Due Diligence: What did you miss?

[JimBoone]

I, too, am interested in this question. "What do we do if we decide we hate it?"

I'm the odd duck with an 8 room motel but I think the real secret is creating a life that makes you happy long term.
Don't get so deep in debt that the business runs you, being happy is worth more than money. Do you need 90% occupancy to be happy (and get the bills paid)? I wasn't smart enough to make all those plans when we started, just blessed that life worked out well. If I can fill my weekends most of the year and some weekday business during the seasons, I'll do okay, own the business, don't let it own you.

Physical layout, eight rooms open to a common porch with my office/apartment at one end. It works well for us, guests don't have to share our living area yet many have walked through the apartment and we can share time on the porch or sitting spots in the garden. I'm not pressured to entertain them and they don't feel required to spend time with me, yet I'm handy if needed.

I'm doing what I like, I don't plan to retire. Don't wait till retirement to be happy

 

[FHI2426]

I like this idea, too. So is your exit plan to set it up for an easy sale when the time comes or step away and investment/manage?

We will fully sell it on but will stay local and will be available to make sure they get off the ground. We are also considering consulting to B&B's inn future to groups like us in that 3rd grouping

 

[Morticia]

What our broker, lawyer, and we missed: lien on business from the state for unemployment benefits. Those are not paid by the state even though they administer the distribution of the funds, they are paid by the business. If you are a successor business you own the debt. Once we hired our first employee we found out about the prior debt that we now owned because we did not get it disbursed before we bought. After almost twenty years it’s still not paid off.

 

[cdrako]

The people we purchased from had what GS calls ‘Newhart Syndrome.’ It was all fun and games and chatting with ‘new friends.’ A few guests told us they never saw the owners except at breakfast, while the owners told us they talked with everyone all the time.

Repeat guests said the owners locked themselves in their apartment at 7pm and they (the guests) were on their own at that point. Many of the repeats were in the habit of using the kitchen to make themselves dinner. The owners said they were always available and stayed up talking with the guests till late and no one was allowed in the kitchen.

It was obvious to us the guests were telling more of the truth. One repeat guest came into the kitchen in the morning and tried shoving me out of the way saying I didn’t know how he liked his breakfast.

So, we think it was a case of letting the guests run the show and they didn’t know how to recapture control. We lost quite a bit of their repeat business because we didn’t allow a lot of what the guests had been doing.

We were invited to a gathering after we bought the place that included the PO. He was so incredibly rude to his wife that I had no idea why they were still married. (Calling her fat and saying now that she didn’t have muffins to sample everyday she might lose weight and be attractive again.) While they were doing the training with us he called Gomez an *******. To our guests! We cut the training short. Better to fumble along and make mistakes than have that attitude ruining our business!

Omg. I can’t even!

 

[Morticia]

I’m not sure if this is due diligence or another category, but it’s worth thinking about. The ‘what ifs.’

What if:

• my partner dies
• we get divorced
• one of us gets really sick (Gomez has had 3 surgeries since we’ve been here, I was ‘out sick’ for 3 months in 2019)
• family members die (I was driving 600 miles every month for years when both of my parents became sick and then died)
• the grief from someone dying makes it impossible for you to do more than basic chores
• there’s a pandemic/recession/terrorist attack that cripples tourism
• a child or other family member needs you to be away from the business (Gomez’s mother needed to be moved to dementia care and her house and belongings sold; I was the executor of my parents’ estates. Both cases in other states. Gomez’s brother just died, guess who’s trying to figure that out with no will in place from 1500 miles away.)

 

[KenW]

I'm the odd duck with an 8 room motel but I think the real secret is creating a life that makes you happy long term.
Don't get so deep in debt that the business runs you, being happy is worth more than money. Do you need 90% occupancy to be happy (and get the bills paid)? I wasn't smart enough to make all those plans when we started, just blessed that life worked out well. If I can fill my weekends most of the year and some weekday business during the seasons, I'll do okay, own the business, don't let it own you.

