When looking to buy or start a destination resort, it is extremely easy to see only the rainbows and butterflies, and to ignore the snakes and thunderstorms. By this I just mean that it is so easy to see the bright side of buying a resort. Most likely it is in a dramatically beautiful location with white sand beaches or mountain rivers sitting right out the front door. It probably also has cute little rooms, cabanas, cabins, or bures for the guests to sleep in, a nice restaurant, and all the amenities. When you look at it, you probably think, “Wow! This place is paradise, and it’s ready to go. All we have to do is hang a shingle on the door saying vacancy and we’ll be packed!” I know that is what I thought when I was looking into purchasing The Lodge at Potosi, the land we ended up buying and turning into Potosi Hot Springs Resort. Talk about being blind to the reality of a situation!!
After we bought the property, we quickly learned about how much we had overlooked- not just with the physical property, but the operating costs of the business as well. Quickly it became very apparent that the property was going to require quite a bit more repairs and capital improvements than we expected (I mean how do you not notice that some of the chimneys show previous signs of having been on fire?!). And despite the business plan I wrote including “all possible expenses”, after year one, we realized that in fact it was about twice as expensive to operate the business as we had planned. Back to the bank we went and luckily they were there to support us- much less likely in today’s economy.
From this hard-leaned lesson, let me pass on this one piece of advice for anyone thinking about buying, or starting a resort: hire a knowledgeable, experienced consultant to help you BEFORE you jump in. The money invested in getting sound, third-person advice is invaluable. Here are three reasons to make this investment:
1) First off, they are not emotionally attached like you are. They can look at the proposed business with a certain degree of emotional separation, thus allowing them to advise you logically. While your eyes are clouded by rose colored lenses, they can bring you down off your cloud and point out the potential costs and difficulties you may encounter with your project. They are your best friend at this point- your Devils Advocate to keep you from making a potentially disastrous mistake.
2) Secondly, the consultant you hire should most likely have experience in this arena and be able to see what ‘s really going on behind the curtain. Their ability to assess the prior operating numbers with some degree of accuracy is key. Unless you’ve been in the business, it is very easy to miss hidden costs, or even possibly other streams of income the current operation is missing out on. The insight a good consultant can provide may very likely be the deciding factor on whether or not you should pursue this venture. Now what’s that worth?
3) Thirdly, the consultant’s assistance in preparing a business plan for your new operation will be the guide for the next three to five years of your business operations. As I told one client: “imagine you are going for a ten day hike across Alaskan wilderness. Now, you don’t necessarily need a map, but there is a lot more likelihood you are going to walk out the other side alive if you do.” Ask yourself: “would you build a house without blueprints?” I don’t think so. Would you make the blueprints yourself or would you hire a professional architect? So, why would you even think about starting a business without a business plan written by a professional consultant?
So here is my simple advice: hire a consultant to help you start or purchase a resort and save yourself a lot of money and headaches in the long run.