Starting an Airbnb business can be very profitable. With proper planning, execution and hard work, you can enjoy great success. Below you will learn the keys to launching a successful Airbnb business.
Importantly, a critical step in starting an Airbnb business is to complete your business plan. To help you out, you should download Growthink’s Ultimate Business Plan Template here.
14 Steps To Start an Airbnb Business:
- Choose the Name for Your Airbnb Business
- Develop Your Airbnb Business Plan
- Choose the Legal Structure for Your Airbnb Business
- Secure Startup Funding for Your Airbnb Business (If Needed)
- Secure a Location for Your Business
- Register Your Airbnb Business with the IRS
- Open a Business Bank Account
- Get a Business Credit Card
- Get the Required Business Licenses and Permits
- Get Business Insurance for Your Airbnb Business
- Buy or Lease the Right Airbnb Business Equipment
- Develop Your Airbnb Business Marketing Materials
- Purchase and Setup the Software Needed to Run Your Airbnb Business
- Open for Business
1. Choose the Name for Your Airbnb Business
The first step to starting an Airbnb business is to choose your business’ name.
This is a very important choice since your company name is your brand and will last for the lifetime of your business. Ideally you choose a name that is meaningful and memorable. Here are some tips for choosing a name for your Airbnb business:
- Make sure the name is available. Check your desired name against trademark databases and your state’s list of registered business names to see if it’s available. Also check to see if a suitable domain name is available.
- Keep it simple. The best names are usually ones that are easy to remember, pronounce and spell.
- Think about marketing. Come up with a name that reflects the desired brand and/or focus of your Airbnb business.
2. Develop Your Airbnb Business Plan
One of the most important steps in starting an Airbnb business is to develop your business plan. The process of creating your plan ensures that you fully understand your market and your business strategy. The plan also provides you with a roadmap to follow and if needed, to present to funding sources to raise capital for your business.
Your business plan should include the following sections:
- Executive Summary – this section should summarize your entire business plan so readers can quickly understand the key details of your Airbnb business.
- Company Overview – this section tells the reader about the history of your Airbnb business and what type of Airbnb business you operate. For example, are you an Airbnb business that only rents out properties, provides both properties and services, or provides only services?
- Industry Analysis – here you will document key information about the Airbnb industry. Conduct market research and document how big the industry is and what trends are affecting it.
- Customer Analysis – in this section, you will document who your ideal or target customers are and their demographics. For example, how old are they? Where do they live? What do they find important when looking for properties like the ones you will offer?
- Competitive Analysis – here you will document the key direct and indirect competitors you will face and how you will build competitive advantage.
- Marketing Plan – your marketing plan should address the 4Ps: Product, Price, Promotions and Place.
- Product: Determine and document what products/services you will offer
- Prices: Document the prices of your products/services
- Place: Where will your business be located and how will that location help you increase sales?
- Promotions: What promotional methods will you use to attract customers to your Airbnb business? For example, you might decide to use pay-per-click advertising, public relations, search engine optimization and/or social media marketing.
- Operations Plan – here you will determine the key processes you will need to run your day-to-day operations. You will also determine your staffing needs. Finally, in this section of your plan, you will create a projected growth timeline showing the milestones you hope to achieve in the coming years.
- Management Team – this section details the background of your company’s management team.
- Financial Plan – finally, the financial plan answers questions including the following:
- What startup costs will you incur?
- How will your Airbnb property make money?
- What are your projected sales and expenses for the next five years?
- Do you need to raise funding to launch your business?
3. Choose the Legal Structure for Your Airbnb Business
Next you need to choose a legal structure for your Airbnb business and register it and your business name with the Secretary of State in each state where you operate your business.
Below are the five most common legal structures:
1) Sole proprietorship
A sole proprietorship is a business entity in which the owner of the Airbnb business and the business are the same legal person. The owner of a sole proprietorship is responsible for all debts and obligations of the business. There are no formalities required to establish a sole proprietorship, and it is easy to set up and operate. The main advantage of a sole proprietorship is that it is simple and inexpensive to establish. The main disadvantage is that the owner is liable for all debts and obligations of the business.
A partnership is a legal structure that is popular among small business owners. It is an agreement between two or more people who want to start an Airbnb business together. The partners share in the profits and losses of the business.
