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Time to Expand? Tips for Opening Another Location

business.com editorial staff
business.com editorial staff

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

  • When a business is doing well, the natural move is to consider expansion. However, the same amount of research should go into launching a new location as starting a new business.
  • Write a business plan to create goals for your new location. Business plans can also generate investment interest in your expansion project.
  • Success at a first location doesn’t always mean a second location will thrive. However, market and industry research reduces risks.

There are few things as exciting as success, and moving into a new market can increase your 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.

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 traditional plan. Both formats outline goals and objectives as a way to attract the attention of investors.

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 physical store.

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?

Estimate inventory needs.

Inventory needs change with expansion. 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.

Secure your cash flow.

It's best if you have the money on hand, but if not, 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.

Evaluate the competition.

Although your brand may be successful at your current location, you need to study the competition before opening a new location. Look at what other competitors are currently operating in the new area and their successes and setbacks.

Record your processes.

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.

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 can give you a leg up in connections and adapting to the local culture. Contact the area's business association and attend some events.

Establish your training.

Your new employees 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.

Prepare your marketing campaigns.

Just like when you opened your first business, you'll want some pre-opening promotion as well as the grand opening kickoff. After that, you should plan on a year of consistent promotion to get your second location established. One advantage this time, however, is you have customers at your first location who can help spread the word and may live closer to your new store. Also, don't rule out promoting to businesses. People often work in one city, live elsewhere, and do shopping on the way home.

Find your new location.

This is as important for your new place 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 balances demand for your product or service with competition from similar businesses.

Experts warn that the success of a first location does not guarantee the success of a second. The different demographics can make all the difference in the world. 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
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