❧Developing

a Bed& Breakfast

BusinessPlan ❧

North Central Regional ExtensionPublication 273

Developing a Bed & Breakfast Business Plan

Robert D. EspesethCoordinator, Illinois-Indiana SeaGrant Program Recreation SpecialistUniversity of Illinois CooperativeExtension Service

Robert D. BuchananExtension Specialist, Restaurant,Hotel and Institutional ManagementPurdue University

North Central Regional Extension Publications are subject to peer review and prepared as apart of the Cooperative Extension activities of the 13 land-grant universities of the 12 NorthCentral States, in cooperation with the Extension Service—U.S. Department of Agriculture,Washington, D.C. The following states cooperated in making this publication available.

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Programs and activities of the CooperativeExtension Service are available to all potentialclientele without regard to race, color, sex,national origin, religion, or disability.

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Issued in furtherance of Cooperative Extensionwork, Acts of May 8 and June 30, 1914, incooperation with the U.S. Department ofAgriculture and Cooperative ExtensionServices of Illinois, Indiana, Iowa, Kansas,Michigan, Minnesota, Nebraska, NorthDakota, Ohio, South Dakota, and Wisconsin.DONALD L. UCHTMANN, Director,Cooperative Extension Service, University ofIllinois at Urbana-Champaign.

The Illinois Cooperative Extension Serviceprovides equal opportunities in programs andemployment.

Published in part by the Illinois-Indiana SeaGrant program with funding from theNational Oceanic and Atmospheric Adminis-tration, U.S. Department of Commerce.

This work is a result of research sponsored byNOAA, National Sea Grant College Program,Department of Commerce, under Grant NA89AA-D-SG058. The U.S. Government isauthorized to produce and distribute reprintsfor governmental purposes notwithstandingany copyright notation that may appearhereon.

This publication resulted from the activities ofthe Great Lakes Sea Grant Network, which iscomprised of university-based programs inIllinois-Indiana, Michigan, Minnesota, New

York, Ohio, and Wisconsin.

Editor: Stephanie HearnDesigner: Krista Sunderland

1 .................................................................. Introduction

5 .................................................................. Step One Consult Professionals with Expertise Related to the Bed and Breakfast Business

7 .................................................................. Step Two Analyze Yourself and Your Family

10 ................................................................ Step Three Develop the B&B Concept

12 ................................................................ Step Four Determine and Research Your Market

15 ................................................................ Step Five Forecast Sales Revenue

17 ................................................................ Step Six Choose a Location and a Building

19 ................................................................ Step Seven Develop a Marketing Plan

27 ................................................................ Step Eight Furnishing Your B&B

29 ................................................................ Step Nine Develop an Organizational and Operational Plan

32 ................................................................ Step Ten Develop a Plan to Meet Laws and Regulations

35 ................................................................ Step Eleven Develop an Insurance Plan

38 ................................................................ Step Twelve Develop a Financial Plan

44 ................................................................ Step Thirteen Complete the Business Plan

47 ................................................................ Appendix A Bed and Breakfast Business References

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

62 ................................................................ Appendix C A Guide: When a B&B Is Not a B&B

64 ................................................................ Appendix D Determining Personal Goals

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

67 ................................................................ Appendix F A Sample Bed and Breakfast Concept

69 ................................................................ Appendix G Types of Visitor Attractions

70 ................................................................ Appendix H Marketing Worksheet

74 ................................................................ Appendix I Amenities Checklist

76 ................................................................ Appendix J Bed and Breakfast Guest Studies

78 ................................................................ Appendix K Questions to Answer When Choosing a Location and a Building

80 ................................................................ Appendix L Ideas for Continental Breakfasts

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

84 ................................................................ Appendix N Planning for a Tax Audit

86 ................................................................ Appendix O Example of a Projected Profit and Loss Statement

88 ................................................................ Appendix P B&B Start-Up Costs

90 ................................................................ Appendix Q Sample Chart of Accounts

92 ................................................................ Appendix R Examples of B&B-Related Zoning Ordinances

Contents

Introduction

Although Bed and Breakfasts have been firmly established in Europe for years, theywere introduced in the United States in the late 1960s. There are now more than20,000 B&Bs, up from about 2,000 in 1979. A sign of a maturing industry is theincreasing average number of rooms per property, increasing occupancy rates, andincreasing number of associations and support services; i.e., national, state, andregional associations setting standards (see Appendix B). There are now professionalnewsletters, travel publications, guidebooks, and vendors catering to small lodges.

The rewards of being a Bed and Breakfast host1 include meeting people, addingincome, gaining independence and an enjoyable way of life, and perhaps, restoring anold building. The business can give you great satisfaction as it grows into a valuableinvestment. 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 thedifferent types of B&Bs, the American Bed and Breakfast Association looks primarilyat 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 underwrit-ers, legislators, code enforcers, and regulatory bodies are discussing and dealing withB&B issues. Differentiating between the different types of B&Bs remains one of themost important issues for the B&B industry as more legislation is being written tooversee its growth. The following definitions are used by the American Bed &Breakfast Association in its dealings with all public and private organizations andindividuals:

B&B Homestay: A private, owner-occupied residence in which the frequencyand volume of B&B visitors are incidental to the primary use of the building as aprivate residence. One to five guest rooms are made available to transient visitors andprovide supplemental income for hosts. Breakfast is the only meal served and isincluded in the charge for the room. A review of current B&B zoning laws indicatesthat the majority of B&B Homestays continue to be unregulated or allowed primarilyunder zoning provisions for “Customary Home Occupations,” subjecting them tooutdoor sign restrictions; health, fire, and building code restrictions; and restrictions onthe number of employees deemed necessary to protect residential neighborhoods fromencroachment by business activities.

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

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Country Inn: A commercially licensed establishment primarily known for itscuisine that is removed from planned, commercial areas and generally accessible forpatronage 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 of20, although a number of Country Inns have more than 20 guest rooms. The business issalable 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 accom-modations. They are frequently thought of as establishments with twenty or morerooms that provide the service and privacy of a hotel in the setting of an inn with someindividual attention from a host. The State of Michigan defines their historic hotels as"at least fifty years old and associated with events or persons of significance in contrib-uting to the broad patterns of history. Many embody the distinctive characteristics of atype, period, or method of construction in architecture. Most are located in historicdistricts and all have twenty-one or more rentable rooms. If breakfast is not includedin the room price, it cannot be a true Bed and Breakfast.

Although all prospective B&B hosts should find much of the information in thisbook useful, it is designed primarily for someone planning to operate a B&B inn as afull-time business for profit. Whether you generate a reasonable profit will depend onmany variables. The primary variable will be your monthly overhead and debtpayments and annual number of room nights sold. Other variables will includenumber of rooms, occupancy rate, seasonality of your location, start-up and improve-ment costs, advertising expenses, owner/host wage level, and your own profit goals. Afive-room B&B inn completely free of debt with no hourly wage taken out by theowner, may generate a profit with 20 percent occupancy, while an eight-roomoperation with high monthly debt payments may not turn a profit at 65 percentoccupancy. A 1988 study by The Professional Association of International Innkeepers3

indicated that most B&B inns needed at least five to six rooms to reach the break-evenpoint before debt service and at least six to seven guest rooms to reach the break-evenpoint after debt service. The study also revealed that average B&B owners devotedmore than 74 hours a week to the daily running of a five- to ten-room inn.

The B&B Business PlanThe Business Plan is a comprehensive analysis of the details surrounding the creation orexpansion of a Bed and Breakfast business. It transforms ideas and concepts into aworking 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 financialrequirements will be met, and what to expect. By completing a business plan, you cantake 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 tomeet them. The plan will help you evaluate and decide whether or not to open a Bedand 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.

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◆ 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 yearlyrefinement.

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

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

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

STEP 1ConsultProfessionalswithExpertiseRelatedto the B&BBusinessp. 5

STEP 3Developthe B&BConceptp. 10

STEP 4Determineand ResearchYour Marketp. 12

STEP 7Develop aMarketingPlanp. 19

STEP 10Develop aPlan to MeetLaws andRegulationsp. 32

➜➜ STEP 2AnalyzeYourselfand YourFamilyp. 7

➜ ➜ ➜ STEP 12Develop aFinancialPlanp. 38

STEP 13Completethe BusinessPlanp. 44

➜ ➜

STEP 6Choose aLocation and aBuildingp. 17

STEP 11Develop anInsurancePlanp. 35

STEP 5ForecastSalesRevenuep. 15

STEP 8FurnishingYour B&Bp. 27

STEP 9Develop anOrganizationaland OperationalPlanp. 29

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➜ ➜ ➜

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➜

FIGURE 1.Flow Chart

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GoalsAt the conclusion of each step, you need to determine which goals are short range (12months or less), and which require long-range planning (more than one year). Someexamples of long-range goals are: to provide an unforgettable guest visit, to meet strongcompetition, to be market minded, to have an enjoyable livelihood, to provide aneeded service in the community, and to earn the status of a desirable communitymember. Some examples of short-range goals are: to develop an award-winningbrochure 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 thethirteen 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 objec-

tive. Fix the time and responsibility.◆ Separate the goals into short-term and long-term lists.

Several creative minds reviewed the original printing of this bulletin and sentcomments, suggestions, and materials that helped shape this final product. We wouldlike to thank the following people for their contributions: Charles Hillestad, real estatelaw 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 ClementsHistoric District of downtown Denver; Pat Hardy Co-director, Professional Associa-tion of Innkeepers International; and Rollin Cooper, Director, Recreation ResourcesCenter, University of Wisconsin at Madison.

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1The host, or the person who has contact with the guests, is usually the owner of the Bed and Breakfastbusiness. However, the host may also be someone hired by the owner to operate the B&B. In thispublication, the term “host” is used generally to signify the owner as well.2Appendix C, “A Guide: When a B&B is not a B&B” by Charles Hillestad, provides definitions of severalrelated categories.3"Bed & Breakfast/Country Inn Industry Survey and Analysis,” 1988 The Professional Association ofInternational Innkeepers, Santa Barbara, California.

❧ Step One

Consult Professionals with ExpertiseRelated to the Bed & Breakfast Business

Depending on yourpersonal situation the following may besome of the advantages to owning andoperating a B&B: being your own boss,integrating family and work responsibil-ity, starting a business in your ownhome with relatively low expenses(otherwise the openings can run veryhigh—between $50 and $150 persquare foot), reducing personal livingcosts, eliminating transportation costsand time to get to work, possibly havingtax advantages, enjoying a variety ofdaily tasks and a casual way of life, andhaving leisure time during scheduledclosed times.

Some of the disadvantages mayinclude: working hours (14- to 16-hourdays, often doing menial tasks); littleopportunity to delegate; concern aboutprivacy and quality family time;competition with chain hotels andmotels; growing competition from otherB&Bs; possible local resentment towardtourists; and uncontrollable factors suchas weather, road repairs, gasolineavailability and price, taxes, changinglaws and regulations, inflation, interestrates, and increasing governmentintervention.

You can gain insight into theadvantages and disadvantages ofentering the B&B business, and obtainvaluable information by talking withnearby B&B hosts, or even helping tooperate their B&Bs for a few days.Attending apprentice programs, one dayoverview workshops, and two- andthree-day seminars may help you decidewhether to enter the B&B business.1

To help with several majorsegments of your business plan and withyour decision about whether or not toopen a B&B, consult a specialist—anaccountant, a lawyer, a banker, aninsurance agent or broker, or a hospital-ity consultant. The fees of suchprofessionals are high, perhaps morethan $100 per hour, or a fixed fee from$100 to $15,000 depending on yourrequirements. However, their knowl-edge may spare you considerablehardship. Their judgement is by nomeans flawless, yet they reduce the oddsof making the wrong choice.

You can reduce the gaps in yourknowledge and experience and increaseyour chance of success by relying onother people’s experience. The follow-ing resources will cost you no more than

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time and a phone call or travel expensesfor a personal appointment:

◆ County Extension and Sea GrantOffices, B&B Organizations, andhotel/restaurant or small businessspecialists.

◆ National, State, regional, or localB&B associations.

◆ Chamber of Commerce, RegionalPlanning Commissions andCouncils, and other touristorganizations.

◆ Small Business Administration:Counselors, Workshops, SCORE(Service Corp of Retired Execu-tives), and ACE (Active Corp ofExecutives).

◆ Small Business Development/NewVenture Centers (Federal & State).

Seek out consultants held in highesteem in the community by smallbusiness owners and the hospitalityindustry. The best sources of names areusually other small business entrepre-neurs who are both experienced andsuccessful. As such, they are in the bestposition to offer honest opinions aboutthe skills, interests, and availability ofconsultants. Examine their work,

Some of the most significant advantages to owning a B&B business are being able to workin your own home and being your own boss.

interview some of their clients, anddiscuss their fees and the scope of theirwork. The experts’ knowledge needs tobe accompanied by a reasonable matchin 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 theB&B business operation. List indescending order of importance.

4. List what you want to find outfrom each resource.

5. Lay out, in precise detail, the steps(best ways) to accumulate essentialinformation from each resource.

1 Information about apprentice programs may beobtained by writing to: Margaret Lobenstine,Wild Wood Inn, 121 Church Street, Ware,Massachusetts 01082; Carl Glassman, the InnSchool, Wedgewood Inn, 111 West Bridge,Hope, Pennsylvania 18938, Charles Hillestad,2151 Tremont Place, Denver, Colorado 80205,and Pat Hardy, Bed and Breakfast InnkeepersGuild, P.O. Box 96710, Santa Barbara,California 93190. Also check the classifiedadvertisements of Inn Times, Inn Review, CountryInns and Innsider, B&B newsletters such asInnkeeping and Inn Business Review; and thepaperback books about starting a B&B. For moreinformation about workshops and seminars,contact your County Cooperative ExtensionService, American Bed and Breakfast Association,and Professional Association of InnkeepersInternational.

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Analyze Yourself and Your Family

❧ Step Two

Evaluating yourself as aB&B host is an important task. Youneed to (1) analyze your strengths andweaknesses, (2) prioritize your short-term and long-term personal andbusiness goals, and (3) carefully examinewhether you have the necessarytechnical and business skills.

Begin by assessing your strengthsand weaknesses. Think about how thesecharacteristics pertain to the B&Bbusiness and be honest with yourself—most people find it hard to recognizetheir own shortcomings.

Be sure to base the pros and consof entering the B&B business on yourown, personal goals and philosophy.Take the time to explore your specificgoals and determine whether owningand operating a Bed and Breakfastbusiness would accomplish what youdesire. You should also set personalgoals for two, five, and ten years fromnow. Then decide whether operating aB&B will help you meet those objec-tives. Consult Appendix D, “Determin-ing Personal Goals,” when you do thisexercise.

To help determine whether youwould enjoy the B&B profession,

carefully complete the following ques-tionnaire:

Would you be able to:◆ Provide old-fashioned hospitality

and courtesy?◆ Combine business sense and

business experience with commonsense?

◆ Wear many hats, and change themoften and quickly?

◆ Repeat answers enthusiastically tothe same questions hundreds oftimes a year?

◆ Go the extra mile to provide anunforgettable 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 withoutalienating that person?

◆ Plan menus; purchase, prepare, andserve food; and follow healthdepartment standards?

◆ Be your own boss, do what isnecessary to accomplish the joband enjoy a challenge, and workwell under pressure?

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◆ Work long hours in varied anddemanding situations withfrequent interruptions?

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

◆ Plan, make many decisions, learnfrom experience, and change yourbehavior accordingly?

◆ Obtain and follow the advice ofexperts?

◆ Become proficient in bookkeepingand accounting?

◆ Develop and monitor a budget,and understand financial state-ments and tax benefits?

◆ Develop brochures, advertise-ments, promotional materials, andmedia relations?

◆ Talk on the phone, take and recordreservations, check customers in,show guests to rooms, andreceive payments for your service?

◆ Clean bedrooms and bathrooms,do laundry, make beds, provideamenities, decorate, landscape,and do building maintenance?

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

Next, evaluate your inventory ofskills and interests. Sort out your ownskills and the skills of your partner(s).Determine how you and your partner(s)will overcome any deficiencies you mayhave in skills that are necessary tooperate a B&B. Decide how importantthese factors are to the success of thebusiness. Keep in mind that an abun-dance of skills in one category will notnecessarily make up for a deficiency inanother. Success is most probable whenyou (and/or your partner) rate high ineach of the categories.

The successful entrepreneur is oftenan overachiever—healthy, energetic,confident, open to reasonable risk,industrious, goal-oriented, accountable,innovative, and technically competent.Being your own boss means meetingcustomer demands, working long hours,providing necessary government reports,and coping with uncontrollableeconomic conditions.

Discussions between groups ofsmall business owners revealed 10common 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 compete10. Coping with regulations and

paperwork

In the hospitality industry youmust show your desire to accommodate.Your primary job will be to satisfy yourguests’ needs. Simply providing a cleanroom and a good breakfast will not beenough to make your guest feel thatyour B&B is special. Only through agenuine interest in customers and acommitment to making their lodgingexperience unique, can you create the

atmosphere that your B&B will need todevelop a regular clientele and to securebookings from favorable referrals. Tohelp you decide whether to enter theB&B business, you may want to consultthe U.S. Small Business Adminis-tration’s Checklist for Going IntoBusiness, (see Appendix A).

Essentials for survival in smallbusinesses include (1) capitalizing onstrengths and compensating forweaknesses, (2) recognizing problemsand limitations, and (3) building onnatural strengths.

The proper frame of mind, realisticexpectations, and strong personalcommitment to your B&B are at leastas important to success as industryknowledge (accounting and bookkeep-ing, food preparation and sanitation,financial management, marketing,hosting, housekeeping, etc.) Findingsomething that you love, that has thepotential of being successful, somethingthat you passionately enjoy doing, willcontribute much to your success. Thelove of doing it is necessary to with-stand the long hours and pressures ofstarting and managing your B&B. Longhours and a variety of tasks requiregood time management skills. Referringback to the business plan will help youset priorities and ensure that you spendtime most efficiently. The ability toadjust to many variables is paramountto increase revenue, reduce costs, andeffectively serve guests.

Research by Dun and Bradstreetclearly indicates that business failuresresult primarily from incompetence.Following are the reasons for businessfailure (in decreasing order) that applyto 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

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Hillestad (see Appendix C) addsthese 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&BWill Affect Your FamilyAnother important consideration ishow the B&B will fit into your familylife. You should carefully consider thefeelings and attitudes as well as agesand work styles of each familymember and try to anticipate familytension and personal impact that thebusiness may cause. You and yourfamily should discuss how your timewill be divided between the business,the family, community functions, andleisure activities. It will be importantto establish areas of the house forfamily only, and to define rules forusing the kitchen and the telephone,both of which will be important tothe business.

Also, if family members plan tohelp with the business, you will needto assign responsibilities (see “Hous-ing and Family ResponsibilitiesAssociated with Owning a Bed andBreakfast Business,” Appendix E),decide how much each member willinteract with guests, and determinehow definite the distinction will bebetween family and business relation-ships. By addressing these types ofconcerns before you open, you will beable to avoid tensions, resentment,and misunderstandings among familymembers later. Also, assess the effectof support or disenchantment offriends and neighbors on yourself,spouse, and children (loss of play-mates, etc.). Remember that friendsand neighbors can cause conflict.

Establishing areas of the house and grounds for family only and those available for guest useis an important consideration when contemplating opening a B&B.

Goals of Step Two: 1. Determine your strengths (what

you like to do passionately) andhow you will capitalize on theseitems.

2. Determine your weaknesses,limitations, what you absolutely donot like to do, and how you willovercome these factors.

3. Determine how to gain an in-depth knowledge of the B&Bindustry.

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

5. Examine your frame of mind,expectations, and personalcommitment.

6. Determine your short-term andlong-term goals (see Appendices Dand E)• personal goals• family goals• family B&B responsibilities• goals for friends and neighbors

7. Determine how you will set timepriorities.

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1 1989 Dun & Bradstreet.

❧ Step Three

Develop the B&B Concept

This step should be completedin two phases. The first phase is todefine, describe, and evaluate the conceptthat best fits your strengths, interests,customer needs, and your home. Theconcept should also be closely related tothe community tourism thrust andlocation of your potential customers butdifferentiated from the competition. Thesecond phase is to redefine your conceptafter completing all the steps in thebusiness plan.

The B&B concept is a combina-tion of ideas that form the foundationof a unique, customer-satisfyingexperience. First, state in a few sentencesthe major features or attractions of eachconcept component. This will help youvisualize your business in relation toyour market segment and yourcompetition. The reader should be ableto “experience” the B&B and feel as ifhe or she were actually there. Thedescription should appeal to theemotions as well as the senses. Explainthe unique touches that will distinguishyour B&B from others. Describeintangible appeals, like charm, ambi-ence, quaintness, and atmosphere. Give

reasons why customers will spreadfavorable comments.

The concept should describe sixcomponents to provide a compositepicture of your B&B. Describe eachcomponent by moving from a generalidea to a more detailed description ofyour proposed B&B:

◆ Explain exactly what you areselling, such as a special travelexperience, host personality,personal touch, romance,privacy, luxury, or history.Explain exactly what businessyou are in and why it will beprofitable and continue to grow.Describe what your business willbe like in five years. Explain yourstandards, appraisal methods ofreaching those standards, andcommitment to quality inhospitality, service, food prepara-tion and sanitation, housekeep-ing, safety, maintenance, andgroundskeeping.

◆ Formulate a preliminary guestprofile including such demo-graphic information as age, edu-cation, and geographic locationof guests. (See Appendix J.)

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◆ Facilities:• Define exterior, physical

features: architecture, renovation(anticipated or completed),theme, decor, colors, predomi-nant features, outdoor furnish-ings such as picnic tables andgrills, view, lawn, landscaping,recreation areas, garden, trails,pond/stream, woodland, etc.

• Define interior features: publicspace, furniture, style, size;distinctive features of thebedrooms; bathroom featuressuch as number of baths that areprivate and whether they havespecial shower heads, thicktowels, etc.; breakfast areas,menu, method of service, andtime of service; other featuressuch as porches or patios,fireplaces, and meeting rooms;favorable equipment featuressuch as individual temperaturecontrols, refrigerator space, andnoise reduction features; andoverall comfort, safety, cleanli-ness, and housekeeping of theinterior.

As part of your B&B concept, you should decide on what type of dining atmosphere youwould like to present.

◆ Assistance and hospitality:• Explain how thinking begins

and ends with the customer—how staff attitudes, manner ofserving guests, and personaliza-tion of service will make guestsfeel like welcome VIPs. Explainhow the staff and service will selland promote the B&B. Describethe staff dress and grooming andhow it relates to the theme andimage of the B&B. Describehow the telephone will be usedas a goodwill ambassador.

• Tell what amenities or physicalitems or articles will be given toguests such as special soaps, foodtrays or baskets, flowers,departing gifts, etc.

• List the unique services orobjects that the host and staffwill provide for the benefit ofthe guest such as a tour of thehouse and grounds, afternoontea, use of the telephone, tourarrangements, bed turn-downservice, laundry service, creditcard acceptance, and 24-hourmessage-taking service. Alsodescribe the assistance providedto the guest on local activities,menus, maps, etc.

• Describe activities that will beoffered, including inside enter-tainment such as games, TV,books, and hosts’ hobbies;activities on the grounds such asoutdoor cooking, horseshoes, orbadminton; and nearbyattractions such as restaurants,shops, and recreation andentertainment centers.

◆ Consider the unique supportfeatures of your location andneighborhood like nearby touristattractions and demand generators.

◆ Business aspects:• Describe your experience or

related experience in thehospitality industry.

• Decide on your B&B’s openingdate, degree of seasonality, hours

of check-in and check-out,breakfast hours, etc.

• Describe what you learned fromother B&B operators that youwill put into practice.

• Define policies that affect theB&B image and customerpreference, such as smoking,alcohol, children, and pets.

• Describe the price structure andhow it relates to the competition, perceived price to valueratio, and to the image of theB&B.

• Relate the name of the B&B tothe logo, theme, image of thebusiness, and the community orarea.

• Tell what amenities might beprovided in the future and howthey will contribute to thesuccess of the B&B.

Hillestad (Appendix C) thinks ofthe concept as a four-legged stool withone leg being the architecture, decor,and amenities, another being serviceand hospitality, the third being food,and the fourth being location. Hispoint is that if one leg is weak, theother three better be very strong. Thestool cannot stand if two or more of thelegs are weak.

Determine whether the compo-nent parts fit together and complementeach other. Is each part compatible withthe overall concept? Is the concept

11

compatible with the market segmentyou are trying to attract? At thispoint, you should evaluate how yourconcept fits your strengths andcustomer interest in staying at yourB&B. Be sure your concept answersthese questions about your proposedB&B: Why will customers want tostay in my B&B rather than thecompetition’s? What is unique ordifferent about my B&B? What willmy B&B provide for my customers?How will I generate satisfied custom-ers? Why will customers feel theyobtained more than expected? Whywill my concept succeed?

Goals of Step Three: 1. Tell who your customers are,

what your B&B’s major featuresand attractions are, where yourbusiness will be located, how youwill operate the business, andwhy 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 meetthem.

