Looking for a bed and breakfast inn business plan? You're in the right place.
An inn is a property business, a hospitality business and, once weddings are on the calendar, an events business. A lender, an investor or a city planner will ask the same questions of all three. How many rooms can the site carry? What does a foggy summer do to occupancy? How much does the mortgage leave for the owners? A blank template won't show you what a sensible answer looks like.
In this article we'll walk through a complete sample business plan for an 11-room inn with an event pavilion in Half Moon Bay, California, section by section. We'll cover the executive summary, the SWOT analysis and, in particular, all of the financials.
Here's what you'll take away:
- The executive summary: see how to put a property, a mortgage and two revenue streams on one page, so a reader knows what you're asking for within a minute
- The funding structure: learn how contributed property, investor equity and a commercial mortgage fit together, and why the cash reserve is sized the way it is
- The month-by-month first year: spot which months of a coastal season lose money before you reach them, and plan your cash around them
- The wedding and retreat line: see how an event pavilion earns on weekends and a retreat product fills the quiet weeks, with the permit risk named
- The team and its cost: understand how an innkeeper team, not just the owners, shows up in payroll and in the profit lines
- The five-year profit, cash flow and balance sheet: follow how rates, occupancy, direct bookings and depreciation shape each year
- The downside case: have an answer ready for the "what if the summer is foggy and fewer couples book?" question, with the steps the owners take
If you're planning an inn or a small hotel, read this before you write your own. The inn is fictional, so take what fits your property and change the rest.
In this plan
If you need a bed and breakfast inn business plan template for your own plan, start it in the Toolkit.
Executive Summary
Magnolia Inn is an 11-room inn on a bluff above the Pacific in Half Moon Bay, California, with a garden pavilion for weddings, elopements and small retreats. The founders, Nora and Ben Castellano, own the property outright. All 11 rooms, seven in the main house and four in the carriage house, reopen in January 2027 after a five-month refresh, and the pavilion opens in June. The inn runs with a paid team of 7.0 full-time equivalents, the two owners included.
The inn raises $1,850,000 of new money: $1,200,000 from two investors, a $500,000 construction-to-permanent mortgage and $150,000 of the founders' cash. The property itself, valued at $2,350,000 for this plan, is contributed by the founders, and the $500,000 mortgage is secured on it. Of the new money, $1,127,000 pays for construction, $171,000 for furniture, kitchen equipment, technology and opening stock, $228,000 covers costs expensed at opening, and $324,000 is held as cash reserve.
| Year 1 | Year 2 | Year 3 | |
|---|---|---|---|
| Revenue | $974,487 | $1,334,675 | $1,602,163 |
| Net income after start-up costs | ($489,286) | ($88,185) | $53,160 |
| Closing cash | $162,417 | $172,656 | $264,701 |
Room stays earn 76% of Year 1 revenue. Weddings, elopements and midweek retreats earn most of the rest, and their share rises from 22% to 40% by Year 5, because a pavilion can sell the weekends that the rooms alone fill only in September and October. Year 1 loses money: the inn opens in winter, carries a full team and a mortgage, and its busiest months come last. Operating profit is positive from August to November. Year 3 is the first profitable year, and the Year 2 mortgage cover test is met with little room to spare.
The plan also tests a foggy summer and a thin wedding season. With revenue 20% below plan, both owners' pay and every discretionary cost trimmed, two hires not made, a longer interest-only period and distributions suspended, year-end cash stays positive in every year of the model. The bank's cover test still fails in Year 2 in that case, and the plan says what the founders would ask for.
The inn's pitch is narrow. It sells an 11-room house with breakfast and a wine-and-cheese hour to couples driving down from San Francisco and Silicon Valley, a venue for 12 to 60 guests, and two weekday nights for a team of up to 16 when the coast is quiet.
The Inn on the Bluff
Ownership and the property
Magnolia Inn, LLC is a California limited liability company managed by Nora Castellano. Nora and Ben hold about 68% of the units and two local investors hold about 32%, in proportion to the value each paid in. The company holds the bluff site, the main house and the carriage house. Nora and Ben bought the property in 2025 from the owner of an inn that had closed, using the proceeds of selling their home in the Bay Area and family savings. They paid $2,250,000, and with closing costs and the design work they have funded since, the plan contributes it to the company at $2,350,000. A lender's appraisal would set the figure that governs. The company pays no rent to anyone.
From closed inn to reopening
Both buildings were operating as an inn until the previous owner closed it, so the rooms already exist. Construction starts in August 2026 and refreshes all 11 rooms and baths, the dining room and the breakfast kitchen by December. Fire sprinklers, an accessible path and septic and utility work run alongside. Design and permits for the pavilion run through the fall of 2026, and it is built from March to May 2027, with the first wedding in June. The phasing is the protection: if the pavilion permit is late, the rooms still open in January and only the events slip. Four wedding dates are held with deposits that are refundable if the permit is refused.
What the site holds
- Seven rooms in the main house, each with its own antique theme and a bath, plus a dining room, a front parlor and a breakfast kitchen.
- Four rooms in the carriage house, two upstairs and two below, with a small guest lounge.
- A garden pavilion and terrace sized for up to 60 seated guests, with a caterer staging area and guest restrooms, built in spring 2027.
- Parking, a service yard and the bluff-edge garden, where elopements are held from March.
Where the inn should be by December 2028
- Occupancy near 50% in the opening year and 59% in the second, at an average of $377 and $386 a night.
