When Business is Bad, Tips to Stay in Business

The Bed and Breakfast industry is a mess! I own a B&B and am trapped between two worlds: having a home-based business and being in the hotel/lodging industry.

There are thousands and thousands of B&Bs out there and as small businesses, it's nice to be a part of a niche market. At the same time, we're pushed into the hotel category and treated as such. We aren't big businesses with many, many employees. We work from home and should be seen that way.

In the past two years, my revenues have fallen off 18% due to the economy and I am barely staying afloat. The B&B brings in over $100K, but my mortgage payment is now about 50% of my income. I am personally carrying the debts of the business, but can't get any assistance. Here is why:

• Everything is in my name and I am overburdened with the debt so nobody will lend me money to carry me through these tough times. My credit rating is going down because of late payments which turns away lenders.
  
• Because I work from home, my taxes are lumped into one return (part personal, part business); therefore I can't demonstrate income since it's all generated by and going into the business (i.e., I have no paycheck).
• I have a commercial bank loan, although I live in the house and the house is my primary residence, source of income, everything. Banks are very unwilling to refinance a commercial loan so I'm stuck with an interest rate over 8% instead of being able to get a residential loan for something like 2%. I've already tried to renegotiate with my local bank and they are somewhat unwilling to help. They say they don't want to foreclose, but they sure aren't trying to keep that from happening. After having me jump through hoops, they begrudgingly lowered my annual mortgage payments from over $55,000/year to approximately $50,000/year. And they made me feel bad for asking for a reduction!
  
• I can't get an SBA loan or guarantee because business is down and I can't demonstrate enough cashflow. I'm trying to get an economic injury loan because of the I-40 rockslide in Western NC, but, again, I'm having to prove that business is good and stable when it isn't, thus the reason I need help.
  
• The worst part of the whole situation is that if I lose the business, not only do they foreclose on my house, but everything I have will be gone: furniture, personal possessions, everything I have and have put into this house because it's part of the business. With 6 guestrooms, 2 dining rooms, parlor, sitting areas, kitchen, plus a carriage house, there's are tens of thousands of dollars in furniture, decorations, antiques, and equipment. My bank had the nerve to suggest that I sell off furniture and items in the Inn. If I sell furniture, what do the guests sleep and sit on? If the guests have nothing to sleep or sit on, how do I rent rooms! This is a prime example of how B&Bs are treated.
  

Sometimes I feel as if small businesses are destined to fail. The cards are so stacked against you in the form of taxes (property, personal, sales, occupancy, etc.), insurance, building and fire safety codes. These outlays are the bulk of expenses, but have nothing to do with the actual expenses of operating the business like supplies, utilities, food, niceties for the guests, etc.

I totally get that there are standards that need to be followed like health and safety and business requirements, but it seems like the big businesses (banks) and the goverment just want their money and who cares if your business fails as a result. I'm even considering bankruptcy as a last ditch effort to try to save the business. So how am I staying in business, you ask?

By nature, I am a positive person, but that quality is definitely being tested this year. When things get bad, I get creative. Following are tips that I have incorporated to keep treading water during these very trying times:

• Finding a niche market within a niche market - B&Bs are a niche market within the lodging industry. Even so, there are over 20,000 throughout the United States. In the Asheville metro area there are approximately 43 legal bed and breakfasts. Therefore, it's imperative to create your own niche market. I have accomplished this by being one of the few B&Bs around to accept pets of any size in 6 of my 7 rooms. I am also child-friendly with no restrictions on age. Lastly, I allow special events and weddings at my property which is something that most of the downtown inns cannot accommodate. These three markets have kept me in the game.
• Cutting expenses - Every year, I do an assessment of all of my utilities, insurance policies, and monthly bills to determine if I can cut costs without cutting services. This year alone, I've shaved about $1000 a month off of my monthly bills. Your insurance agents simply send you a renewal each year, but I make mine do some due diligence and see if they can get cheaper quotes. If they do nothing, I shop around myself and switch agents if I find something cheaper. In 4 years, I've switched agents 3 times because the first two agents didn't do as I asked and I was able to find a cheaper policy. With my utilities, I've approached all of my companies (AT&T, Charter, etc.) and flat out told them I couldn't afford my monthly payment. Somehow they ALL found ways to cut back on the monthly bill while I was able to keep the service. One of the best tricks I found out is with AT&T. If you have a business phone and a cell phone, you can eliminate the business phone plan with unlimited minutes. I forward my business number to my cell phone anyway so that I can get calls at any time. Since my cell phone plan has unlimited minutes, I wasn't using any of the long distance minutes on my business phone plan and could either eliminate or cut down on that part of the plan, saving about $30 a month. In addition, I had a second, roll-over line so that there would always be an open line. Since the main number is forwarded to cell, if I get an incoming call, it goes to my cell phone and opens up the main line. Thus, getting rid of the need for a second business line. Eliminating the second line saved me another $50/month. All said, I ended up shaving over $100/month from my business AT&T account.
• Closing rooms during the off-season - While my place is open year-round, January - March are very slow. This year, I have closed the three rooms in the Inn that are the most expensive to heat. I still have 4 rooms open at all times, but I'm not heating all rooms in the event I get a reservation or two for them. This is saving me about $400/month on my gas bill.
• Entering the Social Media arena - I had a personal Facebook page for the past year, but didn't spend a whole lot of time on it. In the past month, I've gotten a whole lot more involved and have added a Fan Page for the Inn. In addition, I'm educating myself on what I call "blogging" sites through HubPages, ProBlogger, and my own website blog. I still have a long way to go, but I'm enjoying this journey and the education. Digg and Stumble! are also sites that I'm becoming more involved in. If anyone has suggestions, I'm open! I'm not making money yet, more like setting the groundwork, but many hubs here have been helpful in that process, including: this one from Rebecca E., and from relache.
  
• Getting really creative - Traditionally, B&Bs keep to themselves for the most part, but there are some great local, state, and national B&B associations which offer support and resources for innkeepers. Outside of that, I am getting creative with ways that I can bring in business, including adding a small online store to my website for a few gift shop items (still in the works), partnering with a Chef from Atlanta to do a fundraising culinary weekend at the Inn, seeking guest bloggers to the Inn's blog to write about different, but relevant topics of interest to my readers, and doing part-time online gigs like Leapforce.com and FreshApps.com to bring in a little income. Again, if anyone has creative ideas, send them my way.
  

I would love to hear from other small business owners who may have found themselves in a similar situation and how you made your way out of the darkness.