If you are planning to build a new business premises, you should create a large contingency fund. Read on to learn why.
The land may be contaminated
If after testing the soil on your plot, you discover that the land on which you will be constructing your commercial building is contaminated with a hazardous substance (like asbestos, for instance), you will need be able to quickly access a lot of funds, in order to resolve this issue before you continue with the building work.
The reason for this is as follows; land contamination is a serious issue. If you don't have enough money in your contingency fund to address the contamination, and you decide to proceed with your building project without resolving this problem, you could end up putting your employees and clients at risk of illness.
Exposure to asbestos, for example, can drastically increase a person's chances of developing certain forms of lung cancer later in life.
If you are found to have knowingly built a commercial premises on contaminated land, you could find yourself dealing with some extremely costly lawsuits and your professional reputation could be destroyed.
Conversely, if you have put plenty of money aside from the outset, you should be able to easily cover the cost of removing the contaminated soil from the land and thus ensure that neither your future employees nor your future clients will be endangered by spending time in your new premises.
The soil might be expansive
Another important reason why you should create a large contingency fund is that the soil on your plot could be expansive (this means that its volume will change, depending on its moisture content).
If this is the case, you will need to have your contractor build a special, expensive type of foundation, which features stabilising components that will prevent the foundation from shifting when the soil underneath it swells and contracts.
If you cannot afford to build this type of foundation, you may have to make do with a standard one. This could spell disaster for your business in the long run, as over time, the foundation will crack and cave in and, in doing so, will cause a huge amount of structural damage to the rest of the premises.
If this happens, you will have to shut down your business operations whilst you have this damage repaired. The cost of fixing this damage, coupled with the profit losses caused by closing your enterprise, could potentially lead to you going out of business.