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Last Updated on 17/04/2023 by STEPHANE

 

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The financial plan for your B&B in Spain

 

This is our final article on how to open a B&B in Spain.

Let us summarise the conclusions reached earlier in our first 4 themes.

Maria and John are planning to move to Spain and start a bed and breakfast business. They have validated the essential conditions of personal and budgetary aspects.
In order to refine the search criteria, they then had to specify the location of their future B&B. Spain is a large country, very diverse, both geographically and culturally.
In carrying out this study, and based on their common criteria, Maria and John decided to focus their search on a specific area: the coastal region between Valencia and Alicante.

To summarize the conclusions reached in the first four themes, Maria and John have taken the following steps in their journey to open a B&B in Spain:

1. Personal and Budgetary Aspects: Maria and John have assessed their personal and financial capabilities and preferences, ensuring they have the necessary resources, skills, and commitment to run a successful B&B business in Spain.
2. Location: They have recognized the diversity in geography, culture, and tourism opportunities throughout Spain and have narrowed down their search area based on their criteria and interests.
   

   Read more on that here: Theme 4: The Top Spanish Regions for setting up Your B&B

3. Focused Search: Based on their personal preferences, target clientele, and business goals, Maria and John have chosen the coastal region between Valencia and Alicante as their desired location for opening the B&B. This region offers a mix of beautiful beaches, historic sites, and cultural attractions, catering to various types of tourists.

Moving forward, Maria and John should now focus on the following steps:

1. Property Search: Investigate the real estate market in the chosen region, considering factors like property size, condition, and proximity to tourist attractions. They should also evaluate the potential for renovation and expansion, as well as any legal restrictions.
2. Business Plan: Develop a detailed business plan that includes market research, financial projections, marketing strategies, and operational procedures. This will help them stay organized and focused on their objectives, as well as secure any necessary funding. In this article, we will study the financial part of the business plan.
3. Legal and Regulatory Requirements: Research and comply with local laws and regulations regarding business registration, permits, licenses, and insurance. This will ensure their B&B operates legally and avoids any potential fines or penalties.
4. Networking and Marketing: Establish connections with local businesses, tourism boards, and online platforms to promote their B&B and attract potential guests. Utilize social media, a well-designed website, and online booking platforms to increase visibility and bookings.
5. Prepare for Opening: Once they have secured the property and completed any necessary renovations, Maria and John should furnish and decorate the B&B, create a welcoming atmosphere, and train any hired staff to ensure a smooth and successful opening.

By following these steps, Maria and John can successfully open a B&B in Spain and enjoy their new life as business owners in the beautiful coastal region between Valencia and Alicante.

 

They are ready to tackle the next chapter of their feasibility study.

 

 

The last essential roadmap of your Spanish B&B

To pursue a dream is a beautiful thing…. even indispensable. Didn’t Oscar Wilde say, “Wisdom is having dreams big enough not to lose sight of them”?
We can nevertheless put this quotation into perspective. If the dream (and therefore the intuition) is indispensable, pragmatism (and therefore the necessity of profitability) is just as much.
María and John have the budget. So they think the purchase project is doable.

 

But is the project economically sustainable?

Investing is one thing; being able to last in time is another. A new constraint therefore appears. It is essential that the revenues generated by the management of the B&B must at least cover the costs. It doesn’t have to be right away, but you have to have a road map. He will predict when the business will be profitable and what he will be able to generate in profit afterwards.

This roadmap is called a financial plan.

I choose…. to call a friend!

María and John know a couple of friends who have already done this work. They decide to contact them to help them achieve this roadmap.
It will be an easy job, they say. As the primary objective is not to generate a significant income from the activity, this work should not be very complicated. They call Susan and Daniel, the friends in question.
Susan & Daniel have been managing a B&B in Catalonia for almost 15 years. They have had a lot of difficulties in carrying out their project. In the end, they have succeeded and are now well-integrated socially in the region, and well-referenced in terms of their professional activity.

