If you own a brick-and-mortar business, deciding when to open a second location to grow your business is a critical question. Small business expansion isn’t something to take lightly. Open too soon and you risk overextending your resources. Wait too long and you could lose invaluable momentum and competitive advantages.
How do you know when it’s time? This list of essential indicators can help you make the best decision for your business.
How to know when you’re ready to open a second location
1. You have more business than you can handle.
If you’re running out of inventory, space or staff, or turning away customers because you’re too busy, that’s likely a good sign. Your products or services are clearly in-demand and there’s room for business expansion.
Make sure that this demand for your business is consistent and isn’t just a temporary spike. If the demand is continuously high, opening a second location would allow you to spread your inventory and customers across two locations. This will give you and your staff more breathing room and set you up for future expansion as well.
2. You have a local customer-base as well as customers coming from far away.
Your customers can tell you a lot about whether you’re ready for business expansion. For instance, if you have multiple customers asking you to open a new location, maybe it’s time to seriously consider it! Or if your customers are asking for more or newer services, it’s clear that you have demand and a loyal customer base to rely on.
Do you have customers that are traveling long distances to get to your location? If so, this should signal that there’s a need for your products or services outside of your local community. Do some research to find out where your out-of-town customers are coming from and consider opening a second location that’s more accessible to their area.
3. You have a strong team of employees.
Business expansion puts a lot of stress not only on your business but also on you as the owner. You’ll often need to split your time between your locations. For this reason, it’s important to have a strong management team and passionate, reliable employees, who can help support you at both your business locations.
Before opening a second location, think about your current team. Do they have the bandwidth to take on additional work, new demands and new leadership roles without your constant oversight? It’s a good sign that you’re ready to expand if you’re confident in your employees’ abilities and feel comfortable giving them more responsibility and control over your business.
4. You’ve identified a market for your new location.
Have you done your market research for your new target area? Does your potential new location get great foot traffic? Is there easy access to public transportation or parking lots? Will you have a solid supply of potential customers? If you answered “yes” to these questions, then you’re likely ready to open a second location.
As you consider opening a second location, do some in-depth
research and analysis on potential locations and your target audience, and ask
yourself the following questions:
- What is in my customer base?
- Where is there a need for my products/services?
- Is the market large and strong enough to support a second location of the same brand?
- Will I need to scale or adjust my business concept to fit the market at my new location?
5. You’ve streamlined your operational systems in your current location and can replicate them in your new location
One of the most important factors in business expansion is ensuring that each new location has consistent operational systems in place. Make sure your current location has organized and well-documented systems for communication, hiring and training, customer service, financial management, and more. Thoroughly documenting and streamlining your business processes will make it easier for you and your staff to replicate at your new location.
As you review your systems, keep an eye out for opportunities for operational efficiencies. Build those practices into your current systems and then make sure they’re transferred to any new location you open.
6. You have the financial foundation to open a new business.
Just because your first business is profitable, doesn’t mean you’re financially ready to open a second location. You’ll need to take a deep look into your books and determine if you have the revenue, profits, cash flow, and financing to sustain an expansion. Also, make sure that you have enough financial coverage to keep your current business financially stable.
Talk with a Certified Public Accountant (CPA) to fully understand the financial health of your current location. As an expert, a CPA can make sure you’re financially prepared to take on any unforeseen costs with opening a new location and help you prepare for long-term investments.
Well-planned business expansion can lead to long-term business success
When your business is successful, it only makes sense for it to grow. The keys to growing your business in a way that’s sustainable are thorough planning and waiting for the right timing. If your business is hitting the six benchmarks above, then you’re likely ready. And if it’s not there yet, you’ll know what to look for as you work toward that goal.
Pursuit is here to help! Get in touch today and we’ll work with you to determine the best path forward for your business. We’ll help you clarify your goals and plans and find the funding you need to support your business’s continued success opening a second location.