Preliminary Financial Projection
The Preliminary Financial Projection [PFP] for your proposed project (full building, lease space, condominium or remodel) is the single most important tool you can use to determine the viability of your project. Used in conjunction with an Architectural Consultation (site evaluation or interior space evaluation) you can determine whether the project can meet all of your financial and functional goals before ever beginning the design process. DentalOfficeDesignConsulting will automatically perform an PFP as part of your Design Development scope of service so that we know what level of aesthetics to design to, but any single one of the following four reasons indicate that it may well be to your advantage to examine this data very early in the process.
1. The PFP will factor the approximate total cost of the entire project by scheduling the capital costs (locally adjusted shell and/or finish-out costs, site development costs, etc. ); the non-capital costs and contingencies (all design and engineering fees, permits, soil testing, cost of construction financing, etc.); cost of equipment and furnishings; operating costs of your new office, and any other miscellaneous costs you want to consider. After seeing the total cost of the project it is much easier to balance the expenditures you make in the various categories if you to choose to limit your total investment, or if your lender chooses to limit its exposure.
2. The PFP is an excellent tool to use as you interview financiers.
3. The PFP will allow your designer(s) to identify the budget you want to target. It is critically important to the success of the design process that the doctor/owner realize that the designer(s) plan to spend all of the budget which you target (if the pricing comes in substantially under your budget, the project was under-designed; if the pricing comes in substantially over your budget, the project was over-designed).
4. The PFP is a projection which has been based primarily on the history of the cost of hundreds of projects we have designed and data from RSMean's Construction Cost Database which is adjusted by location and inflation; and secondarily from current suppliers and manufacturers, or actual/historical construction costs compiled by DODC for this same building type. These calculations do not reflect short term fluctuations in the market due to availability of materials or labor. In short, the project will cost what the project will cost, and the designers simply cannot tell the contractor what the price is going to be.
Download Financial Projection Survey
FAQs regarding the relationship between the PFP and the actual cost of construcion
Q: What does it mean that “the designer(s) plan to spend all of the budget which you target”?
A: Most designers, architects, interior designers and engineers are not professional cost estimators or contractors; any expectation you have that they can simply tell you what an aspect of the work will cost is unrealistic… but, to serve their clients appropriately, it is necessary for them to be relatively knowledgeable about the current capital costs for the type of work they are designing such that they can forecast a reasonable cost (such as within a ±10% range) of the work.
Q: What if I want the project cost to be a specific, not-to-exceed dollar figure?
A: You need to find a design/build contractor who specializes in dental offices, and prepare to have your dental functions and aesthetic dreams Value-Engineered to meet that price: once you sign a contract with them, your project will become a numbers game, and whatever must be adjusted to reach the bottom line will be compromised with very little additional thought given to the effect it has on your office.
Q: What if I want high-end aesthetics, but I really want to pay the least amount possible?
A: DODC will be patient while you negotiate-down your contractor and subcontractors as long as you choose to (…however, please decide in advance what your personal time is worth in $$/hour and how many months of additional rent and interim interest payments you’re willing to pay while you continue your negotiations)…but, we will not back away from a professional opinion about what you can reasonably expect to pay for your project (just because you know the unemployment rate is slightly higher in your area, so construction has to be cheaper…or, because your best friend since grade school is a contractor and he says he’ll forego any profit & overhead so he can break into the dental market…or, this guy in my study group said…).
Q: What if I want the project to fall within a certain Description of Design Levels (downloadable), but there are areas or features that I want to add to or enhance?
A: DODC will tailor your design services to whatever scope of work you stipulate, and adjust your PFP to reflect the construction cost as best we can…our efforts will always attempt to inform you about the effect of your functional and aesthetic decisions on ROI [return on investmest], and to maximize the value of the investment you choose to make.
Q: So, what is the bottom line in this tug-of-war?
A: If you proceed in the direction DODC advises you, you will get what you pay for – the full extent of the design services you are paying for, and the best bang-for-your-buck in a built dental office. The way you feel about going to work there every morning, and your increase in production numbers, will make it seem like a bargain…but, during the design and construction process you must force yourself to focus on the mantra: “I’m getting what I paid for – no less, and no more.”
Q: What if I change my mind after seeing the construction pricing about the amount I am willing to spend…or if I really can’t get the level of financing I thought I could?
A: If you change the amount (after the designers have completed their work and pricing has come in within an expected range) which will be spent on the construction of your project, then you have changed the Scope of Work after the fact, and you have purchased over-budgeted design services. Changes to the design will be performed as Additional Services after you identify your revised Scope of Work.
Q: What if the pricing comes in below or above the expected range?
A: DODC will work with you (at no additional charge) to adjust and revise the design to conform to an amount within the expected range (e.g. ±10%) of pricing.
What information will a design consultant request
to compile the Preliminary Financial Projection from?
DODC will fax you a form to fill out and fax back which requests the following, (but if you do not know, or need to estimate any of the answers to the questions asked above, DODC may be able to assist you):
• Are you a specialist or GP?
• Total number of Operatories (if specialty, total number of dental chairs)
• What Classification Of Design Aesthetics do you want?
• Are you planning on using an Interior Designer?
• Are you planning on integrating High Tech equipment?
• If this is a new building or addition, are you planning on building on a basement, crawlspace or slab?
• Do you have any reason to believe there may be any unusual costs associated with site conditions such as demolition, sloping site, access to utilities, subsurface conditions, etc.?
• If you are finishing out a space in an existing building, will demolition and/or asbestos abatement be required?
• How much cash and/or equity do you intend to infuse into the project?
• What is the rate of the interim construction loan?
• What is the rate & length of long-term equipment financing, and the rate & length of your permanent financing?
• What is the monthly rent or payment on your current dental office?
• If you are purchasing a condo, existing building, previously developed site, or raw land, what is the purchase price?
• If you will be leasing, what is the new monthly rent? Do you have a finish out allowance? If YES, how much? (Please note: if no total $$ amount, or $$/square foot is written into your lease agreement, we will assume that your Landlord is not taking any financial responsibility for the construction costs of your project.
• What is your current utilities+tax+insurance+maintenence cost per month
• Estimate your new utilities+tax+insurance+maintenence cost per month?
• What is your current average monthly production (for at least the past six months)?
• How much do you intend to spend on new Dental equipment?
• How much do you intend to spend on new High Tech equipment?
• How much do you intend to spend on new Business equipment?
• How much do you intend to spend on new Furniture, Artwork, Etc.?
• Have you used the services of a Practice Management Consultant?
