget the potential cost to your personal life. You may have decided you’re okay with the relentless early starts required to cook breakfast and clean up after your guests, but have you really thought through what it will be like to share your home with complete strangers?

As well as the limitations imposed on your privacy, your guests will have certain expectations that may affect how you would normally choose to live your life. For example, it’s reasonable for your guests to expect a peaceful night’s sleep; that could mean that owning noisy pets, or looking after noisy grandchildren, is completely out of the question.

Make a free enquiry

We are solicitors who specialise solely in working with business buyers and business sellers, including buyers of B&Bs. The sooner we become involved in the process of helping you to buy your Bed and Breakfast business, the better understanding you will have of the associated risk and the more likely it is that your purchase will be successful.

Please either call us now on 01392 879414 or complete our Free Online Enquiry and we will soon be in touch.

Our full contact details can be found on our Contact Us page.

We look forward to hearing from you.