❧ Step Four

Determine and Research Your Market

The key to marketing in theB&B industry today is understandingthat there is no one consumer. Compre-hending this concept, understanding theneeds of the consumers, knowing thesegmentation of your market, andselecting the best ways to reach yourconsumer are what marketing research isall about.

A given group of consumers can bedivided into market segments, orspecific (limited) groups of people withsimilar needs and wants, such astravelers for (1) pleasure, (2) business,(3) special occasions or events, (4) visitsto friends or family, (5) specialty market(such as school teachers, foreigntravelers), and (6) weekend or weekdaymarket segments.

Market research involves learningwho your competition is, establishingyour market segment, developing thestrength of your B&B so that yourmarket will notice and want it, pricingit right, and telling your market that it isavailable. Marketing research serves twofunctions: It develops new knowledgeabout your B&B, especially about howcustomers will see it compared to other

accommodation alternatives, and itprovides information for decisionmaking. Researching the market usuallyinvolves systematically gatheringinformation, analyzing the data to findout what it means, and developingimplications. Ask yourself, “What doesit tell me to do, or not to do?”

Marketing research is customer andprospective customer oriented andshould answer the following questions:

◆ Why will/do customers come to myB&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 thecompetition?

A study of your market will helpyou examine your B&B’s location inrelation to the economic environment,proximity to events and attractions thatcould generate business, and the currentand future demand for rooms. Thestudy will help you determine whether a

12

proposed B&B has market potentialand estimate the occupancy rate foryour B&B.1

To obtain the informationnecessary to analyze your market, youmay need to consult lodging operators,community business people, thepersonnel and purchasing departmentsof local companies, merchant associa-tions, the county’s CooperativeExtension director, Sea Grant MarineExtension personnel, city planningcommissioners, real estate developers,bankers, and city government officials.You should also contact such state andlocal agencies as the Chamber ofCommerce, economic developmentcommissions, planning agencies, andconvention, visitors, and tourist develop-ment bureaus. Many areas have eco-nomic development offices where youcan find current, statistical data regard-ing the economy, building activity, salestrends, and community services of aspecific area. Other resources to tapinclude local B&B hosts, regional, state,and national B&B associations, andregional reservation service organizations(RSOs).

When considering your bedroom decor, it is helpful to have a profile of your prospectivecustomers in mind.

Many state tourism and develop-ment offices have considerable informa-tion about travelers, such as theirincome, age, location, education level,etc. Some states have departments,bureaus, or university divisions thatcollect and chart demographic data bythe state and county. The SmallBusiness Administration (SBA)consulting arm called “SCORE”(consisting of retired executives) mightalso be able to help in your marketresearch project.

The Department of Commerceoversees the research and distribution ofeconomic information. Their Survey ofCurrent Business and census bureaureports population statistics and otherchanges in the nation’s economy. Don’toverlook the Superintendent ofDocuments, U.S. Printing Office,Washington D.C. 20402, which offersbooks, reports, and governmentdocuments on a variety of subjects.

The marketing worksheet inAppendix H will help you identify andresearch your market. Fill in theworksheet as you analyze aspects of yourB&B. The result of your analysis,recorded on the worksheet, will formthe basis of the marketing plan that youwill develop in Step Seven. Consider thefollowing points as you complete themarketing worksheet:

◆ Determine what you are selling,taking into account the type ofB&B and area. For example,decide whether you are marketinga unique experience, a personalservice, a friendly atmosphere, agood location, an opportunity tomeet new people, or an area ofscenic beauty.

◆ Evaluate your community. Assessthe quality and availability ofresources (facilities, services, staff,and image). Consider how thetourist attractions in the area mightaffect your market potential andhow your B&B might betterattract overnight guests. Take into

account the following types of attrac-tions:• Natural features such as lakes,

beaches, streams, forests,wildflowers, foliage, scenicvalleys, rugged terrain areas,caves, nature preserves, andstate parks.

• Historic sites such as historichomes, old mills, round barns,Indian burial grounds, monu-ments, memorials, birthplaces offamous people, and exhibitions ofold-fashioned lifestyles.

• Annual or seasonal events such as flea markets, craft fairs,festivals, pageants, outdoor artshows, community theaterproductions, and sportingevents.

• Recreational areas such as zoos,parks, amusement parks,museums, and botanicalgardens.

• Recreational facilities such ashealth spas, racquetball courts,golf courses, tennis courts,swimming pools, bicycling and

13

hiking trails, and skiing areas.• Restaurants and shopping areas.• Nighttime entertainment such

as theaters, comedy houses,nightclubs, and concert halls.

◆ Evaluate the advantages anddisadvantages of your B&B. Takeinto account the following aspectsof your B&B and determinewhether they would be consideredadvantages or disadvantages byyour target market:• Determine the uniqueness of

your B&B. Consider unusualfeatures such as a collection ofpaintings, antiques, a library, oran exceptional view. Alsoconsider services and amenitiessuch as brushing snow off cars,providing coffee and a news-paper with personal wake-upcalls, placing flowers in the roomor chocolates on the bed pillows,and 24-hour answering and faxservice. (For a more completelisting of amenities see Appen-dix I.)

◆

,

s

1 See The Inn Business, Canadian GovernmentPublishing Center, Supply Service Canada,Ottawa, Canada, K1A059. Marketing ofHospitality Services, Food, Travel, and Lodging byW.J.E. Crissy, Robert J. Boewadt, and Dante M.Laudadlo, published by the Educational Instituteof the American Hotel and Motel Association,East Lansing, Michigan.

• Make an honest appraisal ofyour B&B. Consider thelocation and road network, thehome and its condition, yourabilities as a host, quality ofservice, pricing, design, facilities,and overall image of your B&B.Determine which aspects wouldbe considered advantages andwhich would be considereddrawbacks.

• Evaluate your operating policies.Consider your policies onsmoking, pets, children, andalcohol, and whether your targetmarket would perceive thesepolicies as advantages ordisadvantages.

• Evaluate the potential of aspecialty market such as foreigntravelers, school teachers, retiredfarmers, singles, handicappedindividuals, etc.

• Evaluate the competition.Consider your competition’slocation, facilities, promotionalthemes and messages, type ofcustomers attracted, and prices.Note anything unusual abouttheir policies, services, andcommunity status. Find out thevisitor statistics and occupancyrates in the area.

Determine business factors thatattract people to the community.Consider the area’s manufacturingor agricultural business activity,conferences and conventions, hotelsand motels, hospitals, nursinghomes, colleges and universities,and retail stores. An analysis of the elements listedin this section will provide a listingof the strengths and weaknesses ofyour proposed B&B, which youwill use in Step Seven, “Develop aMarketing Plan,” to improve theattractiveness of your B&B and takeadvantage of your situation.Appendix J compares the results ofa Michigan and Minnesota B&Bguest study completed in 1988.

This information may be used as aguide until you have obtainedspecific information for your B&Barea.

Goals of Step Four: 1. Determine travel/tourist growth

trends regionally and locally. 2. Divide the market into segments:

tourists, businesses, group meetingspackage tours, special occasions,visits to family and friends, specialtymarkets, etc.

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

4. List attractions in your communitythat draw or could draw customers.

5. List all the strengths and weaknesseof your B&B.

6. Examine the competition bylocation, facilities, prices, andanything unusual about theirpolicies, services, and communitystatus.

7. From the information gathered, listproblems 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 theform of specific recommendationsand weigh in terms of cost, effec-tiveness, and ultimate benefit(return).

14

❧ Step Five

Forecast Sales Revenue

A fter determining themarket potential, you should make amonthly estimate of the room revenuefor the first year. A good forecastestimates sales revenues over a three-yearperiod broken down as follows: firstyear - weekly, second year - monthly,and third year - quarterly. The roomsales forecast is very important to theprofit planning process—it is also verydifficult to estimate with certainty.Review your estimate repeatedly foraccuracy, then develop strategies toincrease revenue and profit. Withoutgood sales forecasts, you cannotrealistically plan expenses and makefinancial commitments.

Sales are calculated by multiplyingthe number of rooms rented during agiven period (days of operation) by theaverage room rate. Occupancy measuresthe percentage of available rooms rentedat a given time. Area B&B operators,the American Bed and BreakfastAssociation, and reservation serviceorganizations may supply importantinformation concerning occupancy.Keep in mind that factors such as theseason of the year, time of week, andweather conditions affect occupancy.

The major variables affectingoccupancy during your first year ofoperation will probably be yourlocation, the amount of travel throughyour area, the attractive qualities of yourB&B, and the amount of promotionand exposure you have received.

A few B&Bs have had all thebusiness they wanted the first year,while others did not have a singlecustomer during their first six monthsto a year. But, there are no hard, first-year occupancy figures available.Informal reports from operators indifferent locations suggest that anaverage occupancy ranges from 10 to 25percent the first year. B&Bs in ruralareas usually have a relatively highoccupancy rate because hotel/motelconstruction is not feasible in ruralareas. Promotion, favorable word-of-mouth, and repeat customers mayincrease occupancy by perhaps 10 to 15percent each year for the first threeyears.

To project income you need to:

◆ Determine preliminary room rates.◆ Investigate your situation carefully.

Use judgment and knowledge of

15

the area gathered from hotels andmotels, the chamber of commerce, areservation service, national, stateand regional B&B associations, etc.Talk with several B&B operators insimilar situations about theiroccupancy/marketing experience.

◆ A nine-state survey of B&Bestablishments conducted in May,1990 by CenStates Chapter, Traveland Tourism Research Associationand the Department of Hotel,Restaurant and InstitutionalManagement, Iowa State Univer-sity, showed that the occupancyranges during the slowest monthand the busiest month variedwidely by state. Mean occupancyduring the slowest month rangedfrom 5 to 13 percent, and duringthe busiest month ranged from 24to 48 percent.

◆ A realistic occupancy percentageduring the first year for many ruralB&B locations without resort ormajor attractions has been 10 to 25percent. With advertising, repeatguests, moderate competition, andfavorable self and word-of-mouthpromotion, occupancy should

increase to about 25 percent thesecond year and perhaps byanother 5 to 10 percent the third year.

◆ Annual revenue is projected bymultiplying the number of rooms bythe room rate times the number ofdays open, times the occupancy rateplus additional sales. (See Table 5-1).

◆ Additional Sales• services, such as: - transportation - guided tours - child care - laundry - mending - meeting/banquet rental space• retail sales, such as: - catering extra meals, luncheons,

or off-premise (if in a licensed kitchen)

- baked goods - crafts - antiques - books

The sales revenue is based on roomrate, occupancy, and the number ofdays open. It is a key estimate because itserves as the basis for almost all otherestimates you make. It is vital, therefore,that occupancy and income be pro-jected in a realistic way—not just pickedout of the air. Revenue projections mustbe based on facts and well-thought-outassumptions. It is critical that youknow the anticipated time betweenstart-up and the time you reach

occupancy break-even. You may needto refer to a book about break-evenanalysis, a hospitality accounting book,or an accountant.

Goals of Step Five: 1. Apply your knowledge from

researching the market; and makerealistic assumptions, taking intoaccount the travel volume to yourarea and your competitor’soccupancy percentage. Make goalsfor:• first year - weekly• second year - monthly• third year - quarterly

2. Make assumptions based oneverything going right.

3. Determine how much lowerrevenue would go if everythingwent wrong.

4. Determine how sales could beincreased, and by how much:• promotion and advertising• personal selling• word-of-mouth• quality services• retail sales• other

5. Project the time between start-upand reaching break-even occu-pancy.

TABLE 5-1.Example of Income for a 5-room B&B Inn

1st Year 2nd Year 3rd Year

Average Room Rate $60.00 $60.00 $70.00

Yearly Occupancy 15% 25% 40%

Days Open 365 365 365

Yearly Room Income $16,425 $27,375 $51,000

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❧ Step Six

Choose a Location and a Building1

A common saying in thehospitality industry is that the threemost important factors for a successfuloperation are “location, location, andlocation.” Ideally you would select alocation by geographical region, a citywithin that region, an area within thatcity, and a specific site within that area.However, few prospective B&B hostsgo through that process of site selection.Most B&B operators already have alocation in mind based on personalpreference for a certain climate or ahometown where long-time friendscould help raise money and drawcustomers. However, prospective B&Bhosts should balance personal preferencewith business sense. Because the two donot always coincide, it may be necessaryto compromise.

In selecting a location andbuilding, ask yourself why you prefer aparticular area. Does the home matchyour expected customer profile? Toselect the best building and location, listthe items that require minimal time andexpense and those that require extensivetime and expense.

The ideal location of your B&B

would be close to main traffic routes andyear-around, high tourist destinations.Find out where tourists like to go,and locate there. An attractive countrysetting with little competition is alsoideal. Unique features are valuable (butnot compulsory), such as a historicbuilding with antique furnishings.

An important criterion for selectingyour location is that the environmentmeet your needs and those of yourfamily. Consider factors such as climate,the size of the city, the recreational,social, educational, and cultural aspectsof the community, availability of healthcare services, employment for yourspouse, and distance from relatives.Before you commit yourself to aparticular location and building, youshould examine the zoning, fire, andhealth requirements that pertain tothem. The cost of coming intocompliance with such requirementsmay preclude the possibility of operat-ing a B&B business there. See “Inspec-tion Checklist, A Guide for Buyers andOwners of Vintage Houses” forquestions to consider in the selection of a building and its location.2

17

Buying ConsiderationsIf, after answering the questions inAppendix K, you are seriously consider-ing buying property to start a B&B,there are a number of factors to considerand verify. Hillestad points out in hispaper “B&B Acquisition and OpeningCosts,” that your initial building willlikely range between $50 and $150 persquare foot, and that you will need4,000 to 7,000 square feet for a typical10-bedroom inn. Renovation by alicensed contractor will cost approxi-mately $20 to $70 per square foot.Additionally, Hillestad suggests, “If youare going to restore a historic structure,you should obtain the services of aspecial architect and contractorexperienced with preservation tech-niques, which are vastly different fromnew construction techniques.” Refer-ences and the Better Business Bureaushould be checked also. To be eligiblefor tax credit, you need to follow theSecretary of Interior standards for ahistoric building used for commercialpurposes.

In his paper, “Preventative Law ForInnkeepers - Contracts,” Hillestad

Some things to consider when choosing alocation and a building include availabil-ity of parking, attractiveness of outdoorlandscape and surrounding neighborhood,and proximity to restaurants andhighways.

suggests that you include severalcontingencies in any contract such asavailability of financing, approval fromall government entities, and condition ofhouse such as mechanical systems andstructural components. It would beworthwhile to pay someone and get awritten report to make sure everythingis in working condition and that youhave adequate utilities. Other items tocheck for are back taxes, title, and aproperty survey.

Be sure to research the site’s zoningclassification and those of the surround-ing properties. If zoning laws do notpermit accommodation facilities, findout whether a variance or a change inzoning can be obtained.

Estimate the chances for objection-able future development such as noiseproducers, and examine factors thatcould limit expansion. Also find outabout expected road and highwaydevelopment. Review restrictions on theplacement and size of signs. Also be sureto check the asking price and taxburden because these costs willultimately be reflected in the room rates.Analyze the deed to see if there are siteeasements or other restrictions.

Goals of Step Six: 1. Realistically evaluate your

location. 2. Evaluate the location as a place

for you and your family. 3. Determine, if appropriate, the

factors to research and verify inbuying your B&B property.

4. Determine, if purchasingproperty, the specific contingen-cies to include in your contract.

5. Integrate the location, building,and concept.

1Even if you have already selected a locationand building, this step can help you evaluateyour choice.2Published by the Old-House Journal, 69ASeventh Avenue, Brooklyn, New York 11217.

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❧ Step Seven

Develop a Marketing Plan

Your marketing plan shoulddetail exactly what you want toaccomplish, factors that may affectmarketing efforts, resources available inthe community, specific groups ofpotential guests most interested in yourB&B and strategies to attract them,objectives for each market segment, animplementation plan, a budget, and amethod for evaluation and change.Keep in mind that marketing is anongoing process and that promotionalactivities must be continuously carriedout.1

Look upon your property, itsarchitecture, decor, and pricing as yourproduct package. Think of all thelodging alternatives in your area ascompetitive products sitting on a shelfnext to yours. Then imagine travelers asconsumers with a wide range of tastes,incomes, and interests. You need toexamine the market, decide to whomyou are going to sell, and then directyour marketing toward attracting thoseconsumers. Step Four, “Determine andResearch Your Market” provided theinformation to determine whatsegments of the market offer opportu-nity. Design your market strategies so

that your market will notice your B&B.In this step you will determine the bestway to tell your market about your B&Band the best way to price it right. Youneed to develop a series of strategies thatsatisfies the special needs, desires, andbehavior of your target markets. Thenevaluate each strategy in terms of cost,effectiveness, and benefits (return).

Importance of Image, Name,and Word-of-MouthThe personal image you project and thereputation of your B&B can make thedifference between success and failure.You need to promote yourself as well asyour B&B. You will be judged on howyou dress, walk, speak, and interact. Yourattitude of caring and ability to makeguests feel special will produce repeat andreferral business. A good, lasting impres-sion can be created by (1) front deskpersonal and telephone contact withguests; (2) the name of your B&B, yourlogo, slogan, and sign; (3) the design ofyour stationery and business cards; and(4) the eye-catching brochures andconfirmation cards.

Coming up with a catchy name—one that sounds good, piques people’s

19

curiosity, and tells something about your B&B—is an important marketingconsideration. The name alone can helpgenerate customers. A consumer’sdecision to select a B&B may involveactually visualizing or imagining what itmay be like to stay in the B&B. Try tochoose a short name, falling early in thealphabet, with a lot of imaginationassociated with it.

B&Bs grow stronger by personalrecommendations of customers andfriends. Consumers generally ask trustedfriends where to find a good B&B. It isthe quality of the total B&B experiencethat makes the customer appreciativeand talkative. Prospective owners/hostsneed to be aware of how critical word-of-mouth public relations are in thegrowth of their B&B, thus one of yourmost important goals should be thatevery customer have an enjoyableexperience.

Marketing Strategy (Mix)The marketing strategy, or mix, shouldbe viewed as a package of offeringsdesigned to attract and serve thecustomer. Both external and internalmarketing mixes need to be developed

◆

◆

To objectively evaluate your property and its architecture, imagine that you are a travelerdriving by looking for a nice place to spend an evening.

for different target markets. You need todevelop ways to enhance the quality ofthe overall trip experience including (1)trip planning and anticipation, (2)travel to the B&B area, (3) the experi-ence at the B&B, (4) travel back home,and (5) recollection. Focus attention onthe experience desired by the guests andalso the facilities, lodging, food services,and events that will produce theseexperiences.

Guidelines to External Pro-motionFollow these guidelines to receive thebest promotion for your money:

◆ Promote only to the marketsegments that are most likely tofind your B&B attractive andsatisfying.

◆ Become a member of the Chamberof Commerce, the Better BusinessBureau, and the nearest Conven-tion and Visitors Bureau. Find outif you can advertise in their annualor seasonal mailings. Volunteer togive presentations on the B&Bbusiness at local clubs andcommunity gatherings. Becomeactive in civic and communitygroups and offer your home as ameeting place to build rapport andcooperation. Provide rooms forcharity auctions. Invite thecommunity to an open house.Consider purchasing advertisingspace in local Chamber ofCommerce brochures and specialtypublications on local activities suchas skiing and hunting. Whenbuying ad space, compare pricesbased on cost per thousands(CPM) of readers reached. Become the local touristpromoter and expert. Develop areputation as an involved memberof the community who providesquality, personal service at a fairprice. Help develop promotionalliterature on the history, seasonalevents, and unique features of your

2

community. Through membershipin a national, state, and regionalB&B organization you may havethe opportunity for joint publicityand advertising.State and regional directoriespublished by your State Depart-ment of Tourism and Bed andBreakfast Association are veryeffective.An attractive brochure is animportant marketing tool.Relatively inexpensive brochuresneed to be developed to provideinformation about your type ofexperience, unique features,location, bathroom arrangements,getaway aspects, rules, nearbyrestaurants and recreationalactivities, and sightseeing ideas.Make sure the brochure fits into abusiness envelope, is rack size(approximately 4 inches wide by 9inches long), and has good rackvisibility. Be very careful to selectimages and words that willrepresent your B&B in an accurateand inviting manner. Unless youare a talented writer and artist, youwill need to hire professionals towrite the copy and create theartwork for the brochure. You willalso need to select a typesetter anda printer. Secure bids from severalprinters to get the best value foryour money. However, be careful

0

not to sacrifice quality. Keep in mind that you will haveto review the brochure carefully ateach stage of development. Makesure important information such asroom rates and policies on depositsand credit card usage are clearlystated. The brochure can bedistributed to potential customers;other B&Bs; lobby areas ofrestaurants, hotels/motels, andhealth care facilities; travel/customer locations; appropriatepublic events, fairs, and festivals;recreation and sporting shows;local and regional retail servicebusiness firms and organizations;local funeral homes, upper-levelschools, and antique dealers.Estimate your distribution numberbased on a six-month supply. Thenobtain a printing cost for thatamount, as well as estimates foradditional quantities or reprints.

◆ Aggressively pursue opportunitiesfor stories in newspapers2 andmagazines. Media coverage is veryimportant for new B&Bs. Sendregular news releases to national,state, and local newspapers andradio and television stations. GuestTV and radio appearancesdescribing the uniqueness of yourB&B can be extremely effective.Consider contracting with afreelance writer to develop articles

Promote your name and logo on a signin your yard if the zoning allows; ordisplay a B&B flag or banner.

about your B&B for submission toregional newspapers. Somenewspapers have a weekly calendarand tourism section that lists thearea’s lodging accommodations.Finally, develop a press kitincluding a photograph, a briefhistory, and a description of yourB&B to give to newspaperreporters, freelance writers, andtravel writers.

◆ Work on getting listed in B&Bguidebooks.3 There are B&B“critic” guidebooks with indepen-dent opinions on B&Bs based onthe author’s standard, and usuallythere is no fee. Some guidebookshave someone inspect the B&B.Another type is a “listing” B&Bguidebook which is useful inlocating B&Bs in an area oralternative B&Bs in an area or city. Listing your B&B in guidebooksis a relatively simple and inexpen-sive (the majority do not charge afee, others charge about $50 to$75) way to attract guests,particularly distant customers. Todecide which books you would liketo be listed in, browse through thetravel section of a bookstore. (SeeAppendix A for a listing of B&Bguidebooks.) Select a reasonablenumber of guidebooks that lookattractive and compare them basedon the following factors: cost,circulation, market, updatingfrequency, membership require-ments, type of B&B description,exclusivity stipulations, certainstandards that must be met, andinspection policies. You may alsowant to inquire about liability andgroup life insurance policies. Alsoask about newsletters and otherbenefits. Because it may be one totwo years before a new or updatedguidebook reaches the bookstores,contact the guidebook’s writersbefore you open.

◆ Incorporating the name and logoof your B&B on business cards,

fact sheets, stationery, and policysheets is a relatively inexpensiveway to promote your B&B.Professional-looking business cardscan help establish credibility andraise interest. Attractive, well-written fact sheets can gainexposure and promote the imageyou have created for your business.Fact sheets can be posted onbulletin boards, handed out toguests, included in mailings, andsent to other B&Bs in your region. Policy sheets should be posted ineach room to outline the rules ofyour establishment while remind-ing guests of your business’s nameand logo. Also consider incorporating thename and logo of your B&B onin-house items such as informa-tional posters, placemats, statio-nery, and complimentary gifts suchas matchbooks, pens, and post-cards. Making your name and logoas visible as possible will makeguests more likely to rememberyour particular B&B.

◆ If the advertising price to valueratio is appropriate, plan to attracttravelers by advertising in state andassociation magazines for business-people, health care professionals,educators, engineers, and com-puter technologists.

◆ Cultivate and encourage goodword-of-mouth through discountsand complimentary services.

◆ Follow up on contacts with thebusiness firms of guests by offeringmidweek price reductions andsmall, corporate meeting packages.Encourage guests staying duringvacation and pleasure times to takeadvantage of B&Bs for businesstrips.

◆ Provide discounts for customerswho refer a guest to your B&B.

◆ Look into the cost/value relation-ship of accepting credit cards.

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Other Relatively Low-CostPromotional ProgramsAfter weighing the time, cost, andbenefits, you may find it advantageousto become involved in other promo-tional and community programs thatmay include:

Cooperating with area businesses andcompetitors. Make personal sales calls onarea business people, especiallyrestaurant managers, personneldirectors, purchasing agents, hotel andmotel managers, real estate salespeople,and taxi drivers. Give them brochuresand other promotional material andfollow up each visit with a personalletter. Local referrals are a very solid wayto attract guests at little or no cost.Cooperate with area hotels and motelsto jointly promote facilities. Develop areferral network with area and regionalB&Bs.

Contacting private citizens andcommunity leaders. Read the localnewspaper carefully and make personal

If you offer special features, such as a music room or fireplaces in the bedrooms, be sure tomention these in your promotional efforts.

calls to local people holding familyreunions, weddings, funerals, confirma-tions, bar mitzvahs, and other eventswhere out-of-town guests may beinvolved. Send out congratulatory lettersconcerning awards, promotions, andaccomplishments to keep your businessprofile high among communityleaders.

