Businesses experiencing a growing customer base and increasing sales may be eager to expand by opening up a second location, however, business owners must tread carefully.
Managing one location can be challenging enough so it is crucial to examine and prepare for the ramifications of opening up a second store. Here are some things to consider before taking the leap:
Evaluate your current business
Before expanding into another location, you must look at how your current business is performing. Does your business have healthy sales, strong cash flow, loyal customers, adequate amount of staff etc? Reviewing your first location is critical as it needs to be stable and provide security while you are focusing on opening a second store.
Opening a second store is not as simple as “expanding” a first store; it will often require just as much time, money and energy as your first store opening. Understanding your overall goal is critical for a smooth transition and sustainable growth.
Review your budget
Expansion requires sufficient cash flow and funding. Even if your first location is running smoothly; remember there will be additional expenses such as rent, inventory, equipment, advertising, new staff members and so on.
Where possible, avoid outside funding. Business loans are always an option, however, you should have a solid business plan and financials to back up your investment. It is also worth preparing a contingency plan for unexpected expenses, based on your current earnings.
Research industry trends
It is important to be realistic about the chances of a second store succeeding. Is a large part of your business’ success due to its location? Is your current business fulfilling a market need? Will there still be demand in one year, five years?
When researching your ideal second location observe competition, neighborhood trends and products and services that saturate the market. Ideally, your business should provide an offering to meet the needs of customers in the selected neighborhood. When choosing a second location, be mindful of the distance between your current location as you do not want each store to compete with one another.