- 8 weddings and 12 elopements in Year 1, and 14 and 20 in Year 2.
- Year 2 revenue of $1,334,675 and EBITDA of $57,438.
- A direct-booking share of 45% in Year 1, rising to 55% by Year 3.
- A first profit after interest and depreciation in Year 3, and a first owner distribution that year.
What the inn sells
| Line | How it is priced | Year 1 share of revenue |
|---|---|---|
| Room stays, breakfast included | $310 to $430 a night depending on month | 76% |
| Wine-and-cheese hour and add-ons | $18 per guest in Year 1 without alcohol, $26 from Year 2 | 2% |
| Weddings and elopements | $15,000 for a wedding weekend, $4,600 for an elopement | 18% |
| Small retreats and group stays | $10,500 for two nights, eight rooms and meals | 4% |
What has to be confirmed first
This is a fictional plan, and a real one would settle the following before a lender or a city saw it:
- Construction bids, a contractor and a design-stage estimate. No bid is behind the $1,127,000, which splits into $460,000 for the room and kitchen refresh, $380,000 for the pavilion, $140,000 for sprinklers, access, septic and utilities, and a 15% contingency.
- An appraisal of the property, and the county's assessed value after the work.
- Permits: a use permit for events, a coastal development permit where the site requires one, a county health review of the breakfast kitchen, a fire inspection and a city lodging registration. Each has its own fee and timeline, and none is quoted here.
- A state alcohol license of a type the regulator determines, if wine is to be poured. The plan prices Year 1 without alcohol and treats a license as held from January 2028, a planning date.
- The city's transient occupancy tax rate and filing rules. The tax is collected from guests, passed to the city, and sits outside revenue.
- Insurance quotes for coastal property, event and liquor liability.
- A rate, occupancy and venue-fee comparison with nearby inns and wedding venues, since the plan's rates, occupancy and event prices are its own figures.
Lodging on the San Mateo Coast
How the coast books
Half Moon Bay sits on the San Mateo coast south of San Francisco, which makes it a natural weekend and short-stay market for Bay Area residents more than a destination for long vacations. Fog is the main seasonal fact. On this stretch of coast it tends to hold summer weekends back, while September and October are usually clearer and busier, and winter is the weakest season. The plan's occupancy pattern follows that shape, from 42% in January to 82% in October in a mature year.
Who the inn competes with
| Alternative | What it offers | Why a guest picks it | How Magnolia differs by design |
|---|---|---|---|
| Large coastal resort hotels | Amenities, spa, brand standards | Predictability and facilities | Eleven rooms, a named innkeeper and a breakfast the cook sets each morning |
| Other small inns and bed and breakfasts nearby | Character, similar guests | Established reputation | A pavilion for weddings and a weekday retreat product that smaller inns cannot host |
| Vacation rentals | Space, kitchens, privacy | Group size and price per person | Breakfast, daily housekeeping and an on-site team |
| Wedding venues inland and in wine country | Large lawns, on-site lodging for the party | Capacity and price | A coastal setting for up to 60 guests, with 11 rooms on the same bluff |
The table describes categories and how the inn positions itself, not a ranking. No competitor is named, because rates and policies change often and are not quoted here.
SWOT
| Strengths | Weaknesses |
|---|---|
| Property owned by the founders, so there is no rent and the mortgage is 14% of cost | Year 1 loses money and draws on the reserve |
| An ocean-view bluff that a guest cannot copy | No review history or brand at opening |
| Eleven rooms and a pavilion earning from the same site | Weekend wedding income depends on one permit |
| Opportunities | Threats |
|---|---|
| Midweek retreats that fill the off-season | Summer fog holding back weekend demand |
| Elopements and micro-weddings with small guest counts | Labor cost and pay rules for hourly staff |
| Repeat Bay Area guests booking direct | Online agents holding the first booking at a commission |
Who Books a Bluff-Top Weekend
The Bay Area couple on a two-night break
The core guest lives in San Francisco, the Peninsula or Silicon Valley, books two nights on a Friday or Saturday, and chooses between an inn, a rental and a larger hotel. Stays average 2.1 nights, about 932 stays in Year 1. These guests value a quiet room, a breakfast cooked for them and an innkeeper who suggests a beach, a table or a trail.
The couple who marry or elope on the bluff
Wedding couples choose a venue first and lodging second, and bring a party who need rooms. Elopement couples bring a dozen guests or fewer, book a Monday or a Thursday, and often stay two nights. They find the inn through planners, photographers and search.
The retreat organizer
A founder running a team offsite, a writing group or a yoga teacher books eight rooms for two nights between November and March, when the coast is quiet. A retreat of 16 people is worth $10,500 and takes the house for two midweek nights.
What guests ask of the inn
- A quiet room and a bath that works.
- Breakfast that is cooked, not set out.
- A host who is present on the weekend and answers the same day.
- For couples marrying, a coordinator who has run the day before.
Filling Rooms and Weekends
From inquiry to deposit
Rooms book through the inn's own website and through two online travel agents. Direct guests pay the first night at booking and the balance on arrival, with a 14-day cancellation window and 30 days on peak weekends. Wedding dates are held with a 25% deposit, with the balance due 60 days before the date. Retreats take a 50% deposit. These are the plan's own policies, not market norms.
