When the time comes that you are finally ready to sell your B&B, will your B&B be ready to sell? Will a buyer be willing to pay for the potential that you feel your B&B has? B&B owners can't always predict the future, will your health hold up? How about disability? Will you want to sell your Inn as early as tomorrow?

It is prudent to plan now for the sale of your property which could happen next month or may not take place for years. By that I mean take the steps to keep your property as appealing as possible at all times. Maintain the complete property in as new a condition as possible. There is no quick solution to neglected maintenance. Buyers know the difference between a well maintained property and one that has been given a recent coat of paint. Buyers are more savvy now, they have access to hundreds of B&Bs for sale on the internet, and it is not unusual for a buyer to visit fifteen or more Inns before arriving at a decision as to which Inn to purchase. Clearly, step one is to keep your property appealing.

Step two has to do with the documentation of the financial operation of your Inn. Operating statistics are a must, and buyers want to see at least the three most recent years of income and expenses. The higher your "reported" gross income is, the better off you will be at sale time. The Gross Revenue Multiplier (GRM) is a common calculation used to arrive at the sales price for an Inn. Most Inns we have sold recently have been priced in the four to six multiple range of gross income. As an example if your Inn has a gross income of $100,000, then the sales price should fall in the $400,000 to $600,000 area.

$100,000 x 4 = $400,000; $100,000 x 6 = $600,000.

This is normally a fair price for both the seller and the buyer, as the buyer can then meet mortgage and operating expenses and still have an adequate return on his cash investment. It must be said however that many B&B sales fall outside of this four to six GRM range and the reasons are many. A property which has underutilized buildings or structures or vacant land that can be used for expansion is a good reason as is Historical property, which is always hard to evaluate.

Try keeping your Inn expenses in two categories. One category would include only the very basic property or Inn expenses, which are absolutely essential in the operation on the Inn. These would include property taxes, insurance, basic utilities, advertising, Guest breakfast costs, Inn supplies, bank charges and the like. The second category would include all the other expenses that the IRS tells us we can deduct from our taxable income such as depreciation, all insurance other than property and liability, one time repairs and the necessary supplies, tools, subscriptions, dues, entertainment, convention charges, legal and accounting and the like.

This leads to Income Capitalization. If you have done everything possible to bolster the gross income, then subtracting your category one basic Inn expenses, should leave a very healthy net return before debt. Net income is always divided by a capitalization rate (cap rate) to arrive at market value. The cap rate is a percentage return on investment used in business investments, and can range from a low 6% return to a high of 12% return. As an example, using a gross income of $100,000 again, and assuming that basic Inn expenses are $46,000, this then leave us with a $54,000 net profit. Using a cap rate of 10%, the market value would be $540,000

Gross income $100,000
Less Basic Inn expenses -$ 46,000
Net income $ 54,000

Using a cap rate of 10%, we would then divide the net income by this cap rate to obtain the market value.

$ 54,000 = $ 540,000
.10

In the above example, if the Innkeeper had been under reporting his income by $15,000, then the net income would only be $39,000 which when divided by the same 10% cap rate, yields a low $390,000 market value. A $150,000 potential loss for a possible tax avoidance of approximately $4,500. It's a no brainer to figure out who loses in this situation! It is enormously advantageous for the Innkeeper to report all income.

Buyers are knowledgeable, and the vast majority of them take one or more aspiring innkeepers seminars before purchasing an Inn. They know which questions to ask and what the financial ratios should be before signing on the dotted line. Buyers are also willing to pay several hundred dollars to obtain the best home inspection report available on your property, which should detail any and all neglected maintenance. If the cost of repair and replacement is too high, and even though this cost is borne by the seller, some buyers are walking away from the deal. They do not want to take on a problem Inn. There are simply too many other Inns to choose from that are in good condition.

So be prepared! Your property, including both the physical and the financial aspects of it, should be ready today, should you decide you would like to sell it tomorrow.

This article is by no means meant to be a substitution for a professional appraisal of a property. Indeed for properties that fall outside of our four to six GRM, we many times recommend that the Inn be appraised before we will attempt to market it.

Every wonder what little things can be done to help promote your inn or bed & breakfast without making a huge investment? Sometimes smaller efforts can have a big impact. Here are a few great ideas to help get your name out their...

A Little Postage Pays Off
Put out some of your postcards with postage stamps already applied, either in a basket in the foyer, near the front desk or even in the guest room. This welcomes your guests to write home to loved one’s, family members and folks back at work. What do all of these people have in common? Chances are none of them have been a guest or even heard of your establishment yet - however most are very viable potential guests. Once they hear about the “great time” and “wonderful relaxing stay” your guest has, your website and contact information is right in front of them. For the cost of a post card stamp you can make a big impact and your guests will love it.

by Carol Hart

While the age of the internet has brought powerful marketing opportunities to the fingertips of innkeepers, more seasoned guest marketing professionals have identified that a balanced approach is critical to reaching a diverse demographic spectrum. There’s no question that the internet can deliver potential guests right to your desktop, specifically with the capability of online availability and electronic reservations, however the internet does miss some opportunities that online print collateral can deliver upon. In a marketplace that can take advantage of drive by or walk-in guests, a brochure or rack card strategically placed at information centers, tourism hot spots, and rest stops can deliver unexpected room revenue and potentially even return guests that may have never been reached by the internet. After all, you can’t put a website in your back pocket or in a hand bag. You can’t have a website sitting on your coffee table inspiring conversation about bed & breakfast travel amongst your dinner guests.

Boston-based,Captivate Marketing specializes in hospitality and destination marketing with two distinctly different creative departments for print and interactive. While the interactive and web division has grown considerably over the past 7 years, the call for creative brochures, rack cards and other printed material keeps its print creative department as busy as ever. “I think that many innkeepers, lodge owners, and hoteliers realize that there is still a market segment that is a little technology resistant,” says Carol Hart, Director of Client Services for Captivate. “We see innkeepers today making huge investments in their website, however we see them still spending considerable money for traditional print, often times having the website follow the same creative angle or look and feel as their print collateral. Is it possible that industry experts don’t want to put all their eggs in one basket or are they still seeing a return on investment from their print marketing that supports both mediums? Some innkeepers see a lot of results from the internet and subsequently disregard their print marketing in comparison, instead of asking the question: what’s wrong with my print piece that it’s not performing? A strategically planned, professional designed print piece in harmony with your online marketing efforts can set you apart from your competitor and give your property a marketing edge.

Technology will continue to evolve as it always does. People will continue to download Podcasts™ and music, exploring vast vacation destinations on the web or reading up on current events right at the comfort of their home computer. However, there’s a pile of magazines in the lobby of the dentists office or in the waiting area where you get your oil changed, not a pile of websites! The power of traditional print to inspire an unplanned weekend away at a bed & breakfast in the Berkshires is uncanny. The power of traditional print to be passed on from one consumer to another and to reach a broad audience is still very strong.

“Our advice to our clients is to ride the technology wave. Make the investment in internet marketing because it will provide a significant return and keep you competitive. At the same time have a professionally printed brochure, rack card or other printed piece to send as a follow up to the online inquiry, for direct mail purposes or local rack distribution. A balanced approach to marketing is still essential.” adds Hart.

Carol Hart can be reached at 1-800-335-1651 or at chart@captivatemarketing.com