Small Business Tips

What to Consider Before Opening a New Location for Your Small Business

For small business owners, the holiday shopping season can be a great time of year. With business booming and profits increasing, you might even start thinking about opening another location in order to grow your company. Unfortunately replicating the success of your first location isn’t always easy as there’s no guarantee that what worked once will work again. Of course there’s also potential for your second location to become just as big of a hit (if not bigger) and take your business to new levels. But, in order to make that happen, you need to have a solid plan in place first.

With that in mind, here are four things to consider before opening a second location for your small business.

Capital

Just like with your first location, opening a new storefront will require a considerable amout of money. Furthermore it may take some time for your new location to become profitable even if it is successful. Because of this you’ll want to make sure that you have a way of financing this new location.

In many cases this will mean taking out a small business loan. Although this may make expanding easier than it would be if you were merely bootstrapping, it does expose your current business to risk should the new location fail. Thus this is definitely something to keep in mind before gambling on an expansion.

Management

Another big question to ask yourself before opening a second location is who will run it? Presumably you have a big role in the day to day operations of your current business and, as it turns out, you really can’t be in two places at once. That’s why it’s imperative to have someone capable of executing your vision to run your new location.

When seeking a general manager for your second location, you’ll first want to find someone you can trust and who fully understands your business. More often than not, this is someone who’s already part of your team and whom you’ve worked closely with. The only problem there is that you’ll then have to replace their position at your flagship location, which could prove to be a hardship. To help with this, once you’ve selected your heir apparent, you’ll want to confirm that you also have team members in place that can step up and either help open the new location or take over for those who will be leaving.

Repeatable processes

Speaking of your team, right now your business may be a well-oiled machine thanks to both experience and the staff you have in place. Meanwhile your actual processes may have room for improvement and your overall business could be more efficient. Before duplicating your business operations for a second location, you should work to ensure that your current processes are as strong and as repeatable as they can be. This could require some organizing, a shift in roles among your staff, or even simple things like labeling that you might take for granted now but could cause problems in the hands of a less seasoned staff.

Growing vs. cannibalizing

Finally, before taking the step of opening a second location, you’ll need to consider whether your expansion will spark actual growth or if it could potentially cannibalize your existing business. For example, if you have a dedicated customer base that drives 20 miles to visit your store, it may be tempting to just build another location closer to them. While that may be nice for them, it could mean that your current store takes a hit. If your intent behind opening a new location is to be closer to your current customer, it may be better to simply move your location instead of trying to run two stores to serve the same amount of customers. However, if your proposed location brings you to a new set of customers that fit your target demographic, it could very well be a great opportunity to grow.

As a small business owner and entrepreneur, it’s natural to want grow your business by opening a new location. Additionally, when done right, a second location cannot only drive profits for your company but also spark further growth. That said not all expansion plans are up to snuff as many leave out important details like how the new location will be paid for, who will run it, how it will run, and how its existence will help the company grow. So, before deciding to build out your own second location, take the time to consider these four things in order to set yourself and your small business up for success.

Also published on Medium.

Other Articles by Jonathan Dyer