Clearly, this is the most simplified example; you may want to split some of the key headings – for example, you might break down your“ advertising and marketing” budget into online keyword advertising, magazines, official tourist websites etc.
The principles are clear, however: once your budget is mapped out, you can see what changing one or more variables does to your“ bottom line” – for instance, reducing your assumed occupancy to 50 %, or increasing it to 60 %. If your budget is on a spreadsheet program such as Microsoft Excel ®, this is quick and easy.
The budgeting exercise also forces you to calculate important figures like your direct costs per room per night – and your detailed workings on this will also form part of your budget.
Note that we have left out the lines below“ net profit” – taxation and net profit after tax. They are vital to you, though! We only omit them as they will depend entirely on your own tax circumstances. Get professional advice, and build an estimate of your tax liability into your budget.
Success measurements
Measuring your success is vital in any business. In putting together your Business Plan, you will have set your overall financial objectives; your budget would have quantified these in terms of a few key success measurements; now you need to see how well( or badly) you are actually doing in relation to these.
If you are doing better( ahead of your Business Plan), besides congratulating yourself, you have accrued some extra financial credit, either to invest in the business, take out of the business( if you have already allowed for and covered necessary reinvestment), or to act as a financial“ cushion” against unexpected costs or lean periods.
If you are doing less well than your original Business Plan, don’ t panic but DO realise that your planned returns will not be there, so you need to adjust as you go along to get back to where you hoped to be. The first thing to do is to calmly and dispassionately look at the facts and figures of your actual current trading, and compare these with those used in your business plan. How far out are they? Which ones are out, and which are OK?
For instance, you may have budgeted for 65 % occupancy and achieved 67 %- well done! BUT you may have only achieved an average room rate of £ 44, after all the discounts you gave to get the bookings coming in, instead of the £ 55 you budgeted for.
Success is a combination of many things, don’ t forget: good occupancy rate, good average room rate, low marketing cost per booking, low direct costs per booking( eg breakfast & linen costs), well-controlled overheads, and low cancellation and complaint / refund rates. Only if all( or at least most) of these are happening will success follow.
How to Start & Run a B & B www. howtorunabandb. com