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Interview with Bob Fuehr, one of the United States' most experienced broker of bed and breakfast inn sales.

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BBResources.com - Interview with Bob Fuehr, continued . . .

BBResources.Com: What happens if innkeepers aren't forthcoming about their finances?

Bob Fuehr: I tell them that I sell self-supporting businesses. I concede the B&Bs that are just supplemental sources of income to the local realtors. They have to sell me first on the marketability of their inn otherwise, how can I sell something that I don't understand?

BBResources.Com: On the other side - how many buyers find themselves overwhelmed by the amount of preparation they need to purchase and operate a bed and breakfast?

Bob Fuehr: The second-generation B&B buyers are older, wealthier & more sophisticated business people than the first generation of innkeepers. Most of the buyer frustrations are a product of uninformed or inflexible sellers.

The biggest hurdle with B&B buyers is getting them to define what it is their looking for and then acting on it when we do find it. It is much easier to find an inn for a buyer than a buyer for an inn.

BBResources.Com: Do you find the success rate of your buyers higher among those who attended your seminars?

Bob Fuehr: The innkeeping seminars help, but I've had a few cases of some people just lacking basic business acumen. They isolated themselves and didn't get the help they needed to shore up their shortcomings. Fortunately, for them, real estate appreciation enabled them to bale out and still make money on their B&B resale. I've had more cases of folks, particularly males, who don't care for the lack of privacy that's involved in B&B hospitality. We can help project how the B&B experience will be like but I recommend that aspiring innkeepers volunteer their time at a local inn to see if they'll like the experience.

BBResources.Com: What about males being the ones to feel the privacy issue? Is that the most prevalent reason that newer owners get out of the business after only a few years?

Bob Fuehr: Yes, definitely. The business was successful but they weren't excited about the world visiting them rather than vice-versa. The Mon-Fri., 9-5'rs have the toughest time. The more entrepreneurial have the easiest transition. There are probably more teachers as innkeepers than any other profession represented. It's hard for them to give up their weekends, evenings, & summer.

BBResources.Com: How often do you stay in contact with buyers who purchased a bed and breakfast from you? Do you follow up on the health of their business?

Bob Fuehr: Probably not as much as I should. I'll drop in on former buyers and sometimes I'll host a dinner in an area & have a roundtable with former buyers. This year, with my partner in Innkeeping Consultants, Lynda Petty, we're hosting a free afternoon educational & social session in Saugatuck for area innkeepers and seminar graduate innkeepers.

BBResources.Com: How much of a shock do buyers experience in those first few days/weeks?

Bob Fuehr: We try to schedule closings doing a slow period, and I recommend that the new keepers not accept guests for a minimum of a week so that they can be settled in. If there is staff remaining, that could make the transition easier. I have sellers provide at least 50 hrs. of orientation prior to closing and then be available by phone for a maximum of 1 hour a week for 3 months. That seems to buffer the shock of transition.

For the buyers who can't wait for a slow season, I describe a high season transition like "grabbing on to a speeding train"!

BBResources.Com: Would you say there are many more people aspiring to owning a bed and breakfast recently as compared to 10 or 20 years ago? To what would you attribute that to?

Bob Fuehr: Using our seminar attendance as a gauge of interest level, I'd say B&B innkeeping peaked in the mid-90's. Bob Newhart did for innkeeping what The Love Boat did for cruising. At that time, we were attracting a lot of dreamers and today's aspiring innkeepers may be smaller in numbers, but much more determined to be innkeepers. We're no longer a novelty but a small but elite segment of mainstream tourism. Being established makes it easier to get loans, credit and insurance. We've passed the "fad" test.

Increased demand for resort real estate has resulted in a situation where there are more inns becoming homes than homes becoming inns. The same is true for folks who opened inns in less popular locales. Likewise, construction costs, zoning restrictions and financing underwriting is much more difficult and expensive than it was for the new inns in the 1980's. When your new inn comes up for sale, your cost basis will be much higher than those created twenty years ago.

The reduction in the labor market and low interest rates have made this year my very best ever for Michigan inn sales. I've already closed 5 Million in sales this year with another $2+ Million that's supposed to close within 90 days!

BBResources.Com: That's great Bob! Congratulations! Now, you mentioned financing, which always seems to be a major issue. What are the obstacles to financing that most buyers face?

Bob Fuehr: Inadequate down payments and inflexible sellers. Most buyers will need at least 20% down on a B&B purchase. That percentage decreases as he price rises. It's not very likely that will find a buyer with $400,000 for a $2 Million inn.

On a larger inn, ideally I like to obtain 50% of the financing from a bank, 25% from the buyer and a 25% second mortgage from the seller. That formula maximizes the sale price for the seller and greatly extends the buyers down payment and financing potential. Most of those seller second mortgages are interest only and have a 7-10 year balloon. That gives the buyer an opportunity to build up some equity (through revenue enhancement and appreciation) if they have to refinance the balloon.

A lot of the second generation innkeepers don't last as long as long as the first generation. They're coming in older & leaving quicker. Seven years would be a long time for a second generation innkeeper.

BBResources.Com: Can sellers help clear obstacles by the way they run their business?

Bob Fuehr: Definitely! Sellers that keep computerized tracking of income and expense appear much professional than the shoebox full of receipts crowd. Likewise, sellers who report all their income and don't take excessive personal living expenses are much attractive to buyers & lenders than those who don't. Unrealized income and potential income growth is very hard to sell to a buyer or a lender. The past belongs to the seller and the buyers earn their own future!

BBResources.Com: Thanks Bob, I really appreciate your time in sharing this information. But, I have one last question for you; What is the single most given piece of advice that you offer to a seller or buyer?

Bob Fuehr: Many sellers don't realize that buyers drive the market. If they can't come to terms with a buyer, the buyer moves on the next B&B for sale. The seller has to wait for another buyer to come along. Most inns take an average of 2 yrs. to sell. My advise to sellers is: If you have a qualified buyer who shares your B&B vision, you must explore every possible avenue with that buyer before you dismiss them. You never know how long it will take to locate another buyer.

Many thanks to Bob Feuhr for his time and energy in giving this interview.

About Bob Feuhr:

Bob Fuehr
The Inn Broker, Inc.
11368 E. Indian Lake Dr.
Vicksburg, MI 49097-9101
Email address: fuehr@innbroker.com
Phone/Fax: 269\649-5556
Phone/Fax: 800\926-INNS (4667)