The advantages of a partnership are that it is easy to set up, and the partners share in the profits and losses of the business. The disadvantages of a partnership are that the partners are jointly liable for the debts of the business, and disagreements between partners can be difficult to resolve.
3) Limited Liability Company (LLC)
A limited liability company, or LLC, is a type of business entity that provides limited liability to its owners. This means that the owners of an LLC are not personally responsible for the debts and liabilities of the business. The advantages of an LLC for an Airbnb business include flexibility in management, pass-through taxation (avoids double taxation as explained below), and limited personal liability. The disadvantages of an LLC include lack of availability in some states and self-employment taxes.
4) C Corporation
A C Corporation is a business entity that is separate from its owners. It has its own tax ID and can have shareholders. The main advantage of a C Corporation for an Airbnb business is that it offers limited liability to its owners. This means that the owners are not personally responsible for the debts and liabilities of the business. The disadvantage is that C Corporations are subject to double taxation. This means that the corporation pays taxes on its profits, and the shareholders also pay taxes on their dividends.
5) S Corporation
An S Corporation is a type of corporation that provides its owners with limited liability protection and allows them to pass their business income through to their personal income tax returns, thus avoiding double taxation. There are several limitations on S Corporations including the number of shareholders they can have among others.
Once you register your Airbnb business, your state will send you your official “Articles of Incorporation.” You will need this among other documentation when establishing your banking account (see below). We recommend that you consult an attorney in determining which legal structure is best suited for your company.
4. Secure Startup Funding for Your Airbnb Business (If Needed)
In developing your Airbnb business plan, you might have determined that you need to raise funding to launch your business.
If so, the main sources of funding for an Airbnb business to consider are personal savings, family and friends, credit card financing, bank loans, crowdfunding and angel investors. Angel investors are individuals who provide capital to early-stage businesses. Angel investors typically will invest in an Airbnb business that they believe has high potential for growth.
5. Secure a Location for Your Business
There are a few things you’ll need to consider when choosing a location for your Airbnb business:
- Your target market: What type of guests are you hoping to attract? City dwellers? Families? Businesspeople?
- The availability of resources: Are there restaurants, bars, and other businesses in the area that will be beneficial for your guests? Is there public transportation nearby? Is there adequate and convenient parking available?
- The zoning laws in the area: Make sure you’re not breaking any regulations by opening up a business in your chosen location.
Once you’ve weighed all these important factors, you’ll be able to choose the perfect spot for your Airbnb.
6. Register Your Airbnb Business with the IRS
Next, you need to register your business with the Internal Revenue Service (IRS) which will result in the IRS issuing you an Employer Identification Number (EIN).
Most banks will require you to have an EIN in order to open up an account. In addition, in order to hire employees, you will need an EIN since that is how the IRS tracks your payroll tax payments.
Note that if you are a sole proprietor without employees, you generally do not need to get an EIN. Rather, you would use your social security number (instead of your EIN) as your taxpayer identification number.
7. Open a Business Bank Account
It is important to establish a bank account in your Airbnb business’ name. This process is fairly simple and involves the following steps:
- Identify and contact the bank you want to use
- Gather and present the required documents (generally include your company’s Articles of Incorporation, driver’s license or passport, and proof of address)
- Complete the bank’s application form and provide all relevant information
- Meet with a banker to discuss your business needs and establish a relationship with them
8. Get a Business Credit Card
You should get a business credit card for your Airbnb business to help you separate personal and business expenses.
You can either apply for a business credit card through your bank or apply for one through a credit card company.
When you’re applying for a business credit card, you’ll need to provide some information about your business. This includes the name of your business, the address of your business, and the type of business you’re running. You’ll also need to provide some information about yourself, including your name, Social Security number, and date of birth.
Once you’ve been approved for a business credit card, you’ll be able to use it to make purchases for your business. You can also use it to build your credit history which could be very important in securing loans and getting credit lines for your business in the future.
9. Get the Required Business Licenses and Permits
There are several licenses and permits you may need to start an Airbnb business, depending on your location. For example, you may need a business license, a zoning permit, or a certificate of occupancy. To find out what other licenses and permits you need, contact your local government office or business licensing authority. You can find contact information on your city or county website.
10. Get Business Insurance for Your Airbnb Business
Business insurance policies you should consider for your Airbnb business include:
- General liability insurance: This covers accidents and injuries that occur on your property. It also covers damages caused by your employees or products.
