Looking for a bed and breakfast business plan? You're in the right place.
An inn is a small business with a large building behind it, and a lender or a co-investor will want straight answers. How many nights will the rooms actually sell, and at what rate? How much of each booking goes to an online travel agent? What does the mortgage cost in the months before the spring season? What happens if bookings run 20% short of plan?
In this article we'll walk through a complete sample plan for a seven-room, Caribbean-themed bed and breakfast in Raleigh, North Carolina, section by section. We'll cover the executive summary, the SWOT analysis and, in particular, all of the financials, ending on a downside case.
Here's what you'll take away:
- The executive summary: see how to put a property purchase, a funding mix and three years of results on one page
- Rates and occupancy by season: learn how to set a rate for each part of the year and test it against a month-by-month calendar, so your first year is not a single average
- RevPAR and the booking channels: understand how occupancy and rate combine into revenue per room, and what a 15% commission costs when 42% of room revenue arrives through an online travel agent
- The marketing plan: find out what a new inn might spend to win its first 390 direct stays, and what each costs against a commissioned one
- The start-up budget and reserve: see how much cash a house needs for renovation, pre-opening costs and the first two years
- The five-year profit, cash flow and balance sheet: follow how the mortgage, payroll and depreciation show up in the numbers
- The downside case: have an answer ready for "what if bookings are 20% short?", along with the steps the owners take
If you're planning an inn, read this before you write your own. The business is fictional, so take what fits your property and change the rest.
In this plan
If you need a caribbean-themed bed and breakfast business plan template for your own plan, start it in the Toolkit.
Sea Grape House in Brief
Sea Grape House is a seven-room bed and breakfast in outer-ring Raleigh, North Carolina, opening on 1 January 2027. Rooms are sold with a Caribbean-inspired breakfast. The house also hosts small weddings, private events and a Sunday island supper. Founder and innkeeper Denise Alleyne holds 56% of the equity, lives in an owner's suite on site and runs the inn day to day. A family co-investor holds 44%.
The business raises $1,030,000: $780,000 of equity and a $250,000 bank mortgage. Of that, $540,000 buys the house, $260,000 renovates it, $71,000 furnishes the rooms and kitchen, $77,500 covers legal and closing costs, permits, pre-opening carry and the launch campaign, and $81,500 stays in the bank as a reserve.
| Year 1 | Year 2 | Year 3 | |
|---|---|---|---|
| Revenue | $281,740 | $355,141 | $413,914 |
| Net income after start-up costs | ($112,465) | ($434) | $28,442 |
| Closing cash | $64,224 | $86,912 | $138,579 |
Rooms sell at 49.6% occupancy in Year 1 and 58.0% in Year 3, at an average daily rate of $187 and $197. That works out at $93 and $114 of revenue for every room available. Events add 12% of revenue in Year 1 and 26% by Year 3. EBITDA is $12,127 in Year 1 and $74,962 in Year 3. Year 1 carries $77,500 of start-up costs and the build-up of bookings, so the loss is $112,465. Year 2 is break-even, Year 3 is the first profit and net income reaches $47,722 in Year 5. Debt cover is 0.6x in Year 1 and 2.1x in Year 2, and the Year 1 gap comes out of the reserve.
Online travel agents book 42% of room revenue at the start and 29% by Year 5. The 15% commission on that share costs $14,902 in Year 1.
A 20% shortfall in bookings is tested at the end of the financial section, with the owners' response spelled out. Cash stays positive in every year, and the inn is back in profit in Year 3.
The House and the Offer
Legal name: Sea Grape House, LLC, a North Carolina limited liability company. Owners: Denise Alleyne (56%) and a family co-investor (44%). Property: a vacant 1920s house with eight bedrooms, outside the beltline in Raleigh. Seven become guest rooms and one becomes Denise's suite. The kitchen is rebuilt to commercial standard. The garden seats a 30-guest event. Opening: 1 January 2027. The house is bought and renovated before then. Stage: a purchase contract is in negotiation. The first-year model has it closing and the work finished before opening.
Why the price is what it is
The $540,000 price is $77,000 per guest room before renovation and $114,000 after it. The figure is low for a seven-bedroom house near downtown Raleigh and reflects where this one stands: outside the beltline, vacant for two years and without a working kitchen, sprinkler system or modern bathrooms. The owners treat the price and the renovation as one cost. Only the price is mortgaged; the renovation comes from equity.
The offer
Seven en-suite rooms, a breakfast that draws on the food of Denise's family in Barbados, and a house that can host up to 30 guests for a small wedding or a long supper. Breakfast is included in the room rate. The Caribbean theme lives in the kitchen, the planting and the art on the walls, with no costume and no pirate flag on the porch.
