Entering Innkeeping,…….. the Business Plan

Businesses with plans have a higher success rate. As you have gathered information, you have already compiled much of the information needed for a written business plan. Writing your business plan will help you make your intentions clear to yourself, and your business compelling to others. Among its other uses:
Financing
Organization method
Communication tool
Reminder of your focus

There are a number of business plan formats, even software programs designed specifically for the purpose. Generally, business plans include:

Mission Statement
General business description
Pro-forma balanced operating statement
3(aggressive) and 5 (conservative) year plans to a balanced pro-forma statement
Cash flow projections for the same period demonstrating cash needs for both
Marketing Plan
Management's background
Loan request

Your business plan is going to outline the business you are proposing and demonstrate first to you, and then to others that it is a sound financial investment. You will establish a balanced pro-forma financial statement, generally for the third or fifth year. You will then demonstrate the progression of financial improvements that will provide that balanced statement. It will serve you well to do an aggressive approach that will take your to solid financial footing in only three years and to do a more conservative approach to reach the goal in five years.

A Marketing Plan will be the second most interesting element of your plan for at least two reasons. First, you along with potential investors will want to see a documented plan for producing guests (customers) who will buy your product, that will provide money to pay back their investment. Second, people are often fascinated by all sorts of hospitality ventures. Many people have dreamed of owning their own restaurant, club, small hotel, or bed and breakfast. General discussions or your venture and its market base are part of the fascination.
Marketing is a fluid activity based on a well thought out and clearly defined plan. It's important to develop concrete lists of marketing activities complete with a time line. You will be well served to include task assignments, and to establish deadlines for many of the activities. Among other activities it will be important for you to:
Define your customer. Be as clear in establishing this profile as possible. This definition is your target market.
Define your product. Be brutal with yourself. Develop a concise definition of your product, and it must be something that no else is...or why bother?
Outline your marketing methods. Web based, print, hand to hand, advertising, public relations, and word of mouth are all important elements of a marketing plan. Determine each of their values to you in your marketing plan.
Develop a marketing budget. Once you determine the values of different marketing opportunities, how much to you plan to spend on each of them.
Be prepared to measure the results of your efforts, refine your plan, and to react to opportunities that are new to you.

With each passing day there are new web based opportunities for businesses of every sort. Many of us use the internet to research our airline reservations, car rentals, hotel rooms, vacation activities. Today's marketing plans include a great deal of web based activity. While there are a number of free web site design services available, you will be well served to enlist the services of a professional website designer with experiences specific to this industry. It's relatively easy to make a website look nice and compatible with the vision of your property. However, if key words, search engine optimization, pay per clicks, on line availability, and real time reservations are phrases that mean little or nothing to you, a professional designer is in your future. And let’s not forget social media. How will you integrate social media opportunities into your marketing plan and your daily list of activities?

At some time you will have to select a name for your new venture. If you are buying an existing property, you may elect to keep the name. There is a tradition to the name and hopefully a good reputation of product and service. However, if you are in the market for a name, don't just pick a name, any name. Here a few considerations:
• Classic wins out over clever: first time guest are always skeptical of cute names.
• Leave your ego at the door: don't name the Inn after yourself.....you will eventually sell.
• Pick a name that is short, and memorable with a matching, available web domain name.
• Be sure the name identifies you as a lodging property and not a flower bed.
• Properties are often listed alphabetically in guides
• Don't include "The" in your name unless you want to be listed with the "T"s.

What can you do right now? Take the time to discover this new and exciting life. Innkeeping is a wonderful life for yourselves and your family. You will meet terrific guests, become a part of peoples lives on a level unattainable in any other profession, and will provide wonderful times together.

Next we’ll talk about an Action Plan.

Entering Innkeeping, Part 5

As you explore the physical opportunities for entering the Inkeeping world, talking with realtors, chambers of commerce, current owners of B&Bs and Inns, even those who casually rent space in their homes, it will be important to begin to do some analysis. Careful analysis of the elements of your business as it develops is important to reaching the goals you've established for yourself and your business. I’ve organized the areas of analysis into these five categories:
• Site
• Market
• Size
• Competitive
• Supply & Demand

The site. Here we’re talking about the physical components of your potential new enterprise, and let’s not forget your new home. This business development is about you, your preferences, and your interests. Be sure the location and site are conducive to your interests. If, for example, you hate the heat, don't consider properties in the deep south. If you hate gardening, don't consider a property with acres and acres of lawns, fields, gardens.

