Our wildest dreams of sports academy ownership often involve a gleaming new facility built just the way we want.
The biggest hurdle for most of us to seeing that dream become reality is securing the funding. If you think you can raise the capital, it’s time for you to decide whether the benefits of new construction outweigh the headaches.
I went through this process myself when I considered moving my sports academy from its rented location to a new, custom built facility.
I ended up selling my sports facility to devote more time to my growing software company. For a time, I was convinced that I could run both companies much more easily if they were in the same building.
Besides being convenient for me, it would have been good for my software company staff. Our main product is scheduling software for sports facilities. So, they’d get more direct insight into what our software needed to do.
I spent plenty of time doing research and in meetings with building designers, financiers, architects, and local officials pursuing the idea of building new, because I was so drawn to its benefits:
The Benefits of New Construction
Financial / Investment. In general, I prefer property ownership to renting, because I consider it a good financial investment. Of course, your payoff on any property investment depends on the location you choose and the market in that area. When you construct the building to suit you, can make the investment even better by tailoring it to what you think will sell well when the time comes. (Related: Your Sports Academy’s Exit Strategy)
Benefits of New Building Ownership. When you own your building, you won’t risk unexpected rent hikes or getting kicked out by your landlord. You WILL, of course, risk the expense of unexpected repairs. Also, you will be responsible for keeping the building safe and functional. Hopefully, those will be minimal and/or covered by warranties if the building is new.
Customization. Having a fully customized facility can be a big advantage for you business. You can build exactly what you need, prioritizing your highest revenue activities and using as little square footage as possible. (Using minimal square footage saves on energy costs and other related costs, such as required parking spaces. I go into more detail in this post: Choosing a Location for your Sports Facility.)
Despite these benefits, the hurdles I encountered ultimately made me decide to stay in our current, separate locations.
The Hurdles of New Construction
Regulations. Local governments all have different rules about how you can build and use real estate. You’ll have to present your building plans to your local municipality – usually their zoning department – for approval. This turned out to a big limiting factor for me, because I wanted a full indoor soccer field for team rentals and training. However, that field space would have required me to build hundreds of unnecessary parking spaces. I also needed to stay in the same area of town, because I’d done careful market research when choosing the community. I knew that moving might upset clients who had purchased long-term memberships for our current location. If you’re a brand new facility and aren’t limited by a current location, you can take these regulations into account as you choose an area of town for your new business. Just be mentally prepared for regulatory roadblocks.
Financing. Banks are happy to finance loans for what they consider to be low-risk construction. However, sports academies aren’t typically considered low-risk, because the success rate for our type of business is not great. (Related Post: Why Sports Facilities Fail.) You can probably still get a loan depending on your credit history and down payment, but you’ll likely pay higher rates than you would for other types of businesses. This can add another financing hurdle for would-be builders.
Time. Besides the time it takes to plan and get all the permits, you have actual construction time, which is always at the mercy of weather and other unforeseen problems.
Consider Existing Space
As I mentioned in my post on Financing Your Sports Facility, I’d suggest looking for existing spaces before you move ahead with construction. If you can find and buy an existing space – or even a current sports business – that works for your business and doesn’t have a bad reputation from previous owners, it will be well worth avoiding the months of headaches that new construction brings.
If you have a success story about building new or any other questions, just contact me or leave a comment on the post.