A typical breakfast: coconut bread and johnnycakes, fried plantain, eggs from a local farm, fresh fruit and a spiced coffee. Menus change with the month and are checked for allergens on booking.
Where the revenue comes from
| Line | How it is priced | Year 1 share of revenue |
|---|---|---|
| Rooms | $158 to $205 a night by season, breakfast included | 84% |
| Micro-weddings, private events and island suppers | $6,200 per wedding package for up to 30 guests; $58 a head at supper | 12% |
| Packaged foods, add-ons and gift cards | About $9.50 per occupied night | 4% |
Goals for the first three years
- 1,267 room-nights sold in 2027 (49.6% occupancy), rising to 1,482 in 2029 (58.0%).
- Year 3 revenue of $413,914, EBITDA above 15% of revenue (the model reaches 18.1%) and the first net profit.
- Bring the share of room revenue booked through online travel agents from 42% to 33% by Year 3.
- Debt cover above 1.25x from Year 2 (the model reaches 2.1x) and net income above $40,000 by Year 5.
What has to be confirmed first
Zoning and permits decide whether this business exists. Before closing, Denise's lawyer confirms with the City of Raleigh that the property may operate as a seven-room inn and host events of this size. Food-service rules for a small inn, fire and life-safety inspections and lodging-tax registration are checked with the state and Wake County at the same time. Sunday suppers open to the public need a food-establishment permit; if it is refused, suppers are limited to house guests and event clients and $8,352 of Year 1 revenue falls away. Lodging taxes collected from guests are remitted and are not counted as revenue in this plan. If events are not permitted, the events line comes out and the plan is rewritten around rooms alone.
Raleigh's Lodging Market
Visit Raleigh reported that Wake County welcomed a record 19 million visitors in 2024 and that they spent $3.4 billion, of which $850 million went on lodging (release of 21 August 2025). Wake County hotel occupancy was 69.7% in 2024. Sea Grape House's occupancy sits well below that in every year: 58.0% in Year 3 and 60.0% in Year 5, which is 11.7 and 9.7 points under the county's hotel figure. The comparison is loose, since hotels and a seven-room house do not share a cost base or a customer, and the county figure covers hotels only. Even so, 60% at maturity is at the upper end of what the owners expect from an independent inn, and the downside case tests a shortfall.
Pay is the largest cost an inn controls. The Bureau of Labor Statistics put the median annual wage of lodging managers at $69,250 in May 2025. Denise draws $42,000 in this plan, because she lives on site and takes the rest of her return as profit. A buyer of the inn would have to pay a manager more.
Rates are the least certain number in the plan. No source consulted gives an average daily rate for independent inns in Raleigh, so the seasonal rates of $158, $180 and $205 are the owners' own judgement. They are the first figure to test against live listings before any money is committed.
Who a guest could book instead
| Alternative | What it offers | Why a guest picks it | How Sea Grape House differs |
|---|---|---|---|
| Limited-service and full-service hotels | Consistent rooms, loyalty points, parking | Predictable and often close to the event | A host on site, a cooked breakfast, a house with a garden |
| Short-term rental homes and apartments | Whole-home privacy, a kitchen | Space for groups and longer stays | Daily housekeeping, breakfast and a person to ask |
| Other inns and bed and breakfasts | Similar scale and service | Established reviews and repeat guests | A Caribbean-led menu and a small-event offer |
| Wedding barns and rental venues | A single-day venue | Capacity beyond 30 guests | Rooms for the wedding party in the same house |
The table describes categories and not a ranking. Rates, fees and reviews on every platform change often, so none are quoted.
SWOT
| Strengths | Weaknesses |
|---|---|
| A cooking style with a clear point of view | First inn owned by Denise; no track record as an owner |
| Two ways to earn from one building: rooms and events | Debt service of $21,684 a year against Year 1 EBITDA of $12,127 |
| Eleven years of hotel operations behind the innkeeper | Seven rooms limit revenue however well the house is run |
| Opportunities | Threats |
|---|---|
| Direct bookings raise the share of each room rate kept | Fewer weddings booked, or events not permitted |
| Returning guests and gift cards | Staff turnover in housekeeping during the peak months |
| Midweek stays from visiting families and small groups | Rising insurance and repair costs on an older house |
Who Books a Room Here
Four kinds of guest
The plan uses this mix of room-nights in Year 3. The shares are the owners' estimate and not survey results. In Year 1, with four weddings, event guests are about 3% of room-nights.
| Guest | Typical stay | Share of room-nights | What decides the booking |
|---|---|---|---|
| Couples on a weekend away | Two nights, Friday and Saturday | 48% | Photographs, reviews, breakfast, quiet |
| Wedding and event guests | One or two nights around the event | 8% | Being in the same house as the event |
| Families visiting students, patients or relatives | Two to four nights | 24% | Price, parking, a kitchen to share |
| Business travellers | One or two weeknights | 20% | Wi-Fi, an early breakfast, a desk |
The event share follows from the event count: 12 weddings in Year 3, each filling about 10 room-nights across 7 rooms, is 120 of 1,482 nights, or 8%. The average stay is taken as 1.9 nights, which gives about 670 stays in Year 1.
