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Time to Expand? Tips for Opening Another Location

Max Freedman
Max Freedman

There are a few things to consider before opening a new location.

There are few things as exciting as running a successful business. Often, finding success leads some to consider opening up a second location in a new market in an effort to increase profits. However, before you jump into starting a new location, be sure it's the right next step for your business.

Even if an exciting opportunity comes your way, be sure you can handle it without sacrificing your primary business. You should be bringing in a steady profit, and your staff should be able to handle the business while you set up the second location. Next, be sure you can duplicate your business. Are you willing to share the family secret recipe? Is the key to your success clients who insist on working with you alone? If you're satisfied that your business can thrive at a second branch, then start planning.

In many ways, a second location takes as much work and consideration as your initial one. Some business advisers suggest creating a business plan for the second location just as you did for the first. Before opening the new location for business, make sure you've done the following.

1. Create a business plan.

A business launch and expansion should always include a detailed plan. Business plans can be written in two different formats, according to the Small Business Administration: a lean startup plan or a traditional plan. Both formats outline goals and objectives as a way to attract the attention of investors. [Need help writing your business plan? Check out our recommendations for the best business plan software.]

2. Consider the online alternative.

Expanding your business into cyberspace with an online store could give you the advantages of expanding your market but far more cheaply than creating a new brick and mortar store. That's because opening a second location means additional expenses and tasks – rent, utilities, cleaning – that are never part of operating an online store. Plus, 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 a location, follow it up with research. Do you have competitors there? How are they faring? Is there room for your business, or should you choose a different area? Only open a second location in a market where you're fully confident your business could thrive. Anything less could lead to more expenses than profits.

4. Estimate inventory needs.

Inventory needs change with expansion. That's because every location will require its own stock – if a customer visits your new location and you're out of the requested item, you usually can't get it from another location quickly enough to serve that customer. Use current analytics to make projections about the inventory required at a new location. Along with inventory, review current and future supply chain and warehouse needs.

5. Secure your cash flow.

When opening a second business location, it's best if you have the money on hand to expand. If you don’t have ample cash flow, you can look for angel investors, SBA loans or peer funding. Just be sure you can handle worst-case scenarios, like slow months while you get established.

6. Evaluate the competition.

As mentioned earlier, 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 competitors are currently operating in the new area, analyze their successes and setbacks and determine how your competitors present different challenges at your second location than at your primary one.

7. Record your processes.

When opening a second location, it should operate the same as your initial location does. To account for this, create training manuals for everything from how to use the POS system to how you follow up with customers. Have someone else go over them to be sure they are understandable even when you are not around to explain.

8. Find a good staff.

You'll need to find not only reliable workers but a manager who is invested in your company's mission and way of doing business. If you are opening in an unfamiliar area, finding a local who knows the people there can give you a leg up in connections and adapting to the local culture. Contact the area's business association and attend some events.

9. Establish your training program.

Your new employees may need more training than those in your first location, if only because you won't be on hand all the time to catch and correct issues. In addition to a good training program, have evaluation standards in place so you can catch issues before they become problems. Schedule regular check-ins with the location manager to assess how the employees there are performing.

10. 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 kickoff. After that, you should plan on a year of consistent promotion to get your second location 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, not just people, in your new market.

11. Open the right way.

While a grand opening is an important 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, and gradually moving resources and employees from one location to another is one of a few good reasons for an incomplete start. Plus, a soft opening is a great trial run for full operation, so you might notice some gaps you need to fill.

12. Alert the local media.

Even if your company offers highly specific products or services, there's no harm in reaching out to local journalists, broadcasters and other media personalities who can help spread the word about your company. Some local journalists may report on new businesses in their areas regardless of the products and services provided, with a focus on the company and founder's story, so don’t be afraid to inject some personality and background into your pitches.

13. Find your new location.

Finding a perfect location within your target market is as important for your new location as it was for your original business. While rent or purchase price is important, also look at 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.

It's not just what's outside your second location that matters. The building itself is just as important. Can you reasonably fit your operation there? Can you modify it 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 location.

14. Commit yourself.

You probably know from opening the 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 for opening your second business location. A second launch can move fast, and you should be prepared.

Experts warn that the success of a first location does not guarantee the success of a second. The different demographics in each of your markets can make all the difference. However, with careful research to find the best place to expand and by making sure your business has the funding, procedures, and staff to carry on in your absence, you will increase your chance of success in your new locale and those that follow.

Image Credit: arto_canon / Getty Images
Max Freedman
Max Freedman
business.com Contributing Writer
Max Freedman is a content writer who has written hundreds of articles about small business strategy and operations, with a focus on finance and HR topics. He's also published articles on payroll, small business funding, and content marketing. In addition to covering these business fundamentals, Max also writes about improving company culture, optimizing business social media pages, and choosing appropriate organizational structures for small businesses.