Writing My Inn's Business Plan - Where do I Start?

(Originally Published in May 2005, PAII Innkeeping Newsletter, Vol. 23, No. 5)

With B&Bs and inns still increasing in price, more and more lenders are looking for a complete business plan before they’ll advance a loan on a business that is in their eyes, decidedly risky.  So where do you start if this is your situation?

Aside from helping you to assure a lender that you are a good risk for a loan, a formal business plan helps you to think through all the factors which can make or break your new business.  When researched and constructed effectively, your business plan will not only help you see the business as it really is now, but it will also help you to plan what you need to do to be successful for the next 3 to 5 years. 
 
Despite the desire to think of your perfect property as just that – perfect, you should start by asking yourself some hard questions.  Why is the inn here?  What business does it attract?  What makes it profitable now or what will make it profitable in the future?  Is it really a year-round business?  Who is my competition?  Despite what you may hear from the seller’s agent, you should take a step back, do your due diligence, and find out the answers to these questions yourself, or with the help of someone experienced, knowledgeable and above all impartial.  The information you end up with may well surprise you!

So now you have the bones of your business plan, its time to flesh them out.  Separate your information into categories; Market Analysis, Operations, Financial Statements.  As concisely as you can, write down all that you’ve found out and how it relates to your new business.  Include your ideas for the future and match them with the research that backs them up and makes them plausible. 

Thoroughly review the financial statements from the seller.  Even if you’re writing your business plan yourself, this is one area where it makes sense to get professional help.  You shouldn’t buy a house without having an inspection of the building’s structure, its systems and foundations; you shouldn’t buy a business without a close inspection of the business’s foundation either.  PAII’s biennial Industry Study is an excellent resource for helping you decipher the numbers initially, but contact your accountant or consultant to perform a proper review.  It’s worth the investment in their time to ensure that the property you’re buying is going to yield enough to meet your goals and pay off the debt you’re looking to take on.

Next, list the factors that could make your business fail.  Although you probably don’t want to consider your new B&B failing in any regard, sometimes a more pessimistic view-point is actually helpful rather than detrimental.  Try to imagine situations outside your control that would prevent guests from wanting to stay with you.  An unusually warm and dry winter in a ski resort area is a good example, and a string of seasons like this can prove disastrous.  Devise realistic back-up plans for each of your ‘threats’ so that you feel comfortable that you could still meet your financial obligations should the worst really happen. 

So now its time to assemble your information into easy to read, digestible chunks of information.  When compiling your business plan consider who will be reading it.  Many lenders see hundreds of business plans over the course of a year and yours needs to stand out to get attention.  Do not overwhelm with excessive volume however, you may still end up with a document of twenty or thirty something pages by the time you’ve added your Executive Summary, resumes and income projections.  As long as your plan is well indexed, easy to read and professionally laid out, with ideas that are plausible and plans that are credible and supported with research, your business plan will stand above the rest.  Let the lender decide what he or she wants to read.  Above all, before submitting it to anyone, make certain that someone other than you proof-reads your final copy to ensure there are no spelling or grammatical errors.

Realistically, a business plan should be no more work than compiling the information for a standard loan package.  The difference is that once finished, you can submit it to any lender or investor, confident that it contains everything they need to know.  It’s worth the time and investment to do it well.  Happy Writing!

Copyright Hilary Jones 2005. All rights reserved.