Physical layout, eight rooms open to a common porch with my office/apartment at one end. It works well for us, guests don't have to share our living area yet many have walked through the apartment and we can share time on the porch or sitting spots in the garden. I'm not pressured to entertain them and they don't feel required to spend time with me, yet I'm handy if needed.

I'm doing what I like, I don't plan to retire. Don't wait till retirement to be happy

Our lodge is our transition into semi retirement, I've been in retail/ people business for 40 years and owned our own for 28. We had 0 experience in BNB business but it's about people so if your not a people person then think long and hard before diving in. Some guest will challenge your patience. We are going into our 5 season and spent that time building a reputation while getting our lodge upgrades to a point we are happy. We are setting into motion the permanent transition to only doing this for income and closing or selling our other business. We have learned a lot over the past 4 years. I have always had the philosophy that this is a job and not my life so the balance between the 2 is crucial. For us and our lodge I can't imagine operating it without my wife so plan well.

 

[gillumhouse]

What if:

my partner dies I was settling my brother's estate in SC (I am in WV) and driving in VA when Himself called to say he was calling the EMS to go to the hospital. Said I will stop in an pick you up on my way home tomorrow. I was minutes away from my destination for the night in NC when I got the call from ER - he died. Fortunately, we had wills AND I was a sole proprietor. As I already advised - have a document of succession.

we get divorced Have seen thriving, well-managed B & Bs have to be sold due to divorce because of the financial devastation AND the workload being impossible for one person with no help.

one of us gets really sick (Gomez has had 3 surgeries since we’ve been here, I was ‘out sick’ for 3 months in 2019) When Himself had a 6-way bypass it was 7 weeks of hospital & rehab (due to polio, he could NOT lift himself with just his legs). AND of course, it was one of the few periods of revolving door guests and commitments - I missed seeing him one day. A woman who walked past my house daily, saw me and asked if I had a lawn mower - then SHE and her granddaughter came over and cut the grass I had not noticed was ankle-high. It happens, just as Morticia said.

family members die (I was driving 600 miles every month for years when both of my parents became sick and then died) My Father died HERE the month we opened. My b-i-l was here for 8 months dying of cancer (fortunately the weekend the house reeked we had no guests) and died HERE. My brother died in NC and fingers pointed to me to settle the estate - that was 3 months before Himself died.

the grief from someone dying makes it impossible for you to do more than basic chores I was fortunate to have City duties and responsibilities and a slow season - did not realize how "coast" I had become until my jeans started falling off me - I found myself forgetting to eat - something I never ever would have dreamed possible. I have lost 4 pant sizes (a good thing but doing it the hard way).

there’s a pandemic/recession/terrorist attack that cripples tourism I opened in 1996 - 9/11 hurt so bad that I got DEEP in debt. 2008 almost closed us but (Himself's medical incidents did not help) I was old enough to draw my pension and filed for SS - THAT saved us. (I have almost FINALLY paid off that debt from 2008 - there was not enough life insurance to pay it.) What saved me with this pandemic is that I was NOT paying for Himself's prescriptions, special foods, etc. It was just me and I was able to take care of my food/gas/daily expenses from the tiny salary I get from the City as City Clerk and had enough business to pay the B & B bills which were minimal since there was not much business.

• a child or other family member needs you to be away from the business (Gomez’s mother needed to be moved to dementia care and her house and belongings sold; I was the executor of my parents’ estates. Both cases in other states. Gomez’s brother just died, guess who’s trying to figure that out with no will in place from 1500 miles away.) My oldest daughter has several heart attacks - this one I dealt with via phone as her sons and siblings were there and I was not needed.

Just pointing out that what Morticia said is NOT something rare. Life happens so fill in YOUR What IF blanks.

 

[GoodScout]

One of the sellers I encountered when searching for our inn flat-out told me she was selling because "I'm not a people person." I can't imagine why she thought she'd enjoy innkeeping with that handicap.

 

[gillumhouse]

One of the sellers I encountered when searching for our inn flat-out told me she was selling because "I'm not a people person." I can't imagine why she thought she'd enjoy innkeeping with that handicap.

