Wolgast Blog

Preparing Your Business for a New Buyer

Posted by Cory Sursely on Fri, Feb 17, 2017 @ 10:50 AM

BusinessOwner.jpgBruce has owned his business for more than 30 years and he’s ready to retire.  He is five years under the retirement age and has no children to take over this operation he has poured his blood and sweat into for most of his life.  Bruce has a few options.  He can close the doors, walk away, and lay off his staff of 25.  He can sell the business and the building to an interested party and use the money to supplement his retirement savings.  Or, he can find someone who wants to buy the business and then lease the building to him or her, keeping rental income for continual cash flow.

To supplement his retirement the second two options are the most appealing.  Bruce has employees to think about and having extra cash in his pocket would be beneficial.

Bruce begins to think about how he can make his business attractive to a buyer and among other things, he realizes that even though he has kept up with repairs, the building could use an overhaul after 35 years.  His HVAC system could be more efficient, his flooring is worn out, the lunchroom is a little drab, his conference room doesn’t function as well as it could, and there are areas that could change to help workflow.  There are many things that a remodel could do that would help him to attract a serious buyer and sweeten the deal if the new owner doesn’t have to turn around and renovate the building.

A renovation can also drive traffic to a business because community members are curious to see the changes (note: depending on the industry).  Promoting a remodel is a great marketing tool.  So increased traffic can help Bruce recover some of the expense of the updates and a freshened building can help attract a buyer to set him on his way to a comfortable retirement.

If you have any questions about remodeling your business or options for leasing your building to a future owner, please contact Wolgast’s, Rick Suitor-Business Development, to set you in the right direction.  If you’re a little further from retirement, you may want to start your succession planning now and keep Wolgast in mind for future renovation needs.

Tags: Leaseback, Good for Business, Risk Management

Leaseback: Get a New Building While Keeping Capital in Your Business

Posted by Cory Anderson on Thu, Aug 01, 2013 @ 02:37 PM

Build to Suit

Build to SuitWhen the time comes to move your business to its own brick and mortar (or any other building material) building, or expand to a bigger building, you have an option to keep your capital in your business rather than spend it on a loan to cover construction costs.  This new building can be built to suit your operational needs rather than trying to fit your operation into an existing floor plan, and with limited risk to your business. 

Leaseback is a construction delivery method that provides the best of both worlds to qualified business owners and even though it may sound too good to be true, it’s legitimately a great, low risk option for presidents or CEOs to remain focused on their business while a building is created for their use.  I’ll explain more about how it works below.

By definition, leaseback is a construction delivery method whereby a developer builds, finances, and leases a facility back to a business owner, allowing him or her to keep capital in the businessThis method is perfect for newer, up-and-coming businesses or those that are established and experiencing rapid growth because there is little risk to the business and there is a lot of flexibility in defining the provisions with the developer.

How it Works

The developer reviews the business owner/lessee’s business financials and determines that he or she is a qualified candidate to take on the risk of building a building.  The building owner then enters into a contract for the lease, which is flexible in the terms of the duration of the lease, who will handle maintenance, and who will cover taxes and insurance payments among other things.  The developer will then work with the business owner to find the most optimal location for the business.  Then they both work with the architect to design a building suited to the business’ use (i.e. square footage, floor plan, finishes).  Once the floorplan is determined, the developer works with the general contractor to ensure that construction goes as planned, leaving the business owner time to focus on business without the interruption of making decisions because, let's face it, they likely have enough of their own work to do without adding on construction management. 

Early in the design process, the developer will be able to determine the lease payment amount, so the business owner will know quickly what the leaseback will cost per month.  Also, the terms are negotiated in the contract and the lessee has flexibility to negotiate many of the terms with the developer.  Typically, the finishes chosen by the lessee have the most direct effect on the monthly rent of a leaseback.  By working with the architect, developer and general contractor, a lessee can choose the interior look and feel that's in their budget.