What guests look for
A clean room, a host who answers, a breakfast worth getting up for and a rate that matches the photographs. A weekend couple reads the reviews before the rate. A parent visiting a student reads the rate first.
From the platform to the direct page
A guest who finds the inn on an online travel agent often books direct on a return visit if the inn's own page is easy to use and quotes the same price. That is the aim of the direct booking page and the emailed thank-you.
Filling the Calendar
Rates and occupancy by season
Raleigh's year has two peaks and two quiet spells. Rates follow the seasons, and the Year 1 build-up is shown month by month.
| Month | Room-nights sold | Occupancy | Average daily rate | RevPAR | Room revenue |
|---|---|---|---|---|---|
| Jan 2027 | 50 | 23.0% | $158 | $36 | $7,882 |
| Feb 2027 | 61 | 31.1% | $158 | $49 | $9,646 |
| Mar 2027 | 101 | 46.5% | $180 | $84 | $18,162 |
| Apr 2027 | 118 | 56.4% | $205 | $116 | $24,264 |
| May 2027 | 125 | 57.6% | $205 | $118 | $25,633 |
| Jun 2027 | 107 | 51.0% | $180 | $92 | $19,286 |
| Jul 2027 | 106 | 48.9% | $180 | $88 | $19,118 |
| Aug 2027 | 105 | 48.4% | $180 | $87 | $18,901 |
| Sep 2027 | 125 | 59.7% | $205 | $122 | $25,700 |
| Oct 2027 | 151 | 69.7% | $205 | $143 | $31,011 |
| Nov 2027 | 120 | 57.0% | $180 | $103 | $21,529 |
| Dec 2027 | 98 | 45.0% | $158 | $71 | $15,415 |
RevPAR is room revenue divided by the rooms available for the month. It is the figure that ties occupancy and rate together: a high rate at low occupancy and a low rate at high occupancy can produce the same RevPAR.
Five years of rooms and booking channels
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Room-nights sold (of 2,555) | 1,267 | 1,405 | 1,482 | 1,520 | 1,533 |
| Occupancy | 49.6% | 55.0% | 58.0% | 59.5% | 60.0% |
| Average daily rate | $187 | $192 | $197 | $203 | $209 |
| RevPAR | $93 | $105 | $114 | $121 | $126 |
| Share of room revenue booked through OTAs | 42% | 37% | 33% | 30% | 29% |
| OTA commission paid (15%) | $14,902 | $14,945 | $14,478 | $13,907 | $13,963 |
Had the OTA share stayed at 42%, Year 5 commission would be $20,222, or $6,259 more. Commission in dollars stays close to flat while room revenue rises 36%, because the direct share rises.
Capacity
The busiest month in Year 1, October, sells 151 of 217 available room-nights. By Year 5 the same month runs at about 77%, which fills most weekends and leaves room on weekdays. The inn does not add rooms in this plan.
How a stay is booked
- An enquiry or booking arrives through the inn's own page, an online travel agent or by phone.
- A deposit of one night secures the room, and the balance is taken on arrival.
- A pre-arrival email gives directions, check-in times and a breakfast allergy form.
- After checkout a thank-you message offers a gift card and a direct-booking rate for the next visit.
Events
Weddings are booked 9 to 12 months ahead, so Year 1 holds only four events: one in June, one in September and two in October, taken through launch marketing and deposits before opening. The count rises to 8 in Year 2 and 16 by Year 5. A $6,200 package covers up to 30 guests, catering, a day-of coordinator and use of the garden and ground floor, with the wedding party staying in the rooms. The 60% direct cost covers catering, rentals and serving staff, about $3,700 for a 30-guest wedding. Alcohol is not sold by the inn. Events that need a bar use a licensed caterer, and no liquor permit is budgeted. Sunday island suppers for 16 guests at $58 start in April, subject to the food-establishment permit.