The Year 1 pipeline
Four wedding dates and one retreat are held with deposits before opening, from a planner open house in the fall of 2026. Year 1 then needs 4 more weddings, 12 elopements and 3 more retreats to reach the forecast, and about 419 direct room bookings. The inn sells weekends first and fills midweek last, which is why the retreat is priced to fill specific weeks.
How rates are set
Rates move by month, from $310 in January to $430 in October in Year 1 dollars, and by weekend. Direct guests receive a late checkout and a credit toward the wine hour, not a lower rate, because agent contracts may restrict undercutting and a rate gap trains guests to book elsewhere first. The plan raises rates 3% a year.
Online agents and direct bookings
Online agents book 55% of Year 1 stays and fall to 40% by Year 5, as repeat guests and wedding parties book direct. The plan sets the commission at 15%. Agent bookings cost more, but they are the first discovery for guests who have not heard of the inn.
Repeat guests and referrals
A guest who returns books direct, tells friends and often brings a second couple. The plan counts on this rather than on discounting: the direct share rises 10 points between Year 1 and Year 3.
Paying to Be Found
The Year 1 marketing budget
| Item | Year 1 |
|---|---|
| Website, booking engine and search optimization | $12,000 |
| Paid search and social ads aimed at the Bay Area | $9,000 |
| Wedding and elopement directory listings and planner events | $10,000 |
| Photography and video content | $5,000 |
| Press and travel-writer stays | $4,000 |
| Email and guest follow-up | $3,000 |
| Concierge and local business relationships | $3,000 |
| Total | $46,000 |
Launch spend of $34,000 sits on top of that: photography, the website, a wedding-planner open house and press. With about 419 direct bookings in Year 1, the operating budget costs $110 a booking, or $191 with launch costs counted. In Year 3 the $54,000 budget is spread over about 623 direct bookings, which brings it to $87.
Review and booking milestones
- The website and booking engine live by October 2026, with deposits taken for 2027 dates.
- A planner open house in the fall of 2026 and a second in the spring of 2027.
- Fifty reviews on the main review sites by the end of Year 1, asked for at checkout.
- A repeat-guest list of 300 by the end of Year 2, with a September and October preview before the dates go public.
Operating the Bluff Property
A day at the inn
Breakfast is served from 8 to 10 each morning from the main house kitchen. Check-in opens at 3 pm, the wine-and-cheese hour runs from 5 to 6 pm, and the assistant innkeeper covers the front desk until 9 pm. The head housekeeper's team turns rooms between 10 am and 3 pm. On event days the events coordinator and the part-time associate run the pavilion, and the outside caterer works from the staging area.
Housekeeping and capacity
At 62% occupancy about seven rooms are occupied on an average night. The head housekeeper and one part-time housekeeper cover that through the winter, and a seasonal housekeeper joins from April to October. A wedding weekend can need all 11 rooms turned on a Sunday, which is why the associate and the owners are on site.
Events at the pavilion
Couples bring their own caterer from a preferred list, and the inn takes no catering margin. The inn provides tables, chairs, heaters and sound, the coordinator, and a crew for set-up and breakdown. Amplified music hours, guest limits and the number of events a year are likely to be set by the permit, and the plan treats that as its largest open risk: a cap of 8 weddings a year would turn Year 3 net income from $53,160 into a loss of about $110,300: 13 lost weddings at about $12,570 of gross profit each is $163,414.
Insurance and risk
Property, general and innkeeper's liability, liquor and event liability, business interruption and cyber cover are budgeted at $66,000 in Year 1. No quote has been obtained, and coastal property cover can be slow to place.
Maintenance and the bluff
Salt air, wind and wood decks mean paint, rails and roofing wear faster than inland. Repairs are budgeted at $26,000 in Year 1 and $40,000 by Year 5, and grounds and bluff-edge upkeep at $16,000. A geotechnical review of the bluff edge is part of the architect's scope before the pavilion is placed.
Systems and vendors
A property management system and channel manager handle rates and availability across the website and agents, and a point-of-sale system handles the wine hour. Linen is on a contract laundry service, breakfast supplies come from two local suppliers, and a payroll provider runs timekeeping and pay. None is hard to replace.
The Innkeepers and Investors
Nora Castellano, managing innkeeper
Nora has twelve years in hotel operations, the last four as general manager of a 60-room hotel in the Bay Area. She manages revenue, reservations and the team, and sells the inn to planners and repeat guests. Her $72,000 salary is in the cost base from month 1.
Ben Castellano, director of property and events
Ben spent fifteen years managing construction projects. He runs the refresh, the pavilion and the grounds, and manages event days. His $64,000 salary is in the cost base from month 1.
The team around them
An assistant innkeeper, a breakfast cook, a head housekeeper, a part-time housekeeper and a part-time maintenance and grounds role make up the team at opening. The events coordinator starts in month 4, ahead of the first wedding. A part-time associate joins in month 14 and a part-time relief innkeeper and crew lead in month 31, as weddings pass 20 a year. The team is built so that the inn runs when Nora and Ben are both away for a weekend.
What the founders have not done before
Neither founder has run a wedding venue or an event business of this size, and neither has set up an alcohol program. The plan covers this with an events coordinator hired before the first wedding, a preferred caterer list and a consultant who reviews the first season's event pricing.
Advisers on call
A hospitality accountant goes through the books every quarter. A land-use attorney takes the coastal and events permits, and a wedding planner on retainer looks over the package before it launches.
