Are You Ready to Open a Second Location?

Business is booming at your restaurant or retail store, and you’re considering opening another location. But doing so will require a significant investment. Are you biting off more than you can chew?

To help determine whether or not you’re ready to expand, ask yourself the following questions:

Do I have access to enough capital to finance the new location?

Even if you’ve already worked out a formula for success at your first establishment, opening a second shop is a big, expensive project. You’ll need to cover your shop’s rent or purchase cost, additional inventory, furnishings, employee salaries, and various other expenses — some of which probably haven’t even occurred to you yet.

The source of the money is important, too: If possible, pay in cash to avoid interest payments or giving up equity in your company. “Every small businessman is best off to use his own cash flow and to stay away from other people’s money as much as possible,” consultant Adam Hartung told Inc.com. When you seek loans or investments, he says, it’s often difficult to achieve the returns that investors seek.

Is there a large enough market to support another location?

Just because people are lining up outside your current store doesn’t mean that they will do so at a new one in a different neighborhood. When considering whether to expand, be sure to pick a location that makes good business sense.

Pay close attention to the demographic data for the area you’re eyeing, and make sure that you find a site that’s far enough away from your current location that it doesn’t simply feed off your existing customer base — unless, of course, you’re launching a concept that substantially differs from the original one.

Do I have someone I trust who can manage operations effectively?

Whether you aim to relocate to the new location and leave a manager in charge of the original space or plan to hire someone else to take the reins at the new shop, you will need someone with the skills and experience to keep your business running smoothly despite the hurdles of starting up.

On The New York Times blog You’re the Boss, entrepreneur Jay Goltz claims that the cost of a bad hire could add up to as much as $200,000 in lost income. That could mean the difference between success and failure at a new location, so be sure that your appointed supervisor is trustworthy and well-trained before moving forward.

About Kathryn Hawkins

Kathryn Hawkins is a principal at the content marketing agency Eucalypt Media. She's written about business, marketing, and entrepreneurship for publications including BNET, TheAtlantic.com, Inc.com, and owns and operates the positive news site Gimundo. Follow her on Twitter at @kathrynhawkins.
This entry was posted in Local and tagged . Bookmark the permalink.
5 comments
gutter guards
gutter guards

Thank you for inspiring me with those helpful questions! I now know that I am ready for my expansion!

Intuit
Intuit

@SynergyBizNWA Thanks for the tweet! Which one of the tips do you think is most important? ^Ehsan

Intuit
Intuit

@etechparts Thanks for the tweet! Which of the tips do you think is most important when looking at opening another location? ^Ehsan

Harry
Harry

Good points. It's tempting for many small business owners to think 1 + 1 = 2. But sometimes it ends up being less than 2 or even less than 1. Managing multiple locations is more challenging than many realize.

Intuit
Intuit

@beethedesigner Thanks for the mention! Have any other tips you can think of for opening a second location? ^Ehsan

Trackbacks

  1. [...] efficiency, you may be able to avoid a move to a new location by expanding into an adjacent area, establishing a new or satellite location, or even just renting a storage [...]

  2. [...] efficiency, you may be able to avoid a move to a new location by expanding into an adjacent area, establishing a new or satellite location, or even just renting a storage [...]