Report

Enough money to set up a hostel?

Start a Hostel

graflo started this discussion 13 years 11 months ago

Hi Guys,

I've found my perfect property to rent. Good location, nice owner who likes our ideas, very cheap rent however it needs a bit of renovation mainly decorating but also need to put in a new bathroom and kitchen.

The hostel will be a 22 person hostel with 3 6 bed dorms and 2 double private rooms.

My budget to do all the work and get the hostel open is €18,000. I've done my figures and it is pretty close. The costs to do it up and furnish the hostel are around the €17,000. I've also done a detail financial plan and my break even point is about 29-30% occupancy. If needed I get get extra cash by taking out a loan etc however then it makes the opening of the business alot more riskier...

Me and my partner have contacted the other hostels in the city pretending to be students needing figures for a pretend business plan for uni. The other hostels have on average around 80-85% occupancy throughout the year and they are alot bigger (60, 80 and 90 beds).

My big question is do you think I have enough money to get this hostel up and running? or would I need more money to stabilise the business?

Comments

Report

ACBBPatrick

13 years

Hi Guys,

I've found my perfect property to rent. Good location, nice owner who likes our ideas, very cheap rent however it needs a bit of renovation mainly decorating but also need to put in a new bathroom and kitchen.

The hostel will be a 22 person hostel with 3 6 bed dorms and 2 double private rooms.

My budget to do all the work and get the hostel open is €18,000. I've done my figures and it is pretty close. The costs to do it up and furnish the hostel are around the €17,000. I've also done a detail financial plan and my break even point is about 29-30% occupancy. If needed I get get extra cash by taking out a loan etc however then it makes the opening of the business alot more riskier...

Me and my partner have contacted the other hostels in the city pretending to be students needing figures for a pretend business plan for uni. The other hostels have on average around 80-85% occupancy throughout the year and they are alot bigger (60, 80 and 90 beds).

My big question is do you think I have enough money to get this hostel up and running? or would I need more money to stabilise the business?

With a breakeven of 30% (does this include salaries for you and your partner, marketing and R&M?) and a new hostel I would suggest that your cashflow forecast may be low. Having a line of credit will help smooth out the start up bump and actually make your business less risky.

If your numbers are sound and your credit good get 3-4months operating expenses as a line of credit.

You may never need it but you will sleep better and when and if you want to expand to a new building or a purchased building you will have great business credit for the bank to analyse. Pay all your bills on time with your checking account as the bank likes your money going through theirs. This is a very important thing to keep in mind. Don't think of the fees etc as debt but as investments that will pay off with expanded credit when you need it and a track record that has been through their audit trail.

Good luck

Report

graflo

13 years

With a breakeven of 30% (does this include salaries for you and your partner, marketing and R&M?) and a new hostel I would suggest that your cashflow forecast may be low. Having a line of credit will help smooth out the start up bump and actually make your business less risky.

If your numbers are sound and your credit good get 3-4months operating expenses as a line of credit.

You may never need it but you will sleep better and when and if you want to expand to a new building or a purchased building you will have great business credit for the bank to analyse. Pay all your bills on time with your checking account as the bank likes your money going through theirs. This is a very important thing to keep in mind. Don't think of the fees etc as debt but as investments that will pay off with expanded credit when you need it and a track record that has been through their audit trail.

Good luck

The breakeven includes a salary for myself however my partner is working full time and will help out in the evenings and weekends. Her wage isnt taking into consideration on the accounts but should be enough the pay the bills and rent if the hostel isnt running as well as hoped.

We are going to sign the contract for the property this week so I just wanted to make sure the final touches to are financial plan are correct.

Report

ACBBPatrick

13 years

The breakeven includes a salary for myself however my partner is working full time and will help out in the evenings and weekends. Her wage isnt taking into consideration on the accounts but should be enough the pay the bills and rent if the hostel isnt running as well as hoped.

We are going to sign the contract for the property this week so I just wanted to make sure the final touches to are financial plan are correct.

Many businesses start this way, but can often lead to issues when too much of a person "off site" salary is used to prop a start up curve. If you can get a line of credit the business can operate as it's own entity almost right a way. You will have to personally guarantee the line of credit but by doing it this way the true numbers of running the business are better understood.

Having this facility when you don't need it is the best way to have it. Because when you do need it, it can be very hard to convince a bank to support you. Do try and pay your bills with your bank account it will pay off big time when you want to expand.

Report

Dgalkaniz

13 years

Goodnight

Out of curiosity, could you tell what city you've assembled your hostel?

I'm surprised the low initial investment, pleasantly of course!

And if not too much to ask ... Is it working well? Do you meet this 30%?

A greeting!

Search form

Report 'Enough money to set up a hostel?'?

Report 'Re: Enough money to set up a hostel?'?

Report 'Re: Enough money to set up a hostel?'?

Report 'Re: Enough money to set up a hostel?'?

Report 'Re: Enough money to set up a hostel?'?

Join the world's largest community of hostel professionals.

Check Your Email