Where the Marketing Money Goes
Spend and the bookings it buys
Year 1 marketing is $29,000: $18,000 of launch spend paid from start-up capital and $11,000 of running costs. That is 10.3% of Year 1 revenue and 3.4% of Year 2 revenue. About 670 stays are expected in Year 1, and the 58% of room revenue booked direct means about 390 of them arrive without a commission. The marketing cost per direct stay is therefore about $75 in Year 1. An OTA stay costs about $53 in commission. From Year 2, with $12,000 of spend against about 470 direct stays, the figure falls to about $26.
| Channel | Year 1 spend | What it is expected to do |
|---|---|---|
| Website, booking engine and photography (launch) | $12,000 | A page that takes bookings and gift-card orders with photographs of every room |
| Opening weekend and local press (launch) | $6,000 | Introductions to neighbours, local writers and the first wedding photographers |
| Google Business profile and local search | $3,000 | Ranking for searches such as "bed and breakfast Raleigh" and "small wedding venue Raleigh" |
| Wedding and venue directories | $3,000 | The four events held in Year 1 and most of the 8 booked for Year 2 |
| Photography and short video for social | $2,000 | A steady supply of pictures of breakfast, the garden and events |
| Local partnerships | $1,200 | Referral arrangements with florists, photographers and nearby restaurants |
| Email to past guests and gift cards | $800 | Repeat stays and gifts |
| Signage and printing | $1,000 | Welcome cards and a menu for supper nights |
Milestones
- January 2027: booking page live, first guests arrive.
- April 2027: 118 room-nights sold in the month and the first island suppers begin.
- June 2027: the first wedding is held.
- October 2027: 151 room-nights, the year's peak, and 70% occupancy.
- December 2027: a gift-card campaign for the winter months, with Year 1 closing at 49.6% occupancy.
Running the Inn
The house and the renovation
Seven en-suite rooms across two floors, a ground-floor sitting room and dining room, an owner's suite, a commercial-standard kitchen, a laundry room and a garden. The $260,000 renovation is itemised in the funding table: $60,000 for a sprinkler system and fire alarm, $70,000 for seven en-suite bathrooms, $38,000 for the kitchen with a hood and grease trap, $42,000 for the roof, porch and exterior, $34,000 for electrical, plumbing and heating and cooling, $8,000 for an accessible entrance and one accessible room, and an $8,000 contingency. A contingency of 3% of the renovation is thin for a house of this age. The owners would get fixed-price quotes before closing and walk away if they came in higher. The house is owned, so the model carries no rent. Property tax, building insurance and repairs are separate lines.
Where Denise lives and who covers the nights
Denise lives in the owner's suite on the ground floor, so a person is on site every night. She works six days. The part-time relief host covers her day off, weekend evenings and any nights she is away, at about 25 hours a week. The business charges no rent for the suite. How the suite is treated for tax is settled with the accountant.
A day in the house
Breakfast is served from 8 to 10 a.m. Check-out is at 11 a.m. and rooms are turned between 11 and 3. Check-in is from 3 p.m. Denise cooks breakfast on weekdays and a part-time cook covers Friday to Sunday.
Housekeeping and laundry
Cleaning is the largest recurring job. A turnover takes about 45 minutes a room and a stay-over about 20, with an allowance of an hour and a half a day for the common rooms and laundry and about 4 hours to reset the house after each event. In the peak month of Year 5 that comes to about 160 hours, of which about 90 are rooms. January needs about 90 hours in all. The lead housekeeper works about 25 hours a week and a casual housekeeper takes peak days and event mornings. Together they are paid for about 1,880 hours a year (at $17 an hour), against about 1,600 hours of work in Year 5, so hours flex with the calendar. Linens are laundered in-house.
Systems and software
A property management and channel manager system keeps the calendar identical across the inn's own page and the booking platforms, so a room is never sold twice. Software costs $4,800 in Year 1, including the booking engine, payment processing and email.
Licences, tax and insurance
- Zoning and permit confirmation from the City of Raleigh before closing.
- Food-service, fire and life-safety inspections, completed before opening and repeated on the schedules the authorities set, and a food-establishment permit for public suppers.
- State and county lodging and sales tax registration, with a monthly calendar for returns.
- Property, general liability, cyber and loss-of-income cover, budgeted at $14,000 in Year 1. Workers' compensation is inside the 27% payroll on-cost. The inn sells no alcohol.
Suppliers
Local farms for eggs and produce, a coffee roaster, a linen supplier for replacements and two trade contractors on call for plumbing and electrical work. None is hard to replace.
The Innkeepers
Denise Alleyne, founder and innkeeper
Denise grew up in Bridgetown, Barbados, and moved to North Carolina to study. She has eleven years in hotel operations, the last five as rooms manager at a 200-room hotel in the Triangle, where she ran front office, housekeeping and the guest-complaint line. She has not owned or run an inn or any commercial property, and she has not run weddings. Her $440,000 is savings and the proceeds from selling her home.
The co-investor
A family member puts in $340,000 for 44% of the equity. The role is passive: no day-to-day duties and no salary. A written operating agreement sets out voting rights, what happens if either owner wants to sell, and how new money would be raised.
Where the team is thin
Denise has no event experience beyond hotel banquets. A licensed caterer handles large menus until the events coordinator joins in month 18. She has also not managed a construction project. A general contractor is hired on a fixed-price contract for the renovation, and an inspector reviews the work before the loan is drawn.