Perhaps she did not realize that fact until she became an innkeeper. We see another side of people that is not seen in normal circumstances. We are not people they are going to be friends with for the most part. And with many of our guests WE can say, thank goodness when they leave.

 

[myschae]

Those who regretted it usually had fallen into what we call the "Newhart Syndrome:" They think it would be fun to be the innkeeper, to bake muffins and chat up the guests. They don't realize the job entails calls in the middle of the night, plunging toilets, constantly fixing things, and in many cases working for 90-120 days straight without a day off. Plus having strangers in your house can be extremely stressful. My advice for those who want to be innkeepers is always the same: Find an innkeeper who needs someone to "inn-sit" for them for a week or two while they go on vacation. After a week or so of running an inn during the slow season, if you aren't enjoying it then you know it's not right for you.

I love the idea; I've used something similar for people who were on the fence about having children. (Don't you have a relative/friend who'd like a break?) Unfortunately, with the pandemic and our current circumstances it's not practical. We did just return from visiting the place and we really like it. Now we're working on numbers to see what to expect.

We've spoken about the length of the season and the lack of weekends (days off) and then the inevitable need for maintenance in the off season when you can get into the rooms more regularly. I think we're leaning towards taking the plunge if we can make the figures work out.

 

[myschae]

I started my B&B 24 years ago so I wasn't buying from a previous owner. The one thing I strongly recommend that you look at is the amount of time you will be spending working at your B&B/Inn, especially during peak times, and plan time off and/or hire help accordingly. Owning a beautiful home on a beautiful property that everyone else is enjoying except for you will make you unhappy very quickly. Even if you plan to work from 5:00 a.m. to 8:00 p.m., plan a few hours off in the middle of the day where you can spend time doing what you want. Plan vacations away from your work and/or close the business when you want to have friends and family over and enjoy the space and property yourselves. This has worked wonders for me!

We just returned from a visit to the inn we're considering. We like the area (lived there previously) and already plan to keep on the existing help (housekeeping, landscaping, and handyman) during the first 'learning' season as part of the cost of the first year. Partially so we can learn the business side of the business and partially because there is no sense walking into an overwhelming situation when planning can avoid it - plus we'll learn as we go. That would also keep us in a position to do the management/marketing while keeping the relationships healthy with the community so we have help as we go. It's enough to set up the books, reservation system, build relationships with the local attractions, make the breakfasts, meet and greet guests, reservations, and add the little homey touches that we noted that we think would add value to the experience without breaking the bank.

After the first year and once we have a really good idea of how much work each line item is by itself, we'll be in a better position to think about how independent we want to be about the already setup contracted stuff.

 

[myschae]

We paid too much. So wish we knew that the owners wanted OUT, like yesterday! Emotionally they had already moved on. They had purchased their new home and started moving into it. They had been cruising already and there was a lot of deferred maintenance.

Yeah. I might need a thread on how to price an inn and negotiate. I'm looking for a fair deal. I don't want to steal anything nor do I want to overpay. I just have no idea how to even...

You've given me more to think about. Thank you. (but, ouch.

 

[myschae]

The people we purchased from had what GS calls ‘Newhart Syndrome.’ It was all fun and games and chatting with ‘new friends.’ A few guests told us they never saw the owners except at breakfast, while the owners told us they talked with everyone all the time.

Repeat guests said the owners locked themselves in their apartment at 7pm and they (the guests) were on their own at that point. Many of the repeats were in the habit of using the kitchen to make themselves dinner. The owners said they were always available and stayed up talking with the guests till late and no one was allowed in the kitchen.

It was obvious to us the guests were telling more of the truth. One repeat guest came into the kitchen in the morning and tried shoving me out of the way saying I didn’t know how he liked his breakfast.

So, we think it was a case of letting the guests run the show and they didn’t know how to recapture control. We lost quite a bit of their repeat business because we didn’t allow a lot of what the guests had been doing.

