For owners of brick-and-mortar businesses, deciding when to open a second location is one of the most critical strategic questions for growth that you’ll face: 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? We’ve put together this list of essential indicators to help you decide. You’re likely ready to open a second location when:
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 expansion within your business.
Make sure that this demand for your business is consistent, not just as 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, which would give you and your staff more breathing room.
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 to expand your small business. For instance, if you have multiple customers asking you to open a new location or to provide more services, it’s clear that you have demand and a loyal customer base to rely on.
Do you have clients travelling long distances to get to your location? If so, this is a clear indication that there is 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, more accessible location in their area.
3. You have a strong team of employees.
Expansion puts a lot of stress on your business and will often require you 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 and if you trust them taking 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 and identified a location with great foot traffic, easy access to public transportation or parking lots, and a solid supply of potential customers? If so, 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 my target audience?
- 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 the concept to fit the market at my new location?
5. You’ve streamlined your operational systems in your current location and can replicate it in your new location.
One of the most important factors when expanding to a new location is ensuring that each 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.
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 not only sustain an expansion, but also keep your current business finically stable.
We recommend speaking with a certified public accountant to fully understand the financial health of your current location and make sure you’re financially prepared to account for unforeseen costs and long0term investments.
Well-planned growth can lead to exponential success
Successful businesses should grow and the key to doing it well is planning and timing. If your business has achieved these benchmarks, then you’re likely ready. And if it’s not there yet, you’ll know what to look for in time.
We’re here to help, so schedule a call or meeting soon. We’ll help you clarify your goals and plans and find the funding you need to support your business’s continued success.