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So let me ask you this, seeing a P&L with a loss would make you turn the other way?
If I said "This inn has revenue of $150,000 per annum" approx, and you saw the P&L showing a loss, you would immediately figure it was a dog of a business?
What if they have a high mortgage, or what if they have no mortgage? Do you take this into account?.
"f I said "This inn has revenue of $150,000 per annum" approx, and you saw the P&L showing a loss, you would immediately figure it was a dog of a business?"
I wouldn't, not on just that information. $150K revenue doesn't seem too bad (at least from my perspective), so you really have to study the expense side to understand why they are too high. Yes, look for opportunities to increase revenues, but make sure you understand the expenses and can control costs!
.
this is what kind of baffles me about the situation in the USA - if i was selling as a business I would expect to show at least 3 years of accounts broken down in to various sections ie mortgage, wages (how many staff, how much paid and how much paid as owners salery), maintenance, tax, food etc - and thats just to start.
For serious buyers who had signed a non disclosure might even expect to show what we call our detailed accounts which get right down to how much spent on everything ie beds, towels and so on not just the final yearly total figures.
You also have to remember that everything is on a bigger scale ie I am 11 bedrooms which means 21 place setting for breakfast which means at least 30 place settings of cutlery, crockey and so on, 11 bedrooms of sheets at least 3 sets each (if I did my own) and so on everything needs to be bought in triplicate and replaced a lot more often ie furniture and lamps as they take a beating from guests.
.
Even when we had made a deposit on our place and were in the process of doing 'due diligence' we did not get the info you mention. We were consistently told, no matter where we looked, that expenses are based on how you run the biz. If you let the towels get threadbare then your expenses will be x. Someone else might replace them and their expenses would be y. But that was our decision.
And there's another thing...to this day I have no idea what 'due diligence' is. How do you find out what you don't know you don't know???
 
So let me ask you this, seeing a P&L with a loss would make you turn the other way?
If I said "This inn has revenue of $150,000 per annum" approx, and you saw the P&L showing a loss, you would immediately figure it was a dog of a business?
What if they have a high mortgage, or what if they have no mortgage? Do you take this into account?.
"f I said "This inn has revenue of $150,000 per annum" approx, and you saw the P&L showing a loss, you would immediately figure it was a dog of a business?"
I wouldn't, not on just that information. $150K revenue doesn't seem too bad (at least from my perspective), so you really have to study the expense side to understand why they are too high. Yes, look for opportunities to increase revenues, but make sure you understand the expenses and can control costs!
.
this is what kind of baffles me about the situation in the USA - if i was selling as a business I would expect to show at least 3 years of accounts broken down in to various sections ie mortgage, wages (how many staff, how much paid and how much paid as owners salery), maintenance, tax, food etc - and thats just to start.
For serious buyers who had signed a non disclosure might even expect to show what we call our detailed accounts which get right down to how much spent on everything ie beds, towels and so on not just the final yearly total figures.
You also have to remember that everything is on a bigger scale ie I am 11 bedrooms which means 21 place setting for breakfast which means at least 30 place settings of cutlery, crockey and so on, 11 bedrooms of sheets at least 3 sets each (if I did my own) and so on everything needs to be bought in triplicate and replaced a lot more often ie furniture and lamps as they take a beating from guests.
.
Even when we had made a deposit on our place and were in the process of doing 'due diligence' we did not get the info you mention. We were consistently told, no matter where we looked, that expenses are based on how you run the biz. If you let the towels get threadbare then your expenses will be x. Someone else might replace them and their expenses would be y. But that was our decision.
And there's another thing...to this day I have no idea what 'due diligence' is. How do you find out what you don't know you don't know???
.
Maddy, if they were selling me the business as a business, I would insist on seeing their paperwork. I wouldn't put down even a deposit unless they were showing me their books.
Now, if I was buying the house, that's a totally different story. Which might be why we sold the last B&B as a house and gifted them the B&B. They didn't need to see any paperwork, the house was at a reasonable value and they weren't buying the B&B or the name.
 
