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16 Things to Know When Expanding to a Second Location

ByScott Gerber,
business.com writer
| Last Modified
Aug 05, 2019
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> Business Basics
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1. Know that it will become another separate business
2. Make sure there's enough demand
3. Consider the costs and benefits
4. Establish consistent communication
5. Research neighborhoods
6. Stay on top of your budget
7. Have all processes documented
8. Evaluate how your business is doing
9. Make sure you will have enough cash flow
10. Avoid being too close
11. Make sure your team is ready and wants this
12. Have an SEO plan
13. Establish your company culture
14. Consider alternate growth opportunities
15. Make sure you have time
16. Keep the same level of quality
 

After your business has seen success, a natural step is to consider expansion. When that expansion includes a possible secondary location, then there are more questions that need to be asked. What do you need to look for in a location, for instance? How much of your time will setting up a new location take? What do you need to know about communicating ideas or processes?

To help you with all of these questions, and others, we asked members of the Young Entrepreneur Council (YEC) to share what they think you should keep in mind when considering expanding to a second location. Here is what they said:

1. Know that it will become another separate business

"Oftentimes people assume that because they have had success with one location, they can just replicate everything they did at store one and have success at store two. I have learned that each location, even though it's the same company with the same policies, will become another separate business. You will have to tweak your offerings to accommodate that location and its clientele. Be open." - Lisa Song SuttonSin City Cupcakes

2. Make sure there's enough demand

"Before expanding to a second location do your due diligence to confirm there is enough demand in that area for a new location. You may be very busy at your current location, but that doesn’t necessarily mean the expansion office will be as well. Research the new market thoroughly before making the financial commitment to expand." - Matthew PodolskyFlorida Law Advisers, P.A.

3. Consider the costs and benefits

"It's crucial to conduct a cost-benefit analysis of an expansion to a secondary location. Ask yourself what you have to gain and what you have to lose in the near future, mid-term and also long-term. If you can afford it, try to get third-party perspectives, so you don't risk having your own biases influence the decision." - Frederik Busslerbitgrit Inc.

4. Establish consistent communication

"One of the most important things is consistency — not only with your brand but with the attention given to your employees. Ensure that across the board communication and direction are being established to keep everyone on track with set goals. Weekly mass communication from leadership is an easy way to make sure everyone is receiving the same messaging to protect brand consistency." - Elisabeth SwardstromPixelFish

5. Research neighborhoods

"Always make sure you research the neighborhood you plan on using for your second location. You want to make sure you're positioning your second store around your target audience. It's also a good idea to check out the crime rate in the area. It's important that your business is in a safe neighborhood and close to the people who will benefit the most from your product or service." - Syed BalkhiWPBeginner

6. Stay on top of your budget

"When you're opening a second location, you have to be mindful of your budget. It's easy to lose track of what you're spending when you're using tens of thousands of dollars across various contractors and businesses to build your business. A best practice is to check your weekly budget and compare it to your goals to make sure you don't get in over your head." - David HenzelLTVPlus

7. Have all processes documented

"Since you can't be in two places at once, you need to be sure to document your processes and systems. Creating a company manual will help the manager of your second location run your business like you would and make sure everything goes smoothly when you're not around. Plus, it will also be helpful to new hires down the line as well.” - Stephanie WellsFormidable Forms

8. Evaluate how your business is doing

"If the business you have right now isn't as strong or valuable as it should be, then it probably isn't wise to expand until it is. It's much better to have one business that's thriving than two that are just doing OK. Look over the numbers to determine if your current brand is strong and profitable enough to perform well in a second location." - Chris ChristoffMonsterInsights

9. Make sure you will have enough cash flow

"More locations can mean more headaches and overhead, which can translate into less profit, not more. Now that I've seen this cycle firsthand, I would only expand to more locations if I could support that new location with the cash flow of my old location, without needing any additional revenue. Absolutely maximize the footprint you have before expanding and you'll avoid the dreaded profit dip.” - Peter KozodoyGEM Advertising

10. Avoid being too close

"When considering expanding your business to a second location, it is crucial to remember the importance of avoiding cannibalization. For example, while it may be tempting to open in a geographical area close to your existing location for operational reasons, doing so could hurt your original business, diverting customers of the first location to the second." - Adam MendlerThe Veloz Group

11. Make sure your team is ready and wants this

"Is your team invested in expanding the business to the second location and getting the company to the next level? An expansion is much easier when your team shares and supports the move. While making sure all the legal and logistical elements are in place is important, your company will expand more organically and smoothly if all the "human" elements are in place as well." - Shu SaitoFact Retriever

12. Have an SEO plan

"Ask yourself whether your SEO and marketing are ready to manage a new location. Since your first location was likely in a niche or built-in community, the growth was easier. However, with a new location, you will have to build this network from scratch. Use your current online strength to help get the new location started and make sure you understand these new demographics and geographic audience.” - Jared WeitzUnited Capital Source Inc.

13. Establish your company culture

"Company culture has an immense impact on your day-to-day operations and when you start up a new location you will have to build it from zero. Try to understand the dynamics of your culture and what makes it work and then figure out how to create consistency between locations. You'll also want to be there physically in the early days or have a senior employee do so." - Karl KangurAbove House

14. Consider alternate growth opportunities

"If opening up an entirely new location seems a bit crazy at the moment, consider how you can expand in other ways before taking the big leap. This doesn't mean you can't open up a second physical store, but there may be other steps you can take in the meantime that aren't as scary and can better prepare you for what's to come." - Thomas GriffinOptinMonster

15. Make sure you have time

"Opening a second location is going to take a lot of work and it's also going to take a lot of your time. So, consider if your current lifestyle allows you to put in those much needed extra hours. If you've got way too much on your plate at the moment, it might be better to wait until you can give more of yourself and your time to the project. It shouldn't be a rush to open a second location." - John TurnerSeedProd LLC

16. Keep the same level of quality

"People make places, so even if you have the company culture principles spelled out, the atmosphere will never be the same. However, the quality of service should be equally top-notch, and that's something that can be achieved with the right team in place. And since you won't be able to spend enough time in both locations, make sure that your location managers and you are on the same wavelength." - Solomon ThimothyOneIMS

 

Scott Gerber
Scott Gerber
See Scott Gerber's Profile
Scott Gerber is the founder of Young Entrepreneur Council (YEC), an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched BusinessCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses. Gerber is also a serial entrepreneur, regular TV commentator and author of the book Never Get a “Real” Job.
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