 

The telephone conversation starts.
– Hello Susan, it’s John!
“Hey, hello! How are you? And María?”
“Look, we’re doing great. And you: still in Catalonia?”
“Well, yes. We like it, you know. It wasn’t easy at the beginning, but everything is going well.” We are very happy with the change in our lives that we decided on 15 years ago! My God, how time flies! And you, what’s new?
– We even live in a dream…
“Oh, what is it? You have aroused my curiosity.”
– We would like to follow your example and also open a B&B in Spain…
“No kidding…are you serious?”
“Absolutely; you want to change your life…and you think this is the right time.
– Awesome that…. but brave…! Where are you at with the project?
– Time was spent setting our goals, defining our budget and concept and where we want to be.
– Cool. You’re looking for a house then?
– Yes…well, no; not quite yet. We would first like to ensure that the project is viable in the medium term, financially speaking.
– Wise precaution…and what is your conclusion?
“In fact, Susan and I would have liked to discuss this aspect with you and Daniel…so that you could share your advice and experience… Would that be possible?
– Of course…but it will take a little time. If you want to do things properly, you have to spend a little time. You could stay with us for a few days. We would take the time to analyze all this together. What do you think?
“Excellent! I’ll tell María about it; she’ll be delighted. I’ll call you back in the next few days and we’ll organize a little stay with you.
– Listen, that sounds great. Let us know. We will be pleased to share all this with you. We made a lot of mistakes…as much to avoid others do not commit the same! I await your call!
– Perfect see you soon!

 

 

Why do you need a financial plan? 

The realization of a financial plan for a B&B implies the pooling of many elements that interact.
At the sales level, the amount of turnover will depend on the location but also on the quality of the services and prices offered.
In terms of costs, the variable costs vary according to the occupancy rate of the B&B. Fixed costs have the advantage of being more predictable, but they are more difficult to compress.
Macroeconomic factors are completely out of control (health epidemics, natural disasters, high inflation, political instability, etc.). They, therefore, do not intervene in a plan, other than by providing a “worst & best case scenario”. This can be achieved by acting at the level of room occupancy forecasts.
Overall, the managers of a B&B have some control over certain factors, but not others.
The plan will therefore aim to forecast, at a time “t”, the B&B’s financial entries and exits over a medium-term period “t+X”, while being aware that external elements can generate an impact.
The plan must therefore be:
• accurate to set a course
• flexible to bringing new data and adapting old ones.
• take into account the B&B and the environment in which it operates

 

Each decision will have an impact on the whole project

To illustrate the previous point that everything is linked in a financial plan, let us take a concrete example for María and John: massages. They are considering this service proposal to reinforce the “zen” side of their B&B.
The addition of this type of service leads to an increase in revenues, and costs, but also in the time devoted to the activity. María and John will have to make a choice.
They could decide to:
• outsource this activity to a local discipline specialist, but then they will have to reduce their profit margin.
• carry out this activity themselves, but it will be necessary to follow courses, obtain certifications, dedicate a budget for the necessary equipment (table, sheets, towels, massage oils,…),…
Overall, it will be necessary to choose between saving “free” time (if subcontracting) and a gain of financial revenues (if own realization). The decision will inevitably have a financial impact.

 

The financial analysis of your B&B

Susan and Daniel meet with María and John to discuss the issue and prepare the financial plan together.
First of all, they want to understand María and John’s objectives. The non-exhaustive checklist includes questions such as:
* what are their real goals (a “cool” life, a need for an “authentic” life in nature?)
* What type of clientele do they want to welcome (socio-professional class, social level, cultural background (nationality/country of origin),…)
* Is there a personal touch they want to bring? Here it is a question of identifying unique comparative advantages, which would make María and John’s B&B product exclusive (and therefore offering better control over prices). We can imagine several themes in this sense:
– gastronomy (organic products from the local area, the inclusion of star chefs,…)
– sport (in Spain, disciplines such as golf, horse riding or padèl are very popular)
– culture (possibility of exhibitions of local artists, organisation of concerts,…)
In short, the idea here is to understand what the final “product” is. Based on all of this, we will be able to draw up a plan.