Units, investors and the lender
The two investors hold LLC units without a say in daily management. A sale, new borrowing or a change in the number of events a year needs the consent of both founders and one investor. Distributions of $60,000, $150,000 and $240,000 in Years 3 to 5 are paid pro rata, so the investors' 32% receives about $19,500, $48,600 and $77,800. The rest of their return would come from a sale of the units or the property, which the plan does not forecast. The bank takes a first deed of trust on the property and a personal guarantee from Nora and Ben, and tests debt service cover at 1.25 times from Year 2.
Magnolia Inn in Numbers
The model runs five years: monthly in the first, yearly after that. Funding comes first, because an inn that carries a mortgage and builds its event space before its first wedding is judged on whether the reserve can carry a slow winter. The operating figures follow, so each table can be traced to its reason.
Funding the bluff: new money and contributed property
| Use of funds | Amount |
|---|---|
| Bluff property contributed by the founders (land, main house, carriage house) | $2,350,000 |
| Refresh of all 11 rooms and baths, dining room and commercial breakfast kitchen across both buildings | $460,000 |
| Event pavilion, terrace, guest restrooms and caterer staging area | $380,000 |
| Fire sprinklers, accessibility path, septic and utility upgrades | $140,000 |
| Construction contingency (15% of the work above) | $147,000 |
| Beds, bedding, antiques, rugs and linens for 11 rooms | $82,000 |
| Breakfast kitchen equipment, pavilion tables, chairs, heaters and sound | $46,000 |
| Property system, channel manager, keyless locks, wifi and point of sale | $21,000 |
| Opening stock: pantry, linens in reserve, wine and cheese | $22,000 |
| Permits and license applications (coastal, use, health, fire, alcohol) | $34,000 |
| Architect, engineer, attorney and entity set-up | $58,000 |
| Launch: photography, website, wedding-planner open house, press | $34,000 |
| Pre-opening payroll, training and trial stays (Nov-Dec 2026) | $62,000 |
| Carrying costs during renovation: builder's-risk cover, utilities, five months of loan interest (Aug-Dec 2026) | $40,000 |
| Cash reserve for the first fog-bound winter and the first wedding season | $324,000 |
| Total uses | $4,200,000 |
| Source of funds | Amount |
|---|---|
| Founders: bluff property contributed at a planning value (land, main house, carriage house) | $2,350,000 |
| Nora and Ben Castellano's cash savings | $150,000 |
| Two local investors (LLC units) | $1,200,000 |
| Construction-to-permanent mortgage on the property | $500,000 |
| Total sources | $4,200,000 |
The property is already owned. Nora and Ben Castellano contribute the bluff site, main house and carriage house at a planning value of $2,350,000: the $2,250,000 they paid in 2025, closing costs and the design work they have funded since. A lender's appraisal would replace that figure, and the property carries no other debt. New money totals $1,850,000: $1,200,000 from two investors for LLC units (65%), a $500,000 construction-to-permanent mortgage (27%) and $150,000 of the founders' cash (8%). Units follow value paid in, which leaves Nora and Ben with about 68% and the investors with about 32%. The mortgage is modest, 21% of the contributed value and 14% of the $3,477,000 the property stands at once $1,127,000 of construction is added. It is set at 7.0% over 25 years, the plan's own figure rather than a lender's quote, and a bank may prefer a shorter term with a balloon and a refinance. Timing needs a note. The loan funds and construction runs from August to December 2026, but the model's calendar starts at opening in January 2027, so it books the build, the loan draw and the pre-opening costs at that date, and the five months of construction-period interest sit in the carrying-cost line. The loan is interest-only through December 2027, 17 months from the draw, and principal starts in Year 2 of the model. Of the new money, $1,127,000 pays for construction, $171,000 for furniture, kitchen, technology and opening stock, and $228,000 for costs written off at opening. The last $324,000 stays as cash reserve. The construction figure is a planning estimate with no bid behind it: $460,000 for the room and breakfast kitchen refresh, $380,000 for the pavilion, $140,000 for sprinklers, access, septic and utilities, and a 15% contingency of $147,000. Measured against the monthly model, the reserve bottoms out at about $117,000 at the end of July in Year 1, after allowing for receivables, which is about one and a third months of operating costs. A construction overrun beyond the contingency would have to be met by the owners. The downside case below tests the same reserve.
What the figures rest on
- Capacity is 11 rooms, seven in the main house and four in the carriage house, all open from January 2027, which gives 4,015 room-nights a year. Each retreat takes 16 room-nights out of availability. Year 1 room occupancy is 49.5% of the 3,951 nights left for individual guests, at an average rate of $377. Year 3 is 62.5% at $398, and Year 5 is 64.9% at $423.
- Occupancy follows the coast, not a straight line. In a mature year it runs from 42% in January to 63-70% across the foggy summer months, peaks at 80% in September and 82% in October, and falls to 56% in November and 48% in December. Year 1 starts at 62% of that pattern in January and reaches 92% of it by November, because a new inn has no review history.
- Rates are quoted in Year 1 dollars with breakfast included, from $310 in January to $430 in October, and rise 3% a year. The four carriage house rooms and the three largest main house rooms set the top of the range. These are the plan's own rates; a comparison with nearby inns has not been done. Room revenue in Year 3 is about $86,000 a room. Total revenue is about $146,000 a room, because weddings, elopements and retreats supply 38% of it, and that total is high for a small inn and the first figure a lender would test.