Key Benefits to Business Owners

You’ll notice that there are numerous benefits and most of them have the underlying theme of risk aversion to business owners.  Here are the key benefits:

  • Lease payments are fully deductible as a business expense by the lessee
  • Terms of the lease can be flexible to allow the lessee the option to renew the lease or purchase the building at any time during the lease
  • No large cash investment is necessary, so leaseback saves capital and keeps debt off the balance sheet of the lessee
  • The cost of land can be amortized in the lease payment thereby preserving cash by the lessee
  • You can choose a prime location that you may otherwise not be able to afford
  • There are no financial covenants on a lease, which gives the lessee greater control over its own business and operations
  • Owners would be able to keep financing options open for future opportunities
  • Rather than worrying about all the moving pieces of construction, you can focus on your business

This is a simplified explanation of the leaseback method.  For more detailed information, call Michael Shepard at 800-965-4278 or 989-790-9120.  Or click the link below to find if Wolgast's leaseback services are right for you.

 

Wolgast's Leaseback Services

 

 

Tags: Medical Office Construction, the Wolgast Way, Financing Construction, Leaseback, Dental Office Construction, Good for Business, Manufacturing Construction

You Have Construction Service Options

Posted by Cory Anderson on Wed, Feb 27, 2013 @ 10:24 AM

constructionWhich construction delivery system is best for your project?

There are several unique and distinctive methods for providing construction solutions. As a business owner you have the luxury of selecting the most beneficial and appropriate delivery system for your type of project.

Design/Build

The Owner hires one firm to provide architectural design and construction services in a phased approach.  Oftentimes, the architect is a staff member of the construction company.  The design/builder becomes the single-source that is responsible for designing the building, hiring the subcontractors and coordinating the schedule and invoicing to ensure the project is completed on time and within budget.

It’s the design/builder’s sole responsibility to complete the project to the client’s satisfaction.  The architect and contractor are the same entity, which eliminates misunderstandings as they collaborate throughout the design process.  The design/builder becomes the owner’s advocate, leading them through site planning, permitting, design, value engineering and construction.  The phased approach provides economical/budget information early for the owner to decide if the project is a go or no-go.

Design/build is suitable for busy owners or those who know only a little about construction.  It’s also a fast-track method or a fast construction process for projects with a tight schedule.

Construction Management

A construction manager’s (CM) role as part of the project team is to provide estimating and constructability review during design, and cost, time and quality control during construction.  The client establishes their team of architect, CM and owner’s representative at the onset of the building concept.  The architect is responsible for defining the building through drawings and specifications while the CM regulates and monitors the schedule, budget, materials and performance of the subcontractors.  The owner thoroughly informed by these professionals, can then make educated decisions about his or her project.

The owner must be willing to be involved in the process because by using the CM method each trade contract is signed with the owner.  The CM method is most suitable for those who construction is a recurring activity and/or their project is very large, like schools and retail chains.

General Construction

Considered the design/bid/build method, the owner typically already has plans which were prepared by an outside architect/engineer when they seek a general contractor.  They choose their general contractor by one of three methods, 1) negotiating with one or more contractors of their choice, 2) selecting a group of contractors to bid and then accepting the lowest bid, 3) advertising for a broad variety of bids and accepting the lowest.

For clients who have a simple construction project, general construction is likely the appropriate construction solution.  It’s also the right choice when it’s necessary to bid and then build a project based upon completed plans and specifications.  However, this method leaves little room for correction of design or programmatic errors, if any exist.

Leaseback

The contractor finances, builds and leases a new facility back to a qualified owner, allowing him or her to focus on his or her business.  This is the best option for businesses that are faced with the need to expand their floor-space while at the same time minimize the risk involved with tying up capital in construction costs.

Business owners who qualify and currently have all their working capital in their business without a budget for building their new space are candidates for leaseback.  By choosing leaseback, they can move their business to a prime location and get the space tailored to their design needs.  The owner has the option to purchase at a future date when the business warrants the investment.

Still not sure which one works best for you? Call us to discuss your options.  At Wolgast Corporation, all systems are in place to provide the most appropriate delivery method. 

Click on the Prezi Presentation below for more information about your construction service options.

 

Construction Options on Prezi

Tags: Medical Office Construction, Design/Build, Professional General Contractor, Schools, Construction Management, the Wolgast Way, Restaurant Construction, Leaseback, Dental Office Construction, Manufacturing Construction