How to work out if your B&B could be profitable

Carlton Boyce / 27 January 2017

If you’re hoping to start your own B&B, you’ll need to consider these costs.



Giving up your proper job to set up your own bed and breakfast is a familiar dream, and it’s one that could very well work for you – if you can make the sums work. While the basic calculations are straightforward, here are some hard-won costs of running a B&B that you might not have considered.

Breakfast

The cost of breakfast is probably going to be greater than you think; our bacon and sausage costs about 50p per item, even though we rear our own pigs, which is £1.50 before you start. 

Then there is the cost of hen food for the eggs we serve plus tomatoes, mushrooms, butter, jam, cereal, milk, coffee, tea, sugar and bread. 

Plus homemade yoghurt and fruit compote, juice and smoothies. We also bought a coffee machine that grinds the coffee beans, which saves us about 5p per cup over five years but did entail laying out £500 up front.

Then there is the cost of all the extra plates, glasses, jugs, bowls, cutlery, place mats, table clothes, napkins, teapots, and mugs you’ll have to buy and replace at frequent intervals. 

We totted it all up and averaged it out over five years, dividing that sum by the expected number of guest nights at a 50 per cent occupancy level.

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Occupancy level

An occupancy level of 50 per cent is a good place to start when you’re doing the initial calculations. Big hotels might aim for 90 per cent and higher but half that would mean being as busy as most people would like to be.

Don’t forget the VAT threshold too. It might seem unattainable but you might be surprised how quickly you get close and exceeding it triggers compulsory VAT registration and a loss of a fifth of your income.  

Bedding and towels

My number one tip is to pay a company to collect your dirty laundry and replace it with clean every week. Trust me, you don’t have the time, space or energy to do it all yourself. This will cost a couple of pounds per person per day, which is the best money you will ever spend.

Don’t forget to budget for the cost of throws, cushions and curtains, most of which will need replacing every couple of years. Oh, and you’ll probably need to redecorate every three years too, although carpets tend to last quite well and might only need replacing every other time.

The other major cost is mattresses. Please don’t skimp on quality and expect to replace them every five years, no matter what the manufacturer claims. Spending another hundred pounds per bed on a decent mattress topper/protector is money well spent too because accidents can, and do, happen.

Incidentally, it’s worth splashing out on the mattress and bedding and after spending far more than we felt comfortable with we’ve been amazed at the number of people that have commented on how comfortable our beds are. (We even keep a note of the make and model of the mattress too. I wish we were on commission…)

Ten tips on running a successful bed and breakfast

Electricity, heating oil and gas

We saw the cost of our utilities rise by about 50 per cent after opening as a B&B compared to running a private home. People are much more profligate in their use of heating and lighting than they are at home and they will often put their freestanding room heater on and then open a window. (By the way, you’ll need to budget for a heater and freestanding cooling fan per room too.)

Rubbish collection

You might get away with your usual domestic rubbish collection but if your bin men report you (which is a very good reason to tip them well at Christmas…) you might have to pay commercial rates.

Listing fees

The biggest irritation in running a B&B is that everyone wants money from you. They’ll try and persuade you by rationalising that it’s “only £50”. The trouble is of course that all those £50 outlays soon add up.

So exercise caution in where you list your B&B. TripAdvisor is free (we did the maths and the business listing option didn’t work for us) and our experience is that it just isn’t worth paying to list your accommodation anywhere other than the big two or three online booking websites. As a rule of thumb, if you’ve never heard of them then I wouldn’t bother…

Eight ways to raise money for a new business

Transaction fees

You’ll pay a commission on most online bookings that are made; in some cases this can be as high as 20 per cent. 

We know a lot of people who are happy to accept that as the cost of doing business in a virtual world but I can’t help thinking they’re missing a trick; we’ve had significant editorial coverage (which is advertising by another name) and none of it to date has come about as a direct result of me being a journalist.

We simply identified the PR agencies that work with the various tourist agencies and outlets in North Wales and contacted them to offer free stays for bona fide journalists. 

This, plus a comprehensive library of high-quality images that are made freely available for editorial use, has seen us featured in a number of magazines with large circulations. (Magazines and newspapers love a ready-made feature when they’ve got an unexpected gap and a ready-made feature often happens because they’ve got a great image to hand…)

You’ll never get away from paying commission completely (well, you can, but I wouldn’t recommend it) but if your website offers a small discount if people book direct via the phone or email, you can split that commission with them everyone wins.

You’ll also need a ‘booking portal’ to handle any online bookings that are made through your website. We used to pay for that but have now discovered the aptly named freetobook.com. They don’t charge for taking and processing a booking, although we pay them £1 per booking to update all our other online booking websites, which is the best pound we spend after paying for someone to do the laundry. 

They’re also extraordinarily friendly and helpful and go out of their way to give an unusually high level of customer service.

Insurance

You’ll need to insure the house and contents and you’ll also need third-party liability insurance in case anyone injures themselves while they’re staying with you. (Incidentally, the high cost of liability insurance for the climbing frame was the very reason we removed it…)

Other things that might catch you out are the need to grit and salt all walkways when it’s frosty and keep an eye on any loose or dangerous branches on any trees that are on your property. Both might invalidate your insurance if your negligence causes an accident.

Holidays and days off

You probably won’t want to take a holiday (or be able to afford one…) in the first few years but you should budget for the loss of income by taking one as soon as you can. 

We allow for a two-week holiday in the summer and a week at Christmas. We are also closed on Sunday nights to allow us to spend a day with our children and start the week without having to get up early to cook breakfasts.

You’ll have your own priorities and busy periods but the double whammy – loss of income plus the cost of the actual holiday – can’t be avoided.

Back-up systems

We live at the end of a mile-long private road that is sometimes impassible when it snows. This means we’ve spent thousands on a snow plough for the quad bike plus a gritter/salter, shovels and a snow blower for the paths. Plus a couple of tonnes of rock salt every winter.

We also lose our electricity supply in bad weather too, so we’ve been forced to buy a large generator at considerable cost - and then had to employ an electrician to install the necessary wiring and a huge changeover switch.

This is known as contingency planning in the real world and is something that you’ll need to do as well. You start with the question ‘what happens if’ and then add in the most likely scenarios. 

I know that it sounds like an expensive exercise (and it is - I estimate that we’ve spent over £10,000 in total on the various back-up systems we have) but the alternative is stranded and potentially injured guests, making it money well spent.

Next article: How to turn your home into a successful bed and breakfast >>>

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