- Stays average 2.1 nights, which gives about 932 stays in Year 1 and 1,132 in Year 3. Online travel agents book 55% of stays in Year 1, 45% in Year 3 and 40% in Year 5, at a commission the plan sets at 15%. Card fees on direct bookings (3%), linen service and room amenities (4%) and breakfast ingredients (about $19 per occupied room-night) bring direct costs on room stays to about 18% in Year 1 and 17% in Year 3. The model holds them at 17.5% in every year.
- The evening hour has two prices because of the alcohol licence. In Year 1 it costs $18 a guest and serves local cider, juice and a cheese and charcuterie plate, since the inn holds no licence on opening day. The application sits inside the $34,000 permit budget, and the plan treats a licence as held from January 2028, a planning date that the regulator controls. From Year 2 the price is $26 a guest for two pours as well as the plate. With 1.9 guests per occupied room, 30% of guests buy in Year 1, rising to 42% by Year 4, which gives about 1,115 buyers in Year 1 and 1,807 in Year 3. Direct costs are 40%. The line is worth about $30,000 of gross profit in Year 3 at most, so nothing else depends on the licence.
- Weddings are priced at $15,000 for the pavilion and garden over a weekend, a day-of coordinator and rental mark-up, for up to 60 guests, with catering booked separately by the couple. Elopements are $4,600 for up to 12 guests. Both are the plan's own prices, and a comparison with nearby venues has not been done. The model holds 8 weddings and 12 elopements in Year 1, then 14 and 20, 21 and 26, 22 and 28, and 23 and 30. Prices rise 3% a year. Rooms booked by wedding parties are counted in room stays, so they are not counted twice. Event-day crew, rentals, linens and extra cleaning put direct costs near 30% of event revenue, but the model applies one blended direct-cost rate of 21% of revenue, set from the Year 1 mix, to every line and year.
- Retreats are priced at $10,500 for two nights, eight rooms, meeting space and three meals a day for up to 16 people. The model holds 4 in Year 1 (February, March and two in November), then 10, 13, 14 and 15. They are sold into weeks that start below 60% occupancy. Direct costs are 36%, because the meals are cooked in house.
- The pavilion needs a use permit and may need a coastal development permit, and the city may limit guest counts, amplified music hours or events per year. The 21 weddings in Year 3 depend on that outcome. Each wedding fewer removes about $12,570 of gross profit in Year 3 in the model, so a cap of 8 a year costs $163,414 and turns Year 3 net income from $53,160 into a loss of $110,254.
- Payroll carries 27% on-costs for full-time staff (payroll taxes, workers' compensation, health cover and paid leave), 24% for the seasonal housekeeper and 15% for part-time roles. A payroll provider, paid from the professional fees line, runs timekeeping and pay. Wages are launch rates: a full-year housekeeper at $46,000 is about $22 an hour, the head housekeeper earns $58,000, the cook $60,000 and the assistant innkeeper $58,000. Pay rises of 3% a year appear as their own line from Year 2.
- Nora and Ben are paid from month 1, $72,000 and $64,000, and both salaries sit in the cost base, so every profit line is struck after the two of them have been paid. Neither takes a distribution before Year 3.
- Housekeeping is sized from the rooms occupied. At 62% occupancy about seven rooms are occupied on an average night, a mix of departures and stay-overs, which the head housekeeper and one part-time housekeeper cover through the winter. A seasonal housekeeper joins from April to October, a part-time associate from month 14 covers weekends and event days, and a part-time relief innkeeper and crew lead joins in month 31 as weddings pass 20 a year.
- Property tax of $38,000 is about 1.1% of the $3,477,000 cost basis and is a planning number; the county sets the assessed value. Insurance of $66,000 covers property, general and innkeeper's liability, liquor and event liability, business interruption and cyber cover; no quote has been obtained. Utilities of $46,000 are about $4,200 a room.
- Repairs start at $26,000 and rise to $40,000 as the new work ages in salt air; grounds and bluff-edge upkeep is $16,000. The furniture, linen and equipment reserve is 2% of revenue in Year 1, when everything is new, and 3% from Year 2. License and permit renewals of $9,000 include the state LLC fees.
- Year 1 marketing is $46,000, plus $34,000 of launch spend on photography, the website, a planner open house and press. About 419 direct bookings are expected in Year 1, 45% of 932 stays, so the operating budget alone costs $110 per direct booking and $191 once launch spend is counted. In Year 3, $54,000 spreads across about 623 direct bookings, or $87 each.
- Transient occupancy tax is collected from guests and passed to the city, so it sits outside revenue; the rate and filing rules are set locally and are not modeled. Receivables average 4 days: guests pay by card at stay, online agents pay out after check-in, and wedding and retreat deposits are collected ahead and not counted as early cash. Payables average 21 days.
- Depreciation is straight line: $1,250,000 of buildings over 39 years, $1,127,000 of improvements and the pavilion over 20, $128,000 of furniture and kitchen equipment over 7 and $21,000 of technology over 5, or $110,887 a year. The remaining $1,100,000 of the contributed property is land and is not depreciated. The land and building split is the plan's figure, not an appraiser's.
- Income tax is modeled at 21% federal and 8.84% for California. The Year 1 and Year 2 losses before start-up costs, $349,471 together, are carried forward and cover the whole $260,075 of pre-tax profit in Years 3 to 5, so no income tax is charged in the five years. The $228,000 of start-up costs is left out of the tax base, which can only overstate tax, and an accountant would decide how much of it is deductible and when. An LLC normally passes profit through to its members, so a corporate rate is a cautious planning figure.
