Small-business owners have a lot of issues to deal with when considering building a new facility for their business. This is true whether the project involves a new business, an expanding existing business or just major building renovations.
It is critical that you understand and follow the various regulations that must be dealt with when constructing a building. You should realize from the beginning that there are many government entities that have input into where, why and how the building is constructed.
The following are some aspects of building construction that, if not handled properly, can become serious stumbling blocks to your project or even bring it to a halt.
You should seek the services of a reputable architect who is familiar with your type of business and has experience designing buildings for that use. Drawings must be accurate and thorough so the resulting estimate of costs is as reliable as possible.
It is very important that you acquire three solid quotes from reliable construction contractors. These quotes should have at least a 10 percent contingency built into them, and you should consider adding some additional contingency of your own. Many times there are overruns in construction costs due to unforeseen problems or unexpected increases in material costs over the life of the project.
If outside financing is involved, the lender usually requires a Phase I and possibly a Phase II environmental report concerning the land on which the building is to be constructed.
This is to ensure there is no environmental contamination that must be cleaned up prior to construction.
Local metropolitan planning commissions usually require a survey be conducted to determine where existing sewer, water and power lines are located, where tie-ins will be made, and where new lines will be located.
Small businesses may be affected by the Americans with Disabilities Act. There could be special regulations concerning the construction of the building, including regulations on restroom facilities, accessibility of entrances, elevators, parking and other issues.
There may be environmental impact fees charged by local government entities concerning usage of local resources. For example, a new restaurant may be assessed a fee because of the additional water that will be used at the location of the new building.
There may be special regulations specific to the type of business involved. An example would be state day care licensing regulations requiring sprinkler systems, a specific square footage of space per child and special construction materials. Another example is special ventilation and drainage requirements for a restaurant.
If you are seeking a loan, the lender will want to see the above issues covered in the loan proposal. Some lenders will want you to use the services of a construction inspector.
Construction inspectors are consultants who ensure that the construction work is done properly and according to specifications throughout the project. When the contractor requests a draw (periodic payment for work already completed), the construction inspector receives the request and inspects the work that has been done.
If the work is as specified, the construction inspector authorizes the bank to release the funds. Construction inspectors can be expensive, but the added expense can be built into the loan, and the cost overruns avoided are in most cases more than the cost of the inspector.
While this short discussion does not cover all possible roadblocks, it should encourage you to plan ahead and interact with the appropriate business and government entities as you develop your new facility, thereby minimizing unpleasant surprises and unexpected costs.
Connie Edwards is a business consultant with the University of Georgia’s Small Business Development Center. Contact her at 651-3200.