Answering inquiries promptly.People who make inquiries are yourmost promising potential customers.Such inquiries should be answeredpromptly, and with the informationrequested. You should make it easy forthose who inquire to make a reservationby including a phone number they cancall collect or a self-addressed, stampedreservation form and envelope. Developdirect mail “thank yous.”

Creating special promotions. Con-sider offering holiday and weekendpackages that include activities such ascross-country skiing, snowmobiling, icefishing, autumn hiking tours, Elizabe-than Christmas themes, and interna-tional gourmet holidays. Create events

such as art classes, writing seminars,chess tournaments, mystery weekends,sweetheart escapes, and internationaland harvest fests. Promote your B&B’suniqueness to wedding consultants,town wholesalers, and meetingplanners. Develop walking tours, andprovide free rooms and a free packet totravel writers. During the off-season,advertise special rates in newsletters,newspapers, and regional magazines forfamilies and senior citizens. Offerfamily and friend promotions to regularguests. Special events and package dealssuch as these will create interest in andgenerate publicity for your B&B.

Try to plan special events for eachseason of the year and encourage localmerchants to co-sponsor and promotethe events. Nonprofit sponsorshipentitles you to free public serviceannouncements on radio and television.

Listing in the Yellow Pages. Thereare now separate B&B sections. If youhave a business phone number you areentitled to one free listing (name,address, and telephone number) in the

22

Yellow Pages. Because B&Bs are still aless common form of lodging, yourlisting may be most visible in the motelsection. The majority of people whoconsult the Yellow Pages are passingthrough town and calling at the lastminute to find a place to stay. VariousYellow Page advertisements can bepurchased in addition, through thetelephone sales representative.

Developing a newsletter. Animportant tool for reminding formerguests about your B&B and generatingrepeat business is the newsletter. Ideally,a newsletter will contain information onthe accommodations offered by yourB&B, a history of the home, promo-tional events and package deals, specialcommunity attractions, and announce-ments of improvements or additions tothe B&B. You might also considersending out Christmas cards and otherappropriate seasonal greetings.

Advertising on the radio. Radio isone of the most expensive forms ofadvertising. However, you mightconsider using it to announce youropening and to promote your B&B earlyin the busy season. Select a station thatmore or less shares your target marketsegment. For radio promotion to beeffective, listeners should hear the nameof your B&B several times a day during aperiod of a week. Seek professionaladvice in writing copy and choosingbackground music so that you projectthe image you want.

Listing with a Reservation ServiceOrganization (RSO). B&B ReservationService Organizations maintain andpublish listings of B&Bs in variouslocations that travellers may consultwhen deciding on lodging. The B&Bhost pays a listing fee from $5 to$200—most fees are in the $25 to $75range. RSOs do charge a commission,usually 20 percent of the guest’s lodgingfee and commission is charged forrepeat guests as well. In exchange for thefees and commission, the RSO screensguests, handles deposits, and providessome publicity. Most arrangements

Part of your marketing plan shouldinclude taking a few interesting photos ofyour B&B to distribute to publishers.

between B&B hosts and an RSO areclearly described in the form of a signedcontract. Some RSOs require that yourB&B conform to certain standards andmay have exclusive contracts.

There are many B&B reservationorganizations to choose from, so youwill want to shop around in selectingthe RSO that best suits your needs.4

When selecting an RSO, ask about thefollowing: experience, type of operation,fee structure, advertising scope,exclusivity restrictions, special standards,and membership benefits.

Considering other options. There arenow national B&B magazines, travelagent publications, travel clubs likeAAA, and video brochures. Otherpotential advertising methods areoutdoor advertising on main highways(billboards), directional signs, and signsin front of the B&B. Consider cost andpotential problems with zoning andneighbors.

Using an internal mix. Providequality personal service and if possible, afull breakfast, nicely decorated bedroom,thick towels, and a large bar of soap. Yourinternal marketing strategy needs toreflect: 1) hospitality and good guestrelations (the central focus of the hostand employees’ thinking and actions is tosatisfy customers and their needs)—treateach guest as a B&B critic, continuallythink of ways to make the experiencememorable, call people by their names,etc. 2) quality control—service, cleanli-ness, food, safety, dependability, etc., and3) personal selling—additional items,longer stay, more frequent return visits,referrals, higher priced rooms, etc.

Marketing BudgetMoney and time should be spentduring different times of the year foreach Marketing Mix strategy. Decisionsshould be based on costs, projectedrevenues, and desired profitability ofdifferent activities.

A 1988 Facility Analysis of Minne-sota Bed and Breakfast Industry revealed

that in 1987, B&B operators spent anaverage of $1,261 (several spent morethan $2,000) on marketing andrelated activities, but over half spent$800 or less, which tends to reflectsmaller, more rural B&Bs. The 1988Professional Association of InnkeepersBed and Breakfast/Country InnIndustry Survey & Analysis (of 72 innsin eight states) showed the averagemarketing expense to be $2,738 fortwo to four rooms, $4,975 for five toten rooms, $13,921 for 11 to 20rooms, and $9,498 for 21 plus roomsand an overall average of $6,408. Thisstudy tended to reflect larger B&Binns located in higher priced areas.

Consumer Data Collectionand EvaluationDevelop a formal and informalmethod to collect data about yourguests such as where they are from,their party size, their trip purpose,how they found out about your B&B,and their evaluation of your B&B.Keep track of your occupancy rateand referrals sent and received fromother accommodations. Promotionscan be evaluated by money-offcoupons, post office box numbers,or department numbers.

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It is important that marketingefforts be continually evaluated toimprove effectiveness.

Pricing FactorsDeciding the room rate is complex.Most B&B Inn owners with a largeinvestment cannot survive many yearsunless they take in more than they payout. It is important to realize that costand profit estimates hinge on incomefrom sales—and sales hinge on the rightprice, among other things.

Your price strategies should reflectthe perceived value of the experienceyou are selling, your business costs, andyour profit goals (not someone else’s).Your income (before tax) is the revenueless variable and fixed costs.

PRICE = Guest experience +Image + Service + B&B Product+ Overhead + Profit6

Let’s take a quick look at the meaningof these terms: 1. Guest Experience is the psychologi-

cal value of the experience you areselling to your guests such as:hospitality and personal touches,charm of building, romance,privacy, luxury, view, location,local attractions, etc. Is theexperience unique enough tocommand a premium price?

2. Image involves the personal imageyou project and the reputation ofyour B&B. The goal of image-building is to create a good andlasting impression.

3. Service is a philosophy, a thoughtprocess, a set of values andattitudes that differentiates yourB&B from competitors. Theservice-oriented host makes thecustomer’s needs and expectations thecentral focus of the business.All aspects of the B&B arestructured to make it easy for thecustomer to do business with you,and to give each guest a memorableexperience.

◆

◆

Fe

◆

◆

◆

◆

◆

◆

◆

4. B&B Product is the location, thedesign and condition of thefacilities, quality of food andservice, price, and the total guestexperience.

5. Overhead expenses in the hospitalityservice industries are controllable bythe manager, for example, adminis-trative and general; advertising andpromotion; heat, light, and power;and repairs and maintenance. Non-controllable expenses, or non-operating expenses include rent,taxes, insurance, interest, deprecia-tion, and amortization.

6. The profit formula is: revenue lessexpenses equals profit. However, abetter view of the profit is ex-pressed by the formula: revenueless required profit equals allowableexpenses. This promotes the beliefthat you must know profitrequirements (not what’s left) andfactor them into your pricing andoperating plans. Owners need toconsider the amount of return tocover their original investment plusa return on their investment. Theinvestor must determine “what themoney is worth” so more accurateprofit requirements can beestablished.

These are the factors that influencepricing:

◆ Price Sensitivity. The hotel/motelindustry is considered to be pricesensitive. There is some evidencethat indicates a $1 increase in roomrates will reduce occupancy by one-half percent. Possibly B&Bs arenot as price sensitive as hotels andmotels because of the high averageincome of B&B guests and theselling of a total B&B experience.Results of a 1983 Laventhol &Horwath study support thisassumption. The study showedthat B&Bs charging $70 a nighthad higher occupancy than those

charging $60. However, it cannotbe assumed that higher pricesautomatically cause an increase inoccupancy. Popular areas andhigher cost-of-living areas such asCalifornia charge higher rates andhave higher occupancy.

◆ Quality. Commit yourself toproviding quality to establish andmaintain credibility with yourcustomers. If your B&B provides agreat deal of luxury, personaltouches and charm, historic value,private bathrooms, and fullbreakfasts, higher prices shouldreflect this. High quality and highprices often go together.

◆ B&B Differentiation. A differenti-ated B&B is sufficiently unique forcustomers to develop a preferencefor it. High differentiation,uniqueness, or distinctiveness andhigher rates often go together. Themore differentiated the B&B, theless price sensitive it is.

◆ Competition. Competitive marketsstimulate lower prices.

◆ Service. The more service youprovide, the higher the price maybe. A B&B that focuses on thecustomer’s needs and expectationscan charge more because of a highperceived value5, and will probablyalso receive more repeat and referralbusiness. Do everything to ensurethat your customers are satisfied. Ifyou do not please them and listento them, you are less likely tosucceed. Service builds credibilityand reputation.

◆ Location. Urban, tourist intense,nearby attractions, and high cost ofliving areas can charge more thanremote or low cost of living areas.

◆ Target Markets. Higher prices willtend to limit or attract high incomeand more prestige-conscioustravelers. Lower prices willencourage more family and budgettravel business.

◆ Size of B&B. Larger inns may havesome economy based on size and

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greater possibilities of exceedingthe break-even point. The financialsurvey of inns completed in 1988by the Professional Association ofInnkeepers International andpublished in Innkeeping showedthat two to four room propertiesdid not make money, but with sixto seven rooms the owner/innkeeper started making a profit,and an 11 to 20 room inn averagedan 8.23 percent return on initialinvestment including owner time(which excludes property apprecia-tion). By 25 plus rooms, ownersrealized a 28.7 percent return.Marketing Goals. If you want toincrease occupancy to coveroperating costs during lowoccupancy periods, reducing ratesmay be considered to attractspecific markets such as commer-cial and high frequency business.You may also want to encouragemeetings, packages (confirmationof room and an event), andpromotions to boost weekday oroff-season periods.Your Business Cost. (See Appen-dix Q.)

actors that may increase room rates arestimated to be:

Private baths ($10 to $25)Historic value ($10 to $20)Amenities ($.50 to $6) for eachamenity based on the time andmaterials involved and on thecustomer-perceived value. Thefollowing guidelines may behelpful:

modest, ($.60 to $1)average, ($1 to $2)above-average, ($2 to $4)luxury, ($4 to $6)

Third adult in room ($7 to $10)Child under 12 ($5 to $10)Pets ($5)Breakfast, based on cost of foodand labor:

continental ($1 to $2)continental plus ($1.50 to $3)full ($2.50 to $6)

◆ Unusual features such as a pool,spectacular view, hot tub, access toa lake or river, fireplace, antiques,gardens, gift shop, etc.

◆ Equipment such as air condition-ing, TVs in rooms, fax service, etc.

Factors that may decrease room rateand by how much:

◆ Over two rooms per bath or morethan four persons per bath ($5 to$20)

◆ Single room (10 to 20 percent lessthan double)

◆ Weekly rates◆ Special rates for families occupying

two or more rooms◆ Special rates for seniors (10 to 15

percent less)◆ Special rates for a second night

with no fresh sheets or towels ($2to $4)

◆ Special off-season rates (20 to 25percent less)

◆ Poor location ($2 to $4)◆ Package deal◆ Lack of sound insulation in floor,

walls or ceiling ($5 to $10)

◆ Small room ($5 to $25)◆ No closets, poor lighting ($2 to $5)

Some B&B Homestay operatorsare only trying to supplement theirincome with a few room sales a monthto help pay utilities, taxes, and insur-ance. However, if you are opening aB&B Inn or Country Inn for profit andhave high fixed expenses, such as loanpayments, property taxes, and insurancepremiums, you will want to cover allyour costs and get a good return onyour investment and a fair return onyour time.

Pricing It RightThere are several avenues to try thatmight provide some help for pricesetting: 1. Learn the pricing strategies of

several B&Bs in your area,particularly ones with similarlocation, quality, and service.

2. Seek insight from state, national,and regional B&B associations.

3. Obtain the recommendations ofseveral reservation service organiza-tions.

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4. Charge one dollar for eachthousand dollars of constructioncost as a pricing rule of thumb.

See Table 7-1 for how the pricingformula works.

Cost Recovery and Returnon Investment Plus Valueof Special B&B ExperienceProfits are the target. Revenue andexpense projections are used to deter-mine the average room rate that willfulfill investment and profitabilitygoals. It takes more time and knowl-edge than pricing based on intuition,competition, and trial and error methods.A brief example follows:

Desired after tax dollar return (say 15percent return on equity).

+ overhead (taxes, interest, insurance,depreciation, wages, telephonemarketing, maintenance, etc.)

+ operating expenses (laundry, cleaning,guest supplies, food, office supplies,utilities, etc.)

= required room revenue

Average Room Construction and Furnishing Costmultiplied by 1/10 of 1 percent of average room cost

Turn Key/Total Cost (land, building, furniture, fixtures, and equipment)

number of rooms

TABLE 7-1.Pricing Formula

Room Rate==

◆ EXAMPLE—Motel

$5,000,000 (Total Cost)

100 rooms

◆ EXAMPLE—B&B

$300,000 (B&B value)

5 rooms

= $50,000/Room

= $60,000/Room

$50,000 x .001 = $50 Room Rate

$60,000 x .001 = $60 Room Rate

1 Adapted from Tourism Marketing, Tourism Information Series

No. 4, Edward M. Mahoney and Gary R. Warnell, Cooperative

Extension Service, Michigan State University, East Lansing,

Michigan, 1986.2 For $20, you can purchase an updated list of 350 pressure-

sensitive labels for major news-papers, magazine travel editors

and writers, and freelance writers from Inn Review, P.O. Box

1789, Kankakee, Illinois 60901.3 Innkeeping Newsletter’s 1988 Industry Survey showed that an

average of 23 percent of inn business came from books and

travel guides. Professional Association of Innkeepers

International (P.O. Box 90718, Santa Barbara, California

93190) has an excellent Guide to the Inn Guidebooks. It contains

a list of about 160 guidebooks, and information on fees,

getting the author’s attention, and responding to

questionnaires.4 You can obtain a current listing of RSOs from: The

American Bed and Breakfast Association, 16 Village

Green, Suite 203A, Crofton, Maryland 21114 (as part of

a kit), or from Ellie Chast, Sweet Dreams and Toast Inn,

Required room revenue divided byprojected number of occupied roomnights equals average net rate ($) peroccupied room night. See Table 7-2 foran example of how a 5-room B&B innarrived at a room charge.

Now evaluate your room ratestructure based on the psychologicalperceived value of the unique experience,entertainment value, and special servicesyou are providing.

Can You Meet YourExpenses?The important question to answer iswhether or not you are able to obtain youranticipated (or necessary) occupancy at aroom rate that will allow you to (1) payback your total financing expenses, (2)receive a salary, and (3) receive a return foryour time and money? If not, analyzestrategies to increase revenue and reduceexpenses. Perhaps there are more profitableuses for your building, location, time, andmoney.

Goals of Step Seven: 1. Specifically determine your business

image. 2. Determine the marketing goals for

the first three years:• list what you want your marketing plan to accomplish• estimate sales, occupancy, and profit goals

P.O. Box 4835-0035, Washington, D.C. 20008.

3. Identify the community resources touse.

4. List and describe target markets thatoffer the best opportunity.

5. Determine reasonable modificationof facilities, policies, and rules toattract more of each target marketsited.

6. Establish market strategies to attracteach target market group.

7. Project the market potential of eachtarget market and potential sales andadvantage of each segment.

8. Determine the best way to attainyour goals for:• overall marketing and promo tional strategies• competitiveness• promoting areas of strength• attacking weak areas of competi- tion• pricing goals based on projected sales, experience, desired return, image, target marked, competi- tion, customer sensitivity, perceived value of the unique experience offered, etc.

9. Make room rate check by confirmingthat:• the rate makes sense• competitors rates make sense compared to yours• your B&B experience justifies a better, or poorer value than the results of the cost and recovery

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and return on investment formula• you can meet your expenses• you can live with the time period between start-up and break-even

10. Briefly describe potential problemsand proposed solutions.

11. Create an implementation plan—assignment of responsibility, goals,(objectives or steps), and timetable forcompletion of each segment.

12. Establish a marketing budget by acertain time of year.

13. Establish a short schedule ofimportant review methods by aspecified time of year.

5 Perceived values are the customer’s interpretation of his/

her experience in relation to value received and the price

charged. It is based on (1) lodging facility and food

presentation (image); (2) service, and intangible personal

touch of host and staff, agreement with house rules, etc.;

(3) charm, atmosphere, historic value; (4) entertainment

value; and (5) safety, cleanliness, sanitation value.6 Adapted from The Market Planning Guide, David H.

Bangs, Jr., Upstart Publishing Company, Inc.,

Portsmith, New Hampshire.

TABLE 7-2.Example of a 5-room B&B Inn

$ 7,000 desired return

+ $17,000 overhead

= $24,000 required gross operating income

+ $26,000 operating expense

= $50,000 required room revenue

$50,000 = $182.48 $50,000 = $ 91.24 $50,000 = $60.90

274 548 821Roomnights

Roomnights

Roomnights

= $182.48 = $ 91.24 = $60.90

❧ Step Eight

Furnishing Your B&B

Your B&B should always beclean, comfortable, distinctive, andshould exude a sense of warmth. YourB&B should also be unique and reflectyour family interests and tastes. Youwill want to increase the personalexperience a guest will have at yourB&B by considering the preferences ofyour market segments, enhancement ofthe style of your home and its interiorarchitecture, and the geographical area.

Furniture and FurnishingsFurniture and furnishings include suchitems as: beds, chairs, side tables,dressers, special pieces, lamps, pictures,draperies, fabrics, linens, dinnerware,and plants. Purchasing should be doneon the basis of investigation andcomparison of several sources of supply.Furniture and furnishings need to bevisually appealing (emotional factor)and functional (physical factor). Colors,lighting, paints, flooring, fabrics, andfurniture need to be balanced andproportional, in good taste, able toprovide long service, able to provide apeaceful, warm, and cozy feeling, andintegrated with the overall B&Bexperience.

In selecting furniture, considerstrong construction, upholstery fabricsthat are wear and soil resistant, andcompatibility with what is already inthe room.

Ways to furnish relatively inexpen-sively include:

◆ Developing a display—lease/sellagreement with antique dealers

◆ Buying from local auctions andflea markets

◆ Seeking “Items for Sale” in localand area newspapers

◆ Shopping at “going out of businesssales” throughout your state

◆ Using wholesale houses◆ Buying from salvage houses

The best way to develop your listof needs is to go through an imaginaryday, beginning with greeting the guestat the door. Major areas that you needto consider are: reception, commonrooms, other possible gathering places,eating areas, kitchen, bedrooms(furniture, linen, accessories), bath-rooms, laundry room and storage areas,and patio and porch areas.

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Equipment and SuppliesCompare quality and prices, thenpurchase the best product to suit yourneeds in your price range. The best wayto find what is on the market is to visitwholesale hotel/motel and janitorialsupply houses, hotel/restaurant tradeshows, or contact national and stateB&B associations, write B&B tradenewsletter editors, talk with nearbyB&B innkeepers, and carefully studythe hotel/motel trade journals and B&Bnewsletters.

A partial list of areas to consider isas follows:

◆ Housekeeping1

• heavy duty—floor machinessuch as vacuum cleaners, carpetshampoo machines, steamcleaning machines, etc.

• cleaning—mops, pail and bucket, sponges, etc.

• supplies—cleaning compounds,germicides, disinfectants,polishes, paper goods, guestsupplies (information packet),etc.

◆ Kitchen• large appliances—stoves, ovens,

1 You might start by obtaining a catalog of guestroom supplies and amenities from: AmericanHotel Register Company, 2775 Shermec Road,Northbrook, Illinois 60062-7798; and TheBreckenridge Company, 345 Williams Street,Huron, Ohio 44839. The Inn Review, P.O. Box1789, Kankakee, Illinois 60901 publishes theInn Review Yellow Pages, which is a fairlycomplete catalog/directory of resources for the

The style and arrangement of furniturein the public areas is particularlyimportant in creating the overall feelingof your B&B.

refrigerators, freezers, ice maker,three-well sink, dishwasher, hotwater heater, air conditioner, etc.

• small appliances—foodprocessor, blender, mixers,slicers, coffee maker, scale, canopener, fans, etc.

• equipment—cutting boards,mixing bowls, sauce pans,stockpots, skillets, pans,measuring cups and spoons,knives, ladles, serving utensils,tongs, etc.

• supplies—silverware, dishes,glassware, cleaning materials,paper, uniforms, etc.

Other equipment would include suchitems as smoke detectors, typewriters,telephone and answering system,computers and software, keys andsecurity system, lawn furniture, TVgames, repair equipment (for electrical,plumbing, carpentry, building), foggingmachines, insecticide sprayers, etc.Other office supplies would includestationery, receipt books, and bookkeep-ing/accounting papers.

A budget for furniture, furnishings,and equipment needs to be developed,and all items should appear on a prioritybasis: 1) absolutely essential, 2) adds tovalue and gives a fresh look, and 3)certain to be needed in a few years.

RestorationThe preservation of historical landmarksand the restoration of old homes posechallenges. The owner needs to 1)define the project, 2) clarify the roomrate structure relative to the grading ofthe rooms and public areas (the amountof money spent should be in proportionto the room rates and expenses), 3)establish a budget, 4) establish a timeline for completion, 5) list the resourcesto be acquired, 6) outline the quality ofthe products to be restored, and 7)determine the order of work to be done.

Goals of Step Eight: 1. List the areas of your building that

guests will be in or that B&B workwould be performed in for the guest.

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2. List the furnishings, equipment, andsupplies that are needed.

3. Develop a suppliers list for itemsneeded.

4. Develop a budget based on first,second, and third priorities.

Inn/Bed and Breakfast Business.

❧ Step Nine

Develop an Organizational andOperational Plan

To develop an organizationaland operational plan, you should beginby listing the operational activities andwho will carry them out. (This decision isvery important—couples and familiesshould decide who will do what inadvance.) You also need to know whatnecessary talents are missing and howany inadequacies will be handled, thegoals of major activities, and the policiesand procedures for reaching them.

In a B&B inn you are both themanager and an employee. As themanager, you plan, organize, directpolicies and procedures, control,evaluate the effectiveness of theoperation, and implement innovativeimprovements. Several importantmanagement functions can be performedby the owner and/or assisted byconsultants.

Managerial FunctionsFinance and Accounting. As a B&Bowner you are responsible for securingfunds to operate the B&B, conductingfeasibility studies, showing anticipatedearnings, coordinating cash flow plans,interpreting and evaluating profit and lossstatements, etc. (See Step Twelve,

“Develop a Financial Plan.”)Marketing. As a manager, you are

responsible for putting together a planto attract customers to your B&B basedon a desirable and unique customerexperience. The manager also needs toestablish marketing goals, marketsegments, and a marketing mix. (SeeStep Four, “Determine and Researchyour Market” and Step Seven, “De-velop a Marketing Plan.”)

Food Service. As a food servicemanager you are responsible for themenu, purchasing, service standards,enforcing cost controls, meetingsanitary requirements, and customersatisfaction.

Maintenance. As manager ofmaintenance you are responsible formaintenance contracts, costs, andschedules; work to be done by electri-cians, plumbers, painters, and carpen-ters; heating, ventilation, air condition-ers, and refrigeration; security, tele-phone, water, waste, fire protection,and smoke control systems; manage-ment of sound; and maintenance offood service and laundry equipment.

Housekeeping. As a head house-keeper you are responsible for cleaningtechniques, procedures, and schedules

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for rooms, bathrooms, and public areas;inspecting all areas; cleaning materialsand supplies; keeping an inventory ofguest room supplies and amenities;cleaning floors and carpets; supplyingclean linens, textiles, bedding, laundrysupplies, and facilities; doing heavycleaning; selecting, maintaining,repairing, refurbishing, and replacingfurnishings; maintaining guest relation-ships; assuring safety, handling fireprevention; and keeping records.

As an employee, you will do manyof the tasks involved in the successfulrunning of the B&B business.

Worker-Type TasksFront Desk. As a front desk host you areresponsible for developing credibility,listening to guests, providing informa-tion, finding out about guests’ plans,creating a friendly atmosphere,answering the telephone with courtesy,registering guests, receiving payments,handling complaints and correspon-dence, etc.

Food Service. As a food serviceemployee you are responsible for foodstorage, food preparation and attractiveplate presentation; dishwashing and

As the head housekeeper, you are responsible for inspecting the cleanliness of the bedlinens, floors, and furniture.

sanitation of equipment and utensils,disposal of waste, etc.

Housekeeping. Housekeepers'duties include airing rooms, makingbeds, vacuuming carpet and furniture,dusting, cleaning bathrooms andfurnishings, adjusting shades, arrangingfurniture, emptying trash, replacinglight bulbs, replenishing guest supplies,cleaning public areas, washing linens,etc.

Maintenance. As a maintenanceemployee you are responsible forroutine oiling, greasing, and repairing;replacing, gardening and lawn care.

