I started writing the second part of the What’s Taking So Long series and was about half way through it when I realized that a very important piece of the puzzle needed to be included before I could go any further.
I had said at some point in a previous post that Pearce and I were going to take this thing as far as we could in planning before we decided to spend any money on it. We knew that there would come a point in time where significant amounts of money would need to be spent to move forward and that was the point where we would come together and make the GO OR NO GO decision. That point came when we found the piece of property that fit our needs and we needed to put it under contract and we needed to know how much it was going to cost to build.
We knew how much our equipment was going to cost and we knew how much the land was going to cost. We DID NOT know how much a building was going to cost, and the only way to know was to hire an architect to design the building and that has SIGNIFICANT costs associated with it.
The fear of starting your own business can be overwhelming. Basing your future on projections and what-ifs can be paralyzing. But at some point, you have to jump off the cliff or walk away. And so Pearce and I clasped hands, closed our eyes, counted to three, and jumped…
We committed to fund an account with an amount of money that would cover the deposit on the property as well as the first part of the architectural process. It just so happens that we were able to do this because we both had had cash on hand due to some stock sale and business sale transactions.
The architectural process will be covered in a different post, but what I will tell you here is that between our idea for what we needed, our newly hired architect’s expertise and our newly engaged development coordinator’s experience in the market, we determined the square footage of the building we wanted to build and the base price per square foot of construction of that type of building in our market.
Wow. Now we knew what everything was going to cost. And it was terrifying. But our plan was good and we were committed.
Armed with the knowledge of what everything was going to cost, we started setting up appointments with different banks. I would love to tell you that Pearce and I had so much cash on hand that we were able to finance this entire project out of pocket but that is just silly talk.
There were several banks that were interested in the project. The fact that we were a startup was balanced out by the fact that we would own the land and building that we would be operating out of. We looked at both conventional commercial programs as well as Small Business Administration (SBA) programs.
After talking to 4 or 5 banks we determined that the SBA route would be the best fit for us. We were given a preliminary commitment letter from one bank and that gave us an idea of how much equity we would need to be able to provide in order to close the loan. In most commercial situations we would need to bring 25% of the cost of the project to the table in order for them to fund us. The SBA “only” required 15%. Only is in quotes because “only” 15% was still a crazy amount of money.
So we had a full idea of project costs, the beginnings of a building design, and commitment from a bank. Now we needed to figure out where the skin in the game was going to come from. We had about 5% of the 15% on hand, but the rest would need to be raised. We had two options. Find an outside source (investor) for the other 10% of equity, or figure out how to get it ourselves.
I know this story is starting to get long so I will try to get to the point. Pearce and I thought that the investor route might be the best way so we started putting out feelers to gauge interest. We had a couple of groups of serious investors that wanted to talk. Pearce will kill me if I don’t mention that we had a friend who put us in touch with two groups of investors in New Jersey. We actually flew up there to meet with them. We found out that one group was considered the “Italian” investor group and the other was considered the “Irish” investor group. So our thoughts basically went to exactly where your thoughts just went. If this didn’t go well, we might end up sleeping with the fishes. In all honesty, both groups were great folks and they were NOT involved in waste management or labor unions. We also had a good handful of people who were willing to contribute small amounts that could then be pooled to make up the cash needed. This was looking like an option until we found out that having passive investors grouped together like that actually created a securities scenario and would require an incredible amount of legal work which meant $$$$. Working with investors started looking like much more of a hassle than it was worth considering what we would end up having to give up.
Then the unimaginable happened. Pearce had some things happen in his life that created an opportunity for him to bring more cash to the table and at the same time, I also had some things fall into place that allowed me to do the same. Call it divine, call it lucky, call it whatever you want. The fact is that we had now had both the opportunity AND the means to complete this project on our own.
So that is where I shall leave you today. In the next installment, we will talk more about the architectural process, sourcing our equipment, and the steps that we are taking to breaking ground.
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