Buying a Bed and Breakfast – Part 2 – Using Due Diligence and Making an Offer
As a buyer, it is your responsibility to act with due diligence. Inspect a potential property for problems, such as termites, and also for wear and tear that may go beyond what you are willing to accept. Are there repairs that you will need to make to the property to meet your satisfaction? Not all sellers will hold properties to their standards, so make sure you know what you are buying before entering into a sales agreement. You don’t want to pay their highest price if you have to deal with deferred maintenance issues later. Remember, this is an active business you are looking to buy, not a new home.
Examine the property’s financial records carefully. An accountant familiar with business accounting can be an advantage in examining not only financial records, but tax returns as well. Keep in mind that you are making a purchase for a business, not just a property. Get comfortable with cash flow.
Know what you are getting, to the best of your ability. Research future plans for the surrounding areas so you don’t have any unpleasant surprises in the future. Confirm that you can run the B&B as you wish. Look around. Look more than the B&B itself. Be sure to check the surroundings of the property, including the local laws governing the area, to make sure you can manage your bed and breakfast the way you want.
Be prepared to negotiate. Do your homework and then make your best offer, but keep in mind that most people want to negotiate. It is important to know how you would like to negotiate before bidding. There are advantages and disadvantages to different trading strategies. If you make a low ball offer, it can be rejected without consideration or without a counter offer. A seller may consider that any future offers are being delayed, so they may not be making their best offer. However, if you initially submit your best offer, there is no room to negotiate later. Be prepared to counter offer and find a reasonable compromise. Knowing the seller’s motivation to sell will help you in this process. It’s not always easy to determine their true motivation, although many innkeepers gladly share some of their reasons for moving on.
Above all, be patient. It may take months, or even years, to find a bed and breakfast that is right for you. Take lots of notes and photos, with the seller’s permission. Be flexible with the process, and most of all, have fun.