If Denise is unavailable
The relief host is trained to run check-in, breakfast and bookings. The inn carries loss-of-income cover for a closure from damage to the house. There is no key-person policy on Denise in the budget.
Outside help
A hospitality accountant reviews the monthly numbers in the first year. A real-estate lawyer handles the purchase, zoning and the operating agreement. The bank receives quarterly accounts under the loan terms.
Seven Rooms, Five Years: The Numbers
One model sits behind the tables below. It runs month by month through 2027 and in annual steps from 2028. The reasons for each input come directly after the funding tables.
Buying and opening the house
| Use of funds | Amount |
|---|---|
| Purchase of the 7-room house and grounds (vacant, outer-ring Raleigh) | $540,000 |
| Renovation: sprinkler system and fire alarm | $60,000 |
| Renovation: seven en-suite bathrooms | $70,000 |
| Renovation: commercial-standard kitchen, hood and grease trap | $38,000 |
| Renovation: roof, porch and exterior | $42,000 |
| Renovation: electrical, plumbing and heating and cooling | $34,000 |
| Renovation: accessible entrance and one ground-floor accessible room | $8,000 |
| Renovation: contingency | $8,000 |
| Furniture, beds, linens, lighting and décor for 7 rooms and common areas | $55,000 |
| Commercial kitchen equipment and laundry room | $16,000 |
| Permits, inspections and licences | $3,500 |
| Legal, closing costs, survey and land-use counsel | $24,000 |
| Pre-opening carry: mortgage interest, property tax, insurance, utilities and two months of staff | $32,000 |
| Launch: website and booking engine, photography, opening weekend | $18,000 |
| Cash reserve for the build-up year and the January to February trough | $81,500 |
| Total uses | $1,030,000 |
| Source of funds | Amount |
|---|---|
| Denise Alleyne's savings and home-sale proceeds | $440,000 |
| Family co-investor (minority equity) | $340,000 |
| Commercial mortgage (46% of purchase price; renovation funded by equity) | $250,000 |
| Total sources | $1,030,000 |
The $1,030,000 comes from three places. Denise puts in $440,000 from savings and the sale of her home. A family co-investor adds $340,000, so Denise holds 56% of the equity and the co-investor 44%. A bank lends $250,000 over 25 years at 7.25%, which is 46% of the $540,000 purchase price and 26% of the $948,500 project cost before the reserve. The rate is an illustration for this example and not a quoted offer. The bank takes a first mortgage and a personal guarantee and lends only against the purchase, so the $260,000 renovation and the furnishings come from equity. Equity is 76% of the total. The bank's appraisal has to support the loan: the house is vacant and in poor condition, so an as-is valuation could come in below the price, and the lender's actual limits are not quoted. The $32,000 pre-opening carry covers about two months of mortgage interest, property tax, insurance, utilities and staff before the first guest. The model books the purchase and renovation in month one and does not calculate that period. The $81,500 reserve keeps cash above $45,000 in every month of 2027.
What the forecast takes as given
- The inn has 7 guest rooms and 2,555 room-nights a year to sell, plus an owner's suite where Denise lives. Occupancy follows a Raleigh-shaped year, strongest in April, May, September and October and weakest in January and February. At maturity the monthly range runs from 38% in January to 77% in October.
- Average occupancy is 49.6% in Year 1, because the inn builds from about 62% of its mature level in January to about 97% in December. It then runs at 55.0%, 58.0%, 59.5% and 60.0% in Years 2 to 5. That is 1,267 room-nights sold in Year 1 and 1,533 in Year 5. Sixty percent is at the upper end of what the owners expect from an independent inn, and the downside case tests a shortfall.
- Rates are set by season for a room with breakfast: $158 in winter, $180 in the shoulder months and $205 at the peaks in Year 1, rising 3% a year. The blended rate is $187 in Year 1 and $209 in Year 5. Revenue per available room (RevPAR) is $93 in Year 1 and $126 in Year 5. No published average rate for independent inns in Raleigh was found, so these rates are the owners' own judgement and the first figure to test against live listings.
- Online travel agents (OTAs) are expected to book 42% of room revenue in Year 1, falling to 29% by Year 5 as repeat guests and the inn's own booking page take over. The commission is set at 15% of the room rate, a blended illustration and not any agency's published rate. It appears as its own line in the profit and loss; card fees sit in direct costs.
- Breakfast food, laundry, toiletries and card fees together run at 13.5% of room revenue, about $25 for each occupied night at the Year 1 rate. Event catering, rentals and serving staff take 60% of event revenue, which leaves a 40% margin before the coordinator. Packaged foods and add-ons carry a 50% cost.
