Nothing, and I mean nothing, could be more risky than beginning your building or remodeling project without adequate funding.
Running out of money before the project is finished can be the kiss of death because lenders are loath to repeatedly fund a project. Repeated project funding is a mark of extremely poor planning. You obviously don’t know what you are doing, and this makes lenders very nervous. Your multiple requests for funding may exceed your ability to repay the loan resulting in a monthly negative cash flow and therefore making the project not feasible.
In order to avoid this nightmare scenario, it is critical to have an accurate estimate of the project costs. While an entire course could be taught on construction cost accounting, a short but comprehensive list of costs is assembled below to serve as a guide in assessing the cost of the project:
Repeated project funding signals poor planning and lack of expertise.
Multiple funding requests can lead to an inability to repay loans and negative cash flow.
Lenders may perceive the project as unfeasible, jeopardizing its completion.
To ensure an accurate estimate of project costs, the following factors should be evaluated:
The cost of acquiring the property where the project will be carried out.
The expenses associated with site preparation, such as landscaping or more complex tasks like leveling terrain and installing utilities.
Consulting a construction architect or civil engineer for cost estimates is advisable for complex projects.
The cost of constructing the building or completing the interior space.
Excludes dental or business equipment.
Various professional fees related to the project’s scope, such as architectural, legal, engineering (structural, civil, electrical, mechanical, soils), and accounting fees.
These fees may vary depending on the complexity of the project.
A percentage dictated by the lending institution, typically ranging from 5% to 20%.
If not required by the lender, it is prudent to include this figure in the calculation based on your confidence in the validity of the capital cost.
Additional costs may arise during the project, such as interest on interim or construction financing, double rent, or maintenance fees.
Costs associated with acquiring dental equipment, cabinetry, technology, and other necessary business equipment.
The expenses required to achieve a finished look for the office space, including furnishings and decor.
Developing an accurate initial cost estimate is a crucial task during the planning phase of your new office.
Collaborate with a Schein equipment specialist and an architect experienced in dental office design and construction.
They will assist you in calculating the cost estimate and ensuring comprehensive financial planning.
Adequate funding is a fundamental aspect of any building or remodeling project. Failing to plan and estimate costs accurately can lead to financial difficulties, jeopardize the project’s completion, and damage your credibility with lenders.
By considering all relevant cost factors early in the planning phase and collaborating with knowledgeable professionals, you can mitigate risks and ensure the success of your project.
Dr. Mark Tholen is the past CEO of T.H.E. Design, Inc. and the author of A Guide to Designing the Elegant Dental or Medical Office… The Largest Marketing Tool of Your Career is available at Amazon.com.
He graduated from the University of Texas Dental School at San Antonio and holds an M.B.A. from the University of Texas.