All managerial and employeeactivities need to be aimed towardcustomer satisfaction. Delayedmaintenance, lack of cleanliness andsanitation, and indifferent telephonereception or an unanswered telephoneare the quickest ways to reduce yourB&B’s image.

B&B Rules and PoliciesWhen determining your house rulesand regulations, keep in mind that yourguests may be overwhelmed by alengthy list. Focus on the rules that youfeel strongly about and are mostimportant for a well-run business. Stateyour rules in a positive manner. A longlist of negative rules is a turn-off tocustomers, and may reduce your B&Bimage and hospitality program. Tell theguest your policies before reservationconfirmation. Post your policies in therooms and at the front desk; they willbe respected if you make them clear.Important or unusual items should bementioned in your advertising andreservation material.

You may want to consider thefollowing items when developing yourhouse rules.

◆ Pets

◆ Telephone usage

◆ Children

◆ Laundry facilities

◆ Smoking/alcohol

◆ Tourist information

◆ Check in/check out times

◆ Credit cards/personal checks

◆ Keys

◆ Reservations/cancellations

◆ Breakfast hours

◆ Deposits or advance payments

◆ Kitchen privileges

◆ Provisions for handicapped people

◆ Housekeeping

◆ Equipment rentals

◆ Visitors

◆ Use of house and ground areas

◆ Use of shared bath

◆ Emergencies

◆ Fireplace usage

◆ Taxi service

◆ Evening curfews

Food PlanThe objective of the food plan is toprovide the guest with a memorablebreakfast. Your menu may be builtaround your skills, region, familyrecipes, or recipes from guests, famous

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people, inns, and restaurants. A numberof factors add considerably to the guests’enjoyment of the breakfast, such as apleasant atmosphere, attractive foodpresentation, stimulating conversation,and special touches such as good chinaand flowers. Be sensitive to restrictivediets. Widen your culinary horizons bybrowsing through cookbooks, attendingcooking classes, and developing a B&Bbreakfast sharing network.

Food poisoning can cause largelawsuits and tremendous image reduc-tion. Sanitation rules have been devel-oped by your state to protect the public.It is just good business practice tocarefully study, understand, and followthe state regulations. Knowing howdisease-causing bacteria grow andspread will help you to preventpotential problems.

Food safety is enhanced by: 1)understanding and following your stateregulations; 2) reviewing your kitchen,food preparation, and sanitation planswith your health department; 3)verifying safe water; 4) purchasing

Unless health regulations forbid it, youcan add a special touch to breakfast bygiving guests the option of being servedin their room.

U.S.D.A. inspected foods; 5) cookingfood to 165ºF in center and maintain-ing food at 140ºF or refrigeratingfoods under 45ºF (chilling foodcenters to 45ºF within four hours); 6)properly washing, sanitizing, andstoring all dishes, silver, utensils, etc.;7) washing hands frequently; and 8)completing the National RestaurantAssociation Education FoundationApplied Food Service SanitationProgram.

State and local health regulationsmay restrict the kind of food you mayserve for a continental breakfast,which normally includes rolls, fruit,coffee, and juice. However, you canmake a continental breakfast distinc-tive by offering high-quality pastriesand fresh fruits that are attractivelygarnished and presented. Add apersonal touch by serving it in bed orin a basket. Refer to Appendix L forsuggestions on how to make eachportion of the breakfast memorable.

Estimating Food CostTo determine the food cost per guest,you should take into account thefollowing factors:◆ Quality of the menu◆ Estimated quantity of food items

each guest will consume◆ Estimated cost of the amount (in

ounces) that each guest willconsume — estimate for all foodcategories.

◆ Labor intensive food items

Goals of Step Nine: 1. Develop objectives for:

• front desk (reception, hospital-ity, and service)

• housekeeping (cleaning,laundry, supplies)

• food service (food preparation,storage, service, sanitation,safety)

• maintenance (repair, fire, safety,landscape)

• finance and accounting (SeeStep Twelve)

• marketing (See Step Four andStep Seven)

2. Layout in precise detail the steps (bestways) to accomplish each objective. Fixthe responsibilities and limit the time.

3. Define and set operating standards foreach item in goal 1.

4. Explain your appraisal methods foreach item in goal 1.

5. Review and interrelate goals for:• return on investment (See Step

Twelve)• owner’s lifestyle (See Step Two)• unique customer experience (See

Step Three and Seven)• neighborhood and community

relations (See Step Two andFour)

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❧ Step Ten

Develop a Plan to Meet Lawsand Regulations

Laws and regulations forB&Bs are complicated enough that youshould consult a lawyer at an early stagein developing your business plan. If youfail to comply with laws, your B&Bcould be closed. Attorneys can helpwith:

◆ Avoidance of courtroom battles◆ Observance of all legal require-

ments◆ Explanation of legal consequences

and implications of actions andalternatives

◆ Explanation of advantages anddisadvantages of the various typesof business organizations

◆ Representation in court and toregulatory bodies

Charles Hillestad, Denver realestate and small business law specialistand owner of the award-winningQueen Ann Inn, offers four tips forinnkeepers: 1) Don’t sign anythingunless you know what it means; 2) Getit in writing; 3) Ask lots of questions;and 4) Do independent investigations.

Look for an attorney with whomyou feel comfortable and who hasexperience with small businesses (ideally

home businesses and the lodging field).He should be accessible yet held in highesteem in the business community. It isimportant to realize that there areattorneys that specialize in smallbusiness, real estate, securities, buildingand construction, insurance, OSHA,workman’s compensation, socialsecurity, and other related specialties.You can check recommended lawyers inthe Martindale and Hubbel Directory.

Find out in detail what the fees arefor various legal services and thedifferent methods for charging fees.

A lawyer’s service is usuallycharged on a time basis, but it is alsopossible to set up a retainer fee on anaccount basis. This costs an amountagreed upon by the parties and providescontinual advice and service as needed,with special work such as defending alawsuit charged separately. Theadvantage of having a retained lawyeravailable is that the attorney is muchlike part of management—he cannotrepresent the other side and the fees aregenerally a business expense.

The judgement of attorneys is byno means flawless, yet they reduce theodds of making the wrong choice. It is

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important to find out if the prospectiveattorney has malpractice insurance tocover losses resulting from bad advice.

One of the first things to discusswith an attorney, tax consultant (CPA),and banker is the type of businessorganization and loan agreement to bestprotect your business and personalassets. You do need to know abouthome-based business tax law, taxbenefits, possible catastrophic-typelosses, consequences, investment taxcredit, legal liability, etc. If you proceedblindly, without proper advice, you arelikely to encounter trouble.

You need to first consider underwhich legal form you will operate: 1)Corporation (regular, sub-chapter S, or1244), 2) sole proprietorship, or 3)partnership (general, limited, or family).See Appendix M for a more detailedexplanation of types of businessorganization.

A sole proprietorship can becommenced without the drafting of anylegal papers in many states. The limitedpartnership offers the more flexibleentity to attract private investments. Acorporation seems the best entity toprotect as many of your personal assets

Don’t forget about fire codes whenarranging furniture and checking exits.

as possible from creditors of a business.An S corporation avoids doubletaxation and payment of taxes at higherrates than personal taxes.

If you are being charged on anhourly basis, advice on formation of apartnership and drafting the agreementusually costs $150 or more. Theorganization of a simple corporation,from the articles of incorporationthrough the first stockholders’ anddirector’s meeting, may cost $250 to$350, plus a filing fee of $50 to $100 tothe Secretary of State. These chargesnormally include certain rebates,general advice, and counseling. Manyattorneys do not charge for a callrequiring only a quick response.However, there is likely to be a chargefor questions requiring a long responseor for several calls.

Regulations or ordinances that caneffect the operation of B&Bs areprimarily in the areas of zoning, firecodes, and public health. To somedegree, these regulations may be ineffect at the municipal, county, andstate governmental levels. When aregulation or ordinance exists at ahigher government level, lower levelswill often adopt the same policy. Keepin mind that ordinances in effect atlower levels are often more strict thanthose operating at higher levels.

You should learn about theregulating details at all governmentlevels by discussing your situation withthe zoning administrator, fire marshal,and public health sanitarian. Each statevaries in regard to specific legislation forB&B operations. You may have toconsult legislation pertaining to othertypes of housing or lodging to find outwhich laws apply to you.

ZoningNormally, there are no zoning laws atthe state level that would affect B&Bbusinesses. At the county level, zoninglaws generally apply to rural areasoutside corporate limits. These laws areusually vague enough to favor the

establishment of a B&B enterprise.Zoning difficulties usually revolvearound operating a B&B in a residentialarea.

At the municipal level, zoningordinances vary, if they exist at all. Insome instances, B&B operators havehelped local zoning administrators writethe related ordinance because theofficials were not adequately informedabout the nature of a B&B enterprise.See Appendix R for examples of B&B-related zoning ordinances established inGalena, Illinois, and Warsaw, Indiana.

When reviewing zoning varianceor change requests, administratorsconsider factors such as impact on theneighborhood and benefits anddetriments, including any visualnuisance that might be caused by theenterprise. You should address theseconcerns in your request for a zoningchange or variance. Also, try to meet thepeople in your neighborhood, as theywill be notified of a zoning change andhave an opportunity to appear at apublic hearing on the proposed change.You should explain the benefits ofhaving a B&B in the neighborhood andtry to alleviate any of your neighbors’misgivings. If some are unsure aboutthe establishment of a B&B, yourneighbors could easily become polarizedon the issue.

Keep in mind that applying for azoning variance takes time and will

33

require a public hearing. It may alsocost money and require the help of anattorney.

Fire SafetyLocal fire codes are often a directfunction of the state fire code and of thearea’s building and zoning codes.Additional safety provisions may also beincluded in the state building code;these would be enforced in thosecommunities where the state buildingcode is in effect.

The language in the codes is verydetailed, often with several optionsgiven. All B&Bs should have smokealarms, clearly marked exits, floor planson display, and fire extinguishers visibleand accessible. The fire codes identifyother types of unsafe conditionsincluding interior surface finishes thatallow a quick spread of flame, improperstorage of flammable materials, andattached garages without fire walls.

The code requirements may differaccording to the size of the operation. Itis incumbent upon the B&B operatorto see that the fire codes are met and thesafety of the visitors is ensured.

Licensing and CertificatesAside from zoning there may beconcern with building codes, historicdistrict regulations, liquor licenses, (lawsand regulations), etc. Changing a hometo a B&B in some states requires a newcertificate of occupancy.

Health RegulationsHealth regulations will vary from stateto state and according to the size ofyour B&B and how the operation iszoned. Some states do not regulate thepublic health aspect of a B&B at all,while others have very specific lawsrequiring inspection before a license isissued. Periodic inspections may occursubsequently.

You will need an approved watersupply and sewage disposal system withperiodic testing of the water to ensure a

You should request that the area health inspector conduct a preliminary site investigation, so that you can find out about areas thatmay need improvement, possibly requiring a financial commitment.

pure water supply. Safe food handlingpractices must be observed, and all foodused must be obtained from anapproved source. B&Bs should havethose employees that prepare foodattend a food handlers’ training course.Some local sanitarians suggest that yousimply use common sense and assumethe same health and sanitary require-ments you set for your own family,increasing them somewhat for yourvisitor.

There are significant differences inthe regulations of different statesregarding food handling, types of foodwhich may be served, laundering of bedlinens and towels, bathroom facilities,and related items. Before applying forlicensing, you should evaluate thespecific requirements of your state andlocal jurisdiction with regard to yourproposed operation, and request thatthe health inspector conduct a prelimi-nary site investigation so you cancorrect any deficiencies before applying.(Re-quired changes for a separatekitchen could cost more than $25,000.)

Early in the decision-makingprocess, you should meet with thehealth agency in your area to discuss itsregulations and how they will affectyour B&B. The health department’sregulations on water supply, use ofhome-grown food, and kitchen use mayhave a major impact on how your B&Bconcept is developed.

There are also other laws that needto be considered, such as those regard-ing: 1) employee protection (safety andhealth, equal employment opportunity,unemployment compensation); 2)copyrights or trademarks; 3) environ-mental protection (air pollution, waterpollution, solid waste disposal, under-ground tanks, asbestos, radon) andhistoric district regulations; 4) estateprotection (will, insurance, contracts);5) consumer protection (safety of foodand accommodations, truth in menu);6) acquisitions (purchasing a home,purchasing an existing B&B, history ofproperty, leasing, rezoning, reviewingloan); and 7) taxes (use, sales, unem-ployment, lodging, withholding,

34

workman’s compensation, investmenttax credit).

Hillestad also recommends havinga plan to avoid financial catastrophecaused by death, divorce, disability,and/or disagreements with partners orinvestors.

Goals of Step Ten:1. List your objectives for meeting

laws and regulations and forseeking legal advice.

2. Lay out, in precise detail, the steps(best ways) to accomplish each ofthe objectives above, and set timelimits and responsibility.

3. Make separate short- and long-runlists.

❧ Step Eleven

Develop an Insurance Plan

Insurance primarily safeguardsthe liquidity of the B&B after acatastrophe. Professional help is neededto make sure the B&B is protectedfrom dangers that the owner canneither foresee nor control. Protectionis needed because of a population that isquick to sue and juries that grantastronomical awards.

Insurance rates are increasingrapidly for certain types of insurance. Itis important to make the B&B asaccident free and secure as possible, i.e.,eliminate causes for falls, enforceswimming pool rules and keeprecreational areas in good repair, use fireretardant fabrics and furnishings andfire and burglar detectors, supply long,spring door latches and safety depositboxes, equip fireplaces with grates toprevent flying sparks, etc. There shouldbe a fire evacuation plan posted in everyguest room.

Insurance companies look for:

◆ Fire risks and preventions• smoke alarms and fire extin- guishers

• structure type• condition of wiring and heating system

◆ Food preparation and service• equipment used• type of food served• current food handlers’ permit

◆ Potential guest dangers• lack of lighting in stairwells• swimming pools and other recreation areas

The more strict the local or stateregulations are regarding licensing,inspections, minimum equipment, etc.,the more comfortable the insurancecompany will feel.

Some two to four bedroomhomestay owners have said that asimple rider on their homeowners’policy provides them with coverage at arate of $300 to $400 a year. This needsto be thoroughly investigated. It isrecommended that you obtain from thecarrier (not your agent or broker) inwriting the specific contingencies anddollar amounts covered. Some B&Binnkeepers have spent from $2,000 to

35

$10,000 for insurance protection.If you are thinking about joining

an RSO or a state B&B association, youshould check to see if the organizationhas an exclusive insurance program formembers. Insurance packages are beingsponsored by some of these groups sothat individual B&Bs can take advan-tage of volume rates, but the agency orcompany should work with youindividually to design coverage to satisfyyour needs.

Systematic insurance planning callsfor a complete insurance survey to (1)determine the property, perils and lossesto which the owner and B&B isexposed, (2) determine the best andleast costly way to arrange the insurancenecessary to protect against theirexposure, and (3) study loss preventionto use all avenues of rate reduction.

Risks can be distinguished as (1)large—endangering the survival of theB&B, (2) medium—forcing the ownerto change business plans considerablywithout endangering its survival, and(3) small—changing the business planis not essential.

Risks can also be categorized bywhat is threatened:

1) Property - such as fire, water,theft.

2) Assets - such as liability whenguests and employees are hurt, businessinterruptions, etc.

3) Persons - such as sickness (foodpoisoning, third-party liquor liability),the consequential loss of income, andacts of aggression (robbery, rape,kidnapping).

Gary Ablard and David Lipsky1,partners in a Claremont, California lawfirm specializing in insurance-relatedlitigation, make the following insurancesuggestions:

◆ Make sure coverage is for replace-ment costs, not actual cash value.Many hotel furnishings andequipment are old and valuesdecrease with age; therefore, if youare not covered properly, you willbe responsible for the difference inreplacement cost and actual cashvalue.

◆ Get a reputable, up-to-dateappraisal of on-premise artwork,including paintings, prints,antiques, and unique furnishings.Do not count on insuranceappraisers to offer the current valuewhen you do not have professionaldocuments to support those values.Also, photograph all fine art sodocuments can be verified. Keepthe photos in a safe, fireproofplace.

◆ Make sure your policy includes arider requiring the insurancecompany to pay for mandatedcode updates. With new construc-tion, there may also be newbuilding codes that require newfeatures and more money. Unless itis outlined in the rider, theinsurance company may not coverthe additional expense.

◆ Negotiate a policy rider for anadjustment allowance. For a majorloss it is advisable to get help froma public adjuster or other profes-sional, but first make sure that

your insurance company will paythe adjuster’s fees. The publicadjuster’s charge typically rangesfrom 10 percent to 15 percent.

◆ Obtain realistic estimates of yearlyupdating costs—don’t rely onautomatic inflation clauses in thepolicy. If the policy was writtenseveral years ago, all costs shouldbe reviewed to determine whatupdates are needed on coveragelimits.

◆ Make sure business-interruptioncoverage is adequate. Your businessmay have grown significantly sinceyou obtained the original policyoutlining your limits for businessinterruption.

The insurance industry is com-posed of many different types ofcarriers. Factors that should beconsidered in selecting a carrier are itsfinancial condition, its service, and itsrates. Competition tends to reduce thepoints of distinction among carriers. Inpurchasing insurance, you will want todetermine the cost and exactly what theinsurance contract will do. To deter-mine exact coverage and limitations oncoverage, it is necessary to find theanswers to several clear-cut questions:

◆ What perils are covered? Somecontracts cover only one or morenamed perils, and others use “allrisk” contracts which cover everyperil except those specificallyexcluded.

◆ What property is covered? Be surethat the insurance contractdescribes the property that iscovered, and indicate the propertyspecifically excluded. You canestablish insurable value by hiring aprofessional appraisal service,having the insurance company oragent do it, or doing it yourself.

◆ What losses are covered? Someinsurance contracts cover directlosses only, whereas others mayextend to indirect or consequentiallosses on a limited basis.

36

◆ What persons are covered? Somepolicies cover only the namedinsured and his legal representa-tives, but others extend to severaladditional people. The extensionmay be automatic or at the optionof the insured. Also, notification toor consent from the insurancecompany may be required.

◆ What factors limit or restrict theamount of recovery on theinsurance contract? Consideractual cash value, replacementcosts, deductibles, etc.

Comprehensive and all-riskpolicies come closest to insuring againstall possible losses. B&B innkeepersshould probably carry a $5,000,000minimum excess liability policy,because of the trend of more frequentsuits and high court awards. Look outfor exclusion clauses and check withyour insurance agent to review punitivedamage coverage. (Some states do notallow this coverage while other stateshave no restrictions).

Be sure you understand co-insurance and the reduced premium tocover a portion of the insurable value,and the deductibles based on peroccurrence or per claim. Premiums areadjusted to the loss record. Evaluate thedirect costs of losses as they are often ashigh or higher than the direct cost paidby the insurer for small to medium sizeclaims.

The fields of insurance coveragethat you need to consider are:

◆ Fire insurance lines and forms that(a) add descriptive material (suchas forms describing the physicalnature of the property and formsproviding floating coverage), (b)extend standard forms to coveradditional perils (such asextended coverage endorse-ments), (c) forms coveringadditional losses, (such asbusiness interruption, livingexpense, personal property,personal belongings of customers,rental insurance, replacement cost),

1 Quoted from Hotel and Motel Management,

Before you purchase insurance, get anobjective, up-to-date appraisal of all on-premise furnishings and equipment.

and (d) allied lines (such asearthquakes, floods, sprinklerleakages).

◆ Casualty insurance lines and formsinclude third-party liability forms(such as business liability ofowners, landlords, and tenants andprofessional liability), and hostliquor liability; and automobile(person and business).

◆ Crime coverage for business firms.◆ Social insurance such as temporary

disability benefits, and workmen’scompensation.

◆ Accident and illness insurance.◆ Life insurance (“key-man” and

partnership), annuities, andpension plans for retirementincome.

You will want to explore the costof items that reduce premiums, factorsthat increase customer safety, andpremium reductions for such items as:fire extinguishers, smoke alarms,sprinklers, burglar alarms, double-locksystems, hand-wired telephones,covered fire alarms, outside stairs, firedoors, emergency generators and lights,guest disclaimers, etc.

May 30, 1988.

How do you locate a good agent?A well-informed banker or lawyershould be a good source of informationabout insurance agents. Check theB&B network and your state associa-tion. The insurance buying executive oflocal retail businesses, or a local motelowner may be well-informed on thecomparative abilities of agencies as theyapply to their business. Learn enough tocommunicate with agents and to askthe right questions. Then, contact atleast three brokers or direct writercompany agents, asking for the bestcoverage at the lowest possible cost.Work only with the brokers who canprovide the answers. The buyer needsto feel he/she can trust and can discussthe financial details of the B&Bbusiness with this person. Look forsomeone who will be accessible whenyou need help.

Best Key Rating Guide classifies1,970 licensed insurance carriers by sixrating classifications and by financialsize. A company is reliable if licensed inyour state and rated high in the BestGuide.

Some companies write policies forgroups of B&B hosts. A broker mightbe able to get group coverage if thereare several in your area.

37

Goals of Step Eleven: 1. Determine the perils and losses to

which you and the B&B areexposed.

2. Divide your risks into large,medium, and small.

3. Determine the best and least costlyway to arrange for the necessaryinsurance.

4. Examine all avenues to reducepremiums.

5. Determine insurance for specialrisks.

6. Learn the services an insuranceagent can bring to you, and howaccessible he/she is.

7. Evaluate the benefits and liabilityof a good agent compared to aB&B group insurance policy.

❧ Step Twelve

Develop a Financial Plan

If you do not have anyaccounting background, this step maybe difficult. You may want to obtainsome hospitality accounting books, takea course in accounting, or tap theexpertise of a small business accountantto help manage the financial aspects ofyour business. Finances need to be aprimary issue when you borrow largeamounts of money. You will have anadvantage in borrowing with a well-prepared business plan showingprojections for cash budget, pro formastatements, and how and when the loanwill be repaid.

Financial considerations were notthe primary reason many people gavefor opening a B&B business accordingto a Wisconsin study.1 The mostcommon responses had to do withmeeting people (69 percent), adding toincome (66 percent), and sharing thehouse to relieve loneliness (42 percent).However, a smaller group indicatedreasons for starting that probablyrequired greater concern for financialconsideration such as helping to financetheir home (36 percent), finding taxadvantages (26 percent), restoring an

old building (15 percent), owning theirown business (15 percent), and earningprimary income (9 percent). Bothgroups tend to have much greaterconcern for financial matters after theyopen and these need to be a majorconsideration in your Business Plan andin your decision to open a B&B.

Budgeting - Profit PlanningA business budget (profit plan) is amanagement plan covering all phases ofoperations—usually for one year. It is aformal expression of policies, plans,objectives, and goals. A business budgetis the best means for (1) analyzingalternative courses of action andinvestment opportunities, (2) forcingthe potential owner to examinealternatives prior to adopting particularcourses of action, (3) examining thefacts necessary to achieve particularprofit levels, (4) carrying out a self-evaluation of the operation and itsprogress toward its financial objectives,and (5) providing reasonable estimatesto assist in the setting of room prices.

Before you start to budget youmust spell out your operating plans and

38

define your goals and objectives formarketing, staffing, insurance, account-ing, and legal requirements. Note thatthese are all big parts of the businessplan. Your budget can be no better thanyour well-researched projections.

Forecasting ExpensesYour expenses for the first year ofoperation can be divided into twocategories: start-up costs and ongoing/operating expenses. You should plan forthese expenses carefully, making surethat you have taken all possible costsinto account. The following guidelinesfor determining start-up and ongoingcosts will help you develop a realisticand comprehensive forecast of expenses.

Start-Up CostsWhen determining start-up costs,separate expenses into the followingcategories: one-time starting expenses,start-up costs that can be graduallywritten off or “amortized” over time,and ongoing expenses of operating theB&B. Use the B&B Start-Up Costs inAppendix P to determine which costsapply to your B&B, additional start-up

costs particular to your situation, andthe overhead costs of doing business.You may also want to consider thespread between optimistic and pessimis-tic projections. See Figure XX forsample start-up costs.

Create a table similar to the oneabove that includes all your start-upcosts. The table will help estimate thetotal cost of getting started; the cost andproportion of one-time costs; the costand proportion of operating expensesfor your B&B during the first year; andthe amount and proportion of the costsspread over five to ten years of opera-tion. You will be able to recognize theimpact of long-term overhead and lookat major capital expenditures as “fixed.”

Operating or OngoingExpensesNext, you should examine the totalexpenses incurred during the first yearof operation. Start by determining thedirect costs of running the business,then add the cost of overhead items.These figures should be reviewedmonthly.

See Appendix Q for the Profes-sional Association of InnkeepersInternational chart of accounts. Be asthorough as possible in your efforts toprepare accurate projections for theseexpense categories.

When figuring ongoing expenses,take into account relatively stable itemssuch as rent, mortgage payments,insurance, loan payments, and intereston loans. Some ongoing expensesincrease slightly with greater occupancy,such as the cost of hourly wages,utilities, telephone use, and officesupplies. Other expenses will varydirectly with the occupancy rate, suchas the cost of food, commissions, andoperating supplies. You will want to cutback on controllable items during slowperiods. Also take into account periodicexpenses, such as maintenance andrepairs, professional services, and

advertising and promotion. A sampleprojected profit and loss statement isprovided in Appendix O.

