Time to Build? What to know before you build

Opportunity knocks

American Family Insurance Agent Robert Mitchals chose to build in response to growth and opportunity. Mitchals has targeted the underserved northwest Springfield market since he started his agency 12 years ago, and with the growth in that area, he saw a new location at 2520 N. Airport Plaza Blvd. as a good business investment.

“I wanted to secure a specific location for my office, and there was no way to rent and get the look that we wanted, so that’s why we ended up (building),” Mitchals said.

Mitchals’ agency occupies 2,000 square feet of the $1 million, 7,000-square-foot structure, and he’s offering the remaining space for lease at $12.50 per square foot, triple net.

Mitchals acted as his own general contractor on the project with the advice of Shawn Fink of Canterbury Lane Developers.

Mitchals said that he knew the project might go over budget, and while he didn’t necessarily object, he wanted to know where the money was going and why.

“By doing it yourself, you have control over every penny,” he said. “If you decide to go over, that’s your fault.”

Mitchals recommends that business owners considering building new locations seek the advice of a competent Realtor or a development consultant, particularly one who can provide details on land and construction costs.

“Have all your ducks in a row before you pull the trigger on your piece of property,” he said.

Project alignment

Sometimes, businesses are forced to expand due to customer demands, as was the case for Dr. Jason Crockett of Crockett Chiropractic PC. Crockett realized he needed to expand his office at 733 W. Kearney St. when his waiting room went to standing room only.

This summer, after a year of planning and another eight months of paperwork and gaining city approval, the clinic added 1,600 square feet, including four exam rooms, to an existing 1,200-square-foot space at a cost of $344,000.

Because the project was an addition rather than a new building, it came with its own set of challenges.

Crockett wanted to continue regular business operations during construction, which he spelled out during the bid process. His general contractor, Oak Grove Construction Services Inc., rose to the occasion, working around Crockett’s practice.

Crockett noted that securing the right contractor and design professionals is key to a successful project, and he went by referrals from business advisers and associates.

“I think it just comes down to picking someone that you feel comfortable with, that you can communicate with,” he said. “That makes the whole process a lot simpler.”

The jeweler’s setting

Building a new location also can mean a switch to owning property rather than leasing it. Mitchum Jewelers opened the doors July 9 on its $750,000 building at 2431 W. Jackson in Ozark.

“It’s always been a dream of ours to have our own facility, and this way, we got to design it the way we wanted to,” said manager and co-owner Randy Mitchum. Plus, “Now we know that the money we’re putting toward the building is going to a mortgage and not a lease.”

The switch came in response to continuous business growth – sales have doubled every year for the last four years – but it is also an investment in the future.

“We purchased an acre lot, but we actually are only using a little over half an acre,” Mitchum said. The remaining land provides room to grow and/or a marketable asset.

Mitchum Jewelers’ 2,700-square-foot facility is adjacent to Ozarks Technical Community College’s Ozark Campus.

“We’re about a quarter mile from town, and it kind of looks like we’re out here by ourselves,” Mitchum said, “but I promise within the next few years, everything’s going to blow up around us.”

Mitchum was pleased by the performance of the construction professionals he worked with, including Erdmann-Street Architecture and Planning and general contractor Pyle Brothers Inc.

“The contractors were fantastic,” Mitchum said.

Mitchum Jewelers will celebrate its grand opening with special promotions throughout the month of August.

Words of wisdom: Meeting the demands of local government is a challenge for which the business owner should be prepared. “Some of the city ordinances … held us up in a few different places because some of the covenants are pretty strict.” Mitchum said. “But we surpassed that.”

See the church, see the steeple

Northside Christian Church, which is building a $5 million facility at 4902 State Highway H, didn’t exactly go to standing room only, but its members definitely saw a need for more space. The church’s existing home at 1311 E. Valley Water Mill Road, where it has been for 31 years, was designed to comfortably seat about 250 people. With attendance running about 600, the church had adapted with multiple services.

As a nonprofit business, the church operates on voluntary contributions, and decisions to add on, build and move are made not by executive decree but by congregational majority.

“We waited until people knew we had

to move,” said Senior Minister Ed Holt. “We were cramped enough that people knew this was something that had to happen.”

A vote was taken and 97 percent of the congregation approved the church’s relocation.

The site of the new church was purchased four years ago and meets Northside’s image of the church as a retreat from hectic day-to-day concerns.

“For the younger generation, Gen Xers, what’s important to them is not how many parking slots you have, but how much green space you have,” Holt said. “We probably see less than 20 percent of our property actually developed in building and parking.”

The remainder is reserved for green space, a wedding gazebo, a play area for kids and hiking areas.

Northside benefited from construction-savvy members, including Palmerton & Parrish principal Brad Parrish, and Holt made sure the church went with a contractor with a good reputation.

“We hired Walton Construction, and they’ve done an excellent job for us,” he said.

The Money Questions

Business owners should be prepared to answer some key questions as they seek financing for a new building, said Jason McMillen, vice president at Citizens National Bank.

How much cash do you have to inject into the project?

“Most lenders will want to see 15 (percent) to 20 percent (of the owner’s) cash injected into the project,” McMillen said. “Most banks won’t do 100 percent financing.”

An exception is U.S. Small Business Administration loan programs that require only a 10 percent owner investment.

Why are you building this property?

If the purpose is to increase cash flow, McMillen said, it’s important to make sure the increase will be sufficient to carry the construction debt. If the new building will not increase cash flow, the business must prove that existing cash flow is sufficient to support the loan.

Besides the cost of construction, will other costs increase with the new location?

If new staff will be added or if salaries for existing staff rise with the move, McMillen said, those costs must also be offset by sufficient cash flow.

Will this project meet your long-term needs, say 10 years down the road?

If the benefit is limited to the short term, McMillen advises reconsidering the project.

What documentation do I need?

McMillen said business owners who are seeking construction loans should have three years of financial history, including business tax returns, profit-and-loss statements and an accountant’s financial statement.

Owners also will need income predictions for the new building, if it is expected to increase income.