- Property insurance: This covers damage to your property caused by fire, theft, or vandalism.
Find an insurance agent, tell them about your business and its needs, and they will recommend policies that fit those needs.
11. Buy or Lease the Right Airbnb Business Equipment
When starting your own Airbnb business, you will need a few key pieces of equipment. First, you will need a computer or laptop to manage your reservations and communicate with guests. You will also need a digital camera or smartphone to take pictures of your Airbnb properties. Additionally, you’ll need a reliable internet connection to upload these photos and manage your reservations. Finally, you will need basic office supplies like a computer, printer, scanner, and phone.
12. Develop Your Airbnb Business Marketing Materials
Marketing materials will be required to attract and retain customers to your Airbnb business.
The key marketing materials you will need are as follows:
- Website: A professional Airbnb business website provides potential customers with information about the properties and amenities that you offer, your company’s history, and contact information. Importantly, remember that the look and feel of your website will affect how customers perceive you.
- Social Media Accounts: establish social media accounts in your company’s name. Accounts on Facebook, Twitter, LinkedIn and/or other social media networks will help customers and others find and interact with your Airbnb business.
13. Purchase and Setup the Software Needed to Run Your Airbnb Business
To start an Airbnb business, you will need software that can help you manage reservations, bookings, and payments. Some popular options include Airbnb’s own software, as well as software from companies like HomeAway and VRBO.
14. Open for Business
You are now ready to open your Airbnb business. If you followed the steps above, you should be in a great position to build a successful business. Below are answers to frequently asked questions that might further help you.
How to Finish Your Ultimate Business Plan in 1 Day!
Don’t you wish there was a faster, easier way to finish your Airbnb business plan?
With Growthink’s Ultimate Business Plan Template you can finish your plan in just 8 hours or less!
Click here to finish your Airbnb business plan today.
How to Start an Airbnb Business FAQs
There is no one-size-fits-all answer to this question, as the difficulty of starting an Airbnb business will vary depending on several factors including your location and the level of competition in your area. However, there are a few things you can do to make starting an Airbnb business easier, such as doing your research and making sure you have all the necessary licenses and permits.
Airbnb hosting with no experience can be tough, but it's not impossible. Here are a few tips to help you get started:
- Do your research. Before you start your business, make sure you understand the ins and outs of the Airbnb market. Know what kind of properties are in demand in your area, and learn about the competition.
- Create a business plan. This will help you stay organized and focused as you start your business. It will also help you secure funding if needed.
- Get started with marketing. Start building a database of potential guests and promoting your business online and offline.
- Start small. It's wise to test the waters before investing too much money or time into your business. Try offering one or two short-term rentals first, to make sure everything works out well for you.
The most profitable Airbnb businesses are those that offer multiple properties or rooms for rent. This type of business allows you to make the most money while also providing a service that is in high demand. Additionally, properties in desirable locations for tourists, business professionals, or special events can be more profitable than less in demand areas.
The cost of starting an Airbnb business can vary depending on the location and size of the business. Generally, startup costs will include licensing and permitting fees, insurance, marketing and advertising, and furniture and supplies.
There are a few ongoing expenses that are necessary for this type of business. The first is advertising. Advertising is important for letting potential customers know about your business. You will also need to pay for the costs of maintaining your Airbnb website. This includes the costs of hosting and domain name registration. You may also want to invest in some search engine optimization services to help you get more traffic to your website. Finally, you will need to pay your taxes each year.
An Airbnb host makes money by renting out rooms, apartments, or houses to Airbnb guests for a short period of time. The company charges a service fee for each booking, and the property owner also collects payment from the guest. In some cases, the property owner may also receive a commission from Airbnb for referring a guest.
Airbnb hosting is a profitable business. First, the company doesn't have to pay rent on the properties it rents out, which saves it money. Second, guests are often willing to pay more for an Airbnb rental than they would for a traditional hotel room, since they typically have more amenities and space. Finally, the company doesn't have to hire any employees, which saves it money on staffing costs.
There are many reasons Airbnb business owners can fail. One reason could be that the property is not well-maintained and does not meet the customer's expectations. Another reason could be that the owner is not responsive to customer inquiries or does not provide adequate customer service. Additionally, if the price is too high or there are too many restrictions on the property it can deter potential customers. These cause customer satisfaction ratings to drop and can lead to less bookings and income.