- Events book 9 to 12 months ahead, so Year 1 holds four weddings or private events (one in June, one in September, two in October) and nine Sunday island suppers for 16 guests at $58, starting in April. A wedding package for up to 30 guests is $6,200 in Year 1, including venue, catering and day-of coordination. Weddings rise to 8, 12, 14 and 16 a year in Years 2 to 5 and suppers to 22, 28, 30 and 30. Each wedding fills about 10 room-nights. The plan depends on the city allowing events of this size and on a food-establishment permit for the public suppers; both are confirmed before closing.
- Payroll adds 27% to wages for payroll taxes, workers' compensation, health contributions and paid leave (15% for part-time roles). Denise draws $42,000, below the $69,250 median for lodging managers in May 2025, because she lives on site and takes the rest of her return as profit. Pay rises of 3% a year are charged as a separate line from Year 2. Housekeepers are paid for about 1,880 hours a year at $17 an hour, against about 1,600 hours of cleaning, laundry and turnaround work in Year 5. The relief host covers Denise's days off, weekend evenings and the nights she is away.
- The house is owned, so there is no rent. Property tax of $5,900 and the insurance quote are planning figures and not taken from an assessment or a policy. The $14,000 insurance line covers property, liability, cyber and loss-of-income cover; workers' compensation sits in the payroll on-cost. Repairs and grounds start at $6,000 on newly renovated systems and rise to $12,000 as the house ages. A replacement reserve for linens and furniture builds to $9,000 a year.
- Depreciation covers the building over 39 years ($360,000, the purchase price less $180,000 for land), the renovation over 25 years, furnishings over 7 years and the kitchen and laundry equipment over 10. Land is not depreciated. Income tax is charged at the 21% federal corporate rate and 2.0% for North Carolina, the 2026 rate; rates after 2026 are not modelled. An LLC would normally pass its profit to the owners' personal returns, so corporate rates stand in for that. Tax starts in Year 4, once the early losses are used up.
- Receivables average 10 days, to reflect agency payouts that arrive after checkout and event balances. The monthly view has no receivables timing, so the lowest-cash month is adjusted by the receivables balance. Distributions of $20,000 in Year 4 and $35,000 in Year 5 come from cash the model shows spare.
Revenue by line
| Revenue stream | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Room revenue (occupied room-nights x average daily rate) | $236,547 | $269,275 | $292,482 | $309,048 | $320,994 |
| Micro-weddings, private events and island suppers | $33,152 | $72,116 | $106,497 | $125,270 | $142,985 |
| Packaged foods, add-ons and gift cards | $12,041 | $13,750 | $14,935 | $15,781 | $16,391 |
| Total revenue | $281,740 | $355,141 | $413,914 | $450,099 | $480,370 |
| Growth on prior year | – | 26% | 17% | 9% | 7% |
Rooms earn 84% of Year 1 revenue and 71% of Year 3. Events grow from 12% to 26% over the same two years because weddings book a year ahead and the house and kitchen already carry their fixed costs. Add-ons stay near 4%. Year 2 growth is 26% because the inn runs a full year of the mature pattern after a build-up year.
Month by month in 2027
| Month | Room revenue (occupied room-nights x average daily rate) | Micro-weddings, private events and island suppers | Packaged foods, add-ons and gift cards | Total revenue | EBITDA |
|---|---|---|---|---|---|
| Jan 2027 | $7,882 | $0 | $474 | $8,356 | ($11,007) |
| Feb 2027 | $9,646 | $0 | $580 | $10,226 | ($9,521) |
| Mar 2027 | $18,162 | $0 | $959 | $19,121 | ($2,452) |
| Apr 2027 | $24,264 | $928 | $1,124 | $26,316 | $3,266 |
| May 2027 | $25,633 | $928 | $1,188 | $27,749 | $4,404 |
| Jun 2027 | $19,286 | $7,128 | $1,018 | $27,432 | $4,153 |
| Jul 2027 | $19,118 | $928 | $1,009 | $21,055 | ($915) |
| Aug 2027 | $18,901 | $928 | $998 | $20,827 | ($1,096) |
| Sep 2027 | $25,700 | $7,128 | $1,191 | $34,019 | $9,387 |
| Oct 2027 | $31,011 | $13,328 | $1,437 | $45,776 | $18,730 |
| Nov 2027 | $21,529 | $928 | $1,136 | $23,593 | $1,102 |
| Dec 2027 | $15,415 | $928 | $927 | $17,270 | ($3,923) |
Room revenue peaks in October at $31,011 and falls to $7,882 in January. EBITDA, which is profit before interest, depreciation and tax, is negative in January, February, March, July, August and December and positive in the other six months, and the six weak months together lose about $29,000. Year 1 EBITDA is $12,127. Cash is at its lowest in spring, about $46,000.