We were invited to a gathering after we bought the place that included the PO. He was so incredibly rude to his wife that I had no idea why they were still married. (Calling her fat and saying now that she didn’t have muffins to sample everyday she might lose weight and be attractive again.) While they were doing the training with us he called Gomez an *******. To our guests! We cut the training short. Better to fumble along and make mistakes than have that attitude ruining our business!

Oh dear. We just returned from visiting the inn we're considering. The owners are lovely but there is only one lady running it by herself and it's just too much. She has a hard time getting enough time to just get away from the business even to go shopping or over to the nearby city. There are 3 of us: me, husband, and MIL. We don't expect Mom to help out much but she would at least be able to be there and make sure the place doesn't grow legs and walk off or something. I can't imagine trying to do it alone.

 

[myschae]

One of the sellers I encountered when searching for our inn flat-out told me she was selling because "I'm not a people person." I can't imagine why she thought she'd enjoy innkeeping with that handicap.

Yes. That is strange and I do wonder what they were thinking - unless the inn experience is how they discovered they don't like people. My husband and I have traveled quite a bit and tend to get along with just about everyone - in small doses. Part of the attraction for us to innkeeping is that, unlike working in an office, at least the guests aren't around long enough to form irritating cliques of people like in offices. We love meeting people... continuing to like people after meeting them can sometimes be a struggle.

 

[GoodScout]

Oh, one other suggestion: Whatever your resources, make sure you have 10% of your purchase price in reserves to get you through the first year. There will be issues, needs, and things that break, so make sure you have that much cash on hand.

 

[myschae]

What if:

my partner dies I was settling my brother's estate in SC (I am in WV) and driving in VA when Himself called to say he was calling the EMS to go to the hospital. Said I will stop in an pick you up on my way home tomorrow. I was minutes away from my destination for the night in NC when I got the call from ER - he died. Fortunately, we had wills AND I was a sole proprietor. As I already advised - have a document of succession.

we get divorced Have seen thriving, well-managed B & Bs have to be sold due to divorce because of the financial devastation AND the workload being impossible for one person with no help.

one of us gets really sick (Gomez has had 3 surgeries since we’ve been here, I was ‘out sick’ for 3 months in 2019) When Himself had a 6-way bypass it was 7 weeks of hospital & rehab (due to polio, he could NOT lift himself with just his legs). AND of course, it was one of the few periods of revolving door guests and commitments - I missed seeing him one day. A woman who walked past my house daily, saw me and asked if I had a lawn mower - then SHE and her granddaughter came over and cut the grass I had not noticed was ankle-high. It happens, just as Morticia said.

family members die (I was driving 600 miles every month for years when both of my parents became sick and then died) My Father died HERE the month we opened. My b-i-l was here for 8 months dying of cancer (fortunately the weekend the house reeked we had no guests) and died HERE. My brother died in NC and fingers pointed to me to settle the estate - that was 3 months before Himself died.

the grief from someone dying makes it impossible for you to do more than basic chores I was fortunate to have City duties and responsibilities and a slow season - did not realize how "coast" I had become until my jeans started falling off me - I found myself forgetting to eat - something I never ever would have dreamed possible. I have lost 4 pant sizes (a good thing but doing it the hard way).

there’s a pandemic/recession/terrorist attack that cripples tourism I opened in 1996 - 9/11 hurt so bad that I got DEEP in debt. 2008 almost closed us but (Himself's medical incidents did not help) I was old enough to draw my pension and filed for SS - THAT saved us. (I have almost FINALLY paid off that debt from 2008 - there was not enough life insurance to pay it.) What saved me with this pandemic is that I was NOT paying for Himself's prescriptions, special foods, etc. It was just me and I was able to take care of my food/gas/daily expenses from the tiny salary I get from the City as City Clerk and had enough business to pay the B & B bills which were minimal since there was not much business.

