- Businesses often decide to expand to meet growing demand or tap into new markets
- Research is key for finding the right location, analyzing markets, and more
- Have a sound financial plan to ensure that a second location won’t jeopardize the overall profits of your business
If your business is doing well, you may be interested in expanding it to one or more new locations. This isn’t a step that should be taken lightly. You’ll want to make sure that you comply with all laws and regulations, update your marketing plan, and have a sound business strategy to ensure that the expansion does not jeopardize the overall financial health of your company.
Have a clear reason for expanding
Businesses often expand to multiple locations if they are having trouble meeting customer demand with a single location or if they want to tap into new markets. Explore alternative solutions as well; you may be able to come up with a strategy that lets you meet your goals at a lower cost without opening a new location.
Consider whether your company may be a good candidate for franchising. Companies that offer goods and services that appeal to entrepreneurs, have business values and concepts that are easy to teach, and can be easily replicated in multiple markets are ideal. However, this process is also costly since it requires assistance from numerous business professionals as well as training for franchise owners.
Do your research
A second location will only thrive if it’s in the right place. The ideal location may offer proximity to a target audience, or offer easy access to a pool of talented employees. Study potential locations and determine which one best fits your company’s needs.
Additional locations should seek to replicate the success of your original venture, but it can also be useful to treat it like you’re starting a new business from scratch. This is particularly true if you’ll be targeting different audiences, offering new products, or otherwise setting up the new location with significant differences from your first venture. Conduct a market analysis and update your marketing plan to take factors such as sales plans, target audiences, and other issues into consideration.
Make sure the financials are sound
Any new location is going to require a lease, equipment purchases, staff hires, or other expenses to get it started. If you aren’t prepared to cover these costs until the second location is profitable, it can easily doom the expansion and undercut the profits at your primary location as well.
Set up a financial plan that includes the estimated expenses and revenues associated with the new location, including a cash flow analysis and an anticipated break-even date. See if you have enough capital to cover the initial monetary needs, or if your primary location is generating enough profit to help cover ongoing costs at a secondary location for some time. If these finances aren’t sufficient, consider a business loan or other financing option.
Proceed cautiously. Expanding too early or too rapidly can be devastating to your finances.
Do your due diligence
Your new location should be registered with local agencies and paying any necessary taxes. You’ll also need to comply with any rules on required licenses, registrations, permitting, and zoning; these can vary significantly from your first location if you’re expanding into a new state.
Don’t give secondary attention to a second location
Once you open a second location, you’ll need to be committed to making it successful; however, you also shouldn’t lose focus on your original business. Concentrate on maintaining the health and success of all your locations.
Expanding your locations also gives you an opportunity to build your overall brand. Doing so can help establish your company’s culture and expertise, and make any future expansions easier.