Payroll and hires
| Role | Annual wage | Starts | Year 1 end | Year 2 end | Year 3 end | Year 4 end | Year 5 end |
|---|---|---|---|---|---|---|---|
| Founder and innkeeper (lives on site) | $42,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Lead housekeeper (part time, about 25 hours a week) | $23,000 | Month 1 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 |
| Breakfast cook (part time, Friday to Sunday) | $13,000 | Month 1 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 |
| Relief host (part time, covers days off, weekend evenings and nights) | $20,000 | Month 1 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 |
| Housekeeper (casual, peak days) | $9,000 | Month 3 | 0.5 | 0.5 | 0.5 | 0.5 | 0.5 |
| Events coordinator (part time, weekends) | $15,000 | Month 18 | – | 0.5 | 0.5 | 0.5 | 0.5 |
| Total payroll incl. on-costs | $126,365 | $138,153 | $145,340 | $145,340 | $145,340 |
Denise, a part-time lead housekeeper, a part-time breakfast cook and a part-time relief host are on payroll from opening. Denise lives in the owner's suite and is on site every night except the nights the relief host covers. A casual housekeeper joins in March for peak days, and a part-time events coordinator starts in month 18 when the Year 2 calendar reaches 8 weddings and 22 suppers. Payroll before pay rises is $126,365 in Year 1 (45% of revenue) and $145,340 from Year 3 (35% of Year 3 revenue and 30% of Year 5). With pay rises added it is 37% in Year 3 and 34% in Year 5, as the ratios table shows. The share is high in Year 1 partly because the owner's own pay sits inside it.
Profit and loss
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $281,740 | $355,141 | $413,914 | $450,099 | $480,370 |
| Direct costs (breakfast food, laundry, amenities, card fees, event catering and serving) | ($57,846) | ($72,916) | ($84,983) | ($92,412) | ($98,627) |
| Gross profit | $223,894 | $282,225 | $328,931 | $357,687 | $381,743 |
| Payroll incl. on-costs | ($126,365) | ($138,152) | ($145,340) | ($145,340) | ($145,340) |
| Rent | $0 | $0 | $0 | $0 | $0 |
| Utilities | ($15,500) | ($16,000) | ($16,500) | ($17,000) | ($17,500) |
| Marketing | ($11,000) | ($12,000) | ($12,500) | ($13,000) | ($13,500) |
| Insurance | ($14,000) | ($14,800) | ($15,600) | ($16,400) | ($17,200) |
| Professional fees | ($5,000) | ($5,200) | ($5,400) | ($5,600) | ($5,800) |
| Software subscriptions | ($4,800) | ($5,000) | ($5,200) | ($5,400) | ($5,600) |
| OTA commissions | ($14,902) | ($14,945) | ($14,478) | ($13,907) | ($13,963) |
| Property tax | ($5,900) | ($6,100) | ($6,300) | ($6,500) | ($6,700) |
| Repairs, grounds and pest control | ($6,000) | ($7,500) | ($9,000) | ($10,500) | ($12,000) |
| Furniture and linen replacement reserve | ($2,000) | ($4,500) | ($6,500) | ($8,000) | ($9,000) |
| Licences, association dues and guest-room supplies | ($3,000) | ($3,500) | ($3,800) | ($4,000) | ($4,200) |
| Phones, postage and sundries | ($2,500) | ($2,800) | ($3,000) | ($3,200) | ($3,400) |
| Bad debt and chargebacks | ($800) | ($1,200) | ($1,500) | ($1,700) | ($1,800) |
| Annual pay raises (3% a year) | $0 | ($4,145) | ($8,851) | ($13,477) | ($18,241) |
| EBITDA | $12,127 | $46,383 | $74,962 | $93,663 | $107,499 |
| Depreciation | ($29,088) | ($29,088) | ($29,088) | ($29,088) | ($29,088) |
| Interest | ($18,004) | ($17,728) | ($17,432) | ($17,113) | ($16,771) |
| Income tax | $0 | $0 | $0 | ($9,146) | ($13,918) |
| Net income before start-up costs | ($34,965) | ($434) | $28,442 | $38,316 | $47,722 |
| Start-up costs expensed at opening (legal and closing, permits, pre-opening carry, launch marketing) | ($77,500) | $0 | $0 | $0 | $0 |
| Net income after start-up costs | ($112,465) | ($434) | $28,442 | $38,316 | $47,722 |
Year 1 loses $34,965 before start-up costs and $112,465 after them, with EBITDA of $12,127. Year 2 is break-even, a loss of $434, as the coordinator and pay rises arrive. Year 3 is the first profit, $28,442, with an EBITDA margin of 18.1%. Net income rises to $38,316 in Year 4 and $47,722 in Year 5, a net margin of 9.9%, after depreciation of $29,088 and interest of $16,771 to $18,004 a year. Income tax is zero until Year 4 because early losses are carried forward, then $9,146 and $13,918.
