For any entrepreneur about to construct a commercial building, Elizabeth Olley would highly recommend abiding by "Murphy's Law."
"It's not that you have to be pessimistic, of course. But given the complexity of a construction job of this scale, you would be wise to plan ahead and expect some bumps along the way," says the BDC Account Manager. "Unforeseen problems such as budget overruns, unreliable contractors and delays are common. We see dozens of examples at BDC and that's just a part of the package," she adds.
"This is one of the most important investments you'll be making in your lifetime, so taking the time to plan ahead is crucial," she believes. "Since you know you can expect obstacles such as additional costs and missed deadlines, you have to be prepared to manage change when it happens. The more time you have, the better equipped you are to adjust your plans accordingly," she emphasizes.
So how do you put everything on your side and ensure your construction job runs as smoothly as possible? Olley offers some practical, hands-on advice for business owners.
Get a good architect or designer
When entrepreneurs are faced with high price tags for building construction, they may tend to skip the essential step of hiring a good architect or designer. "You might think that you're saving money up front, but in the end, you lose because you'll have problems down the road, such as an inefficient use of space. It's not just a box that you're building; it has to fit all of your requirements."
In that light, entrepreneurs should plan to hire experts who can help them construct buildings that are functional and efficient. "If you're in a manufacturing environment, for example, you'll want to hire professionals to ensure that your building and layout can accommodate your equipment." BDC Consulting, for instance, can offer production planning services that enable companies to set up production lines that maximize productivity and eliminate waste.
Be vigilant about choosing a contractor
"At the top of my priority list is shopping around for a contractor," emphasizes Olley. "Entrepreneurs tend to shop on price too much. You need to find somebody who is financially stable, has good references and is licensed," she adds. "You don't want to find yourself without a building guarantee and problems getting insurance payments for a badly constructed roof, for example."
So how do you find the right contractor? "Start by asking your architect for good references. Another smart alternative would be to talk to your bank," she says. Banks often have access to the names of contractors who have a good track record. Ask your account manager for references.
A rule of thumb, adds Olley, is to get at least 3 quotes for contractor services. "It's a good sign if they are able to listen to you and that you have a strong affinity with them. After all, you'll be working very closely together," she says. "A good contractor will take you to other buildings that they've constructed and show you their work. You want that reassurance that they're going to deliver on their promises."
Be realistic about your own involvement
Olley cautions business owners to realistically assess how much time they can give to the building construction. "All too often we see companies lose business during construction because the management team is less focused on the performance of the company and too anxious about the new building." Depending on the scale of the job, she recommends entrepreneurs hire project managers who can take care of the complex logistics and ensure that the layout designer, architect, engineers and contractors are working in harmony.
"Ask yourself: do I seriously have the skills to pull together a project like this? If the answer is no, then hire an expert,'' she says. "You still have to be very present on the site of course and take the pulse of what's happening there. However, it means you'll be able to give equal attention to your company's well-being."
Do your costing upfront
"Make sure your costing is done properly from the beginning," says Olley. Banks such as BDC can provide useful advice on assessing costs and budgets. "We have enough experience to know how to recognize whether or not you're getting a good price per square foot. If the costs are above average, then a bank advisor will be able to help you evaluate what you're getting for your buck."
In the same way, entrepreneurs should be wary about quotes that appear to be "great bargains." "This is where you should always read the inclusions and exclusions on your contract. Seemingly minor details like paving your driveway or paying water servitude can quickly change the price down the road."
Be ready with a contingency plan
Olley contends that it's not always possible to predict costs, so building in a contingency plan for up to 5 to 10% additional costs is essential. "Even if you get a fixed price contract, there may be aspects of the job that are easily overlooked," she says. For example, you may have additional landscaping costs, electrical and plumbing modifications to accommodate equipment or additional moving costs.
Get your financing in order
"Don't wait until the last minute to see your bank about your financing needs," Olley suggests. "Get your bank involved from the beginning. It's never too early." A bank advisor can help entrepreneurs determine the affordability of their building and just how much money they'll need from start to finish.
Generally, businesses seeking financing should expect to demonstrate that they have a healthy balance sheet and are showing sufficient profits. BDC offers building construction financing that will cover projects from beginning to end. "No bridge loan is necessary because the big advantage of BDC is that a single loan is dispersed as construction progresses. You'll know all of your financing costs right away," she adds.
Avoid making last-minute changes
Once the construction of the building is underway, one of the most common mistakes for entrepreneurs is making last-minute changes. "I call it the while-we're-at-it-let's-just-do-this syndrome," says Olley. "Never make hasty decisions on the spot because they could cause delays and budget overruns." She recommends that business owners should stay in close contact with the architect or designer to ensure that any changes are necessary and don't empty their wallets. "I've seen too many well-run projects exceed budget because of last-minute decisions. Stay on guard from beginning to end," she concludes.
