It seems like someone’s always in need of a banquet hall. People are using rentals more than ever for events large or small. Weddings, corporate functions, baby showers, and even birthday parties take place in event venues. People prefer to use a seperate space and preserve their own, moving events from home to the banquet hall.
That leaves room for a lucrative opportunity if you make a plan and find the money. Finding out how much does it cost to start a banquet hall business is a great start. Here’s what else you need to open a banquet hall.
Step-by-Step Guide to Opening a Banquet Hall
1. Write your Business Plan
The first step to opening any business is to write down your plans. Some people don’t think an extensive business plan is necessary, but you need some sort of plan. Your business plan is the foundation to every other portion of your business. Plus, financial institutions will want to see your plan as part of determining if they want to take a risk on lending you money.
With your business plan, you will conduct research on the existing industry. On the surface, opening a banquet hall looks like a great idea, but is there a need for it in the area you plan to set up your business? Your research will help you answer that. It could also be a matter of choosing a niche within the event hall industry. You may only want to open your doors to corporate functions or weddings.
The activities you do to create your business plan will help you select a niche. You will also project performance for your company and complete financial statements. This will help you estimate profit and loss and determine cost. By the time you’ve completed your business plan, you will know if you’re ready to start your banquet hall business.
2. Get Funds to Open your Banquet Hall Business
One you’ve projected the cost to start a banquet hall business, it’s time to start looking for funding. The first option is self funding by investing personal savings like bank accounts or retirement funds. If that’s not possible, debt or equity financing is your next solution. As a brand new business, don’t be surprised if you have limited financing options from traditional lenders.
With equity financing, you’re almost creating a partnership by giving up a percentage of ownership in exchange for money. The agreement could require selling shares of the business to many individuals or getting one large investment like an angel investor or venture capitalist. Big time investors look for almost a guarantee that your business will turn a large profit.
Banks aren’t eager to help startups who don’t have a track record of success. If you don’t have the time or resources to prepare for traditional funding, start with alternatives and build from there. Fortunately, there are lenders willing to take on the risk of working with startups. Loans that could be beneficial for startup entrepreneurs are certain SBA loans, equipment financing, and unsecured business lines of credit.
- SBA Loans- The U.S. Small Business Administration has a series of loans to help small businesses and entrepreneurs. They aren’t the actual lender, but work with partnering banks to get business funding for qualified candidates. The way it works is the SBA backs each of the loans, guaranteeing repayment up to a certain percentage. The guarantee ranges from 50% to 85% depending on which loan program it is. Types of SBA loans include: 7a Loans, CDC/504 Loans, CAPLines (lines of credit), Export Loans, Microloans, and Disaster Loans. Each program has different criteria to qualify. Loans specify whether startup ventures qualify and if entrepreneurs must meet certain credit requirements.
- Equipment Financing- Most new entrepreneurs don’t have the cash to buy large equipment outright. Even if you do, it’s wise to preserve those funds for business cash flow. Equipment financing fills in the gap to get what you need for business operation. It’s fairly easy to apply for equipment financing because you can self secure it. Meaning the equipment acts as collateral to secure the loan. If you fall behind on payments, the finance company has already made money from interest and they can put a lien on the equipment to seize and sell it. With equipment financing, you have the option to lease or finance to purchase the equipment. The best option depends on the type business and equipment you need.
- Unsecured Business Lines of Credit- The only source of funding that’s even easier than equipment financing is an unsecured business line of credit. It’s a flexible alternative to traditional loans that new business owners can qualify for. As long as your personal credit is in tact, you can have a revolving credit line to spend as needed. You won’t even need collateral to secure the loan. Lenient stipulations and minimal criteria make this a suitable option for businesses of any type and all levels. We don’t recommend using it for big ticket items like equipment. For opening your banquet hall, it’s best to pair it with an equipment loan.
3. Get Your Business License
The type of fees, licenses, and tax accounts to open a banquet hall may vary by city and state. You can get more information from license commissioners, departments of revenue, and your secretary of state office. The cost of these licenses and fees will be a part of the expenses in your business plan and on your tax return each year.
4. Purchase your Building
The first thing you should do is decide whether building or purchasing is best for your vision. With either choice, getting a building will be your largest expense. If you choose to buy an existing building, you need a down payment and closing costs plus the price of the building per square foot.
5. Upgrade and Furnish the Building
A used building will need some sort of changes to satisfy the needs of the banquet hall. Start off small at first by limiting the amount you spend on equipment. Dedicate a small portion of your budget to creating an attractive facility with lighting, paint, and flooring. Once the business grows, you can upgrade and add equipment.
How much does it cost to start a banquet hall business?
The costs can vary by location, size of the building, and regulations for the industry. Your business plan will help you come up with projections for how much funding you need. Here’s what you should include:
- Business licenses and permits
- Entity Fees (LLC, Incorporation, etc)
- Business/Building insurance
- Purchase, lease, or construction of a building
- List and cost of business supplies
- List and cost of equipment
- Marketing budget
- Staff salary (if needed)
Don’t know where to start with your business plan? Take advantage of business resources to help you get started. Work with a business consultant to help you with projections. A skilled business expert can also help you find the right funding to make your dream banquet hall business a reality.