Frequently, prospective B&Bowners believe they can do all of thework. They do not budget salaries foremployees for busy periods, illnesses,some evenings, and vacation times. Youalso need to budget for personal costssuch as the value of your time, newclothes, food, entertainment, etc.

Depending on the amount of loanpayments and other variables, at about40 percent occupancy, your fixedmonthly and yearly expenses mayconsume from about 50 to 70 percentof your gross revenue. These expensescover relatively fixed mortgages, rent, orbuilding payments, accounting costs,taxes and licenses, office and adminis-tration costs, and depreciation. As youroccupancy rate increases, the percentagespent for fixed costs will decline, thepercentage spent for variable expenseswill stay about the same, and profits willincrease.

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DepreciationDepreciation is a systematic means bywhich costs associated with theacquisition and installation of an assetare allocated over the estimated, usefullife of that asset. An accountant canexplain the various depreciationmethods and possible tax advantages.Capital expenditures are for assets andimprovements with a useful life of morethan one year. Tax deductibility isspread over the number of years thatrepresent their approximate lifeexpectancy.

Cash ReserveIt is important to project expenses fromstart-up to the time you reach break-even occupancy level. If there are noreserves for losses during the perioduntil you break even, bankruptcy couldoccur. It is not uncommon to take twoor more years to generate a profit.

TABLE 12-1.Example of Projected Start-Up Expenses

ExpectedInvestment Expected Annual Monthly

Item or Cost Life Cost Overhead

Renovation cost ofconstruction, of electrical,plumbing, painting,landscaping $22,200 10 yrs. $2,220 $185Mattresses, sheets,blankets, etc. $4,500 5 yrs. $900 $75Smoke detectors $500 5 yrs. $100 $8.33Kitchen Equipment $1,200 10 yrs. $120 $10Directional road signs $1,500 5 yrs. $300 $25Front entrance sign $500 5 yrs. $100 $8.33

First Year CostsLegal fees, permits,licenses $1,200 --- --- ---Promotion, advertising $2,200 --- --- ---Supplies $600 --- --- ---

TOTAL $34,400 $3,740 $311.66

Note: This projection assumes that the building is completely paid for.

Considering the NecessaryInvestmentAfter estimating the start-up costs andongoing expenses, you need to decidewhether investing in a B&B will payoff. You may want to look at the lostinvestment opportunity if your home ispaid for. Determine the value of yourhome, the cost of a smaller house, andthe financial return on investing thedollar difference of the two homes.

You may have to take out a loaninitially to pay for all the start-up costsand ongoing expenses during your firstor second year of operation. Forexample, the projection of start-upcosts, listed earlier in this step, projectedan initial investment of $34,400.Assuming that you had $4,400available, you would have to borrow theremaining $30,000 and pay interest onthe principal.

You should carefully consider theadditional financial burden of such aloan before committing yourself tostarting a B&B operation. By taking afirst mortgage on your home for$30,000, at a 11.5 percent interest ratefor 20 to 25 years, you would havemonthly payments ranging from $305to $320 per month. Some new hostsmay have house payments, or paymentsfor the purchase of property to start aB&B or payments toward buying anexisting B&B. Calculate whether theB&B will bring in enough income topay your bills and compensate you foryour time and invested capital.

Prepare the worst case scenario andhave access to twice as much as youthink you need. Consider delaying loanrepayment until a period when yourprojections show an adequate cash flow.Tap the expertise of a small businesslawyer if you are making a largeinvestment in a B&B inn, purchasingan existing inn, or forming a partner-ship or corporation.

Where You Go for Money2

Small business and family businessowners may be able to provide helpfulfinancial information. Planned financingmay be a combination of the followingitems:

◆ Borrowing on a note basis fromfriends and relatives

◆ Borrowing the cash surrender valueof your life insurance policies andthose of your relatives’

◆ Contacting an insurance companyfor a long-term loan

◆ Securing a loan from a local bank ifyour net worth is high enough (youwill need to locate a cosigner if youhave insufficient assets)• Loan officers look for borrower’s

worth with good credit ratingsand sound business plans.Interest rates and repaymentplans vary from bank to bank, socomparison shop for the loanthat is best suited for yourcircumstances. You willprobably spend from 2 to 5percent of the total amount of acommercial loan up front as loanclosing costs.

◆ Contacting the Small BusinessAdministration for a business loan• For an SBA loan, you need a

good business plan and cash orcollateral. If you are refused bytwo banks, SBA will considerguaranteeing the loan. Womenand minorities may qualify forspecial loan programs.

◆ Obtaining financing from a smallbusiness investment company• Selling interest in your B&B by

forming a partnership orcorporation may produce thecapital you need

• You do not have to repay equitymoney. Investors are interestedin return on their investment.

◆ Obtaining a long-term lease for theproperty• Long-term leases eliminatedown payments and mortgage

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payments. You would probablyhave to locate people to purchase the property to be leased to you.

Obtaining a Bank LoanTo find a suitable bank or lender askthem the following questions:

◆ Do you have small business loanofficers with whom I may speak?

◆ What size small business loans doyou handle?

◆ Do you have innovative, commer-cial loan programs and do youhandle SBA loan guarantees?

◆ Are you loaning now for homebusinesses and B&B-type projects?

You need to have a good businessplan to present a loan proposal. ASCORE counselor from the SmallBusiness Administration or the SmallBusiness Development Center shouldreview it first. Your plan should answerat least five questions including: 1)How much money is being requested?2) What is the exact purpose of the loan(itemized)? 3) For how long a period isthe loan wanted? 4) How is the loangoing to be repaid (proven by projec-tions)? 5) What is being offered ascollateral?

After presenting your loanproposal to the loan officer, the lastquestion should be, “How long will itbe before I get an answer?”

Capital BudgetingCapital budgeting decisions involve thecommitment of large amounts ofcapital for long periods. Typical capitalbudgeting decisions include whether tobuy equipment, whether or not to addrooms and bathrooms, and whether orwhen to renovate the kitchen. Capitalbudgeting involves planning andmeasuring the estimated economicprofitability of alternative use of yourresources.

Figuring Net ProfitOnce you have determined yourestimated revenues and expenses, you

can figure your projected profit. Profitbefore taxes is the excess of revenue(sales) over all costs and expensesincurred over a given period ofoperation (see bottom line of incomestatement in Appendix O). When youhave determined your after-tax profit,make sure that it will provide adequatecompensation for your time and effortand a worthwhile return on yourpersonal investment.

The Profit and Loss Statement inAppendix O projects timing of theincoming revenues, operating expenses,fixed expenses, and profit or loss beforetaxes. It also shows income and expenseaccounts recommended by theProfessional Association of InnkeepersInternational.

Knowing how many guest days (ordollars) are necessary to cover costs isexceedingly important. The break-evenchart, or profit graph, indicates howsales volume, selling price, and operat-ing expenses affect profits and howmany room sales are necessary beforeyou begin to make a profit.

Break-even analyses pinpointwhere revenue equals total costs. Tocalculate your break-even point, takeyour projected income statement andidentify each cost as either fixed orvariable.

Fixed costs are those that over theshort run (a year or less) do no vary

regardless of revenue fluctuations.Examples are salaries, rent, propertytaxes, interest, fire insurance, deprecia-tion, and the committed cost of anadvertising campaign. Over the longrun, all these costs can, of course,change. But changes are not directlycaused by the number of guestsaccommodated.

Variable costs vary in directproportion with sales or revenues—thehigher the occupancy, the higher thecost. Very few costs are strictly linear,but several that are (with slightpossibility that they will not always havethis strict definition) include the costs offood, laundry, linen, and guest supplies.

Semifixed or semivariable costshave an element of fixed expenses(independent of volume) and anelement of variable expenses—and notalways variable directly to sales on astraight-line basis. Such costs wouldinclude payroll, maintenance, andutilities. A B&B operator needs toseparate these semifixed or semivariablecosts. Perhaps a good way to initiallyanalyze this is to examine the fixed andvariable components of each semifixedcost in regard to a low occupancymonth compared to a high occupancymonth, and determine a mid-pointbetween the two.

There may be a relatively highportion of a fixed cost element for many

41

costs because of the relatively lownumber of rooms sold in the first yearor two and the number of unitscontained in the most economicalpurchase container, minimum servicecharge, or cost.

The break-even formula shown inTable 12-2 shows that costs will exceedrevenue until you have sold $54,237worth of rooms. Consult hospitalityfinancial and accounting textbooks formore information on this importanttopic.

Significance of Cash FlowNet profit is not the same as net

cash flow. In addition to accurateestimates of revenue, expenses, andprofits, you need to estimate the timingof cash flows. Your profit and lossstatement (see Appendix O) does notprovide accurate information aboutcash available for an accounting period.

Probably the most important partof the financial plan is a solid cash flowprojection, which translates an operat-ing plan into dollars. The statementdiscloses cash in (operating and otherreceipts), cash out (operating disburse-ments, fixed charges, and otherdisbursements), and their timing. Itthereby identifies the elements thatmake up net change in the cash balancebetween the beginning and end of aperiod, and shows fluctuations in cashbalances. The cash budget also predictsfuture cash flow based on an expectedlevel of sales volume. It indicates whenborrowing will be necessary and in whatamount, and shows when cash willbecome available to repay the loan. It isespecially useful during the pre-openingrenovation and furnishing stage and thefirst months of operation. Unfortu-nately, dollars actually received(particularly cash received from somecredit card plans) are not necessarilyreceived when you need them. Someoperators have seasonal cash flowproblems. The negative impact can begreatly reduced by appropriate advanceplanning.

EXAMPLE:If F = $32,000, S = 100 percent, and V = 41 percent,3

TABLE 12-2.Break-Even Formula

BE =

BE = $32,000(100 percent - 41 percent)

= $54,237

F(S-V)

Where BE = break-even sales in dollarsF = fixed costs in dollarsS = sales expenses as 100 percentV = variable costs as a percent of sales

Installing insulated window shades is one small and relatively simple way to help keep your fixed costs for heat down in the winter.

The cash budget is usuallycomposed of six parts:

1. beginning cash balance 2. receipts - expected operating and

other receipts 3. disbursements - operating, fixed,

and other such as food, labor,supplies, investments, owner’sdraw, house and other loanpayments, and income taxes

4. cash excess or deficiency - thedifference between cash receiptsand cash disbursement. If adeficiency exists, you will need toarrange for borrowed funds

5. financing - a detailed account ofthe borrowings and repaymentsprojected to take place during thebudget period - this includes aprojection of interest paymentsthat will be due on moneyborrowed

6. ending cash balance

The cash budget should be dividedinto monthly (or shorter) periods forone year. For more information, see thelatest edition of the Uniform Systems of

Accounts and Expense Dictionary forSmall Hotels and Motels, AmericanHotel and Motel Association (seeAppendix A).

Developing a Bookkeeping/Accounting System4

An accounting system allows you to plan and control your business, keep taxrecords, compile historical data, andprevent theft and fraud. For guidanceon setting up a B&B accountingsystem, refer to The ProfessionalAssociation of Innkeepers system5 and the Uniform System of Accounts forHotels.6 You may also want to consultan accountant to develop your system.

Record keeping alternatives include(1) regular family checkbook andaccompanying record book withseparate accounts to keep track ofexpenses, (2) one-write or pegboardsystem - combination checkbook andrecord keeping system, (3) duplicatecheck system - get a carbon copy of eachcheck written and identifying account,and give to your accountant eachmonth and the accountant provides you

42

with a monthly Profit and LossStatement, and (4) computer recordkeeping program.

Investigating the Tax Laws7

You can make the tax laws work for youif you are well-informed and have goodcounsel. An accountant and representa-tives of the Internal Revenue Service,Small Business Administration and/or aReservation Service Organization canassist you in understanding your legalresponsibilities, allowable deductions,and options. Be sure to learn about taxpreparation, possible investment taxcredit for newly purchased items,deductions for renovating historichomes, business deductions, self-employment tax, social security tax,state income tax on home-basedbusinesses, and sales tax. Depending onyour tax bracket, there may be advan-tages to you or your spouse discontinu-ing present employment. There mayalso be benefits to having one spousehold the B&B business as a separateproperty.

If you are thinking of restoring ahistoric home, be sure to check intopossible tax deductions.

Overall AnalysisIf the results of your budget and taxplan are positive after comprehensiveanalysis, have the plan reviewed by abanker, accountant, and/or a B&Boperator. An independent review of theoperating plan, marketing plan, andbudget is advisable to ensure that theyare realistic and attainable. If thefinancial results are negative, but youwant to persevere, review the B&Bconcept for possible changes. Considerchoosing another location, anddetermine strategies for increasingrevenues and reducing construction,start-up, and operating expenses.

Goals of Step Twelve: 1. Determine the amount of money

you need to carry out the businessplan (to cover land, building,equipment, start-up, and opera-tional expenses).• Determine how you expect to finance this debt capital and when it is needed.• Determine how the money will be spent.• Determine how soon it can be repaid.

2. Determine possible sources offunding.

3. Project start-up costs. 4. Determine the break-even point of

your B&B. 5. Determine the time period

between start-up and break-even.Then determine the amount ofcash reserve needed for that periodof time.

6. Project a monthly cash budget forone year.

7. Prepare a pro forma profit and lossstatement for three years.

8. Decide on an accounting/bookkeeping system.

9. Investigate the tax laws formaximum benefits and recordsrequired.

43

1The Wisconsin Bed and Breakfast Industry; AnEnterprise Study, Recreation Resource Center andSmall Business Development Center, Universityof Wisconsin, 1990.2 See The ABCs of Borrowing, Small BusinessAdministration, FM1.3 In a Professional Association of Innkeepers1988 Bed & Breakfast/Country Inn IndustrySurvey & Analysis, 5 to 10 room inns’ variableexpenses were 41.23 percent and fixed operatingexpenses were 58.77 percent.4 New England Business Service, 500 MainStreet, Groton, Massachusetts 01471 has a one-write check system for about $70. It includes 300checks, a peg board, a journal, envelopes, andother components. The one-write receipt anddeposit system includes 50 receipts, deposit slips,journal peg board and envelopes. Also, Breakfast-n-Bed, provides a B&B accounting system forabout $80. Their address is 2101 Crystal PlazaArcade, Suite 246, Arlington, Virginia 22202.Also see Recordkeeping in Small Business, U.S.Small Business Administration FM10.5 The Professional Association of Innkeepers,P.O. Box 90710, Santa Barbara, California93190.6 The American Hotel & Motel Association,1201 New York Avenue, N.W., Washington,D.C. 20005-3917.7 See Business Use of (Your) Income For Use inPreparing 1989 Returns, Publication 587,Department of the Treasury.

❧ Step Thirteen

Complete the Business Plan

Two other items essential tothe business plan are the cover letter andthe appendix. The cover letter shouldbriefly summarize the plan andemphasize its purpose and premise. It isa selling tool, addressed primarily toprospective investors, lenders, orpartners.

The appendix should provide easyaccess to supportive and detailedinformation that you have gathered forthe business plan. The items in theappendix are best arranged in the sameorder as the plan. It is helpful to use anumbering system for each section of the appendix for use in makingreferences to the appendix material. Thetype of information that might be listedin the appendix includes:

◆ Detailed biographical sketches ofkey people

◆ Charts, graphs, tables, and state-ments referred to specifically in thebody of the plan

◆ Detailed assumptions supportingthe financial projections (like profitand loss projections, pro formacash flow analysis, balance sheet,and a break-even sheet)

◆ Detailed explanations of occu-pancy patterns from B&Boperators, local and regionalhotel/motel occupancy trends,and other data upon which B&Brevenue is based

◆ Organizations and individualsproviding key services to B&Bs(e.g., lawyers, bankers, accoun-tants, and insurance agents)

◆ B&B competitors◆ Specially prepared market surveys

and existing local market surveys◆ Sales projections for the first

three years◆ Advertising and promotion

schedule for the first three years◆ Equipment and supplies list

Review, update, confirm foraccuracy, and summarize in a clear,concise fashion each step of thisguide. Carefully review the financialplan and get opinions from accoun-tants, bankers, and B&B innkeepersbefore making a major investment orchange in family status, location, job,etc. This then is your “B&B BusinessPlan.” It provides you with an initialoperating plan and explains your

44

business to outside parties. Now youshould have a realistic idea of the timeand resources required to operate aB&B business and what you canexpect from that business. You mustnow decide:

◆ Is a Bed and Breakfast the bestuse of this space or wouldconversion to apartments, officespace, or other alternativesprovide a better yield for mytime, money, and interests?

◆ Will I attract enough customersat the room rate to coverexpenses?

◆ Is it worth devoting a large partof your time to the business?

◆ Will it be worth investing a greatdeal of your assets to thebusiness?

If you answered “YES” to thesequestions, you are ready to implementthe business plan for your B&B.

Conclusion:This publication has outlined a systematic method for developing and

analyzing your potential B&B business. Although a business plan

cannot ensure success, careful completion of the preceding steps should

give you a fairly clear idea of your chances for success or failure. We

hope you have found through your research that operating a Bed and

Breakfast will be a profitable and rewarding venture.

Goals of Step Thirteen: 1. Complete the business plan. 2. Determine what specific knowl-

edge you have. 3. Determine how your knowledge,

experience, and abilities transferto the B&B business.

4. Determine how best to exploitthe opportunity.

5. Evaluate all the facts andDECIDE:• Is it worth a big piece of your time?• Is it worth a big piece of your assets?• Do you want to proceed?

45

46

Appendix ABed and Breakfast Business References

U.S. Small BusinessAdministration -Management Aids

Number Title

Financial ManagementFM 1 The ABCs of BorrowingFM 3 Basic Budgets for Profit PlanningFM 4 Understanding Cash FlowFM 5 A Venture Capital Primer for Small BusinessFM 6 Accounting Services for Small Service FirmsFM 7 Analyze Your Records to Reduce CostsFM 8 Budgeting in a Small Service FirmFM 9 Sound Cash Management and BorrowingFM 10 Recordkeeping in a Small BusinessFM 11 Simple Breakeven Analysis for Small StoresFM 12 A Pricing Checklist for Small RetailersFM 13 Pricing Your Products and Services Profitably

General ManagementMP 1 Effective Business CommunicationsMP 2 Locating or Relocating Your BusinessMP 3 Problems in Managing a Family-Owned BusinessMP 6 Planning and Goal Setting for Small BusinessMP 9 Business Plan for RetailersMP 10 Choosing a Retail LocationMP 11 Business Plan for Small Service FirmsMP 12 Checklist for Going into BusinessMP 14 How to Get Started with a Small Business ComputerMP 15 The Business Plan for Homebased BusinessMP 19 Small Business Decision MakingMP 20 Business Continuation PlanningMP 21 Developing a Strategic Business PlanMP 23 Techniques For Problem SolvingMP 25 Selecting the Legal Structure for your BusinessMP 28 Small Business Risk Management Guide

MarketingMT 1 Creative Selling: The Competitive EdgeMT 2 Marketing for Small Business: An OverviewMT 8 Researching Your MarketMT 11 Advertising

47

Fact Sheets and OrderForms

(Order through your local U.S. Small Business Administration Office. The SBAoffice can also tell you about small business workshops and counseling.)Small Business Administration Regular Business Loan Fact SheetFacts About SBA - Fact Sheet 39Business Loans from the SBA• This is a partial list. There are many others.

Books and Pamphlets

(Order through your local bookstore.)Preventative Law for Innkeepers, Charles Hillestad. 2151 Tremont Place, Denver, CO

80205. 1991.Small Business Reporter, Bank of America. Bank of America Center, San Francisco, CA

94104.Trends in Hotel Business. Pannell, Kerr and Forster, 420 Lexington Avenue, New York,

NY 10017.The Inn Business. Canadian Government Publishing Centre, Supply and Services,

Ottawa, Canada K1A 059How to Start Your Own Bed & Breakfast, Mary Zander. The Talman Co., 1985.Professional Management of Housekeeping Operations, Robert J. Martin. John Wiley &

Sons, 1986.The Professional Housekeeper, Georgina Tucker and Madeline Schneider. CBI Publish-

ing Company, Inc., 1984.Check In - Check Out, Jerome Valten. Wm. C. Brown Publishers, 1985.Uniform System of Accounts and Expense Dictionary For Small Hotels and Motels.

American Hotel and Motel Association Educational Institute, East Lansing, MI,1986.

Hotel Restaurant and Travel Law, 2nd ed., Norman Cournoyer and Anthony G.Marshall. Breton Publishers, 1983.

Modern Hotel and Motel Management, 3rd ed., Gerald W. Lattin. W.H. Freeman,1977.

Principles & Practice of Management in the Hospitality Industry, James Keiser. SBIPublishing Company, Inc., 1979.

Renovating the Victorian House, Katherine Rusk. 101 Productions, 1983.Essentials of Hospitality Administration, Harold Lane and Mark Van Hartesvelt. Reston

Publishing Company, 1983.Maintenance and Engineering for Lodging and Foodservice Facilities, Frank Borssenik.

The Educational Institute of the American Hotel & Motel Association, EastLansing, MI, 1977.

The New York Times Complete Manual of Home Repairs, Bernard Gladstone.Macmillan Co, New York, 1969.

So You Want To Be an Innkeeper, Mary E. Davies, Pat Hardy, Jo Ann M. Bell, andSusan Brown. 101 Productions, 1985.

Open Your Own Bed & Breakfast, Barbara Notarius and Gail Sforzabrewer. JohnWiley and Sons, Inc., New York, 1987.

How To Open and Operate a Bed & Breakfast Home, Jan Slankus. The Globe PequatPress, Chester, Connecticut, 1986.

How To Open a Country Inn, Karen L. Etsell and Elain Brennan. The BerkshireTraveller Press, 1983.

The Entrepreneur’s Master Planning Guide, John Welsh and Jerry White. Prentice Hall,1983.

Start-Up Money: How to Finance Your New Small Business, Mike McKeever. BerkeleyNole Press, 1984.

48

Applied Foodservice Sanitation. National Institute for the Food Service Industry,Chicago, 1974.

Design: Criteria for Decisions, Harold H. Alexander. New York: Holt, Rinehart, andWinston, 1984.

Inside Today’s Home, 4th ed., R. Faulkner and S. Faulkner. New York: Holt,Rinehart, and Winston, 1984.

Environmental Interiors, Mary Jo Weale, James W. Croake, and Bruce W. Weale.New York: Macmillan Publishing Co., Inc., 1982.

Understanding Hospitality Insurance, William J. Hoffman. The Cornell H.R.A.Quarterly, February, 1983, pp. 72-79.

Honest Business, Michael Phillips and Salli Rasberry. New York: Random House,1981.

Marketing Ideas for Small Service Businesses, Tom and Marilyn Ross. Dow Jones -Irwin, Homewood, IL, 1990.

The Unabashed Self-Promoter’s Guide, Jeffrey Lant. J. Lant Associates 50 Follen Street,Suite 507, Cambridge, MA 02138, 1983.

Beginning a B&B in South Carolina, Clemson University. Cooperative ExtensionService, Columbia, South Carolina 29201.

Guidelines for Developing an Operation of a Bed & Breakfast Home in Alberta, Develop-ment Division, Alberta Tourism, 16th Floor, 10025 Jasper Ave., Edmonton,Alberta Canada T5J323.

Bread & Breakfast, Linda Kay Bristow. San Francisco: 101 Productions, 1985.Country Inns Cookery, Coralie Castle and Jacqueline Killeen. San Francisco: 101

Productions, 1982.The Inn Cookbook: New England, Marjorie and Igor Kropotkin. Boston: Little, Brown

and Company, 1983.Country Inns of America Cookbook, Robert R. Reid, ed. New York: Holt, Rinehart, and

Winston, 1982.The American Bed and Breakfast Cookbook, Volumes I and II, The Best Post Writers

Group. The East Woods Press, 1985.

Home-Based Business...Is It for Me? Minnesota Extension Service, University ofMinnesota, 1987. Distribution Center, Room 3 Coffey Hall, 1420 Eckles Ave.,St. Paul, MN 55108.

Family Tension and the Home-Based Business. Minnesota Extension Service, Universityof Minnesota, 1987. Distribution Center, Room 3 Coffey Hall, 1420 EcklesAve., St. Paul, MN 55108.

Why Have a Home-Based Business? Advantages and Disadvantages. Minnesota Exten-sion Service, University of Minnesota, 1987. Distribution Center, Room 3Coffey Hall, 1420 Eckles Ave., St. Paul, MN 55108.

Catering Successfully. Minnesota Extension Service, University of Minnesota, 1987.Distribution Center, Room 3 Coffey Hall, 1420 Eckles Ave., St. Paul, MN55108.

Starting a Bed and Breakfast or Farm Vacation Business. Minnesota Extension Service,University of Minnesota, 1987. Distribution Center, Room 3 Coffey Hall, 1420Eckles Ave., St. Paul, MN 55108.

Establishing the Ambience in a Bed and Breakfast or Farm Vacation Home. MinnesotaExtension Service, University of Minnesota, 1987. Distribution Center, Room 3Coffey Hall, 1420 Eckles Ave., St. Paul, MN 55108.

