Creating a Successful Construction Budget for Self-Storage: Tips for First-Timers
|Copyright 2014 by Virgo Publishing.|
|Posted on: 06/18/2013|
By Danny Clemons
Putting together the construction budget for a new self-storage facility is easy. Well, that may be true if you’ve done it a few dozen times like the large developers in our industry. If it’s your first development, you may find it somewhat more difficult, and then you’ll find sticking to that budget even harder.
The first and most important step toward putting together a solid budget is to have a concrete plan for what you’re going to build. Work out all of the details on paper before you start, and be absolutely sure of your goals. This means penciling out your proposed square footage, how many units the facility will have, whether it will have one or more floors, if you’ll include units for storing boats or RVs, and other features you hope to include.
If you’re planning to build a large facility, engaging an architect who has a lot of experience in the design of self-storage projects can be a true asset. Not only can he help with the initial scope of the project, he can aid in setting and keeping the concept.
Even if you’re planning to build a small facility, you should still develop a solid plan and concept up front, and then don’t change it. Changes to the concept are the downfall of all construction budgets. Spend the time and money in the beginning of the project to clearly outline your goals and objectives, and it will save you big time throughout the development.
Most items in a construction budget are somewhat constant. The electrical, plumbing, foundation, building, driveways, etc., can be easily priced once you have good drawings. However, there’s one item that can throw a curve ball—the dirt work. This is an area some developers take too lightly, and I’ve seen it completely destroy more than one developer’s budget.
The solution? Get a soil test! Sounds simple, right? You’d be surprised how many facilities are built without one and how much that little mistake costs. I found out how expensive it could be when developing a facility in a Dallas suburb. Luckily, we did do a soil test, but we were still surprised at the findings by the engineering firm we hired. Preparing the soil for our development was very costly—a $280,000 sticker shock that could kill almost any financial plan. Fortunately, we discovered the information early on and were able to fold the cost into our budget.
The bottom line is we knew it was coming before we started. Had we not done a soil test, the cost could have been many times more due to cracked slabs and drives.
The next step when creating your self-storage construction budget is to seek advice from others in the industry. When I first got started in self-storage 1979, there wasn’t much experience to draw from, but it’s quite a different story today. Most of the people in our industry are eager to help. Industry magazines, tradeshows and consultants are great sources of information. Take the time to read, attend events and talk to people who’ve been there and done that. There’s a lot of help out there, so take advantage of it. A lot of mistakes have been made by other developers, and those are the guys you need to talk to the most.
Your general contractors and subcontractors can also help you with your budget planning. Get at least three bids on all aspects of the project using the plans and concept you’ve developed, and qualify each bid. Make sure they’re bidding to plan and specifications. If you think that’s easy, you’re wrong. It takes a lot of work and persistence to make sure everyone has your concept in mind. Do the work and be persistent, and you’ll end up with a solid budget.
Stick to It!
Now comes the hard part. Sticking to your budget is as much a frame of mind as anything. You have to be focused on your goals and keep them front and center at all times. One of the hardest things to do during a construction project is to stay focused on your financial plan. It’s OK to go slightly out of it in one area if you know why, see it coming and plan to make it up in another area.
The best method for sticking to a budget is to itemize it to as many individual categories as possible. I prefer to use a spreadsheet and list every item I can think of and try to put a reasonable price on it. Then I set a goal for myself to meet or beat each and every one of those prices as the project moves along. I’ll fight tooth and nail to keep any one item from going over. If it does go over, it puts a lot of pressure on me to make the next one come in under budget. I talk to my subcontractors and suppliers and let them know if I need help. I’ve found that if you’re honest, they’ll help you if they can.
By doing this throughout the project, I’ve been able to stay under or at budget on most developments. Even small items like trash removal, construction signs, etc., can add up, so watch them all. This method also gives you a sense of how your budget is doing from start to finish so, hopefully, you won’t have any surprises along the way.
Remember, plan well, keep your concept in sight and stay focused. Those three things will lead to a successful project built on budget.
A self-storage pioneer, Danny Clemons has been involved in the industry since 1979, participating in the design and construction of more than 50 million square feet of storage space. He’s currently president and owner of DCD Services Inc. and DCD Storage LLC, which furnishes and erects self-storage buildings from coast to coast. He’s also co-owner of D&D Investments, which owns and operates multiple facilities in the South. For more information, call 903.850.8988; e-mail email@example.com; visit www.dcdstorage.com .