The former inn – which is really just a house now without any business vs. an existing inn or going concern
This is a question buyers ask me regularly. And the appeal understandable…the home likely already has the private ensuite baths you want, has the owner’s quarters, there wouldn’t be much in terms of renovations required (unless it’s in a state of disrepair) to start back up, other than maybe decor, linens, kitchen wares, guest soaps, shampoos, dry goods, food, cleaning supplies, etc? What about the expense of a new website, reservation system and the marketing costs? And then the insurance, real estate taxes, business license? And what about the mortgage? And utilities? Landscaping and snow removal? These are fixed costs that you’ll have from the start, without any revenue coming in. And don’t forget about the attorney fees and accounting fees in the initial stages related to forming your business entities, etc. You can see how it can quickly add up.
After some time, you hope to have revenue coming in, but will the revenue in the early stages cover the expenses AND mortgage?
That’s what the bank is going to ask. The bank isn’t in the game of risk. They’re also not in the game of innkeeping, should you fail. They’ll look to you, the buyer, to put a greater amount down and have quite the stock of cash reserves at the ready.