Courtesy is Contagious. Great Lakes Sea Grant Network, 1986. Illinois-Indiana SeaGrant Program, University of Illinois, 51 Mumford Hall, 1301 W. Gregory Dr.,Urbana, IL 61801. This publication can also be obtained by contacting any of theGreat Lakes Sea Grant programs.

Food and Recipes

Cooperative Extension andSea Grant Publications

49

Bed and Breakfast in Iowa, Jim Huss. Pm12631, June 1986, Iowa State University, Ames,IA 50011.

Starting a Bed and Breakfast in Michigan, Philip Alexander and Judy Watson-Olson.Cooperative Extension Service Bulletin E-2143, Michigan State University.

Account Book for Small Business. Robert W. McIntosh. Cooperative Extension ServiceBulletin E-1332, Michigan State University.

Bed and Breakfast Zoning: A Guide to Regulations, Jim Huss. Cooperative ExtensionBulletin NCR358, Iowa State University, Ames, IA 50011.

Considerations in Starting a Bed and Breakfast Business, John Mulcahy. New York SeaGrant and Cooperative Extension, Cornell University, Ithaca, NY 14853.

Opening a Bed and Breakfast, Rich Novak. UNC Sea Grant Publication UNC-SG-84-03,North Carolina Department of Administration, North Carolina State University,Raleigh, NC 27695-8605.

Advertising: An Investment in Your Business Future, James Huss. North Central RegionalExtension Publication #299, Iowa State University, Ames, IA 50011.

Marketing the Small Lodging Business, Chad P. Dawson. Cooperative Bulletin 212, CornellUniversity, Ithaca, NY.

Zoning Principles and Definitions, Agriculture Extension Service, Extension Folder 25 -Revised 1978, University of Minnesota, St. Paul, MN 55108

(Order from Michigan State University Bulletin Office, Box 6640, East Lansing, MI48876-6640.)E-483: Employee Motivation and Work Incentives in the Service IndustriesE-484: Recruiting and Training Employees in the Service IndustriesE-1332: Account Book for Small Tourist and Resort BusinessesE-677: In the Lodging Industry-Marketing ManagementE-656: In the Lodging Industry-Management Through FiguresE-729: Tourism and Your CommunityE-1381: Tourism: Greeting a GuestE-1937: Tourism and Its Significance in Local DevelopmentE-1959: Tourism Marketing

Hotel and Motel Management. Harcourt Brace Jovanovich Publications, 7500 Old OakBoulevard, Cleveland, OH 44130.

◆ Hotel and Motel Management is a newspaper format publication that aims toprovide lodging industry and related news to its 45,000 subscribers nationwide. Thepublication’s every-three weeks mailing schedule allows it the largest staff of anylodging business journal—to report on news in a timely fashion. Regular departmentsand features cover the gamut of topics from hotel development, financing andfranchising to interior design, sales and marketing and risk management. Our readersare lodging industry professionals: chain executives, general managers, food andbeverage directors, hotel developers and investors and lenders. Michael DeLuca iseditor-in-chief. Articles cover topics including operations, managers, food, purchas-ing, beverage, accounting, products, trends, and general news.

Lodging. American Hotel and Motel Association, 888 7th Ave., New York, NY 10019. ◆ As the official publication of AH&MA, Lodging is the association’s primary

means of communicating its work to the hotel industry. Since much of this workpertains to hotel operations, most of the magazine’s features provide operationaladvice. Operational areas usually covered include financial management, humanresources, sales and marketing, and food and beverage. Readers are members ofAH&MA, the Hotel Sales and Marketing Association International, and Interna-

Tourist and Resort Series

Hospitality Periodicals

50

tional Association of Hospitality Accountants. Because AH&MA is a federation,AH&MA members are also members of their state lodging associations. Somesmaller properties, which are state association members but not AH&MAmembers, also receive the publication.

Lodging Hospitality. 1111 Superior Street, Cleveland, OH 44114. ◆ The magazine informs the reader about site selection, operation design and

decor, financing, building, personnel, maintenance and sanitation, computeriza-tion, merchandising, and renovation.

Old House Journal. 69A Seventh Ave., Brooklyn, NY 11217. Published monthly. ◆ Short, non-technical articles about new products and renovating and mainte-

nance ideas for old houses. $16/year. Also publishes newsletter.Restaurant Business Management. 644 Third Ave., New York, NY. ◆ A monthly magazine for the restaurant trade featuring articles on what’s new,

different, and successful. Contains information on suppliers and services whichmay be difficult to locate in rural areas.

Restaurant Hospitality. 1111 Superior Street, Cleveland, OH 44114. ◆ The magazine covers all phases of management, communication, operation,

merchandising, equipment, furnishings, decor, and industry trends.

Critic B&B Guidebooks give independent opinions on B&Bs listed. Usually, theB&B does not pay for this listing to insure that the editor is not influenced byadvertising revenue or payment from the B&B. The following list was adapted frommaterial submitted by Charles Hillestad, 2151 Tremont Place, Denver, CO 80205,(303)296-2151.

America’s Wonderful Little Hotels & Inns by Sandra W. SouleP.O. Box 150Riverside, CT 06878

Recommended Country Inns Series by Globe Pequot Press138 W. Main St.Chester, CT 06412

B&B American Style and Country Inns and Back Roads by Jerry Levitin1565 Patrick RoadNapa, CA 94558

The Recommended Country Inns, Lodges and Historic Hotels Series: Complete TravelersGuides by Hitchcock & LindgrenP.O. Box 151Bridge Hampton, NY 11932

Mobil Travel Guides for various regions by Rand McNally Travel Research CenterP.O. Box 7600Chicago, IL 60680(has special listings for B&Bs)

Birnbaum's United States by Houghton Mifflin Co.2 Park St.Boston, MA 02108

AAA Tourbook by American Automobile AssociationMost of them are by states, some list more than one state, and there is a specialB&B listing.

“Critic” B&B Guidebooks

51

These are useful in locating alternative available B&Bs in a particular city. Thedescription given usually comes from the innkeeper, not the editor. Although most ofsuch books strive for accuracy, the sheer volume of listings sometimes precludeschecking personally on every listing. In a few cases, the innkeeper pays to have theinformation inserted in the guide. It is like an advertisement.

Complete Guide to B&B Inns & Guest Houses by Pamela LanierLanier Publishing International, Ltd.P.O. Box 20467Oakland, CA 94620

Complete Guide to American B&Bs by Rik and Nancy BarnesP.O. Box 270471San Diego, CA 92128

B&B North America by Norma BuzanBetsy Ross Publications3057 Betsy Ross DriveBloomfield Hills, MI 48013

Innviews by Sheila McCormick157 8th StreetNorco, CA 91760(only B&Bs that pay travel agent commissions are listed)

Almost Every B&B SeriesRockrimmon Press110 East EnterpriseColorado Springs, CO 80918

Secrets of Entertaining by America's Best Innkeepers by Gail Greco5600 Southwick St.Bethesda, MD 20817

Annual Directory of American B&B by Toni SotorP.O. Box 152Harrington Park, NJ 07640

Frommer’s Regional Guides:Frommer’s B&B North AmericaPrentice Hall PressOne Gulf & Western PlazaNew York, NY 10023

Fodor’s USA, Fodor’s American Cities, and Regional Guidesc/o Fodor’s Travel Publications201 E. 50th StreetNew York, NY 10022(this one has opinions, but they tend to be very brief)

Featherbeds & Flapjacks by Barbara Sturni and Suzanne DaneNational Trust for Historic Preservation1785 Mass Ave. NWWashington, D.C. 20036

A Treasury of Bed & Breakfasts and Bed & Breakfast HostessThe American Bed & Breakfast AssociationWashington, D.C. 20026

Additional books listed in alphabetical order:ABC Hotel and Motel GuideAmerican Express Guide to B&BsAmerican Guide to Hotels, Motels & Inns

“Listing” B&B Guide-books

Other B&B Guidebooks

52

B&B North AmericaBed and Breakfast, USAB&Bs, Guesthouses & Inns of AmericaB&Bs in the U.S. & CanadaB&B DirectoryBest Places to Stay in America’s CitiesChristian B&BChristopher’s B&B Guide to U.S. & CanadaComplete Traveler SeriesCountry Inns: America RevisitedCountry Inns of America SeriesCountry Inns of the RegionDistinctive LodgingsElegant Small HotelsFamily Vacation ServicesFisher’s WorldGreat Affordable B&B GetawaysGreat America Guest House BookGreat American Travel BookGreat Ski InnsGuest House Book SeriesHome Base HolidaysHotel & Travel IndexINNterlodging Bed & BreakfastInsight GuidesMotorcycle B&BNorth American Vacation Brochure DirectoryOfficial Airlines Guide North American Travel PlannerOld House Lover's Guide to Inns, B&Bs and GuesthousesResorts and Great HotelsSleepcheapSmoke-Free Travel GuideSojourners Bed & BreakfastStarguideTraveller’s Bed and BreakfastZaggat’s Survey

Reading several newletters can help you locate specific information, avoid costlymistakes, and stay abreast of current B&B events. There are a variety of periodicals.Some are primarily for the traveler, some are directed to the B&B owners. Theperiodicals listed below focus full time on B&Bs and other accomodations.

Country Inns Full Color Magazinec/o Gail Rudder Kent, EditorP.O. Box 182South Orange, NJ 07079-0182

Innsider Full Color Magazinec/o Cynthia G. LaFerle821 WandaFerndale, MI 48220

B&B Periodicals

53

Entree Newsletterc/o William Tomicki, Publisher1470 East Valley RoadP.O. Box 5148Santa Barbara, CA 93150

The Hideaway Report Newsletterc/o Andrew HarperHarper AssociatesBox 300Whitefish, MT 59937

Inn Review Newsletterc/o Norman Strasma, EditorP.O. Box 1789Kankakee, IL 60901

Inn Times Newspaperc/o Forrest Lowrey2101 Crystal Plaza Arcade #246Arlington, VA 22202

Romantic Hideaways Newsletterc/o Barbara Brass, EditorSuite 258, 217 E. 86th StreetNew York, NY 10028

Uncommon Lodgings Newsletterc/o Barry W. Gardner, EditorP.O. Box 181329Dallas, TX 75218

Bed & Breakfast Update NewsletterP.O. Box 4814North Hollywood, CA 91607

Winston Travel Deluxe Newsletterc/o Daniel WinstonP.O. Box CSausalito, CA 94966

Yellow Brick Road Newsletterc/o Bobbie Zane, Editor2445 Northcreek LaneFullerton, CA 92631

Trade Organizations are not automatically reservation services, although most TradeOrganizations do make direct reservations. Some have 800 numbers, which makes itvery convenient to use them for reservation purposes. A membership fee is required.

Great Inns of America2666 Riva Road, Suite 410Annapolis, MD 21401Attn: Ray Dunn800/533-4667(has a full color national guidebook available—Great Inns of America)(also functions as a reservation service)(specializes in more luxurious accommodations with ten or more rooms and allprivate baths)

Nationwide B&B TradeAssociations

54

Association of American Historic InnsP.O. Box 336San Juan Capistrana, CA 92629Attn: Deborah Sakach714/496-6953(has national guidebook available — American Historic B&B Inns and GuestHouses)(also functions as a reservation service)(specializes in inns that qualify for the National Registry of Historic Places)

American B&B Association1407 Huguenot Rd.Midlothian, VA 23113Attn: Sarah W. Sonke804/379-2222(has regional guidebooks available produced in association with AAA — ATreasury of B&Bs)

Tourist House AssociationR.D. 2, Box 355AGreentown, PA 18426717/857-0806(has a national guidebook available — B&B USA)

Clarion Carriage House Inns20 South BatteryCharleston, SC 29401Attn: Frank and Rebecca Gay

Homecomings B&B NetworkP.O. Box 502JBellingham, WA 98227Attn: Dolores Hermann

International Inn Society (formerly Treadway Inn Partners)180 Summit AvenueMontvale, NJ 07645Attn: Wendy Denn201/666-1500

Independent Innkeepers AssociationStockbridge, MA 01262Attn: Church Davis413/298-3636

B&B Society InternationalP.O. Box 1789Kankakee, IL 60901Attn: Norman Strasma815/939-3509(has a national guidebook available — Host Directory)

B&B RegistryP.O. Box 8174St. Paul, MN 55108Attn: Gary Wingert612/646-4238(has a national guidebook available — Fodor’s North American B&B Guide)(also functions as a reservation service)

55

National B&B AssociationP.O. Box 332Norwalk, CT 06852Attn: Phyllis Featherston203/847-6196(has a national guidebook available - B&B Guide)(specializes in family-owned B&Bs)

B&B League, Ltd.3639 Van Ness St., N.W.Washington, DC 20008Attn: Millie Broobey202/363-7767

B&B ServiceP.O. Box 5025Bellingham, WA 98227Attn: Dolores Herrmann(also functions as a reservation service)

B&B HospitalityP.O. Box 2407Oceanside, CA 92054Attn: Ruth Dickerson(also functions as a reservation service)

Romantik Hotels of USA and EuropeRomantik Hotels und Restaurants

Beratungs-Und Betreuungs kGHandelregister AschaffenburgHRA 2334Horsteiner Str. 34D-8757 Karlstein/Main(has a national guidebook available - Romantik Hotels)

Professional Association of Innkeepers InternationalP.O. Box 90710Santa Barbara, CA 93190805/965-0707

The Professional Association of Innkeepers International is a trade associationproviding services for the bed and breakfast/country inn owner/operator and theaspiring innkeeper. Services include a hotline for referrals or consultation, technicalassistance to associations, publications, specials programs on phone systems, insurance,airline reservation system access, and discounts on products and credit card fees,workshops for innkeepers and referrals to workshops for aspiring innkeepers, travel andexpertise exchange for innkeepers and a staff locator file. The organization sponsors abiannual international conference.

The following books, periodicals and pamphlets are available from the Associa-tion:

Guide to the Inn Guidebooks: The most complete compilation of books and directoriesthat list inns. Includes guidelines for listing and where to submit information.This is also a good tool for aspiring innkeepers to begin researching the market.Updated annually.

Bed and Breakfast/Country Inns Industry Survey and Analysis: The only comprehensivefinancial and operational data analysis of small inns presently available. In-depthsurvey of occupancy, amenities, prices, employees, rate of return on investment,

56

break-even, revenue and expenses, delineated by actual and percentage graphs.Broken-out geography, size and age of inns. Updated biennially.

Marketing Handbook: From the basics of writing a news release to writing brochurecopy, this compilation of promotional ideas will keep your inn in the media’s eyeand get guests to return when you need them. From the well-researched backissues of innkeeping comes this indexed easy reference 3-ring binder. A must forinnkeepers with less than 100% occupancy. Regularly updated.

My Staff Manual: Reference and tool for busy innkeepers; 70 page 3-ring binder withindex tabs delineating great lines for ads, sample job descriptions, legal informa-tion, innkeepers’ suggestions on interviewing, training, and keeping staff, as wellas pertinent back issues of innkeeping. 1988 edition.

To order the above or receive additional information about the Professional Associa-tion of Innkeepers International, write PAII, Box 90710, Santa Barbara, CA93190; 805/569-1853.

The Bed & Breakfast Innkeepers Guild of Santa BarbaraP.O. Box 20246 (805) 966-0589Santa Barbara, CA 93120 Costs from $300 including room

B&B SeminarsP.O. Box 295 c/o B&B Productions (707) 963-0852St. Helenda, CA 94574 Costs from $375 plus room

Chanticleer Bed & Breakfast Inn (Innkeepers & Associates, Ashland)Jim & Nancy Beaver (503) 482-1919120 Gresham Street Costs from $225 including roomAshland, OR 97520

William Oates and AssociatesP.O. Box 1162 (802) 254-5931Brattleboro, VT 05301 Costs from $295 plus roomHeld periodically at country inns in Vermont and Pennsylvania.

The Captain Freeman Inn15 Breakwater Road, RR 2 (617) 896-7481Brewster, MA 02631

Wedgwood Inn of New Hope111 West Bridge Street (215) 862-2570New Hope, PA 18938

Brown’s Farm B&BWendi Brown (509) 548-786311150 Highway 209Leavenworth, WA 98826

Charles Hillestad (303) 296-21512151 Tremont PlaceDenver, CO 80205

For additional workshops and seminars, contact your nearest inn or innkeepers’association, the extension divisions of nearby state universities, B&B magazines andnewsletters, and Yellow Pages Directory published by Inn Business Review.

ConsultantsSee lists in “Start your B&B” paper back books, B&B magazines, and newsletters, andYellow Pages Directory published by Inn Business Review Newsletter or Inn Times.

Innkeeping Workshopsand Seminars

57

American Hotel & Motel Association, 888 Seventh Avenue, New York, NY 10019(212)265-4506.

Sponsors hotel show in New York each November. The AH&MA EducationalInstitute, 1407 S. Harrison Rd., East Lansing, MI 48832; provides courses forgroup or individual study in operations and management. These can be veryhelpful to small operators with little experience. Sliding scale membership charges.Most members have 25 rooms or more.

Historic House Association, Decatur House, 1600 H Street N.W., Washington, DC20006 (202)673-4025.A membership organization for historic house owners. The Association sponsorsannual conferences and provides specialized information to members uponrequest.

National Restaurant Association, 311 First Street N.W., Washington, DC 20001.Non-members: (202)638-6100; members: (800)424-5156.Publishes NRA News and consumer surveys, and maintains an active lobbyingoffice and up-to-date information on the state of the industry. Also sells books,brochures and films about cookery, sanitation, laws, training, etc., through theirEducational Materials Center.

National Trust Regional Office—Midwest, 407 Dearborn Street, Suite 710,Chicago, IL 60605 (312)353-3419.This office provides technical and advisory services on preservation as well asfinancial and legal assistance for housing rehabilitation.

The New England Innkeepers Association, Norton-Grandi Educational ResourceLibrary, Statler Office Building, Suite 636, Boston, MA 02116 (617)357-5115.

Offices of Preservation Assistance, National Park Service, U.S. Department of theInterior, Washington, DC 20240 (202)272-3761.This office provides copies of the Secretary of the Interiors’ rehabilitationstandards and the names and addresses of state preservation offices. It alsoprovides information on technical issues relating to housing rehabilitation andcertifies projects for federal investment tax credit.

American Bed and Breakfast Association, P.O. Box 2384, Washington, DC 20026.This trade association represents B&B operators renting 12 rooms or less. It hasan annual directory, listing individual descriptions of B&B homes from reserva-tion services. It also publishes a monthly newsletter, provides national and localpublic relations, develops regional advertising packages, and is active in zoning,insurance, and other current issues.

The Educational Institute of the American Hotel and Motel Association, 1407 S.Harrison Road, East Lansing, Michigan 48823.The Institute has developed text books, courses, and programs of study designedto improve the skills and attitudes of individuals in all areas of hospitality service.A diploma and certification program verifies course end program completion.

Cooperative Extension Service, available locally.Educatonal workshops and one-on-one counseling are offered by many extensionoffices. Your local county Cooperative Extension Service office can refer you tothe nearest programs in your area.

Sea Grant Programs, available locally or regionally.Sea Grant offices frequently offer educatonal programs for B&B operations. Yourlocal Sea Grant office can refer you to the nearest program in your area.

Small Business Development Center (SBDC), available regionally.This agency often offers educational workshops and counseling to various types ofsmall business enterprises, including B&Bs. Programs are administered throughthe extension service of the state university system or the state Department ofEconomic Development.

Other Organizations

58

American Woman’s Economic Development Corp. (AWED)60 East 42nd Street, Suite 405New York, NY 10165(800)222-AWED; in NY: (800)442-AWED

National Alliance of Small Business1825 Eye Street NW, Suite 400Washington, DC 20077-2740

National Small Business United (NSBU)1155 15th Street NW, Suite 710Washington, DC 20005(800)541-5768(202)293-8830

Federal Information CentersEach state maintains one or more Federal Information Center that provides asource of free information on a wide range of government-related topics.

U.S. Government Printing OfficeSuperintendent of DocumentsWashington, DC 20402Books, reports, and government documents on a variety of subjects.

Census BureauPublic Information OfficeBuilding 3, Room 2705Washington, DC 20233Statistics and information useful in making marketing decisions.

Small Business Development CentersThese centers provide small businesses with management technical assistance,counseling and answers to business planning and management questions.

Minority Business Development CenterCall (312)353-0182 to locate the closest regional office.

Small Business Administration (SBM)1441 L Street; N.W.Washington, D.C. 20416(202)653-6822Contact to obtain location of nearest field office and publications list. They offerfree consulting help.

General Useful Resources

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Appendix BList of Important Sources of Informationfor Prospective Bed and Breakfast Hosts

This list identifies sources that can provide key information for prospective bed andbreakfast hosts. Unfortunately, many states do not provide a one-stop clearing houseof necessary information that can be used by prospective hosts. Effective utilization ofthis list of resources can save time and money, provide useful information that mightotherwise be missed, and reduce or eliminate difficulties before they occur.

County Cooperative Extension OfficeLook in the telephone book for the name and address of your County Coopera-tive Extension Office in the county offices section. Your Extension office mayprovide bulletins, videos, advice, and sometimes one-day workshops.

The Educational Institute of the American Hotel and Motel Association1407 South Harrison RoadEast Lansing, MI 48823The Institute has developed text books, courses, and programs of study designedto improve the skills and attitudes of individuals in all areas of hospitality service.A diploma and certification program verify course and program completion.

Hotel, Restaurant, and Institutional Management Institute101 Young Graduate House, Purdue UniversityWest Lafayette, IN 47907(317)494-2749Correspondence courses are offered by this institute in management, professionalcooking, food service, purchasing, travel and tourism marketing, contemporarynutrition, and computer application in food service.

State Bed and Breakfast AssociationThe association provides answers to specific questions, information about theirgoals, membership services, and a directory of members. It is recommended thatpotential hosts visit as many association members as possible.

Your State Institute for New Business VenturesThis institute provides an information packet and information about possiblefinancial assistance through local economic agencies.

State Department of CommerceThe department is a contact for various state agencies that can help you begin abed and breakfast business.

State Tourism Development DivisionThe division is a contact that can provide information about your B&B, and itspossible inclusion in the state B&B facilities list. It also handles the distributionof B&B brochures, marketing information, etc.

City or County ClerkThe county clerk’s office includes the zoning department, planning board, andbuilding inspector. Their specific telephone numbers are listed under govern-mental offices—city, village, or township.

60

City or County Health DepartmentThe health department is a source of information about regulations, permits,etc. Obtain a copy of Food Service Sanitation Requirements. Invite your localhealth inspector to your facility for an informal environmental site evaluation(for water supply, septic tank, well/sewage disposal, etc.). Explain your type ofbreakfast menu and food preparation methods. Show your kitchen and askfor advice and recommendations concerning your food storage, preparation,service, and sanitation capabilities.

County Recorders OfficeUse this office to file as sole proprietorship or partnership. This office, listedunder “Government Offices” in your phone directory, is a contact forinformation and questions concerning personal property taxes.

State Department of Fire and Building ServicesThis department inspects and reviews plans for modifications of publicbuildings for compliance with state fire codes. The local fire departmentchecks exits, smoke detectors in guest rooms, and hallways, etc.

Secretary of StateYou will need to contact this office if you want to incorporate. You may alsowant to protect the use of your business name by registering it with thesecretary of state.

Internal Revenue Service (Federal)Obtain a federal ID number if you will have employees. If you do not haveemployees, you would use your social security number as the federal IDnumber. Obtain a self employment (SS), estimate tax form 104OFF, andsmall business kit.

State Department of RevenueFrom this department you need to obtain a kit or information for sales andwithholding tax. Obtain a withholding tax number (if you have employees),and a sales tax number. Figure the amount of your capital improvement,local food and room tax, if any, etc. This office will answer questions con-cerning individual income tax, tax deductions for business use of home, etc.

State Small Business Development CenterThe center provides a cooperative effort between small business administra-tion and local Chamber of Commerce agencies. Contact for free help anddirections to additional resources and outreach programs.

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Appendix CA Guide: When a B&B Is Not a B&B

The Houston PostSunday, July 16, 1989By Charles HillestadSPECIAL TO THE POST

Almost everyone has heard about Bed and Breakfasts, or B&Bs as they are commonlyknown. They have been around for decades and are particularly common inEurope where half the travelers stay at B&Bs at one time or another.

Outside of New England, they are a fairly recent phenomenon in the United States.But their acceptance has been so rapid, there may be as many as 20,000 in theUnited States today.

B&B is a generic term encompassing a wide variety of accommodations. Suchestablishments have anywhere from one to 100 guest rooms. They range frommodern suburban home to city Victorian gingerbread structures, mountaincabins and full-service hotels. There is even a B&B trout farm.

Some are fancy and expensive. Some are funky and low cost. All are unique. Thereare few chains of B&Bs. The only unifying theme is that some sort of foodservice at breakfast time is provided as part of the price and the emphasis is onpersonalized service and hospitality.

There are several distinct subcategories of B&Bs. Although they are only approxi-mate, the following should give some guidance:

A boarding house or bed and board is not a B&B. The people staying in a boardinghouse do so for a long period and consider it their permanent address. A B&B,on the other hand, provides only temporary lodging.

