Editor’s Note: Here at Dispatches, we are always looking for ways to help our readers do things. For some of our readers, that means helping navigate the working world, for others, it means assisting in the ever challenging question,“what’s for dinner?” For still others, it means figuring out how to balance family life with everything else. In an effort to aid in all of these endeavors, we have collaborated on this article written specifically for our readers.
Just like any business, the accuracy of your budget is going to be a big factor in whether or not your business is successful in the long run. If you shoot too high with your projected sales or too low with your costs, you might exhaust all of your resources before you actually make a profit! To make sure this doesn’t happen, here are some integral steps towards budgeting using a theoretical bed and breakfast as the example.
All budgets should begin with a list of expenses. In the case of the theoretical bed and breakfast, you should also create a list of the hotels (competition) in the area and try to find out as much as you can about the hotel. Ideally, you would know:
- How long the guests are staying
- Room cost
- Estimated revenue per guest per room
- Try to find out the number of last-minute bookings, no-shows and cancellations, and so on.
The occupancy rate (the proportion of the rooms rented), and the revenue the hotel is getting on average from each room, are the two most important metrics to look for. It can be hard to find all the information you’re looking for, but local tourism bureaus can be a huge help.
The next important phase in budgeting for your theoretical bed and breakfast is itemizing all the costs which you’re going to incur: staff wages, hotel furniture, food, maintenance, laundry, utilities, taxes and more. This is when an accountant would be a valuable addition to the list.
Review standard costs and adjust them for anything that happens to make your theoretical bed and breakfast different from the competition.
Finally, consider the strengths and weaknesses your theoretical bed and breakfast has when compared to the nearest competitors. If your market depends heavily on drive-by traffic, but your location is a little hard to see from the town’s main road, then this can be counted as a weakness. You might want to offset this by setting up a referrals process with a local restaurant or bar. On the other hand, your theoretical bed and breakfast may be one of the first things anyone’s going to see when getting off the highway. This may mean you can save a bit in your marketing budget.
While a theoretical bed and breakfast will have different expenses than you will, looking at your business from a different angle can help you uncover strengths, weaknesses and opportunities that you otherwise would have missed.