August 24, 2016

A 6 Question Test Before Opening a Second Business Location


test paper

To expand or not to expand, that is every successful small-business owner’s question. The idea of opening a second location is tantalizing: It offers expanded audiences, extra prestige, and increased profits. However, expansion can be dangerous and taking on additional responsibilities before you are ready can cause your existing business to topple.

Before you decide whether or not you should expand with a second business location, you should take this short-and-sweet test to determine whether or not you are ready for a second location.

1. Will Your First Location Stand Strong?

Making any change to your business is a risk, but so is not making any change. Still, you should be fairly confident in the stability of your first location before you consider starting a second one. While your second business location finds its feet, you will be living off the money from your first location, which means you must trust its ability to continue generating profits.

An essential subsequent question is: “Are you critical to your first location’s success?” If your customers come to your first location looking for you ? if your business does not function without you around ? then maintaining a second location will be nearly impossible. Until your business can stand on its own legs without you meddling in everyday affairs, you will not be ready for a second business location.

2. Do You Have the Perfect Place?

The worst scenario is that your second business location leeches life from your first location. Usually, the goal of a second location is to double your potential clientele ? and therefore double your profits ? but when the service area of two locations overlaps, you could create insecurity for both.

Research is critical to finding the perfect spot to open your new location. You should spend some time evaluating possible markets and assessing competition in different neighborhoods. You might also factor in the cost of advertising to a new audience. There is no magic amount of distance between first and second locations that will lead to certain success, so accurate measurements of your industry and region are essential.

3. Are You Sharing Your Systems?

You spent years refining the systems that work at your first location, which means you have the tools to make your second business location successful. Because you already have solutions to the major problems associated with opening a business, you should be able to reach stability and success much faster than the first time around.

Your second location can capitalize on all of the research and development from your first location, including accounting systems, HR practices, and insurance policies. In fact, it might be wise to share a single website and inventory system for all of your locations, so no matter how many stores you open or where you expand, your customers will have the luxury of one simple resource, just like Jimmy Jazz.

4. How Are You Finding Funding?

Though it is important to have sufficient cash flow from your first location, you should avoid drawing too much from your first location’s profits when funding your second business location. Pulling money from your first location to build your second is dangerous because it could weaken your first location and harm your business overall. Instead, most experts suggest seeing a second location as its own business and seeking funding through traditional channels, like banks and investors.

5. Can You Make It Special?

There is something special about your first location that makes customers come back again and again, and it is important that you discover what that secret sauce is before you finalize your plans for your second location.

If your customers are particularly partial to your staff, you should ensure that your new workforce is well-trained by your old guard before opening day. If your customers can’t get enough of your first location’s layout, you should draft your second location’s blueprints to match. Ideally, that special something will be easily duplicated in your second location to maintain brand consistency and continuity.

6. Are There Any Better Alternatives?

Your business may be ready to expand, but that might not mean it is ready for a second business location. There are dozens of other opportunities for expansion, including:

  • Increasing staff
  • Diversifying inventory
  • Moving online
  • Targeting new audiences
  • Acquiring established businesses

Opening a second business location is a big step for any small business, and you shouldn’t be afraid of overthinking the possible ways the second location could go right or wrong. If you believe that your business would benefit greater from another expansion option, you should do more research before you make any irreversible moves.

Test Paper Photo via Shutterstock

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Melissa Thompson


Melissa Thompson Melissa Thompson is a freelance producer and writer at USA Today for the web only video interview series 'Your Take'. She lives in Utah with her 2 kids and husband.

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2 Reactions

  1. Aira Bongco

    I agree. Don’t rush the expansion. Always think things through and make sure that the first business location will still stand.

  2. Regarding #2 Do you have the perfect location? I’d also suggest really checking the potential new location’s Zonability to understand if the city permit will likely be easy – or not.

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