A guesthouse is an entire house, cabin or possibly a condominium for rent. Moreoften than not, it is not a B&B either. But it might be if breakfast is deliveredeach day. In any event, there is nowhere near the same opportunity for interac-tion with the hosts or other guests as in regular B&Bs. That can be viewed as anadvantage if anonymity is desired.

A homestay establishment normally is a B&B. It is primarily a private home wherethe owner rents out one to four or five spare bedrooms. Staff seldom exceeds twopeople, usually the owners. THe European concept of a B&B most often is somesort of homestay. This means baths are shared more often than not. They areusually the least expensive of the B&Bs.

A B&B inn is a structure devoted principally to the care and comfort of overnightguests. The owners may not live there. Typically, such inns have four to 25rooms, larger staffs and a higher percentage of rooms with private baths. Theinnkeepers run the establishment as a full-fledged business, not as a part-timeactivity, which tends to make operations somewhat more professional. As aresult, credit-card acceptance, late check-in and other hotel-oriented conve-niences are more prevalent.

A country inn is much like a B&B inn. In fact, the words are often used interchange-ably. Usually the difference, if any, is that most country inns are located in ruralareas with fewer places to eat nearby. Therefore they usually offer lunch ordinner — or both — for the convenience of guests. The advantage is that guests

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do not have to travel far for non-breakfast meals. Many country inns evolvedfrom buildings which originally were solely restaurants or cafes that had a fewunused rooms on the floors above.

Boutique B&B may be developing as a new term. This occasionally refers to aB&B inn or country inn so superior in attractions, accoutrements andamenities as to deserve a category of its own. This is a highly subjectiveevaluation and is a matter of taste more than standards.

Lodges are often country inns located in a wilderness area. Not everything nameda lodge is a B&B. If breakfast is not included in the room price, it cannot be aB&B.

Dude ranches are not usually thought of as B&Bs, even though meals are in-cluded.

Resorts are not usually included as B&Bs either since they tend to be quite largeand provide many activities.

Historic hotels are full-service B&Bs with some or all of such extras as bars,restaurants, shops, room service, bellhops, concierges, valets, etc. Obviously,not all historic hotels are B&Bs, especially if they charge for breakfast. Somehave elected to be viewed as B&Bs for one reason or another and include atleast a continental breakfast in the price of the room.

Hostels are not B&Bs even if breakfast is included. They serve an entirely differentpurpose, basically dormitory-style living with only the bare essentials. Theseare excellent for traveling students or those on a shoestring budget.

Ordinary hotels/motels are definitely not B&Bs even if they try to use the phrasebed and breakfast in their ads or signboards. The definition may be broad,but it is not that broad.

Each category has its own advantages and disadvantages, its own charms. Aparticular B&B may even overlap into two or more categories. There is nobest category.

The important thing to remember is to ask questions. In addition to asking price,always ask about the size of the rooms, types of beds available, whether thebath adjoins the room or is down the hall, whether a full or continentalbreakfast is served and inquire about the rules of the house. Most B&Bsprohibit smoking, for example. If a smoking room is important, specify thatas a request. Check to see if pets and children are permitted and if telephonesand televisions are available in the rooms if that is important to you.

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Appendix DDetermining Personal Goals

Personal Goals 1st Year 5th Year 10th Year

Annual income (total family income;other sources included) _______________________________________________________________________________

Type of home ______________________________________________________________________________________

Size of home _______________________________________________________________________________________

Location of home ___________________________________________________________________________________

Travel ____________________________________________________________________________________________

Professional development _____________________________________________________________________________

Hobbies ___________________________________________________________________________________________

Membership inorganizations _______________________________________________________________________________________

Community activities ________________________________________________________________________________

Luxuries ___________________________________________________________________________________________

Status and prestige ___________________________________________________________________________________

Professional time ____________________________________________________________________________________

Leisure time ________________________________________________________________________________________

Family time ________________________________________________________________________________________

Lifestyle ___________________________________________________________________________________________

Retirement_________________________________________________________________________________________

Health insurance ____________________________________________________________________________________

(Add other personal goals you would like to achieve.)_____________________________________________________________________________________

64

65

Family goals________________________________________________________________________________________

_________________________________________________________________________________________________

_________________________________________________________________________________________________

_________________________________________________________________________________________________

_________________________________________________________________________________________________

_________________________________________________________________________________________________

_________________________________________________________________________________________________

_________________________________________________________________________________________________

Goals for family responsibility __________________________________________________________________________

_________________________________________________________________________________________________

_________________________________________________________________________________________________

_________________________________________________________________________________________________

_________________________________________________________________________________________________

_________________________________________________________________________________________________

_________________________________________________________________________________________________

_________________________________________________________________________________________________

Goals concerning friends and neighbors __________________________________________________________________

_________________________________________________________________________________________________

_________________________________________________________________________________________________

_________________________________________________________________________________________________

_________________________________________________________________________________________________

_________________________________________________________________________________________________

_________________________________________________________________________________________________

_________________________________________________________________________________________________

Appendix EHousing and Family ResponsibilitiesAssociated with Owning a Bed & Break-fast Business

Directions: For each of the following types of activities, please indicate how the responsibilities are divided in your home and howsatisfied you are with the arrangement. Be sure that the total percentage adds up to 100% from left to right in the columns. If anitem is not applicable to you, circle N/A.

WHO IN YOUR FAMILY USUALLY:

Prepares the breakfast? N/A 1 2 3 4 5

Plans the meals? N/A 1 2 3 4 5

Does the food shopping? N/A 1 2 3 4 5

Does the cleanup after meals? N/A 1 2 3 4 5

Does the household repairsand maintenance? N/A 1 2 3 4 5

Organizes social activities andcoordinates day-to-day activities? N/A 1 2 3 4 5

Pays bills and maintains businessrecords? N/A 1 2 3 4 5

Vacuums the house? N/A 1 2 3 4 5

Does the laundry? N/A 1 2 3 4 5

Takes care of the yardwork? N/A 1 2 3 4 5

Cleans the guest rooms? N/A 1 2 3 4 5

Cleans the bathrooms? N/A 1 2 3 4 5

Does the "extra nice" things? N/A 1 2 3 4 5

Takes reservations? N/A 1 2 3 4 5

Is the major guest greeter(host or hostess)? N/A 1 2 3 4 5

Keeps up-to-date on communityactivities that guests might like toparticipate in? N/A 1 2 3 4 5

Keeps up-to-date on communityattributes such as restaurants, parks,tourist spots, etc.? N/A 1 2 3 4 5

Is responsible for advertisingyour B&B? N/A 1 2 3 4 5

Handles the animals (dog, cat, etc.)while guests are present? N/A 1 2 3 4 5

Other? N/A 1 2 3 4 5

How satisfied are you with thisarrangement? (Complete afterseveral weeks and discussions)

1 = Very Satisfied5 = Very DissatisfiedH

usba

nd

Wife

Chi

ldre

n

Oth

er

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Appendix FA Sample Bed and Breakfast Concept

The Scottish Lion B&B Experience the charm of Bonnie Scotland... and a personalized B&B experience.Our Scottish Lion Bed and Breakfast is located on State Route 36, one-quarter mile

east of its junction with State Route 45 North. As hosts, we (Susan and NormanScott) offer warm hospitality and friendship. Our hobbies include Europeanhistory, historic preservation, and chess. Guests will find the quiet, cozy, andromantic atmosphere reminiscent of a Scottish country inn, and will be treated asVery Important People. Every guest is considered a Bed and Breakfast investiga-tive reporter. We constantly strive to discover what guests need or want to maketheir visits unforgettable.

The common room is the perfect place for guests to relax and get to know each other.When you enter this spacious, sunny area, you will notice the fireplace, parquetfloors, and stained glass windows. A library of great books encompasses one entirewall, and comfortable seating makes reading, playing chess, watching television,or conversing a pleasant pastime.

Our guest rooms are warm and inviting. The colors and furnishings for the roomswere chosen to delight the eye and make the customer’s stay a warm and memo-rable one. Guests can control their environment with individual adjustments forheating, cooling, and ventilation.

Peace and tranquility will greet our guests in the soft blue and cream-colored “Lady ofthe Lake Room,” inspired by the Sir Walter Scott poem; the price is $70 for thisdouble occupancy room with private bath. Guests wake to the freshness of springreflected in the sun-filled, romantic “Brigadoon Room”, inspired by the musical;the price is $70 for this double occupancy room with private bath. “Robert theBruce Room” features a photograph of a bronze statue of Bruce, Stirling Castle,and pictures of the great victory at Bannockburn; $70 and private bath. The “FlagRoom” displays the colorful Rampant Lion and St. Andrews Cross; $70 andprivate bath. The “Bonnie Prince Charlie Room” has pictures, books, andhighlights of his life; $70 and private bath. A large bay window is featured in thebold “Scottish Tartan Room;” the price is $70 for this double occupancy roomwith shared bath. The “Robert Burns Room” features pictures, books, and articlesabout this famous Scot; the price is $60 with shared bath.

A wicker basket of fresh fruit in the room sets the mood for the visit. Bed turn-downservice is provided, with homemade mints left on the pillow. A morning coffeeand tea tray will be left at the door.

Breakfast is served between 7:00 and 9:00 a.m. on the enclosed patio overlooking thepeaceful woodlands. On bleak or cold days breakfast will be served beside acrackling fire in the common room. A glorious Traditional Scottish B&Bbreakfast is served, in keeping with the guidelines of the State Board of HealthRegulation. It consists of orange juice, kippers, oatmeal or corn flakes, eggs, toastand scones, orange marmalade, bacon, grilled sliced tomatoes, fried potatoes, and

67

cheese. Guests may linger over cups of fresh-brewed tea or coffee. They will have achoice of five types of tea and five types of coffee beans.

Guests will enjoy strolling through the 50 acres of woodland, or hiking and bicyclingalong country roads. Our screened gazebo is a perfect place to spend summerevenings, and in the winter, our area is well known for cross-country skiing.

Play our par ten, three-hole golf course with a mashie and a putter. Watch our bordercollies in the evening take a flock of sheep and ducks through a highland gamestype obstacle course.

We suggest that our guests explore the nearby Indian mounds, visit the cheese-makingfactory and winery, attend outdoor plays, and take the nature walk in the stateforest. Local golfing, tennis, fishing, swimming, and a courtesy membership to ahealth club are also available. Shops and an antique mall are nearby. We willmake your reservation at restaurants in the area. We are also pleased to offer 24-hour answering and fax service.

1. State in a sentence or two the experience that you are selling.2. Identify the customer expectations as promised by the hosts.3. Do the various components of the concept fit together and complement each

other?4. Are the parts compatible with the overall concept?5. Is the concept compatible with the market segment or segments identified in Step

Four, "Determine and Research Your Market" and Step Seven, "Develop aMarketing Plan?"

6. How could the concept be improved?7. Could there be greater return for your time and money if the home was converted

into apartments, offices, or another home business?

Evaluate the Concept

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Appendix GTypes of Visitor Attractions1

Natural or environmental Beaches Lakes and pondsCaves MountainsCliffs OrchardsClimate ParksFall foliage Rivers and streamsFarms Scenic viewsForests SpringsGorges WaterfallsGardens WetlandsGeologic formations WildlifeIslands

Battlefields Historic buildingsBirthplaces of famous people Historical markersBurial grounds MansionsForts Museums

Archaeological sites FestivalsArt galleries FolkloreArts and crafts Indian cultureChurches LibrariesConcerts TheaterDistinctive architecture Unique lifestylesEthnic celebrations Universities or colleges

Boating Ice skatingCamping Mountain climbingCanoeing SkiingDancing SnowmobilingFishing SoaringGolf courses Spectator sportsHang gliding (e.g., tournaments) SwimmingHiking Tennis courtsHorseback riding WindsurfingHunting

1Planning for Tourism, University of Vermont Extension Service, p. 19.

Historical

Cultural

Recreational

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Appendix HMarketing Worksheet

1. Determine and briefly state exactly what you are selling.

_______________________________________________________________________________________________

_______________________________________________________________________________________________

_______________________________________________________________________________________________

2. List the tourist attractions in your area. Note for each attraction the time of year that people generally come, the number of peoplethat visit, the number of nights that guests might stay, and methods that you will use to attract people to your B&B. Also note thelocation, if possible.

EXAMPLE: Estimated Room Nights from Attractions

Attraction Months Open No. of People Location B&B Room Nights Methods to Promote and Attract

Lincoln Lake 12 480 3 mi 240 Tourist Department Chamber of Commerce Mailing Lists

Indian Burial 12 150 6 mi 300 Tourism Department Grounds

Octoberfest October 30 1/2 mi 60 Festival mailing list Chess Tourney Dec 18 18 B&B 12 State chess tournament

association newsletterJan 18 18 B&B 12 announcement andFeb 18 18 B&B 12 advertisement

Golf Course 6-9 75 2 mi 150 State Golf Magazine____________TOTAL 786

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3. a) List the advantages of staying at your B&B. What do you have that no one else in your area offers?

1. ________________________________________________________________________________________________

2. ________________________________________________________________________________________________

3. ________________________________________________________________________________________________

4. ________________________________________________________________________________________________

5. ________________________________________________________________________________________________

6. ________________________________________________________________________________________________

7. ________________________________________________________________________________________________

8. ________________________________________________________________________________________________

9. ________________________________________________________________________________________________

10. _______________________________________________________________________________________________

b) List the disadvantages of staying at your B&B. Then determine how they might be eliminated or reduced.

Disadvantage How to Eliminate/Reduce

1. ________________________________________________________________________________________________

2. ________________________________________________________________________________________________

3. ________________________________________________________________________________________________

4. ________________________________________________________________________________________________

5. ________________________________________________________________________________________________

6. ________________________________________________________________________________________________

7. ________________________________________________________________________________________________

8. ________________________________________________________________________________________________

9. ________________________________________________________________________________________________

10. _______________________________________________________________________________________________

71

c)based on the advantages you listed in 3a, state briefly the major benefits and attractions of your B&B that would be highlighted inyour promotional material:.

_________________________________________________________________________________________________

_________________________________________________________________________________________________

4. List business and community leaders that have contact with potential area visitors, and hotels and motels that may have overflow torefer to you. Prepare a plan to meet these people and to provide them with promotional material in order to obtain referrals fromthem. You will probably meet with varied levels of interest. Several good contacts may be necessary for positive results. Estimate thenumber of room nights to be gained as a result of each contact.EXAMPLE: Estimated Room Nights from Business and Community Leaders

Contacts Promotional Method Potential Room Nights

Overflow from Motels Personal Contact - Brochure 50 Restaurants Personal Contact - Brochure 50 Funeral Directors Personal Contact - Brochure 20 Weddings Newspaper follow-up - Mail/Telephone 20 Family Reunions Newspaper follow-up - Mail/Telephone 20 Chamber of Commerce Membership - Co-op Mailings - Referrals 10 Hoosier Manufacturing Personal Contact - Brochure 15 Real Estate Salespeople Personal Contact - Brochure 15 Antique Shops Personal Contact - Brochure 60

Antique News Ads XYZ Printers Purchasing/Sales Manager 40 HI Seed Co. Purchasing/Sales Manager 70

___________ Total 370

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nth

Group Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

5. Based on the information you have provided thus far, estimate the total number of room nights for each type of group by mo(for example, businesspeople, families, sports enthusiasts, seniors, etc.)

EXAMPLE: Estimated Room Nights by Month

73

Appendix IAmenities Checklist

74

Clocks with alarms

Closets (large) and shelf space

Clothes brush

Cologne

Comforter

Computers, word-processors (in room)

Corkscrew

Cotton balls

Courier service

Curling iron

Department gift

Door locks (separate)

Drinking glasses (not plastic)

Drinks (complimentary champagne,

coffee, liquor, tea, wine)

Dry cleaning

Earmuffs, hand warmers

Exercise equipment

Extension cords

Farm animals

Fireplace

First-aid supplies

Fishing poles

Flowers (plants in guest room)

Fruit basket

Games/activities

Gardens, trails, woodlands

Golf service

Hair conditioner/spray

Hair dryers/curling iron

Adapter

Afternoon tea

Aftershave

Air freshener

Airport transportation

Antique furnishings

Art gallery

Baby strollers

Babysitting service

Baggage storage

Bar

Barbecue

Bath salts, bubbles, powder

Bathrobes

Beach towels

Beds (King/Queen)

Bedboards

Bed turn down

Bicycles, mopeds

Boat charters

Books, library

Brush snow off windshield

Candy/cookery

Car rental discounts

Card tables

Carriage rides

Chairs, easy

Cheese tray

Child care

Chocolates

An amenity in the hospitality industry is a physical item given to or a serviceprovided for the guest. Amenities create a sense of luxury, build the image of yourB&B, and encourage favorable word-of-mouth advertising. Consider the fullrange of amenities listed below in relation to the projected image and cost of yourB&B:

Hand cream

Heat controls (individual)

Hobby displays/collections

Homemade items/meals

Hors d’oeuvres

Hot tub/sauna

Ice bucket in room

Insect repellent

Interpreters/Foreign language

knowledge

Iron, ironing board

Kitchen privileges

Laundry privileges/service

Laundry soap, bags

Letter openers

Limousine service

Lint removers

Luggage tags

Maps

Massage

Membership in club/fitness center

Message-taking service (24 hours)

Mineral water

Mints/candy on pillow

Mouthwash

Musicians

Nail polish remover

Newspapers

Night manager

Piano

Pens

Photocopying

Picnic basket/tables

Pillows

Playing cards

Radio

Raincoat

Reading material

Refrigerator use

Restaurant

Restaurant discount

Robes/slippers

Sachet/potpourri in drawers

Safe for valuables

Safety pins

Sauna/hot tub

Secretarial services

Sewing kits/sewing

Shampoo

Shaving cream

Shoehorns

Shoe polish, mitts

Shoe shine service

Shopping discounts, gift certificates

Shower cap/special shower heads

Sightseeing tours/guide service

Skirt hangers

Slippers

Soap

Social hour

Souvenirs

Space & equipment for business

conference retreats and sales meetings/

extra space/privacy

Special rooms — music, billiards

Sports equipment

Spot remover

Stamps/stationery

Stereo in room

Sunscreen

Swimming pool

Tanning beds

Tar remover

Telephone

Telescope

Television/VCR

Telex

Tickets to events

Toothbrush

Toothpaste

Tours, tourist information packets

Towels (large, thick, and many)

Typewriters (secretarial service)

Umbrellas

Views

Wake-up service

Water purifiers/bottled water

Wheelchairs

Window shades (light blocking)

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Appendix JBed and Breakfast Guest Studies

Results of a Michigan1 and Minnesota2 B&B guest study completed in 1988 are rathersimilar and provide a profile of B&B guests. Both states are travel destinationstates with a developed tourism industry but a relatively recent B&B industry.Results from other states may vary depending on location in the United States,location in the state, distance from major market areas, etc. However, this marketresearch can be considered for use as a guideline until more specific informationrelative to your B&B is obtained. Two figures in the following market researchresults indicate the range of response from the two surveys. One figure indicates the response from one of the state B&B surveys.

Sixty to 72 percent were residents of the state and 52 percent drove (Minnesota) 100miles or less to the B&B.

Seventy-seven to 81 percent were under 50, 50 to 60 percent between 25 and 44, and 35 to 40 percent under 34. The average age was 41. Sixty-six to 78 percent weremarried couples with 38 to 45 percent having children at home. Forty-five to 50percent had a family income exceeding $50,000, and 17 to 21 percent hadincomes over $75,000. Sixty-four to 75 percent had college degrees, with 29 to 33percent having some advanced degrees. Occupations were (Minnesota): business,17 percent; health care, 12 percent; education, 10 percent; and professional, 9percent. Thirty-seven to 41 percent were staying the first time in a B&B, and ofthe 59 to 63 percent of guests previously staying at a B&B, 51 to 56 percent hadstayed in more than three B&Bs, 33 percent (Michigan) had stayed in two B&Bs.

Reasons for staying at a B&B were (Minnesota): personal touch, 80 percent; charm ofbuilding, 78 percent; getaway, 71 percent; nicely decorated bedrooms, 61 percent;romance, 61 percent; and an alternative to a hotel, 61 percent.

The primary purpose of the trip (some difference between in-state and out-of-stateguests) were: pleasure, 57 to 67 percent; visit to friends and family, 6 to 11 percent; business, 8 to 11 percent; anniversary, 3 to 8 percent; honeymoon, 2 to 4percent; and wedding/funeral, 2 to 4 percent. Forty-five to 57 percent indicatedthat staying at the B&B was not the primary reason to visit the area. Activitiesparticipated in during the stay (Minnesota) were: dining out, 80 percent; shop-ping, 55 percent; walking, 55 percent; and sightseeing, 42 percent.

Attributes, which played an important part in selecting a B&B were: private bath-rooms, 53 to 54 percent; full breakfasts (Minnesota), 47 percent; shoppers/dining,nearly 28 to 40 percent; credit cards accepted, 30 percent; and recreationalactivity, nearly 31 percent. Fifty-two percent (Michigan) said they would not stay in a B&B if private bathrooms were not available and 66 percent who shared a bath would prefer a private bath. Guests considered the following qualities very

Where Are They From?

Who Are They?

What Is the Trip Behavior?

76

important after a B&B stay:3 warmth of innkeeper, 79.8 percent; private bath,68.5 percent; breakfast, 63.3 percent; and owner-operated, 37.1 percent.

Seventy-two percent of the B&B guests (Michigan) selected the B&B and madereservations before leaving home; 14 percent selected the B&B after leaving home.Information sources which prompted B&B stays were as follows: family andfriends, 22 percent; state B&B directories, 9 to 14 percent; other B&B directoriesand books, 8 to 10 percent; advertisement or story in newspaper, 4 to 7 percent;recommendations from another host/operator, 6 percent; local chamber ofcommerce, 3 to 6 percent; and B&B brochures, 5 percent.

The Wisconsin Bed and Breakfast Industry: An Enterprise Study 19904 found that thehighest effectiveness ratings were given to B&B directories and to the Chamber ofCommerce Registration. Telephone book listings and newspaper advertisementsare considered relatively ineffective by operators. Results YBR Survey of Inn-Goers5, found the following sources of information used in planning trips:guidebooks, 85.8 percent; friends/relatives, 81.2 percent; magazine articles, 70.6percent; and Inn Association brochures, 54.8 percent. About half the personson this list had requested brochures published by Inn Associations and news-paper ads.

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1 1988 Michigan Bed Breakfast Guest Study. Dr. Edward M. Mahoney, Ning Na, and Dr. Donald F.Holecek. Michigan Travel Tourism and Recreational Center, Michigan State University.2 A Market Analysis of Minnesota’s Bed and Breakfast Guests, 1988. William C. Norman. The University ofMinnesota Tourism Center, St. Paul, Minnesota.3 Results YBR Survey of Inn-Goers, Yellow Brick Road, Fullerton, California, 1988.4 By Nancy A. Miller, Rollin Cooper, and John Gruidl, Recreation Resource Center and Small BusinessCenter, University of Wisconsin, Madison, Wisconsin.5Yellow Brick Road, Fullerton, California, 1988.

Appendix KQuestions to Answer When Choosinga Location and Building

To obtain and analyze the facts about a specific location, answer the followingquestions:

◆ Are the neighboring houses well kept?

◆ How close is the competition?

◆ Is there enough parking space allowable by zoning regulations?

◆ Is it on the street or off?

◆ Is the site easily accessible? How far is it from a freeway?

◆ Is it on a main highway or street so people see it when driving through?

◆ Are there any natural barriers?

◆ Is the site accessible to public transportation and attractions?

◆ What zoning, fire, building code, and health requirements must be met?

◆ Are there adequate utilities?

◆ What is the reputation of the owner of the property?

◆ Is it within two hours of a major metropolis?

◆ Will customers be willing to travel to the site?

◆ Are there nearby traffic generators, such as malls, tourist attractions, colleges,sporting events, hospitals, business, and industries that will draw customers?

◆ How close are restaurants?

◆ What is the overall trend in the number of travelers visiting the area?

◆ What is the quality of police and fire protection?

◆ What is the crime rate?

◆ How attractive is the landscape and outdoor living area?

◆ What is the trend toward future resale value?

◆ What is the overall estimate of the quality of the location in ten years?

◆ What are the liquor laws?

◆ What are the discrimination laws?

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Also answer the following questions with regard to the house or building1:

◆ What is the charm, character, and scenic appeal that will attract customers?

◆ What will be a guest's or passer-by’s first impression of the building?

◆ What is the condition of the building (lighting, wall surfaces, floors, win-dows, equipment, furnishings, plumbing, insulation, sound, heat, etc.)?

◆ Is there adequate telephone and cable T.V. service?

◆ How large are the bedrooms, dining room, parlor, and kitchen? How manybedrooms are there?

◆ Are there individual heat controls?

◆ Is there room to install more bathrooms? At what cost? (It is estimated thatabout fifty percent of guests will object to sharing a bathroom.)

◆ What is the arrangement for private quarters?

◆ Are there enough storage areas (for housekeeping supplies, food, lawn careequipment, recycling materials, and laundry facilities)?

◆ Is there an attractive office and check-in space?

◆ Is it free of pet, cigarette, and other odors?