So let me ask you this, seeing a P&L with a loss would make you turn the other way?
If I said "This inn has revenue of $150,000 per annum" approx, and you saw the P&L showing a loss, you would immediately figure it was a dog of a business?
What if they have a high mortgage, or what if they have no mortgage? Do you take this into account?.
"f I said "This inn has revenue of $150,000 per annum" approx, and you saw the P&L showing a loss, you would immediately figure it was a dog of a business?"
I wouldn't, not on just that information. $150K revenue doesn't seem too bad (at least from my perspective), so you really have to study the expense side to understand why they are too high. Yes, look for opportunities to increase revenues, but make sure you understand the expenses and can control costs!
.
this is what kind of baffles me about the situation in the USA - if i was selling as a business I would expect to show at least 3 years of accounts broken down in to various sections ie mortgage, wages (how many staff, how much paid and how much paid as owners salery), maintenance, tax, food etc - and thats just to start.
For serious buyers who had signed a non disclosure might even expect to show what we call our detailed accounts which get right down to how much spent on everything ie beds, towels and so on not just the final yearly total figures.
You also have to remember that everything is on a bigger scale ie I am 11 bedrooms which means 21 place setting for breakfast which means at least 30 place settings of cutlery, crockey and so on, 11 bedrooms of sheets at least 3 sets each (if I did my own) and so on everything needs to be bought in triplicate and replaced a lot more often ie furniture and lamps as they take a beating from guests.
.
Even when we had made a deposit on our place and were in the process of doing 'due diligence' we did not get the info you mention. We were consistently told, no matter where we looked, that expenses are based on how you run the biz. If you let the towels get threadbare then your expenses will be x. Someone else might replace them and their expenses would be y. But that was our decision.
And there's another thing...to this day I have no idea what 'due diligence' is. How do you find out what you don't know you don't know???
.
Maddy, if they were selling me the business as a business, I would insist on seeing their paperwork. I wouldn't put down even a deposit unless they were showing me their books.
Now, if I was buying the house, that's a totally different story. Which might be why we sold the last B&B as a house and gifted them the B&B. They didn't need to see any paperwork, the house was at a reasonable value and they weren't buying the B&B or the name.
.
Not saying we didn't get any details but employees, food costs, expenditures on linens, etc every broker told us were not going to be given as those costs depended on how we ran the biz.
It would have been nice to know some of those things as a baseline. We were told a lot of stuff that wasn't true. The owners did all the work for one. Even tho we met the housekeeper! Neighbors came by and told us about all the people who worked here at various times.
One place we were interested in gave us 10 single-spaced pages of their check register and told us to figure it out for ourselves! (We did and realized they were paying out thousands more than they were bringing in so we lowballed the offer.)
 
So let me ask you this, seeing a P&L with a loss would make you turn the other way?
If I said "This inn has revenue of $150,000 per annum" approx, and you saw the P&L showing a loss, you would immediately figure it was a dog of a business?
What if they have a high mortgage, or what if they have no mortgage? Do you take this into account?.
"f I said "This inn has revenue of $150,000 per annum" approx, and you saw the P&L showing a loss, you would immediately figure it was a dog of a business?"
I wouldn't, not on just that information. $150K revenue doesn't seem too bad (at least from my perspective), so you really have to study the expense side to understand why they are too high. Yes, look for opportunities to increase revenues, but make sure you understand the expenses and can control costs!
.
this is what kind of baffles me about the situation in the USA - if i was selling as a business I would expect to show at least 3 years of accounts broken down in to various sections ie mortgage, wages (how many staff, how much paid and how much paid as owners salery), maintenance, tax, food etc - and thats just to start.
For serious buyers who had signed a non disclosure might even expect to show what we call our detailed accounts which get right down to how much spent on everything ie beds, towels and so on not just the final yearly total figures.
You also have to remember that everything is on a bigger scale ie I am 11 bedrooms which means 21 place setting for breakfast which means at least 30 place settings of cutlery, crockey and so on, 11 bedrooms of sheets at least 3 sets each (if I did my own) and so on everything needs to be bought in triplicate and replaced a lot more often ie furniture and lamps as they take a beating from guests.
.
Even when we had made a deposit on our place and were in the process of doing 'due diligence' we did not get the info you mention. We were consistently told, no matter where we looked, that expenses are based on how you run the biz. If you let the towels get threadbare then your expenses will be x. Someone else might replace them and their expenses would be y. But that was our decision.
And there's another thing...to this day I have no idea what 'due diligence' is. How do you find out what you don't know you don't know???
.
Maddy, if they were selling me the business as a business, I would insist on seeing their paperwork. I wouldn't put down even a deposit unless they were showing me their books.
Now, if I was buying the house, that's a totally different story. Which might be why we sold the last B&B as a house and gifted them the B&B. They didn't need to see any paperwork, the house was at a reasonable value and they weren't buying the B&B or the name.
.
Not saying we didn't get any details but employees, food costs, expenditures on linens, etc every broker told us were not going to be given as those costs depended on how we ran the biz.
It would have been nice to know some of those things as a baseline. We were told a lot of stuff that wasn't true. The owners did all the work for one. Even tho we met the housekeeper! Neighbors came by and told us about all the people who worked here at various times.
One place we were interested in gave us 10 single-spaced pages of their check register and told us to figure it out for ourselves! (We did and realized they were paying out thousands more than they were bringing in so we lowballed the offer.)
.
In the case of a sale of a house around here, you are 100% responsible for up to 20 years if you are found to lie on anything.
 