- The bank tests debt service cover at 1.25x from Year 2. Owner distributions are $60,000 in Year 3, $150,000 in Year 4 and $240,000 in Year 5, shared in proportion to units and paid only while that test is met. By Year 5 the payout is larger than net income of $122,934 because depreciation is a non-cash charge and because the payout releases reserve cash the inn no longer needs. Investors have no redemption right. Their return is those distributions plus any later sale of the units or the property, and no sale is forecast.
Revenue by line
| Revenue stream | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Room stays (breakfast included) | $737,209 | $874,031 | $946,432 | $999,931 | $1,036,029 |
| Wine-and-cheese hour and add-ons | $20,078 | $41,434 | $49,851 | $55,319 | $57,236 |
| Weddings and elopements | $175,200 | $311,060 | $461,067 | $501,343 | $543,621 |
| Small retreats and group stays | $42,000 | $108,150 | $144,813 | $160,631 | $177,268 |
| Total revenue | $974,487 | $1,334,675 | $1,602,163 | $1,717,224 | $1,814,154 |
| Growth on prior year | – | 37% | 20% | 7% | 6% |
Room stays supply 76% of Year 1 revenue and 57% of Year 5. Weddings, elopements and retreats climb from 22% to 40% of revenue, which is the work the pavilion exists to do. Growth is 37% in Year 2, when the pavilion trades for a full year and the occupancy ramp finishes, then eases to 6% by Year 5 as occupancy levels off near 65%.
The first twelve months, month by month
| Month | Room stays (breakfast included) | Wine-and-cheese hour and add-ons | Weddings and elopements | Small retreats and group stays | Total revenue | EBITDA |
|---|---|---|---|---|---|---|
| Jan 2027 | $27,527 | $913 | $0 | $0 | $28,440 | ($51,298) |
| Feb 2027 | $28,368 | $913 | $0 | $10,500 | $39,781 | ($42,340) |
| Mar 2027 | $39,631 | $1,211 | $4,600 | $10,500 | $55,942 | ($29,574) |
| Apr 2027 | $52,015 | $1,508 | $4,600 | $0 | $58,123 | ($27,851) |
| May 2027 | $66,708 | $1,806 | $4,600 | $0 | $73,114 | ($16,010) |
| Jun 2027 | $64,033 | $1,703 | $19,600 | $0 | $85,336 | ($6,355) |
| Jul 2027 | $70,884 | $1,867 | $19,600 | $0 | $92,351 | ($814) |
| Aug 2027 | $79,201 | $2,062 | $19,600 | $0 | $100,863 | $5,910 |
| Sep 2027 | $98,736 | $2,380 | $39,200 | $0 | $140,316 | $37,074 |
| Oct 2027 | $108,213 | $2,586 | $39,200 | $0 | $149,999 | $44,723 |
| Nov 2027 | $52,200 | $1,580 | $19,600 | $21,000 | $94,380 | $789 |
| Dec 2027 | $49,693 | $1,549 | $4,600 | $0 | $55,842 | ($29,653) |
Monthly revenue ranges from $28,440 in January to $149,999 in October. September and October together bring in $290,315, 30% of the year, and the three summer months of June, July and August add up to less ($278,550) because fog holds the summer back. EBITDA is negative from January to July and again in December, and positive from August to November. The eight loss months lose $203,895 between them and the four profit months earn $88,496. January to April are weakest, with occupancy at 26% to 44% and no weddings; elopements start in March. Cash is lowest at the end of July, at about $117,000, about one and a third months of costs, after allowing for the 4 days guests and online agents take to pay.
The innkeeping team and what it costs
| Role | Annual wage | Starts | Year 1 end | Year 2 end | Year 3 end | Year 4 end | Year 5 end |
|---|---|---|---|---|---|---|---|
| Co-owner and managing innkeeper | $72,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Co-owner and director of property and events | $64,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Assistant innkeeper (front desk, reservations, evenings) | $58,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Breakfast cook (also wine-hour and event plates) | $60,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Head housekeeper | $58,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Housekeeper (part time, year round) | $30,000 | Month 1 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 |
| Seasonal housekeeper (April to October) | $46,000 | Month 1 | – | – | – | – | – |
| Events coordinator | $60,000 | Month 4 | 1 | 1 | 1 | 1 | 1 |
| Maintenance and grounds (part time) | $40,000 | Month 1 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 |
| Guest services associate (weekends and event days, part time) | $32,000 | Month 14 | – | 0.5 | 0.5 | 0.5 | 0.5 |
| Relief innkeeper and event crew lead (part time) | $34,000 | Month 31 | – | – | 0.5 | 0.5 | 0.5 |
| Total payroll incl. on-costs | $567,163 | $619,947 | $642,563 | $662,113 | $662,113 |
Five salaried staff are on payroll from opening: Nora, Ben, an assistant innkeeper, a breakfast cook and a head housekeeper, joined by a part-time housekeeper and a part-time maintenance and grounds role. The events coordinator starts in month 4, ahead of the first wedding in June, the part-time guest services associate in month 14 and the part-time relief innkeeper and crew lead in month 31. The seasonal housekeeper works April to October and is paid for those months, which is why the row shows a dash at each December year end. Headcount at year end is 7.0 full-time equivalents in Year 1, 7.5 in Year 2 and 8.0 from Year 3, with one more in the summer months. Nora and Ben do the selling and weekend management themselves, and their $72,000 and $64,000 salaries are already in the cost lines.