◆ Is the building easily accessible for people with handicaps?

◆ What is the condition of utilities and water and sewage systems? Collectinformation and corrective costs on drainage, soil depth, source of water (city,privately owned wells and septic system, potable water), pollution control,storm sewers, sanitation sewers, water mains, and electrical power supply.

◆ Does the area or the basement flood?

◆ What is the cost and future availability of gas, electricity, and water?

◆ Is there room for expansion?

◆ Is there space for retail shops or space for additional revenue generators suchas meetings, parties, art exhibits, and weddings?

◆ Can catering be done?

◆ Is it free of radon, asbestos, underground tanks, etc.?

◆ What will be the future resale value of the building?

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1Adapted from the Mary E. Davis, Pat Hardy, Joann Bell, and Susan Brown, So . . . You Want To BeAn Innkeeper (San Francisco: 101 productions, 1985), p. 32.

Appendix LIdeas for Continental Breakfasts

All items served in your continental breakfast must be of high quality and plentiful.Provide a variety. High quality coffees and teas are very important to the success ofa continental breakfast. You should offer brewed coffee both regular anddecaffeinated. Consider offering a final cup of coffee “to go.” To please teadrinkers, provide several kinds of herbal and black teas, as well as a decaffeinatedvariety.

You might try offering champagne with strawberries, or variations such as champagnepunch, champagne and orange juice, or wine coolers. (Of course you must checkinto your liability before offering alcoholic beverages.) There are also many non-alcoholic fruit-based drinks you can serve such as a banana frappe, made by blending bananas and pineapple with orange and lemon juice.

Pastries, specialty breads, assorted bagels, toast, croissants, or scones, are the centerpieceof a classic continental breakfast. You should provide a variety of high qualitybaked goods served either warm or cold, with butter and assorted jams and jellies.

Decide whether you will serve this portion of the breakfast or allow your guests to servethemselves from a pastry bar. If you plan to serve breakfast, consider showcasingyour pastry selection on a tray or cart from which your guests can order.

If you decide on a self-service pastry bar, elegantly arrange a variety of danishes, sweetrolls, and breads on a linen tablecloth. Also set out small tubs of chilled fruit juiceand pots of coffee and tea. Be sure to replenish the pastry bar throughout thebreakfast hour so that it always look plentiful and attractive.

Fresh fruit is the perfect complement for a continental breakfast, especially if the fruit islocally produced and in season. Place the fruit on the table just before the guestsarrive. An example of an elegant fruit dish would be large glazed strawberries orblueberries (not available all year) served in long-stemmed crystal, or a plate ofcantaloupe wedges topped with kiwi slices.

You can also add variety by providing certain foods that require little or no preparation,such as individual cold cereals, assorted yogurts, and cheeses.

The presentation of the meal is as important as the food itself. Take care to selectgarnishes that add the right color and texture. A quality set of dishes and attractiveserving bowls are also very important.

Imaginative centerpieces can enhance the dining atmosphere. Create unusual arrange-ments that complement the dining room decor and the season of the year. In thefall, for example, you might arrange small colorful gourds and squash on a base ofleaves. Change your centerpieces from time to time to reflect the uniqueness of yourlocale or to add festivity to holidays and special events. You should also

Coffees and Teas

Wines and Fruit-BasedDrinks

Danishes, Sweet Rolls, andSpecialty Breads

Adding Variety

Finishing Touches

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carefully consider elements that affect the overall atmosphere such as music,lighting, decor, and aroma.

Choose an attractive eating area such as the dining room; a patio, porch, balcony,deck, or flower garden; the guest room itself (only if the space is largeenough); by a crackling fire, or by a window with a beautiful view.

Plan special table settings by using cloth tablecloths and napkins or attractiveplacemats and pretty china or dishes that complement your color scheme.Also add an interesting centerpiece (plan a theme according to the season).

Use decorative techniques for folding napkins. And if you know your guests aretraveling on a special occasion such as a birthday, anniversary, graduation,etc., make the event memorable by creating a centerpiece to help celebrate. Ifyou have a child-sized table and chairs, use them for children who are guests.Decorate with something the children can take with them.

Attractive Eating Places

Table Settings

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Appendix MWhich Form of Business ManagementIs Best for Me?

Proprietorship(One Person in SoleControl)

Some AdvantagesAbsence of formalities, red tape and organization expense.You are your own boss and not dependent on others.Avoidance of “double tax” on owners of corporations ineligible for small corpora-

tion tax benefits.Anticipated losses of new business may be set off against other income.

Some DisadvantagesUnlimited personal liability.No provision for continuity in case of absence, disability or death.No one with whom to make a buy-sell agreement in case of death.All profits are taxed as income to you as proprietor.Expansion can only come from after-tax dollars.If business grows, may eventually have to incorporate.

Some AdvantagesAbsolute right to select your business partners.Lower tax brackets for many-membered families actively engaged in the business.As a limited partner, you can put capital into the business without general

personal liability, but only if you are completely divorced from businessactivity or direction.

Can make buy-sell agreements to cover death or retirement.Liquidation of a retired or deceased partner’s interest can include a distribution of

earning taxable only to the recipient.

Some DisadvantagesUnlimited liability of general partners for acts of other partners.Federal tax uncertainties surrounding family and limited partnerships.Must share the profits of the business with partners.Cost of organizing partnership.Business can only expand on retained profits on which you pay income taxes even

though the income is retained in the business.Death of one partner may dissolve business.Danger of disagreement between partners with no way of resolving the stalemate

except through liquidation.

Partnership(Two or More Persons)

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Corporation(Consists of One or MorePersons)

Some AdvantagesLimitation of personal liability to amount of capital contributed.Perpetual existence.Ease of obtaining capital from a number of sources through issue of stock.Official status can be given to key employees by designation as directors and officers.Easier to grow and expand with dollars left after corporate tax, which may be lower

than individual tax.Corporation stock is an efficient way of making gifts.Inactive family members and others can own a share of the business.Stock is easier to probate and keep the business going.Buy-sell agreements may be made to liquidate the stock of a deceased stockholder.Pension, profit sharing, tax advantages and other fringe benefits.Permits various categories of investors—nonvoting stock, preferred stock.

Some DisadvantagesCosts of incorporation and corporate taxes.Organization and operation governed partly by statutes.Need for filing corporate papers and holding corporate meetings.Unless properly guarded against, minority stockholders can be almost completely

subject to the wishes of the majority.“Double tax” burden on corporate profits and dividends except where stockholders

are eligible for small corporation tax benefits.Retained earnings are lock-in until sale, liquidation or paid out as dividends.More complicated tax records and returns.

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From Starting A Business, a public service of the State Bar of Wisconsin.

Appendix NPlanning for a Tax Audit

The law: “weighty, complex, inscrutable, its seamless web waits to entangle the haplessbusiness owner at the first misstep,” recites the March 1990 issue of Entrepreneur.

With the recent flurry of Internal Revenue Service (IRS) innkeeper tax audits, this articleseemed appropriate, a pointed reminder that April is the month U.S. citizens pay, orattempt not to pay, the government what it demands.

Richard Engel, a Certified Public Accountant and President of Engel and Company,shares advice given to his large covey of inn clients on preparing for a tax audit.

With the tightening of home-based business tax laws and the increased success andprofessionalism of bed and breakfast and country inns, a review of your financialsituation is definitely in order. This discussion of legal liability and the potential taxconsequences is simplified and condensed to assist you in preparation for conversa-tions with your tax advisor.

A sub-chapter S-corporation which owns everything is an option Engel does not prefer.In this situation, the real estate, the business and the furniture, fixtures and equip-ment (FFE) are all within the corporation. Tax losses are limited to stockholder basis(capital and stockholder loans). Tax problems develop whenever S-corporation statusis lost or basis problems develop. Stockholders are taxed only as individuals, eventhough they gain the other advantages of the corporate structure.

Sole proprietorship or partnership owns all aspects of the inn. In this entity, the ownerliving on premises must allocate depreciable assets to personal and business uses.This allocation is measured by the more rigid home-based business law. For ex-ample, if you use an area at all to cook, eat or chat, it is viewed as personal space.Even the inn’s maintenance costs must be prorated and, at the very least, arequestionable under either of these legal designations. This allocation has not yetbeen tested in the courts. However, a private-letter ruling has been issued that iscontradictory to the interests of owner-innkeepers.

Traditional is what Engel calls a combination of personal ownership of land andbuildings and S-corporation ownership of FFE as well as corporate operation of thebusiness. A written lease between corporation and individual makes it possible forthe individual to receive depreciation benefits on all assets and still obtain businessloss benefits. Allocations between personal and business usage are not required here.However, the S-corporation must report the value of fringe benefits, such asshareholders living on premises (owner/innkeepers).

You probably have heard that setting up a corporation and doing the annual paperworkis more trouble than it’s worth. In reality, the government has done the smallentrepreneur a favor. Two primary corporate forms apply to inns—sub-chapter Sand the regular or C-corporation.

An Interview with RichardEngel, CPA

Ownership Options

But Isn’t a Corporationa Pain?

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A slight variation of the “traditional” form results from operating as a regular orC-corporation. A written lease still exists between the corporation and theindividuals; however, tax losses are passive and limited to $25,000 per year.Under the 1986 tax law revisions, income is divided into “baskets” (passive,earned and portfolio) and cannot be intermingled when claiming losses. Inother words, if you receive rent from the active operation of an inn, thedepreciation and interest losses cannot exceed $25,000 if it is a C-corpora-tion. Fringe benefits (i.e., health insurance and value of lodging), however,are not taxable for the C-corporation stockholders.

The C-corporation has the least amount of paperwork. It can end its fiscal year onany date, and the issue of allocating innkeeper space as a fringe benefit iseliminated. Losses may build up in the corporation, but the owners cannotreceive any tax benefit from them. Rent paid by the C-corporation needs tobe at arms-length. Rental losses are considered passive losses, subject to the$25,000 cap. In addition, at the time of sale, you will be double-taxed—as acorporation and as an individual.

Sub-chapter S-corporation is more involved and requires additional elections,compliance and, perhaps, deposits. All income and losses pass through to theshareholders. In a recent IRS ruling, income from lease contracts under the S-corporation (where your corporation pays rent on the building you ownseparately) is not passive income and is not subject to the $25,000 cap.However, an owner needs to bite the bullet and pay self-employment tax onthe fringe benefit of living on premises. But a few years after buying anexisting inn or operating a new one, you will recoup substantial tax benefits.

Incorporating for tax reasons just does not cut it with the IRS; you need a solid,valid business reason. With the broadening consumer base of this industry,along with the increase in utilization of staff and more sophisticated foodservice and preparation, incorporating may be a wise business decision for noother reason than to limit your liability in possible legal action. With a largermainstream consumer base comes another price to pay: the potentialattraction of a guest or two who may not be gracious and careful with yourinn and its furnishings. This is not meant to sound pessimistic—onlyrealistic. Innkeepers, and their individual assets, need to be protected. This isjust good business acumen.

You cannot arbitrarily change from one form of corporation to another. Addi-tional taxes, as well as time and other limitations, are involved. If you areconsidering incorporating your business or transferring your assets to acorporation, you should seek tax advice from a competent attorney andCertified Public Accountant.

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Innkeeping, Vol. 9, No. 4. April 1990. Richard J. Engel, CPA, President, Engel and Co., POB 1359,Manchester Center, VT 05255. (802)362-1946.

Appendix OExample of a Projected Profitand Loss Statement*

Gross Revenue JAN FEB MAR APR MAY JUNBed & Breakfast 220 715 1430 1870 1925 2365Gift Shop — 10 15 25 25 30 Total 220 725 1445 1895 1950 2395Less Cost of SalesFood 12 39 78 102 105 129Gifts 75 25 25 — — — Net Cost of Sales 87 64 103 102 105 129Gross Profit 133 661 1342 1793 1845 2266

Variable ExpensesRoom & Housekeeping Supplies 25 25 50 75 75 90Hourly/Part-time Employees — — — 175 225 225 300Food/Beverage Employees — — — — — — 30Utilities 90 90 90 90 90 90Towels & Linens 50 -— -— -— — 50 Total 165 115 315 390 390 560

Fixed Operating ExpensesMarketing 900 50 25 25 25 25Commissions — — — — — 25Office Supplies 15 10 10 10 15 10Telephone 70 70 70 70 70 70Travel & Entertainment — 50 200 — — 100Dues & Subscriptions 25 50 100 50 — —Auto 10 10 20 20 30 50Maintenance 200 150 100 100 100 100Outside Services — — — — — 120Insurance 75 75 75 75 75 75Legal & Accounting Fees 200 50 — — — 100Business Taxes 10 25 50 65 70 85Interest 675 675 675 675 675 675Salaries 10 15 25 100 100 120Owner’s Wages 150 150 150 150 150 250Other Expenses 90 90 90 90 90 90 Total 2430 1470 1590 1430 1400 1895

Total Expenses 2595 1585 1905 1820 1790 2455Net Profits/Loss -2462 -924 -563 -27 55 -189 (before taxes, debt service, and depreciation)

* This example is for a first year, six-room B&B, open 360 days, projected for 20 percent occupancy, and an average room rate of $55.00.These figures serve as illustrations only, and should not be interpreted as ideal or serve as a standard.

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JUL AUG SEP OCT NOV DEC TOTAL3850 3330 2860 2145 1925 1155 23,760

55 40 30 25 25 20 3003905 3340 2890 2170 1950 1175 24,060

210 180 156 117 105 63 1296 — — — — — — 125

210 180 156 117 105 63 14213695 3160 2734 2053 1845 1112 22,639

150 130 110 80 75 40 925 475 400 350 250 225 150 2775 60 50 40 20 — — 200 90 90 90 90 90 90 1080100 — — — — — 200

875 670 590 440 390 280 5180

25 25 25 25 25 25 1200 50 40 35 25 — — 175 20 15 20 10 10 10 155 70 70 70 70 70 70 840 — — — — 50 — 400 — — — — — — 225 50 50 50 40 20 20 370

100 100 100 100 50 50 1250 120 120 120 120 — — 600 75 75 75 75 75 75 900 — — — — — 200 550

135 120 100 75 70 45 850 675 675 675 675 675 675 8100 120 120 120 120 100 50 1000 250 250 250 250 150 150 2275

90 90 90 90 90 90 10801780 1750 1700 1675 1385 1460 19965

2655 2420 2290 2115 1775 1740 251451040 740 444 -62 70 -628 -2506

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Appendix PB&B Start-Up Costs

◆ Building acquisition, appraiser fees, independent investigations of mechanicalsystems and structural components, tax situation, etc.

◆ Home renovation, architect fees◆ Furnishings◆ Bedroom and bathroom items◆ Safety equipment (smoke detectors, fire extinguisher, exit light)◆ Utilities◆ Energy conservation improvements◆ Office equipment◆ Loan cost, loan closing cost◆ Accounting fees and equipment◆ Complimentary items and reading material for guests◆ Legal fees, licenses, permits◆ Insurance (homeowners, property damage, liability, business interruption,

workman’s compensation, hospitalization)◆ Membership fees for business-related associations◆ Initial advertising and promotion, sign cost◆ Security features◆ Cleaning equipment, staff, and supplies◆ Food inventory◆ Dishes and kitchen utensils◆ Automobile◆ Uniforms◆ Ice machine◆ Petty cash◆ Operating capital, cash reserve

It is recommended to project high for the following cost categories, and then base thecost on the cost per rentable room.

1. Acquisition - If you buy, include the down payment, closing costs, etc., anddivide the total by the number of rentable rooms. If you lease, include the cost ofthe first and last month’s rent and security deposit, other fees, etc.

2. Renovation and Furnishings - These costs will vary widely depending on thecondition of the house but may include costs for linens, wall coverings, drapes,fixtures, furnishing for the guest rooms and common rooms, kitchen equipment;bathroom additions; paving and landscaping; painting (interior and exterior);electrical work; plumbing (sewer, gas, water); and others. Add the costs togetherand divide by the number of rooms rented. Find out about available financingarrangements and develop a schedule for any necessary construction.

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3. Start-up Working Capital and Cash Reserve - These are costs incurred priorto opening. They might include the owner’s living costs during the renova-tion period, office and stationery supplies, purchase or lease of equipment andinstallation, starting inventory, utility deposits, legal and accounting service,market research, licenses and permits, insurance, promotional materials(advertisements, brochures, logo, signs, business cards), travel costs and feesfor trade associations, mortgage or lease payment, owner’s salary, emergencyneeds, petty cash, etc. These initial costs may seem high, but they includeboth a home and a business opportunity. Again, divide the total by thenumber of rooms. Bankruptcy could occur if there are no cash reserves forlosses during the period to reach break-even occupancy. Project the occu-pancy needed to break even, and the point in time (months) when you canexpect to make a profit. It may take two or more years.

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Appendix QSample Chart of Accounts

In order to establish a consistent standard of comparison (as is currently available inthe rest of the lodging industry), bed & breakfast/country innkeepers are encouragedto set up their accounts as listed here.

Revenue AccountsRoom Revenue (Room rental excluding sales and bed

taxes.)

Food & Beverage Revenue (Meals, catering, liquor, etc.)

Other Revenue (Weddings, entertainment, conferences,books, souvenirs, etc. Does notinclude room rental.)

Operating Expense Accounts

Food (All food and liquor for the inn.)

Room and Housekeeping Supplies (Supply items such as soap, toilet paper,light bulbs cleaning supplies, laundrysoap, notions, toiletries, etc.)

Hourly or Part-time Employees (All wages and payroll taxes such asFICA, Worker’s Comp., etc.)

Food & Beverage Employees (All wages and payroll taxes as above forfull-time and part-time food &

beverage employees, if the inn serves mealsother than breakfast.)

Utilities (Utilities including trash, gas, electric,water, etc.)

Towels & Linens (Purchase price of all towels, linens,blankets, pillows, bathrobes, etc.)

Marketing - Advertising & Promotion (Brochures, magazine and newspaperads, printing, direct mail lists, etc.)

Commissions & Bank Card Charges (Agent commissions, referral services,credit card fees.)

Office Supplies (Paper, tape, pens, letterhead, etc.)

Telephone (Telephone and related expenses.)

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Travel & Entertainment (Travel-related expenses and businessentertainment.)

Dues & Subscriptions (Dues to associations and subscriptionsto services, magazines, etc.)

Auto Expenses (Automobile gasoline, repair andmaintenance, car leasing.)

Maintenance, Repairs, and Fixtures (Materials for maintenance and repair.Also include miscellaneous purchasesunder $300 for appliances, fixtures,furniture, etc.)

Outside Services (Fees for outside services such asgardening, maintenance, laundry, etc.)

Insurance (Non-payroll insurance such as fire,theft, auto, liability, etc.)

Legal & Accounting Fees (Fees for legal and accounting services.)

Business Taxes & Fees (Property taxes and business fees.Exclude sales and bed tax and incometax.)

Interest Expense (Interest paid on all types of business-related loans, excluding any mortgages.)

Salaried or Permanent Employees (All wages and payroll taxes such asFICA, Worker’s Comp., etc. Do notinclude owners.)

Owners’ Wages or Draw

Other Expenses (Money actually taken out of thebusiness by the owner(s). All expenseitems that do not belong to any otherfixed or variable account.)

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From Innkeeping’s Bed & Breakfast/Country Inn Survey. For detailed report, call 805/965-0707.

Appendix RExamples of B&B-RelatedZoning Ordinances(Warsaw, Indiana; Galena, Illinois)

BEFORE THE PLAN COMMISSION

OF THE CITY OF WARSAW,

INDIANA

PETITION FOR AMENDMENT TO

THE ZONING ORDINANCE OF

THE CITY OF WARSAW

IN THE MATTER OF THE PETITION OF WILLIAM S. HAMBRIGHT, etux. FOR AMENDMENT OF THE ZONING ORDINANCE OF THECITY OF WARSAW

The petitioners, William S. Hambright and Deborah Hambright, husband andwife, by counsel, respectfully petition the Plan Commission of the City ofWarsaw, for amendments to the Zoning Ordinance and in support thereofsay the following:

1. That they are proceeding under Article 7 of the Zoning Ordinance ofWarsaw, Indiana as revised in April, 1981.

2. That they are the owners of more than fifty percent (50%) of the areainvolved in the petition.

3. That they propose an amendment to Article 11: Definitions to read asfollows:

Bed and Breakfast FacilityAn owner occupied, or owner employee occupied, architecturally or historically

significant residence containing no more than six (6) guest rooms for hire, forlodging by prearrangement for periods not to exceed three (3) consecutiveweeks and providing for occasional meals daily (usually breakfast) and not ahotel, boarding or lodging house.

4. That they propose an amendment to Article 12: Zoning District Regulations,specifically, Article 12.4.5 List of Special Exceptions to read as follows:

Bed and breakfast facilities shall be permitted in the R-2 and R-3 Zone Districts,provided that:

(a) the owners of such facility obtain annually on or before February 15, a permitor license from the building commissioner of the City of Warsaw for theoperation of said facility.

5. That your petitioners request a hearing upon this petition after public noticein accordance with the laws of the State of Indiana.

WHEREFORE, your petitioners request the Plan Commission for its approval ofthe proposed amendment and that upon its approval that its recommendationbe forwarded to the Common Council of the City of Warsaw for hearingthereon.

Rasor, Harris, Lemon & Reed

By______________________________________Rex L. ReedAttorney

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CITY OF GALENA, IL 61036

CITY ORDINANCE

SECTIONS ON GUEST HOUSE

AND GUEST HOMES

3.2.79 Garage, Public. A building other than a private garage, used for thecare, incidental servicing and sale of automobile supplies or wheremotor vehicles are parked or stored for remuneration, hire or salewithin the structure, but not including trucks, tractors, truck-trailersand commercial vehicles exceeding one and one-half (1-1/2) toncapacity.

3.2.80 Guest House. Sleeping quarters for rent within a dwelling and/ordetached accessory building for use by temporary guests of the owneror agent of the premises.

3.2.81 Grade: Streeta. For buildings having walls adjoining one street only, the elevation ofthe street at the midpoint of the wall adjoining said street.b. For buildings having walls adjoining more than one street, theaverage of the elevation of the street at the midpoints to the wallsadjoining said streets.c. For buildings having no wall adjoining the street, the average levelof the finished surface of the ground adjacent to the exterior walls ofthe building.Any wall approximately parallel to and not more than twenty (20) feetfrom a street line is to be considered as adjoining the street for thepurpose of this definition. Where no street is near or established, thegrade shall be determined by the City Engineer.

3.2.82 Height of Building. The vertical distance measured from the streetgrade or equivalent established grade to the highest point of the frontfacade or uppermost habitable floor, whichever is greater.

3.2.82(A) Historic District. That portion of the City of Galena located within“The Original City” as recorded in the Courthouse of Jo DaviessCounty on 28 March 1838 and all subdivisions added to the Cityprior 31 December 1859. The same boundary is recognized by bothlocal ordinance and the National Register of Historic Places andrepresents an area predominantly characterized by nineteenth centuryarchitecture.

3.2.82(B) Historic District Design Guidelines. Architectural guidelines aspresented in “Architectural Styles and Design Elements of the MainStreet Buildings of Galena, Illinois, 1830-1890” by Tacie N. andThomas A. Campbell and any other design guidelines that may beadopted by the City of Galena in the administration of the GalenaHistoric District.

3.2.83 Home Occupation. The conduct of an art or profession, the offeringof a service, the conduct of a business or the handicraft manufacture ofproducts for gain in accordance with provision in Section 11.2.1.1.There shall be no exterior display or sign except as allowed in signregulations for the district in which such “home occupation” islocated, and there shall be no exterior storage of equipment ormaterials used in connection with the home occupation.

8.4.2.4 That spacing between principal buildings shall be at least equivalent tosuch spacing as would be required between buildings similarlydeveloped under the terms of this ordinance on separate zoninglots, due consideration being given to the openness normallyafforded by intervening streets and alleys; and,

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8.4.2.5 That along the periphery of such planned developments, yardsshall be provided as required by the regulations or the district inwhich said development is located.

8.5 RESERVED8.6 Guest Homes. Guest homes, as defined in Section 3, are of such a

nature as to require additional standards to insure the integrity ofthe neighborhoods of which they are a part.

8.6.1 The following additional standards shall be applied to each guesthome:a. A maximum of four (4) guest units shall be permitted on onezoning lot.b. The owner or his agent mush reside on the premises or immedi-ately adjacent to the house, this distance not to exceed onehundred (100) feet.c. Proof of registration with the Illinois Department of Revenueand Jo Daviess County for tax purposes must be submitted to theOffice of the Zoning Administration within ninety (90) days ofCity Council approval of the Special Permit.d. All applicable state and local codes and ordinances must becomplied with or the special use permit shall be subject to revoca-tion.

Additional Concerns Regarding Guest Homes:

1. Should an applicant wish to prepare and serve food in a guest home, theymust obtain a permit from the Health Department in compliance with theState Restaurant Code.

2. Adequate transportation routes to the guest home and available parking mustbe provided.

3. That the guest home provide the proper number of exits as required by StateFire Codes.

4. That the guest home must maintain the appearance of a residential dwelling. 5. That signage and exterior lighting be kept at a minimum.

First time guest homes are usually only given a two (2) year permit.

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