If you run a successful brick-and-mortar business, you may be considering expanding to a second location. Opening a new store can be exciting, but it does come with significant risks. Another outpost brings additional costs, and there’s no guarantee your new location will be as successful as the first. However, if you go about it the right way, expanding your business can help you find new customers and achieve more profitable growth.
Whether or not you expand to a new location, doing certain things now will make or break your business for the year.
Tips for opening another business location
Opening and operating a second location takes as much work and consideration as your initial one. The following tips can set you up for success.
1. Create a business plan.
A business launch and expansion should always include a detailed plan. Business plans can be written in two formats: a lean startup plan or a traditional plan. Both outline your goals and objectives as a way to attract the attention of investors.
Some people these days believe it’s fashionable to skip creating a business plan, but doing so may be reckless.
2. Consider the online alternative.
Creating an online store is less expensive than opening a new brick-and-mortar location. An e-commerce store doesn’t come with any rent or utility payments while still allowing you to reach a new market of customers. And unlike a physical location, you can keep an e-commerce site open and accessible 24/7.
3. Evaluate the market.
Even if you have a gut feeling about opening a location, follow it up with research. Do you have competitors in the area you’re targeting? How are they faring? Is there room for your business, or should you choose a different neighborhood? Does the site attract your target customer? Open a second location only in a market where you’re confident your business could thrive. Anything less could lead to more expenses than profits.
>>Read next: In Pursuit of Profit: Applications and Uses of Break-Even Analysis
4. Find your new location.
Finding the perfect place within your ideal market is as critical for your new location as it was for your original business. While property rent or purchase price is a vital factor to weigh, also consider safety, local ordinances, average foot or drive-by traffic, ease of access, and demographics. Be sure you are in an area that has ample demand for your product or service, with at most modest competition from similar businesses.
Also, it’s not just what’s outside your second location that matters. The building itself is just as important. Can you reasonably fit your operations there? Can you modify the space to resemble your first location and develop a unified brand? Does the landlord seem trustworthy and responsive? Make sure to answer these questions before committing to your second property.
5. Estimate inventory needs.
Inventory needs change with expansion since every location will require its own stock. If a customer visits your new site and you’re out of a certain item, you usually can’t get it quickly enough to serve that customer. Use current analytics to make projections about the inventory required at a new location. Along with stock, review current and future supply chain and warehouse needs. [Read related article: How to Cash In on Your Excess Inventory]
6. Secure your cash flow.
When opening a second business location, it’s best to have the money on hand before you begin the process of expanding. If you don’t have ample cash flow, you can look for angel investors, Small Business Administration (SBA) loans or peer funding. Just be sure you can financially handle worst-case scenarios, like slow months while the new location gets established.
7. Evaluate the competition.
Your competition matters, and opening a second location may introduce you to competitors you don’t have at your primary site. Look at what other businesses are currently operating in the new area, and determine which ones could be competitors. From there, you can analyze their successes and setbacks and determine how these companies present different challenges at your second location when it comes to keeping your business competitive.
8. Record your processes.
A second location should operate the same as your initial location. To account for this, create training manuals for everything from how to use the point-of-sale (POS) system to how to follow up with customers. Have someone else review these to be sure they are easy to understand even when you’re not around to explain. [See which high-quality POS systems we recommend.]
9. Find a good staff.
To staff this new location, you’ll need to recruit reliable employees and leaders invested in your company’s mission and way of doing business. If you’re opening in an unfamiliar area, finding a local who knows the people there can give you a leg up when establishing connections and adapting to the local culture. Start this networking process by contacting the area’s business association and attending some events.
10. Establish your training program.
Your new employees may need more training than those in your first location, mostly because you won’t be on hand all the time to catch and correct issues. You should also have evaluation standards in place so you can catch issues before they become problems. Schedule regular check-ins with the location’s manager to assess how the employees there are performing.
11. Prepare your marketing campaigns.
Just like when you opened your first business, you’ll want some pre-opening promotion for your second location as well as a memorable grand-opening event. After that, you should plan on a year of consistent promotion to get your second location solidly established. One advantage unique to opening a second location is that you have customers at your first location who can help spread the word and may live closer to your new store. You may also be able to promote your company to other businesses in your new market.
12. Open the right way.
While a grand opening is a crucial part of marketing your new location, you can also introduce your new spot with a soft opening. This smaller start is perfect for opening a second business location since it implies an incomplete opening. From there, you can gradually move resources and employees from one location to the other. Plus, a soft opening is a great trial run for full operations, as you might notice some gaps you need to fill.
13. Alert the local media.
Even if your company offers highly specific products or services, there’s no harm in reaching out to local journalists, who can help spread the word about your business to a particular or general audience. Some local writers may report on new businesses with a focus on the company and founder’s story, so don’t be afraid to inject some personality and background into your pitches. Just be sure to avoid the PR mistakes that could kill your business.
14. Commit yourself.
You probably know from opening your first location that launching a company requires you to devote most of your time to the process. It’s no different with a second location. Keep your schedule free to tend to any needs that may arise. A second launch can move fast, and you should be prepared.
The success of a first location doesn’t guarantee the success of a second. The different demographics in each of your markets can make all the difference. However, with careful research and planning to ensure your business has the funding, procedures and staff to carry on your mission, you increase your chance of success in your new locale and those that follow.
How to know when to expand your business to a new location
Opening a new location is a big decision, and you want to make sure it’s the right step for your business. If you don’t have a solid plan in place, operating multiple locations can do more harm than good.
Here are some signs that it may be time to expand your business to a new location:
- You can’t meet customer demand. If your business is so successful that you’re unable to meet the full demand at your current location, it may be time to grow your footprint. When you constantly find yourself turning away new customers, then a second location could be the solution.
- You have a documented process. Can you duplicate your current business processes at your new location? Documented procedures will allow you to mirror your operations and train your staff at the new store on what works. If you don’t have these, you’re not ready to expand.
- You’ve identified a new opportunity. If you’ve identified a new market opportunity, time could be of the essence. While you never want to rush such a major decision, a chance to attract a new customer base and grow your business may warrant expansion.
- You have a well-developed staff. Setting up a second location is going to take a lot of your time and energy, so you want to make sure your staff can handle the logistics at your primary site. If your current team has operations down pat, you’ll have the time to focus on expansion efforts. On the flip side, staffing and operational issues at your existing spot are a sign that it’s not the right time to add another location to mix.
- You’re running out of space. Do you constantly find yourself short on space at your current location? Is your business constantly crowded with customers? If so, a second location may be an outright necessity.
Jamie Johnson contributed to the writing and reporting in this article.