If you’re running a business with a bricks-and-mortar location, at some point you might wonder: Is it time to expand our company to a second location?
But before you make that important decision, consider the key considerations you should recognize in order to better prepare your business.
First, do you truly need to open another store? “Ask yourself if a second location is the best option or if you need to, instead, enhance your ecommerce strategy?” says Kate McKenzie, manager at ATB X. She stresses that your first location “should be bursting at the seams” to warrant plans to expand to another store.
Also, learn if customers are clamouring for this second location, McKenzie says, because if you decide to take root in an area far from where they are, the expansion may fail. “Customer feedback is key to researching what you need to know before making this decision,” she says.
What’s also helpful is setting specific milestones for your business to reach before considering opening additional locations. You can set a goal of, say, reaching a certain revenue or profit level, or a specific number of employees.
Cash flow prep, location scouting smarts
A critical question to ask yourself is if your business can afford a big move. Opening a new location carries with it immense costs, often more than you anticipate. You get saddled with the added overhead of a second lease, office equipment, a second utility bill, and more employees to hire and train. These are the significant expenses, and certainly many other smaller costs will add up over the months.
Understanding your cash flow and forecasting revenue/profits is essential to prepare yourself for this decision, McKenzie says. Diving deep into your books can give you more data to help you predict what cash flow issues you may have when facing the added expenses of expanding to another location, as well as figuring out if now is the right time to make this move.
If all the stars align to give you the confidence to open another site, be sure to scout the proposed area first, McKenzie suggests. “Talk to business owners in that region, talk to the community, and get a sense of factors like foot traffic. And what are the demographics of this new location?”
A tip in this Small Business Trends article is also worth noting: “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.”
Consistent work culture considerations
To effectively manage multiple locations, business leaders should standardize business processes, as BDC writes. Plan wisely by setting up standardized, repeatable processes and management controls across your operations. “These can range from marketing and sales plans to HR practices to financial controls and will be a huge help in managing multiple locations,” the post goes on to say.
Coupled with this step is making sure you’ve trained management to be ready once the second location opens. “Succession planning is important for any business, but especially when you expand,” McKenzie says, “so you need to plan to allocate time before the move to train your staff who can run the day-to-day operations at the new outlet.”
Bringing a consistent work culture to all locations should be a priority, too, she adds. “If your company mission statement and vision isn’t clear to all employees by now, make sure it’s crystallized before this expansion, so that behaviours get transferred no matter where your staff are physically.”
Small business owners: Talk to experts to learn about property taxes, regulations
It can be overwhelming to add another location to your business, especially if your business is run by a small team, but you don’t want to miss key details that could slip through.
Consult with your financial institution to learn about nuances such as property tax differences between your first location and the new one, says McKenzie. Learn about the bylaws that may be in place for businesses in this new area, especially if you expand to another province or another country.
Also, if you’re boosting your brand internationally, it’s recommended to register trademarks and other intellectual property in the country you are considering expanding to as a business.
Moving to a new location can bring with it opportunity along with a slew of new challenges. But if you equip yourself with the right questions to ask your management team, expanding your business won’t feel as daunting as it could be.
If you’re looking for a deep dive on everything you need to know around how to grow your business, our ATB X Accelerator program might be just the place for you. Alternatively, feel free to reach out to one of our entrepreneur strategists to explore where you are with your business, where you want to be, and how to get there!