So let me ask you this, seeing a P&L with a loss would make you turn the other way?
If I said "This inn has revenue of $150,000 per annum" approx, and you saw the P&L showing a loss, you would immediately figure it was a dog of a business?
What if they have a high mortgage, or what if they have no mortgage? Do you take this into account?.
"f I said "This inn has revenue of $150,000 per annum" approx, and you saw the P&L showing a loss, you would immediately figure it was a dog of a business?"
I wouldn't, not on just that information. $150K revenue doesn't seem too bad (at least from my perspective), so you really have to study the expense side to understand why they are too high. Yes, look for opportunities to increase revenues, but make sure you understand the expenses and can control costs!
.
this is what kind of baffles me about the situation in the USA - if i was selling as a business I would expect to show at least 3 years of accounts broken down in to various sections ie mortgage, wages (how many staff, how much paid and how much paid as owners salery), maintenance, tax, food etc - and thats just to start.
For serious buyers who had signed a non disclosure might even expect to show what we call our detailed accounts which get right down to how much spent on everything ie beds, towels and so on not just the final yearly total figures.
You also have to remember that everything is on a bigger scale ie I am 11 bedrooms which means 21 place setting for breakfast which means at least 30 place settings of cutlery, crockey and so on, 11 bedrooms of sheets at least 3 sets each (if I did my own) and so on everything needs to be bought in triplicate and replaced a lot more often ie furniture and lamps as they take a beating from guests.
.
Even when we had made a deposit on our place and were in the process of doing 'due diligence' we did not get the info you mention. We were consistently told, no matter where we looked, that expenses are based on how you run the biz. If you let the towels get threadbare then your expenses will be x. Someone else might replace them and their expenses would be y. But that was our decision.
And there's another thing...to this day I have no idea what 'due diligence' is. How do you find out what you don't know you don't know???
.
Madeleine said:
Even when we had made a deposit on our place and were in the process of doing 'due diligence' we did not get the info you mention. We were consistently told, no matter where we looked, that expenses are based on how you run the biz. If you let the towels get threadbare then your expenses will be x. Someone else might replace them and their expenses would be y. But that was our decision.
And there's another thing...to this day I have no idea what 'due diligence' is. How do you find out what you don't know you don't know???
Due Diligence
Evening Constitutional
Two sayings I find funny. :)
 
We had to plead and beg for info, and this was using a B&B Broker who will remain nameless, and who you never see me post or promote on this forum. As the same said broker also allowed another innmate on this forum to be sold a bag of goods.
In other words, the numbers were fudged, and the broker said he has nothing to do with verifying any numbers. He did not care, even though he said he represented both THE BUYER and the SELLER. I won't recommend that "Team" even when they are at all the PAII conferences.
shades_smile.gif

In my best old fogey grandpa voice I proclaim "LET THAT BE A LESSON TO YOU!"
 