Cash movements
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Cash from operations | ($91,096) | $26,643 | $55,920 | $66,412 | $75,980 |
| Property, renovation and furnishings | ($871,000) | $0 | $0 | $0 | $0 |
| Funding received | $1,030,000 | $0 | $0 | $0 | $0 |
| Mortgage principal repaid | ($3,680) | ($3,956) | ($4,252) | ($4,571) | ($4,914) |
| Owner distributions | $0 | $0 | $0 | ($20,000) | ($35,000) |
| Net change in cash | $64,224 | $22,687 | $51,668 | $41,841 | $36,067 |
| Closing cash | $64,224 | $86,912 | $138,579 | $180,421 | $216,487 |
Cash is positive at every year end and rises each year. Operations consume $91,096 in 2027, of which $77,500 is start-up cost, and the reserve covers it. From Year 2 operations produce more than the principal due and, from Year 4, more than the $20,000 and $35,000 of distributions.
Balance sheet
| At year end | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Cash | $64,224 | $86,912 | $138,579 | $180,421 | $216,487 |
| Accounts receivable | $7,719 | $9,730 | $11,340 | $12,331 | $13,161 |
| Property, renovation and furnishings (net) | $841,912 | $812,824 | $783,736 | $754,648 | $725,560 |
| Total assets | $913,855 | $909,466 | $933,656 | $947,400 | $955,209 |
| Mortgage | $246,320 | $242,364 | $238,112 | $233,541 | $228,628 |
| Paid-in capital | $780,000 | $780,000 | $780,000 | $780,000 | $780,000 |
| Retained earnings | ($112,465) | ($112,899) | ($84,456) | ($66,141) | ($53,419) |
| Total liabilities and equity | $913,855 | $909,466 | $933,656 | $947,400 | $955,209 |
Debt cover, margins and break-even
| Measure | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| EBITDA margin | 4.3% | 13.1% | 18.1% | 20.8% | 22.4% |
| Net margin (before start-up costs) | -12.4% | -0.1% | 6.9% | 8.5% | 9.9% |
| Payroll incl. pay raises as share of revenue | 45% | 40% | 37% | 35% | 34% |
| Revenue per full-time equivalent at year end | $93,913 | $101,469 | $118,261 | $128,600 | $137,249 |
| Average monthly revenue | $23,478 | $29,595 | $34,493 | $37,508 | $40,031 |
| Monthly revenue needed to cover operating costs | $22,207 | $24,731 | $26,632 | $27,686 | $28,758 |
| Debt service cover (EBITDA / interest + principal) | 0.6x | 2.1x | 3.5x | 4.3x | 5.0x |
Year 1 average monthly revenue is $23,478 against $22,207 needed to cover running costs, so the inn clears them before interest, depreciation and start-up costs. With debt service of $21,684 a year the monthly need is about $24,480 in Year 1, just above the average, and $27,005 in Year 2, against an average of $29,595. Debt cover (EBITDA over interest and principal) is 0.6x in Year 1, 2.1x in Year 2 and 5.0x in Year 5. Some lenders assess an owner-run business on earnings before the owner's pay. Adding back Denise's $53,340 of loaded pay, cover is 3.0x in Year 1 and 4.7x in Year 2. Year 1 is met from the reserve.
If bookings run 20% short
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $225,392 | $284,113 | $331,131 | $360,079 | $384,296 |
| Net income before start-up costs | ($51,821) | ($23,030) | $4,990 | $19,352 | $29,973 |
| Net income after start-up costs | ($129,321) | ($23,030) | $4,990 | $19,352 | $29,973 |
| Closing cash | $48,912 | $49,405 | $77,943 | $121,019 | $174,502 |
Every revenue line falls 20% in every year, volume and price together. The response has several parts. The events coordinator is never hired. The casual housekeeper starts in month 7 and not month 3, and relief host hours fall by 30%. Marketing is cut by 20%. Denise takes a 20% pay cut, to $33,600. OTA commissions fall in step with room revenue. No distributions are paid. On those terms cash stays positive and bottoms out at $48,912 at the end of Year 1, and at about $41,000 in August 2027 within the year. Debt cover is negative in Year 1, 1.1x in Year 2, 2.4x in Year 3 and 3.5x in Year 5. The inn loses money in Years 1 and 2 and earns $4,990 in Year 3 and $29,973 in Year 5. Equity ends Year 1 at $650,679. The case does not model a fall in the house price.
Sources
- Visit Raleigh (Greater Raleigh Convention and Visitors Bureau), 2024 Wake County visitation figures released, 21 August 2025.
- Bureau of Labor Statistics, Lodging managers, Occupational Outlook Handbook, May 2025 median wage.
- North Carolina Department of Revenue, Corporate income and franchise tax rates, 2.0% for 2026.
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