• a child or other family member needs you to be away from the business (Gomez’s mother needed to be moved to dementia care and her house and belongings sold; I was the executor of my parents’ estates. Both cases in other states. Gomez’s brother just died, guess who’s trying to figure that out with no will in place from 1500 miles away.) My oldest daughter has several heart attacks - this one I dealt with via phone as her sons and siblings were there and I was not needed.

Just pointing out that what Morticia said is NOT something rare. Life happens so fill in YOUR What IF blanks.

Great list. Yes, we're already listing documents and figuring out (like a prenup) how we'd split things up in the event we divorce*. It's been 30 years but this is a HUGE investment like ... not exactly throwing everything and the kitchen sink at it but enough that it would pretty much make retirement a far distant dream if we crash it.

We're a little worried about the pandemic with the news of the new variant but, we just returned from visiting the place, and in that area I don't think I saw anyone out without a mask. That's very, very different from where we live now. I think it's because the area is a tourist attraction area so all the businesses work together because they all depend on tourists and each other. We met several friendly folks; it's vital that we fit into the community, support the other local attractions, build solid relationships and keep an upstanding reputation. It was kind of interesting since the conversation turned to why we were there and it almost felt like being interviewed by the local community and then really kind of welcoming/encouraging because we've always been of the community cooperation and support kind of people.

I really hope this works out for us but we still have a lot of work to do. Legal work, financial work, and all that but, after visiting, at least we're sure we'd like to live there.

*We refer to it as our 'inevitable divorce' because our families were convinced we were too young to get married and doomed. We were 21/23 and that was 30 years ago.

 

[gillumhouse]

Another thought - I went to EVERY City Council meeting. It kept me up to date with what was REALLY happening in the City - of course, it also got me appointed to City Council to fill a vacancy, lost an election but stayed involved on the sidelines and then got muzzled again by a City Manager who made me City Clerk - 4 City Managers later, I still am (she retired). By going to council meetings you will know when someone is trying to pull a fast one (wanted a green space for a parking lot - lost and now came back with make it a parking lot or we will block parking at the Library & Museum (they bought it from the bank before the City knew it was for sale). But the Mayor does not like blackmail). It will also keep you informed if they want to raise sales tax or try for an Excess Levy, change a street from 2-way to one way or vice-versa, etc.

 

[GoodScout]

I would agree with paying attention to town/city government and making sure everyone in town meets you and knows you. My experience steers me to suggest not getting appointed/elected to your town council or selectboard.

After my three years on our local board, I tell people "I was elected because everyone in town liked me -- and I fixed that."

 

[JimBoone]

I might need a thread on how to price an inn and negotiate. I'm looking for a fair deal. I don't want to steal anything nor do I want to overpay.

Expect negotiation depends on the needs of the buyer and seller. As a buyer sometimes favorable terms have been more important to me than actual price. As a seller I expect it depends on the seller's position and next activity. When I listed property for sale to purchase this business I got all sorts of offers but an offer had to reach a certain point to allow me to move forward with my dream or it was useless to me. I wouldn't normally be a good one at negotiation, my emotional side has to want the item and my practical side has to know it is possible without too much risk.

 

[gillumhouse]

I would agree with paying attention to town/city government and making sure everyone in town meets you and knows you. My experience steers me to suggest not getting appointed/elected to your town council or selectboard.

After my three years on our local board, I tell people "I was elected because everyone in town liked me -- and I fixed that."

I guess THAT depends on the mindset of the area and the person. I was welcomed and treated nicely DURING my 3 years on Council (1 year finishing a term and 2 years in my own elected position - BTW the election in my own right says a lot since I was a woman AND an ALIEN, you ain't from here are ya).

Now, over 20 years later, some people think I am still on Council and many people call me for info and help. They also refer friends and family here as guests. One cannot make a blanket statement about participation in local government. (Prior to opening my business so I was still eligible to vote on the issue, I voted to raise B & O taxes on businesses which would raise mine when I opened. When notified of the condition of the restrooms at the Little League Field (a situation that was rectified after) I took bleach, mop, bucket and cleaned them myself. People knew that I was not afraid to do "dirty jobs".)