So let me ask you this, seeing a P&L with a loss would make you turn the other way?
If I said "This inn has revenue of $150,000 per annum" approx, and you saw the P&L showing a loss, you would immediately figure it was a dog of a business?
What if they have a high mortgage, or what if they have no mortgage? Do you take this into account?.
"f I said "This inn has revenue of $150,000 per annum" approx, and you saw the P&L showing a loss, you would immediately figure it was a dog of a business?"
I wouldn't, not on just that information. $150K revenue doesn't seem too bad (at least from my perspective), so you really have to study the expense side to understand why they are too high. Yes, look for opportunities to increase revenues, but make sure you understand the expenses and can control costs!
.
this is what kind of baffles me about the situation in the USA - if i was selling as a business I would expect to show at least 3 years of accounts broken down in to various sections ie mortgage, wages (how many staff, how much paid and how much paid as owners salery), maintenance, tax, food etc - and thats just to start.
For serious buyers who had signed a non disclosure might even expect to show what we call our detailed accounts which get right down to how much spent on everything ie beds, towels and so on not just the final yearly total figures.
You also have to remember that everything is on a bigger scale ie I am 11 bedrooms which means 21 place setting for breakfast which means at least 30 place settings of cutlery, crockey and so on, 11 bedrooms of sheets at least 3 sets each (if I did my own) and so on everything needs to be bought in triplicate and replaced a lot more often ie furniture and lamps as they take a beating from guests.
.
Even when we had made a deposit on our place and were in the process of doing 'due diligence' we did not get the info you mention. We were consistently told, no matter where we looked, that expenses are based on how you run the biz. If you let the towels get threadbare then your expenses will be x. Someone else might replace them and their expenses would be y. But that was our decision.
And there's another thing...to this day I have no idea what 'due diligence' is. How do you find out what you don't know you don't know???
.
Maddy, if they were selling me the business as a business, I would insist on seeing their paperwork. I wouldn't put down even a deposit unless they were showing me their books.
Now, if I was buying the house, that's a totally different story. Which might be why we sold the last B&B as a house and gifted them the B&B. They didn't need to see any paperwork, the house was at a reasonable value and they weren't buying the B&B or the name.
.
Not saying we didn't get any details but employees, food costs, expenditures on linens, etc every broker told us were not going to be given as those costs depended on how we ran the biz.
It would have been nice to know some of those things as a baseline. We were told a lot of stuff that wasn't true. The owners did all the work for one. Even tho we met the housekeeper! Neighbors came by and told us about all the people who worked here at various times.
One place we were interested in gave us 10 single-spaced pages of their check register and told us to figure it out for ourselves! (We did and realized they were paying out thousands more than they were bringing in so we lowballed the offer.)
.
In the case of a sale of a house around here, you are 100% responsible for up to 20 years if you are found to lie on anything.
.
I think that may go state by state here. I know we had to sign a statement on our house in VT when we sold it that there wasn't any lead paint, radon, mold. We had to check that we didn't know if there were any of those things because we'd never checked or had the house tested.
Here we did the radon test ourselves because the entire state shows up red on the radon map. We had a radon abatement system put in. The guys who installed it told us they had done the testing here the year before we bought. The owners told us it had never been done. Sigh.
 
So let me ask you this, seeing a P&L with a loss would make you turn the other way?
If I said "This inn has revenue of $150,000 per annum" approx, and you saw the P&L showing a loss, you would immediately figure it was a dog of a business?
What if they have a high mortgage, or what if they have no mortgage? Do you take this into account?.
"f I said "This inn has revenue of $150,000 per annum" approx, and you saw the P&L showing a loss, you would immediately figure it was a dog of a business?"
I wouldn't, not on just that information. $150K revenue doesn't seem too bad (at least from my perspective), so you really have to study the expense side to understand why they are too high. Yes, look for opportunities to increase revenues, but make sure you understand the expenses and can control costs!
.
this is what kind of baffles me about the situation in the USA - if i was selling as a business I would expect to show at least 3 years of accounts broken down in to various sections ie mortgage, wages (how many staff, how much paid and how much paid as owners salery), maintenance, tax, food etc - and thats just to start.
For serious buyers who had signed a non disclosure might even expect to show what we call our detailed accounts which get right down to how much spent on everything ie beds, towels and so on not just the final yearly total figures.
You also have to remember that everything is on a bigger scale ie I am 11 bedrooms which means 21 place setting for breakfast which means at least 30 place settings of cutlery, crockey and so on, 11 bedrooms of sheets at least 3 sets each (if I did my own) and so on everything needs to be bought in triplicate and replaced a lot more often ie furniture and lamps as they take a beating from guests.
.
Even when we had made a deposit on our place and were in the process of doing 'due diligence' we did not get the info you mention. We were consistently told, no matter where we looked, that expenses are based on how you run the biz. If you let the towels get threadbare then your expenses will be x. Someone else might replace them and their expenses would be y. But that was our decision.
And there's another thing...to this day I have no idea what 'due diligence' is. How do you find out what you don't know you don't know???
.
Maddy, if they were selling me the business as a business, I would insist on seeing their paperwork. I wouldn't put down even a deposit unless they were showing me their books.
Now, if I was buying the house, that's a totally different story. Which might be why we sold the last B&B as a house and gifted them the B&B. They didn't need to see any paperwork, the house was at a reasonable value and they weren't buying the B&B or the name.
.
Not saying we didn't get any details but employees, food costs, expenditures on linens, etc every broker told us were not going to be given as those costs depended on how we ran the biz.
It would have been nice to know some of those things as a baseline. We were told a lot of stuff that wasn't true. The owners did all the work for one. Even tho we met the housekeeper! Neighbors came by and told us about all the people who worked here at various times.
One place we were interested in gave us 10 single-spaced pages of their check register and told us to figure it out for ourselves! (We did and realized they were paying out thousands more than they were bringing in so we lowballed the offer.)
.
In the case of a sale of a house around here, you are 100% responsible for up to 20 years if you are found to lie on anything.
.
I think that may go state by state here. I know we had to sign a statement on our house in VT when we sold it that there wasn't any lead paint, radon, mold. We had to check that we didn't know if there were any of those things because we'd never checked or had the house tested.
Here we did the radon test ourselves because the entire state shows up red on the radon map. We had a radon abatement system put in. The guys who installed it told us they had done the testing here the year before we bought. The owners told us it had never been done. Sigh.
.
Here it's pyrite. You sometimes have to drill a hole down to have it tested that they didn't use pyrite as part of the backfill. But then I have never owned a house young enough to worry about that.
 
