How to Start a Bed & Breakfast

Despite the rise of home rental apps like Airbnb, traditional bed and breakfasts, or B & Bs, remain a popular choice for romantic getaways and weekend vacations. If you like hosting guests and live in an appealing area, starting a bed and breakfast could be a great way to make a living or add another income stream, while giving people memories they’ll never forget!

Starting a bed and breakfast will have challenges, so it’s wise to understand what’s involved before you jump in. Fortunately, you’ve come to the right place: this step-by-step guide is full of insights that will help you develop and launch your own B & B and put you on the road to entrepreneurial success.

Step 1: Decide if the Business Is Right for You

Pros and Cons

Starting a bed and breakfast has pros and cons that you should consider before deciding if the business is right for you.

Bed & breakfast industry trends

A major trend today is the rise of the multi-billion-dollar home-stay lodgings market, led by Airbnb and VRBO. Learn more about this booming industry in this article on starting an Airbnb. It’s probably a good idea to list your B & B on those sites, as well as on your own website, to boost awareness, customer reviews, and occupancy rates.

Industry size and growth

The bed & breakfast and hostel accommodations industry in the US is well on the way to a rebound after the pandemic dip of 2020.

• Industry size and past growth – The market is valued at $1.7 billion, according to German research firm Statista.((https://www.statista.com/statistics/1174136/bed-and-breakfast-and-hostel-market-size-us/)) It experienced modest growth prior to the pandemic, says market analyst IBISWorld.((https://www.ibisworld.com/united-states/market-research-reports/bed-breakfast-hostel-accommodations-industry/)) 
• Growth forecast – The market is expected to grow nearly 2% in 2022.((https://www.ibisworld.com/industry-statistics/market-size/bed-breakfast-hostel-accommodations-united-states/)) 
• Number of businesses – There are around 8,000 B & B establishments and hostels in the US.((https://www.ibisworld.com/industry-statistics/number-of-businesses/bed-breakfast-hostel-accommodations-united-states/))
• Number of people employed – More than 20,000 people are employed in the B & B and hostel accommodations industry.((https://www.ibisworld.com/industry-statistics/employment/bed-breakfast-hostel-accommodations-united-states/)) 

Trends and challenges

Domestic tourism is expected to improve with the lifting of pandemic restrictions. Consumers these days want B & Bs that offer a unique experience, such as:

• Live entertainment, top-notch dining, or close proximity to local attractions
• Safety precautions, including online check-in and disinfectant cleaning
• Workspaces for remote workers

The industry faces some challenges like:

• Presence of new COVID-19 variants
• Competition from Airbnb and VRBO

Consumer spending

• Average consumer spend – The average American household planned to spend more than $2,000 for a summer vacation in 2021, according to the Vacation Confidence Index 2021 of Allianz Travel.((https://www.allianztravelinsurance.com/travel/vacation-confidence-index/2021-summer-vacation-spending-all-time-high.htm))
• Potential customer base – Around 2.3 billion Americans went on an overnight domestic trip in 2019, according to the US Travel Association.((https://www.ustravel.org/system/files/media_root/document/Research_Fact-Sheet_US-Travel-and-Tourism-Overview.pdf))
• Average prices – The average B & B room costs $170 per night.

What kind of people work in the bed & breakfast industry?

• Gender – Three in four innkeepers in the US are female. The rest are male.((https://www.zippia.com/innkeeper-jobs/demographics/))
• Average level of education – Half of innkeepers hold a bachelor’s degree. They usually study business, hospitality management, or psychology.((https://www.zippia.com/innkeeper-jobs/education/))  
• Average age – Most innkeepers are between 35 and 46 years old.((https://www.zippia.com/innkeeper-jobs/demographics/#age-statistics))

How much does it cost to start a bed and breakfast business?

Starting a B & B costs anywhere from $75,000 to $300,000 or more. The largest expenses are a down payment on the house, renovations, furniture, and décor. A home in a good location with enough space and bedrooms is going to be pricey. It may not need renovations and could even come fully furnished, but you should expect a down payment of at least $50,000.

How much can you earn from a bed and breakfast business?

The average B & B room costs $170 per night, and you should be able to achieve a profit margin of about 70%.

So if you have five rooms and average 50% occupancy your first year, you’d bring in over $150,000 in annual revenue. This would mean almost $110,000 in profit, assuming that 70% margin. As your brand gains recognition, you could increase occupancy to 75%. With expected annual revenue of over $230,000, you’d make over $160,000.

