(Mark Tholen, DDS, MBA is our guest blogger today at Sidekick Magazine)
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 make 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 are assembled below to serve as a guide in assessing the cost of the project:
|•||Land or Condominium Purchase Price|
|•||Site Improvements. This can be as simple as landscaping or as complex as leveling the side of a mountain and running utilities to the site. For more complex projects, cost estimates should be solicited from a construction architect or civil engineer.|
|•||Capital Cost. The cost of the actual building (without dental or business equipment) or build-out completion of the interior space.|
|•||All Service Fees. Architectural, legal, (structural, civil, electrical, mechanical, soils) engineering, and accounting fees may be encountered depending on the scope of the project.|
|•||Margin of Error Factor. This factor, which is a function of the capital costs, is usually dictated by the lending institution and can range from 5% to 20%. If it is not required by the lending institution, this figure should be included in your calculation to the degree of confidence you have in the validity of the capital cost.|
|•||Other Expenses. Interest on the interim or construction financing, double rent, and additional maintenance fees are examples of additional expenses.|
|•||Dental Equipment and cabinetry, technology, and business equipment.|
|•||Office Furnishings. This figure will include all the items to yield a finished look to the office.|
Developing this accurate initial cost estimate is a very important task that should be accomplished early in the planning phase of your new office. The Henry Schein Equipment Sales Specialist and an architect familiar with dental office design and construction should be members of your team who calculate this cost estimate with you.
About the Author
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 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.