So let me ask you this, seeing a P&L with a loss would make you turn the other way?
If I said "This inn has revenue of $150,000 per annum" approx, and you saw the P&L showing a loss, you would immediately figure it was a dog of a business?
What if they have a high mortgage, or what if they have no mortgage? Do you take this into account?.
"f I said "This inn has revenue of $150,000 per annum" approx, and you saw the P&L showing a loss, you would immediately figure it was a dog of a business?"
I wouldn't, not on just that information. $150K revenue doesn't seem too bad (at least from my perspective), so you really have to study the expense side to understand why they are too high. Yes, look for opportunities to increase revenues, but make sure you understand the expenses and can control costs!
.
this is what kind of baffles me about the situation in the USA - if i was selling as a business I would expect to show at least 3 years of accounts broken down in to various sections ie mortgage, wages (how many staff, how much paid and how much paid as owners salery), maintenance, tax, food etc - and thats just to start.
For serious buyers who had signed a non disclosure might even expect to show what we call our detailed accounts which get right down to how much spent on everything ie beds, towels and so on not just the final yearly total figures.
You also have to remember that everything is on a bigger scale ie I am 11 bedrooms which means 21 place setting for breakfast which means at least 30 place settings of cutlery, crockey and so on, 11 bedrooms of sheets at least 3 sets each (if I did my own) and so on everything needs to be bought in triplicate and replaced a lot more often ie furniture and lamps as they take a beating from guests.
.
I think this was preliminary Cambs. Innkeepers aren't going to give away all their detailed information to someone who just calls, stops by or emails. We have had people DROP in and expect this stuff!
We are for sale and I have every last bit of info broken down, even marketing!
This thread has depressed the heck out of me. And in fact I just booked a week away in July because of it. Life is too short, especially when there is not a whole lot we can do about these things. Most B&B's are lifestyle sustainable businesses, unless they are a large inn. For us, we COULD make keep money if we deferred all maintenance. But that ain't gonna happen!
lightbulb.gif

.
not that Im selling = but due to all the renovations we made a small loss last year but Im definately not stopping! want to get at least 2 more bathrooms done this year at least! and hopefully all the stair carpet as well! (4 flights and 2 staircases and all new underlay) the PO's we all we always had 20,000 in the bank - was so tempted to say cos you never spent anything on renovations in 5 years!!!!!
 
I just wanted to thank you all again. We are plugging away still and asking good questions (I hope) using all your advice.
 
So let me ask you this, seeing a P&L with a loss would make you turn the other way?
If I said "This inn has revenue of $150,000 per annum" approx, and you saw the P&L showing a loss, you would immediately figure it was a dog of a business?
What if they have a high mortgage, or what if they have no mortgage? Do you take this into account?.
Keep in mind, too, that a mortgage does not show up on a P&L. That is a figure that shows on the Balance Sheet as a reduced liability. The only portion of the mortgage reflected on the P&L is the interest expense.
 
Disclosure: I have not read through all the responses and I have also never purchased a B&B.
BUT - as a professional bookkeeper, I can tell you that a P&L can say anything you want it to say. It's the official tax return that you really want to see. I have had clients alter the figures on my P&Ls to sell their business and that P&L ended up being very different from the tax return (I refused to participate & that's why they are no longer a client).
Honestly, I would not trust any P&L that was just handed to you. I would recommend an Audited Financial Statement from a CPA. But, also keep in mind, that anyone can put a cover letter or cover page on it to make it appear to be an official Financial Statement.
 
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