Beware of Build Out Costs

When you move into a new company location, customizing the interior to look and feel like your business while meeting customer or staff needs, is important.  This build out process can get expensive very fast and cripple young companies.  Even if a landlord offers some tenant improvement funds or credits to help with the build out, don’t go overboard.  What are some gotcha’s to be aware of?

Contractor Delays – this happens all to often with construction projects.  Any delay will eat into time you could be using the location.  That means lost revenue and probably lost rent, because you still have to pay the landlord.  This happened to a new quick service restaurant near our headquarters at the end of 2017.  As a result, the business owner used up all his personal savings paying thousands of dollars in rent for something he could not use until January 2018 – 3 months late!  Contractors can frequently overbook themselves and get pulled away from your project for other priorities.  Perhaps you can incentivize them with bonuses for finishing early or penalties for being late.

Extravagance – its easy to get carried away picking out the best trimmings, especially for your first location.  However, the extra expense of “gold trim” versus brass can break a budget and cause months of pain.  This happened to a local therapist who wanted to really wow her clients when they walked through the door.  The problem was she didn’t have any clients to wow!  Instead she had a huge bank loan to pay on top of rent and not enough money to keep up.  After a year, the bank foreclosed.  You can avoid this by thinking functional but nice.  Maybe do a few strategic upgrades instead of going all out.

When you move, do your best to stick to a budget and make sure your contractor does the same.  However, you can do yourself a favor by saving up some extra funds to cover the unexpected and plan ahead for delays.  You might even consider an SBA loan for the move.  The longer time frame, typically 10 years, can provide lower monthly payments that give the location time to reach profit capacity.

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