Profit and loss
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $974,487 | $1,334,675 | $1,602,163 | $1,717,224 | $1,814,154 |
| Direct costs (online-agent commissions, card fees, linen service, breakfast, wine and cheese, event crew and rentals) | ($204,723) | ($280,392) | ($336,587) | ($360,759) | ($381,122) |
| Gross profit | $769,764 | $1,054,283 | $1,265,576 | $1,356,465 | $1,433,032 |
| Payroll incl. on-costs | ($567,163) | ($619,947) | ($642,563) | ($662,113) | ($662,113) |
| Rent | $0 | $0 | $0 | $0 | $0 |
| Utilities | ($46,000) | ($47,600) | ($49,300) | ($51,000) | ($52,800) |
| Marketing | ($46,000) | ($50,000) | ($54,000) | ($56,000) | ($58,000) |
| Insurance | ($66,000) | ($69,000) | ($72,000) | ($75,000) | ($78,000) |
| Professional fees | ($22,000) | ($23,000) | ($24,000) | ($25,000) | ($26,000) |
| Software subscriptions | ($15,000) | ($16,000) | ($17,000) | ($18,000) | ($19,000) |
| Property tax on the bluff site and improvements | ($38,000) | ($38,700) | ($39,400) | ($40,100) | ($40,900) |
| Repairs, paint, decks and salt-air maintenance | ($26,000) | ($30,000) | ($34,000) | ($37,000) | ($40,000) |
| Grounds, landscaping and bluff-edge upkeep | ($16,000) | ($16,500) | ($17,000) | ($17,500) | ($18,000) |
| Furniture, linen and equipment replacement reserve (2% to 3% of revenue) | ($19,000) | ($40,000) | ($48,000) | ($52,000) | ($54,000) |
| License and permit renewals, inspections and dues | ($9,000) | ($9,500) | ($10,000) | ($10,500) | ($11,000) |
| Guest amenities, phones and office supplies | ($11,000) | ($12,000) | ($13,000) | ($13,500) | ($14,000) |
| Event rentals reserve and chargebacks | ($4,000) | ($6,000) | ($8,000) | ($9,000) | ($9,500) |
| Annual pay raises (3% a year) | $0 | ($18,598) | ($39,132) | ($61,396) | ($83,101) |
| EBITDA | ($115,399) | $57,438 | $198,181 | $228,356 | $266,617 |
| Depreciation | ($110,887) | ($110,887) | ($110,887) | ($110,887) | ($110,887) |
| Interest | ($35,000) | ($34,736) | ($34,134) | ($33,488) | ($32,796) |
| Income tax | $0 | $0 | $0 | $0 | $0 |
| Net income before start-up costs | ($261,286) | ($88,185) | $53,160 | $83,980 | $122,934 |
| Start-up costs expensed at opening (permits, design and legal fees, launch marketing, pre-opening payroll, renovation carrying costs) | ($228,000) | $0 | $0 | $0 | $0 |
| Net income after start-up costs | ($489,286) | ($88,185) | $53,160 | $83,980 | $122,934 |
Year 1 EBITDA is a loss of $115,399. Depreciation of $110,887 and interest of $35,000 take the operating loss to $261,286, and $228,000 of start-up costs written off at opening push the Year 1 total to $489,286. Year 2 earns $57,438 at EBITDA and still loses $88,185 after depreciation and interest. Year 3 is the first profitable year, with net income of $53,160, a net margin of 3.3% and an EBITDA margin of 12.4%. Years 4 and 5 earn $83,980 (4.9%) and $122,934 (6.8%). No income tax is charged in any year, because the early losses carry forward against Years 3 to 5. Payroll, with pay rises, falls from 58% of revenue in Year 1 to 43% in Year 3 and 41% in Year 5, even with pay raises of $83,101 by Year 5.
Cash movements
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Cash from operations | ($411,583) | $18,568 | $160,977 | $193,547 | $232,709 |
| Property, build-out and equipment | ($3,626,000) | $0 | $0 | $0 | $0 |
| Funding received | $4,200,000 | $0 | $0 | $0 | $0 |
| Mortgage principal repaid | $0 | ($8,329) | ($8,932) | ($9,577) | ($10,270) |
| Owner distributions | $0 | $0 | ($60,000) | ($150,000) | ($240,000) |
| Net change in cash | $162,417 | $10,239 | $92,046 | $33,970 | ($17,561) |
| Closing cash | $162,417 | $172,656 | $264,701 | $298,671 | $281,110 |
The $2,350,000 of contributed property appears on both the funding and the build-out lines and nets to nothing in cash. Operations use $411,583 in Year 1, start-up costs included, and the year closes with $162,417. Cash reaches $264,701 in Year 3, after the first $60,000 distribution, and $298,671 in Year 4. Year 5 closes at $281,110, just under three months of operating costs, after $240,000 of distributions and $10,270 of principal. Mortgage principal begins in Year 2, when the interest-only period ends.
