Ten tips for buying or selling a B&B
Thinking about buying or selling a bed and breakfast? David Weston, chairman of the B&B Association, offers ten top tips.
Tips for buying a B&B
1) Research the area (and competition) thoroughly
Before buying, check out your target area and assess the demand for B&Bs. Look at the prices and customer reviews, both for your prospective purchase and for its key competitors nearby.
Is the market buoyant? Is it growing? How is your target B&B doing compared with the competition? Is there room for improvement? Will business be boosted by a planned new local attraction, or easier access (a new road, for instance), or might it be damaged by a new budget hotel chain opening nearby?
2) Find out why the owners are selling
This is a key question and of course there are many good reasons for owners to sell. However, you need to know if the property is being sold because the business is declining, unviable, or threatened by imminent development which may spoil the view or create noise, for example.
Ask questions!
3) Ask for the last three or four year's accounts and study them
Study the accounts, making sure they tell a full picture and hold no surprises. Ask questions about occupancy rates and try to gauge what scope there is to improve occupancy and/or raise prices.
Ideally the last three or four years' accounts should show consistency and a steady improvement.
4) Check what is included in the sale
Besides the building itself, you need to know whether other assets necessary to the business are included in the asking price or would be charged as extras. Are the website and domain name, the customer database and any equipment and fittings necessary to the business included?
Are you buying the trading entity, e.g. the limited company, if it is one? If not, you may have the effort and potential cost of re-establishing trading relationships with distribution partners, payment processors, the booking management system provider, and others.
5) Does it (or can it without huge expense) comply with regulations?
As with the property survey (also vital), some careful checking now may save you a lot of expense later - and that is especially important if you are buying a house that is not currently a B&B, for future B&B use.
You need to be fairly sure what major work may be needed - e.g. a fire alarm system (which might mean redecoration), fire doors, emergency lighting.
Tips for selling a B&B
1) Think ahead a few years before a sale
Most buyers will be looking for straightforward financial accounts that do not need adjustment and show consistent (and ideally steadily growing) sales and profits. Do think well ahead and run your business to achieve that, if you can.
2) Explain clearly why you are selling
All buyers will want to understand the real reasons you are selling, so think carefully about that.
Your buyer will understand if, for instance, you have family reasons or must relocate, or are simply retiring in a planned way and wanting to pass on a thriving business. You may lose a sale if the buyer thinks that he/she has not been told the full picture.
3) Make sure the property is presented well
As with any property sale, presentation is vital. It may be well worth spending a bit to improve the garden, adding or refreshing planters or window boxes or repainting or redecorating tired areas.
4) Try a specialist B&B sales channel as well as a local estate agent
Most B&Bs and guest houses sell through the standard residential property market, as they are often interchangeable with family homes (i.e. they can be converted back to family use). So often, your first port of call will be the best local estate agent - who will of course advertise the property nationally online too.
However, it may also be worth considering how you specifically reach existing B&B owners, who may be looking to relocate. For example, the B&B Association has a 'B&Bs For Sale' page on its website, which is checked out by both prospective B&B buyers looking to enter the industry, and existing owners thinking of making a move.
5) Try to avoid giving warranties or guarantees
Your buyer's lawyer may request warranties about things like forward bookings, liabilities etc. They may even request that you give guarantees. Including guarantees related to regulatory compliance (for example, promising to meet future costs, for a given time period, of meeting compliance standards should a regulator request work be done).
Clearly it is in your interests to resist these as far as you can and to sell the property and business 'as seen', passing the risk to the buyer on completion.
Good luck with the transaction!
David Weston, Chairman of the award-winning Bed & Breakfast Association, has over 30 years' experience in travel and tourism, is a Fellow of the Tourism Society (FTS), sits on the Government's Tourism Industry Council and is the co-author of the book 'How to Start and Run a B&B'.
At Direct Line for Business, we offer personalised insurance cover for your bed and breakfast or guest house.
Want to know the difference between a B&B, guest house and hotel? Find out more here.