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There is no universal way to make up a financial plan and assess the feasibility of an accommodation, since most of the costs are sensitive to local conditions. To demonstrate a possible way to proceed, a financial feasibility assessment of a simple B&B is presented.
The idea of a farmer is to build four rooms, each with two single beds, instead ofan empty barn. Each room has its own bathroom, one room has its own kitchen, and the average surface area of the rooms is 25 m². Next to the four rooms a common lounge and a kitchen will be built. The construction works will be partly executed by the farmer himself.
Table 1. Required investment, in euro
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The number of guests is estimated considering tourist activities in the neighbourhood and their average performance. Rooms will be rented both with and without breakfast. Tax (tourist tax, VAT, etc.) is not included in the price. Hence, the guests will have to pay the prices mentioned below plus VAT, etc. In Holland VAT is 19%, while tourist tax varies from municipality to municipality. All prices are given in Euro. The calculations assume that in the first year the B&B business is only functioning during a part of the year.
Table 2. Estimated revenues for 5 years period, in euro
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It is assumed that the labour comes from already employed personnel (the owner himself and his wife). Energy prices are based on commercial tariffs for enterprises.
Table 3. Estimated operating costs, in euro
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As we have now both the estimated costs and revenues of this business, the profitability can be calculated. The next table shows that during the first year or two, profits may not be raised, as it is the case with most new businesses. Only after 3 years the overall financial balance starts to be positive. Starting a B&B business, your financial situation should allow you not only to start the business, but also be sufficient to cover the initial losses.
It should be noted that in the calculations presented no labour costs were considered. Based on the profit, the farmer can now calculate how much he gains per hour if doing this business.
Table 4. Estimated profit, in euro
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There is another issue to be considered in the financial plan that was irrelevant for the B&B owner, but might be relevant for you - subsidy possibility. Subsidies may be obtained for track-bounded accommodation business if (local) authorities stimulate the development of small-scale tourism, creation of jobs, etc. Sometimes it is also possible to obtain funding for reconstruction of (historic) buildings. You should find information on the subsidizing opportunities always before you sign any kind of contract with a construction company, since it is possible to obtain subsidies only for those investments that you are going to make and not for those that you have already done. The easiest way to get this information is to visit the Chamber of Commerce, speak with colleagues, and place an inquiry to the regional and local authorities.
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2.5. Feasibility: is Commercialisation Realistic? | 2.6 Cooperation with other Entrepreneurs |
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