Balance sheet
| At year end | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Cash | $162,417 | $172,656 | $264,701 | $298,671 | $281,110 |
| Accounts receivable | $10,679 | $14,627 | $17,558 | $18,819 | $19,881 |
| Pantry, wine, cheese and linen stock | $34,283 | $38,824 | $42,195 | $43,646 | $44,867 |
| Property, build-out and equipment (net) | $3,515,113 | $3,404,226 | $3,293,339 | $3,182,452 | $3,071,565 |
| Total assets | $3,722,492 | $3,630,332 | $3,617,793 | $3,543,587 | $3,417,424 |
| Accounts payable (food, linen service and trade vendors) | $11,779 | $16,132 | $19,365 | $20,756 | $21,928 |
| Construction-to-permanent mortgage | $500,000 | $491,671 | $482,739 | $473,162 | $462,892 |
| Paid-in capital | $3,700,000 | $3,700,000 | $3,700,000 | $3,700,000 | $3,700,000 |
| Retained earnings | ($489,286) | ($577,471) | ($584,311) | ($650,330) | ($767,396) |
| Total liabilities and equity | $3,722,492 | $3,630,332 | $3,617,793 | $3,543,587 | $3,417,424 |
Margins, break-even and mortgage cover
| Measure | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| EBITDA margin | -11.8% | 4.3% | 12.4% | 13.3% | 14.7% |
| Net margin (before start-up costs) | -26.8% | -6.6% | 3.3% | 4.9% | 6.8% |
| Payroll incl. pay raises as share of revenue | 58% | 48% | 43% | 42% | 41% |
| Revenue per full-time equivalent at year end | $139,212 | $177,957 | $200,270 | $214,653 | $226,769 |
| Average monthly revenue | $81,207 | $111,223 | $133,514 | $143,102 | $151,180 |
| Monthly revenue needed to cover operating costs | $93,381 | $105,163 | $112,606 | $119,011 | $123,052 |
| Debt service cover (EBITDA / interest + principal) | -3.3x | 1.3x | 4.6x | 5.3x | 6.2x |
Year 1 falls short: monthly revenue averages $81,207 against the $93,381 needed to cover operating costs. Year 2 clears the line at $111,223 against $105,163, and Year 3 at $133,514 against $112,606. Debt service cover is negative in Year 1 because EBITDA is a loss, then 1.3x in Year 2, when principal starts, and 4.6x in Year 3. The bank's 1.25x test first applies in Year 2, where EBITDA of $57,438 clears the $53,833 required by only $3,605, about 0.3% of that year's revenue. A bank would likely lend more against Year 3 cash flow, but the founders keep the loan at $500,000 because Year 2 is where the covenant is hardest to meet, and they would ask in the term sheet for a longer interest-only period or a test that starts in Year 3.
A foggy summer and fewer weddings: revenue 20% lower
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $779,590 | $1,067,740 | $1,281,730 | $1,373,779 | $1,451,323 |
| Net income before start-up costs | ($315,858) | ($150,284) | ($18,014) | $23,443 | $54,200 |
| Net income after start-up costs | ($543,858) | ($150,284) | ($18,014) | $23,443 | $54,200 |
| Closing cash | $110,081 | $67,377 | $148,711 | $272,245 | $385,999 |
Revenue falls 20% on every line in every year. The owners respond in several ways. The weekend associate and the relief innkeeper are not hired. Nora and Ben each take a 20% pay cut. Part-time housekeeping and maintenance hours drop by about a quarter, and the seasonal housekeeper works May to September. Marketing is cut 20%, the replacement reserve is halved, and repairs, grounds, amenities, event rentals, utilities and professional fees are trimmed. Distributions are suspended until Year 5, when $40,000 is paid. With those steps year-end cash stays positive, at its lowest $67,377 at the end of Year 2, net income is a small loss in Year 3 ($18,014) and the inn is profitable from Year 4. Equity ends Year 1 at $3,156,142. The lowest Year 1 month-end balance, measured as in the base case, is about $103,000 in August, against $117,000 in July in the base case. The mortgage is the weak point. On the loan's original terms, interest-only for the 12 months after opening and principal after that, Year 2 debt service is $43,066 against EBITDA of negative $4,397, so cover is below zero against the bank's 1.25x test and Year 2 closes with $59,311 of cash. Extending interest-only to 24 months, a request the plan makes of the bank in this case, cuts Year 2 debt service to $35,000 and lifts closing cash to $67,377, but cover stays below 1.0x. The founders would therefore ask the bank to waive the test for Year 2 and fund the gap, about $39,400 of interest after EBITDA, from the reserve. From Year 3 cover is about 3.0x on the original terms and 2.9x on the extended ones. Without the owners' response, the same revenue shortfall leaves the inn with about $10,700 of cash at the end of Year 1 and $189,090 short at the end of Year 2.
Sources
Two tax rates are quoted, and each rests on a source below. Every other rule or rate is hedged in the text, and the offices listed are where it would be confirmed.
- 26 U.S.C. section 11(b), corporate income tax rate: sets the federal rate at 21 percent of taxable income, the rate used in the model.
- California Franchise Tax Board, business tax rates: lists 8.84% for corporations other than banks and financials in its September 2025 update, the state rate used in the model.
- California Coastal Commission, coastal development permits: whether the site and the construction need a coastal development permit.
- California Department of Alcoholic Beverage Control, licensing: the license type for wine service and its conditions.
- City of Half Moon Bay planning and finance offices: use permits for events, lodging registration and transient occupancy tax.
- San Mateo County assessor and environmental health: property reassessment and the breakfast kitchen's classification.
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