 

…indicates the following

During this brainstorming, María and John explain that they want to offer
– a quiet and relaxing place for middle to high-class families,
– services such as table d’hôtes and also massage, yoga and pilates
– a place that will be pet-friendly.
María intends to dedicate herself 100% to the B&B while John will continue his current part-time job to ensure a secure monthly income. They also want to minimise any investment outside the purchase of the property. It is possible that over the years they will decide to develop the B&B differently, but they prefer to wait a few years. This will allow them to take the time to integrate into their new environment as well as possible, to get to know the requirements of their clientele and thus to define, with thought and experience, the areas of growth for their business.

 

Concrete financial planning of a B&B set up in Spain

Here is a plan on which Patrick worked to assist a customer with his financial planning.

With this data, we create a spreadsheet with all the data relevant to María and John’s project. We estimate high and low season prices and occupancy levels. Either we indicate a “mother” cell and, by modifying the value (best/normal/worst case) we determine the impact, or we create 3 spreadsheets (the first one: “best”, the second “normal” and the third “worst”).
Note that when it comes to setting a price for a night in a B&B, three sources can be useful and provide a lot of relevant information, namely
– existing offers from other B&Bs located geographically close by
– discussions with people active in the hotel sector in the area
– the local tourist office
Based on this information, Susan and Daniel prepare a financial table. Here is an example of what the plan might look like, for the year 2024.

Here are the accommodations revenue

 

Here the extra revenues

The operational costs

 

And the fixed costs of the bed and breakfast

 

All those information should be adjusted for each project and will help you to learn more about the financial aspects of your project and its profitability.

On the basis of this table, we realize that the break-even point for the B&B de María et John would already be reached by the end of the second full year of activity (“t+2”).
Whether that is the case or not is not the most important. What is interesting is that at t+2 time, and on the basis of the information available and the projects currently planned, it would be possible to cover all costs in a relatively short time.

Is this acceptable? Fine.
Is that not the case? We have to look at the data and see where we can reduce costs or increase revenues.
This is where the whole point of the plan lies: to be able to play with the various parameters in order to judge their changes and obtain an acceptable end result.

 

Our little extra tip

Get help with your project. Test it with your family and friends, and challenge it with your family. Listen to what they say. You’ll have to sort it out because there may be jealousy…or even a desire for you to fail, but it doesn’t matter. You will sort it out and you will certainly come up with ideas that you had not thought of.

 

General Conclusions to help you with Your B&B financial plan in Spain

María and John are moving forward step by step, in a structured way, in the development of their beautiful project. They are defining the final product more and more precisely. The concept, location and financial plan are defined. The next step will be to find the property…. and detect any administrative loopholes.

 

 

Need assistance for your B&B? Ask for more information to Patrick. Our B&B Specialist in Spain

 

Introduction: How to set up a Bed & Breakfast…and manage it?

Theme 1: Is the life of a B&B Manager for you?

Theme 2: How to select the perfect bed and breakfast in Spain?

Theme 3: The Spanish B&B market

Theme 4: The Top Spanish regions for setting up your B&B

Theme 5: The financial plan for your B&B in Spain

 

 

Patrick

 

B&B adviser, Partner of HowtobuyinSpain

Patrick created and managed his own B&B in Spain for 8 years. He knows the ins and the outs of that business.

About Patrick and his team, our B&B adviser

Patrick has a degree in Applied Economics and a master’s in International Politics. With a financial background, he lived for 8 years in Spain, setting up from scratch and managing a charming B&B. The B&B is still running today.

Patrick advises you on all the major decisions related to the business life of a B&B: B&B Business setting up, B&B estate selection criteria, administrative & legal procedures, Communication strategy and Day to day business.

His expertise covers all the Spanish coastal regions.

Languages: Dutch, French, English, Spanish & Catalan

 

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