What barriers to entry are there?

There are a few barriers to entry for a bed and breakfast. Your biggest challenges will be:

• A down payment on a large home in a good location will be $$$
• You’ll likely need to uproot your life and move to a new area

Related Business Ideas

If you’re still not sure whether this business idea is the right choice for you, here are some related business opportunities to help you on your path to entrepreneurial success.

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Step 2: Hone Your Idea

Now that you know what’s involved in starting a bed and breakfast, it’s a good idea to hone your concept in preparation to enter a competitive market.

Why? Identify an opportunity

Research bed and breakfasts in the area to examine their services, price points, and customer reviews. You’ll want to come up with a concept that will be in demand, but you also should look for a good location with few B & B options.

You might consider targeting a niche market by specializing in a certain aspect of your industry, such as a B & B for romantic getaways, or a B & B for older couples.

This could jumpstart your word-of-mouth marketing and attract clients right away.

What? Determine your products or services

In addition to a room and breakfast, you could offer:

• Three homemade, locally sourced meals every day
• Entertainment, such as live local music acts
• Transport to local attractions

How much should you charge for a bed and breakfast?

Prices for bed and breakfasts range from $85 to $250 per night, with an average of $170. Your main expenses will be your mortgage, taxes, food and cleaning supplies. Your labor costs will be minimal if you do the work yourself or have family members help you.

Once you know your costs, use the Step By Step profit margin calculator to determine your price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Who? Identify your target market

Your target market is probably going to be more established people with higher incomes. You’re most likely to find these people on Facebook or LinkedIn.

Where? Choose your business premises

You can find a house or building to rent in your area on sites such as Craigslist and Crexi.

When choosing a location for your bed & breakfast, you may want to follow these rules of thumb:

• Central location accessible via public transport
• Ventilated and spacious, with good natural light
• Flexible lease that can be extended as your business grows
• Ready-to-use space with no major renovations or repairs needed

Step 3: Brainstorm a Business Name

Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.

Here are some ideas for brainstorming your business name:

• Short, unique, and catchy names tend to stand out
• Names that are easy to say and spell tend to do better
• The name should be relevant to your product or service offerings
• Ask around — family, friends, colleagues, social media — for suggestions
• Including keywords, such as “bed and breakfast” or “B & B”, boosts SEO
• Choose a name that allows for expansion: “Jim’s Bakery” over “Jim’s Cookies”
• Avoid location-based names that might hinder future expansion
• Use online tools like the Step by Step business name generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.

Step 4: Create a Business Plan

Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:

• Executive Summary: Brief overview of the entire business plan; should be written after the plan is complete.
• Business Overview: Overview of the company, vision, mission, ownership, and corporate goals.
• Product and Services: Describe your offerings in detail.
• Market Analysis: Assess market trends such as variations in demand and prospects for growth, and do a SWOT analysis.
• Competitive Analysis: Analyze main competitors, assessing their strengths and weaknesses, and create a list of the advantages of your services.
• Sales and Marketing: Examine your companies’ unique selling propositions (USPs) and develop sales, marketing, and promotional strategies.
• Management Team: Overview of management team, detailing their roles and professional background, along with a corporate hierarchy.
• Operations Plan: Your company’s operational plan includes procurement, office location, key assets and equipment, and other logistical details.
• Financial Plan: Three years of financial planning, including startup costs, break-even analysis, profit and loss estimates, cash flow, and balance sheet.
• Appendix: Include any additional financial or business-related documents.

If you’ve never created a business plan yourself before, it can be an intimidating task. Consider hiring an experienced business plan writer on Fiverr to create a professional business plan for you.

Step 5: Register Your Business

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business!

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to bed and breakfasts.

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state.

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your bed and breakfast will shape your taxes, personal liability, and business registration requirements, so choose wisely.

Here are the main options:

• Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
• General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
• Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
• C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
• S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using ZenBusiness’s online LLC formation service. They will check that your business name is available before filing, submit your Articles of Organization, and answer any questions you might have.

Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN.

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

The IRS website also offers a tax-payers checklist, and taxes can be filed online.

It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.

Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

• Bank loans: This is the most common method, but getting approved requires a rock-solid business plan and strong credit history.
• SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
• Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
• Venture capital: Offer potential investors an ownership stake in exchange for funds, keeping in mind that you would be sacrificing some control over your business.
• Crowdfunding: Websites like Kickstarter and GoFundMe offer an increasingly popular low-risk option, in which donors fund an entrepreneur’s vision.
• Personal: Self-fund your business via your savings, the sale of property or other assets, and support from family and friends.

Bank and SBA loans are probably the best option for funding a bed and breakfast business.

Step 8: Apply for Licenses/Permits

Starting a bed and breakfast business requires obtaining a number of licenses and permits from local, state, and federal governments.

Federal regulations, licenses, and permits associated with starting your business include doing business as, health license and permit from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits.

You need to make sure that the house that you choose is zoned for short-term rentals as a B & B. If not, you’ll need to apply for a variance with the local government. You may also need state-level licenses and local county or city-based licenses and permits. 

The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Step 9: Open a Business Bank Account

Before you start making money you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your bed and breakfast business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

• General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
• Business Property: Provides coverage for your equipment and supplies.
• Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
• Worker’s compensation: Provides compensation to employees injured on the job.
• Property: Covers your physical space, whether it is a cart, storefront, or office.
• Commercial auto: Protection for your company-owned vehicle.
• Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
• Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of any of the above insurance types.

Step 11: Prepare to Launch

As opening day nears, prepare for launch by reviewing and improving some key elements of your business.

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.

You can use industry-specific software, such as Little Hotelier, Cloudbeds, or ResNexus, to manage your scheduling, bookings, and payments.

Accounting

• Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero.
• If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial.

Marketing

Some of your business will come from the casual passerby or online visitors, but still you should invest in marketing! Getting the word out is especially important for new businesses, as it’ll boost customer and brand awareness.

Once your website is up and running, link it to your social media accounts and vice versa. Social media is a great tool for promoting your business because you can create engaging posts that advertise your products:

• Facebook: Great platform for paid advertising, allows you to target specific demographics, like men under age 50 in the Cleveland area.
• Instagram: Same benefits as Facebook but with different target audiences.
• Website: SEO will help your website appear closer to the top in relevant search results, a crucial element for increasing sales. Make sure that you optimize calls to action on your website. Experiment with text, color, size, and position of calls to action such as “Book Now”. This can sharply increase purchases.
• Google and Yelp: For businesses that rely on local clientele, getting listed on Yelp and Google My Business can be crucial to generating awareness and customers. 

Kickstart Marketing

Take advantage of your website, social media presence and real-life activities to increase awareness of your offerings and build your brand. Some suggestions include:

• Competitions and giveaways – Generate interest by offering prizes for customers who complete a certain action, such as 20% off your first night.
• Signage – Put up eye-catching signage at your store and website.
• Flyering – Distribute flyers in your neighborhood and at industry events.
• In-Person Sales – Offer your products/services at local markets, trade shows.
• Sponsor events – You can pay to be a sponsor at events that are relevant to your target market.
• Post a video – Post a video about your bed and breakfast. Use humor and maybe it will go viral!
• Start a blog – Start a blog and post regularly. Change up your content and share on multiple sites.
• Seek out referrals – Offer incentives to generate customer referrals to new clients.

Develop your website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism. They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google.

You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your bed and breakfast meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your bed and breakfast business could be:

• Our home is your home away-from-home
• Bed, breakfast, and live music!
• Lively B & B in the arts district

Optimize calls to action. Experiment with text, color, size, and position of calls to action such as “Book Now”. This can sharply increase purchases.

Networking

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a travel agency, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in the tour industry for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks. You’ll probably generate new customers or find companies with which you could establish a partnership. Online businesses might also consider affiliate marketing as a way to build relationships with potential partners and boost business.

Step 12: Build Your Team

If you don’t live at your B & B, you will need workers to fill various roles. Potential positions for a bed and breakfast business would include:

• Desk Clerk – Check-ins and check-outs, customer service
• Housekeepers – Cleaning rooms, bathrooms, and kitchen
• Cook – Prepare breakfasts and other meals
• Marketing Lead – SEO strategy, social media

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need.

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent.

Step 13: Start Making Money!

Many travelers love the coziness and warmth of a B & B over a stale hotel. It’s a billion-dollar industry that you can tap into and make a healthy profit. Running a bed and breakfast also offers a unique lifestyle in which you constantly serve as host to a steady stream of interesting people.

You’ve educated yourself with the right information, and now you’re ready to start your entrepreneurial journey into B & B life.