You will spend a great deal of time at your home/business and it will become a reflection of your tastes and interests. As you begin your search you might want to make a short list of specifications that starts somewhat like:
• In a skiing area for your love of all winter sports and the mountains
• A city population of no less than 20,000 with excellent schools
• With-in a two hour drive to major medical facilities

You'll also want to assess the amenities at the location that will meet your guests' needs. As examples:
If you're considering a beach resort community, will your business be convenient to the beach, shopping, dining, parking?
If food service is not nearby, are you planning to provide that service in-house?
If you are interested in a remote location, is there sufficient road signage for guests to physically find your property in the night?

Market analysis is a collection of economic data of the area. The local government or Chamber of Commerce collect and maintain records of the area's economic health. You'll want to have historical data to review the economic trends for your potential hometown, its present economic health, and projections for its future including any developments in the planning stages. The big question you want to have answered, Is there a market for your new venture in the location that you are considering? This is not the time to depend on anecdotal information, but rather cold, hard facts. This information isn’t sexy or romantic, but crucial for your success.

Size analysis is a matter of determining the number of guest rooms you will manage. This is another important analysis that will affect the outcome of your venture on a number of levels. If you plan for a B&B/Inn of 2-4 rooms, you may find you are completely comfortable working the business with no additional staff.
To the other extreme, if you plan for a 32 room property, you will rely on employees and you may find yourself more heavily involved in staff management than you would prefer. How are you planning your personal time each day?

Your financial goals are another consideration. If your goal is some additional income, then you may find a small property appropriate. To the other extreme, if your new business is to be your primary means of income, the sales potential of a larger property may be necessary to meet your goals.

Carefully consider the property size in relation to your interests and financial goals.
Real estate investment that will provide a specific (substantial) return in a specific projected time frame.
In and Out in 5-10, etc? You know your goals. Do they match the site you have in mind, the market you’ve selected?

So far, most of your focus as been on you, your wants, and how to get, it. Now we’re focusing on the community that will be around you.

• How many other lodging businesses are in the area and how many rooms do they constitute?
• What are their rates?
• Do they offer discounted pricing?
• Are there minimum stay requirements, which indicate they are busy enough to be selective?
• Are any of the properties similar to your property?
• What markets are being served by your competitors?

When you have the answers to these questions, you'll be able to determine where and how your property will fit in the lodging landscape of your area.

The last area of analysis is supply and demand. Much of this information will also be available from local government and Chambers of Commerce, especially in communities who rely on tourism for at least part of their economic health. However, in some areas you may have to make some assumptions on which to base your analysis because area hoteliers and innkeepers may not have or be interested in sharing statistical information.

However, a little well thought research can help you come to some good conclusions.

• Calculate the area's overall occupancy rate, OCC. This is a sum of all the potential rooms available in your market, compared to the number of these rooms that are occupied in a specific time frame.
• You'll also want to calculate an estimated average daily rate, ADR. You’re looking for the total room revenue collected in your market for a specific time frame. You will compare that number to the total number of room nights for the same period. You want to make some comparative calculations between the information you can gather from your market area, and what you have in mind for your own venture.
• Make a careful review of the different market segments being served and any known goals for market growth or expansion. For example, if you discover there is a 400 room hotel about to be developed in your area, that certainly changes your market and you may be uncomfortable competing for travelers in that market.
• Based on the information you have gathered it will be important for you to estimate your properties projected occupancy and average daily rate for year 1, year 2, and year 3.

I can’t stress sufficiently the value of this work. It will be the foundation for all that you do in developing your business venture. Just as in building any structure, no matter how pretty the interiors, it’s the foundation that supports all the pretty. Work to establish your business venture on the solidest of footings.

Once you’re worked through this analysis, it’s important to digest your work so that you can communicate your venture clearly to those around you. You may be talking with lenders, marketing professionals, artists, vendors, potential employees, neighbors, family, and friends. While I think the term is overused, and I avoid its use as much as possible, I’m talking about a Mission Statement.

You want to clearly know and understand the answers to these two questions:
• How will the Inn be different from other guest lodging opportunities?
• Why will the guest prefer your lodging opportunity?

What was once a cloudly “idea” for a potential business in your future, should now begin display itself as a clear vision. With all the information you have gathered, you’re ready to write your business plan.