Start-up costs for an accommodation business
Provided by Business Partners Ltd, South Africa's leading investor in SMEs
After much soul-searching, you’ve decided that you want to open your own guest house, boutique hotel or B&B. There are many factors to consider, such as where your business will be and who your target market is, but much of these decisions will be based on your budget, so that may be a good place to start.
Here are just some of the costs associated with setting up a new accommodation business:
- The cost of building or buying a new premises
- The size of the entire property and its location (rural or urban) will influence the building costs. For example, the cost of transporting equipment, furniture, etc. will be higher if one is further away from an urban area
- The level of refurbishment, renovation or upgrades needed; including landscaping the garden and building/maintaining the pool
- Room: Beds, TV, linen, furniture, towels, curtains, bathroom mats, lamps, coffee sets, décor
- Dining Room: tables, chairs, table-cloths, cutlery, crockery and glassware, décor.
- Kitchen: Appliances (perhaps industrial sized) like fridges, stoves and coffee machines, cooking utensils, bains maries, hot-plates, etc.
- Public areas: Furniture, mirrors, décor and other fixtures
- Consumable stock for the kitchens and bedrooms
- Office: Computers, printers, copiers, booking systems, furniture, office supplies (guest register, purchase orders, letterheads, etc.), switchboard
- Licenses and levies: there are various documents you will have to apply for, such as a zoning certificate, trading license and perhaps a liquor license. These cost money, so it must be included in the budget
- Marketing: A professional website, ads, business cards and brochures will be needed
- Other modern conveniences, such as Internet access/wifi, DSTV, air-conditioning
- Hiring employees is a significant start-up and on-going cost. In the beginning, employees will have to be trained and provided with uniforms
The extent of these costs will depend on the type of establishment and its target market – perhaps the star grading you hope to get – as this will dictate the quality or luxury of the materials that need to be purchased.
Financing your start-up
Any financial institution you approach to finance your business will expect you to have an own cash contribution and an asset you can use as security. This means that you will need a smaller loan, which will help when it comes to having enough monthly cash flow to service the debt. In order to cover any finance repayments and to keep your business viable, you should not have more than 50% of the value of your business being debt.
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