Time to Expand? Tips for Opening Another Location

Tips for opening another business location

Opening and operating a second location takes as much work and consideration as your initial one. The following tips can set you up for success.

1. Create a business plan.

A business launch and expansion should always include a detailed plan. Business plans can be written in two formats: a lean startup plan or a traditional plan. Both outline your goals and objectives as a way to attract the attention of investors. Remember, though, it’s not enough to simply copy and paste your plan from your original location.

“The original business plan was created at a time where your goals were different,” said Jamie Mitri, CEO and co-founder of Moss Pure. “You may not have planned for future expansion and what it holds. You definitely did not know the information you know at this moment when you originally started the business. A business can change in even the course of the year, especially after it is first launched. The new business plan will cover new business goals, budgeting, employees and plans.”

In addition to budgetary considerations, your new plan should also account for any potential obstacles that might arise at your proposed location. “A business plan for expansion should focus on projected revenue and expenses in the new location, as well as potential challenges and how to overcome them,” advised Andrew Pickett, founder of Andrew Pickett Law. “It should also include a detailed marketing strategy specific to the new location.”

2. Consider the online alternative.

Creating an online store is less expensive than opening a new brick-and-mortar location. An e-commerce store doesn’t come with any rent or utility payments while still allowing you to reach a new market of customers. Unlike a physical location, you can keep an e-commerce site open and accessible 24/7. Plus, if you want to test the waters, expanding to e-commerce can be a great way to see if a new location makes sense.

“Expanding online is a strategic and cost-effective way to grow a business without the overhead and operational complexity of managing additional physical stores,” said Kirill Bigai, CEO and co-founder of Preply. “For instance, before committing to a new location, an online store can help you test the demand in different areas, offering valuable data with less risk. Secondly, several consumers prefer the convenience of shopping from home, especially for repeated purchases or busy lifestyles.” [Learn how to develop an e-commerce marketing strategy]

3. Evaluate the market.

Even if you have a gut feeling about opening a location, follow it up with research. Do you have competitors in the area you’re targeting? How are they faring? Is there room for your business, or should you choose a different neighborhood? Does the site attract your target customer? Researching your new local market is essential for answering these questions and more.

“You will have to research potential new locations to evaluate competition and consumer demographics,” said Bigai. “Understanding the market dynamics ensures that the chosen location aligns perfectly with the target audience and business goals.”

Open a second location only in a market where you’re confident your business could thrive. Anything less could lead to more expenses than profits.

>>Read next: In Pursuit of Profit: Applications and Uses of Break-Even Analysis

4. Find your new location.

Finding the perfect place within your ideal market is as critical for your new location as it was for your original business. Property rent or purchase price is a vital factor to weigh. But, you should also consider safety, local ordinances, average foot or drive-by traffic, ease of access, and demographics. Be sure you are in an area that has ample demand for your product or service, with at most modest competition from similar businesses. “Conducting thorough research and seeking local insights can help identify the right location for a business,” said Pickett.

Also, it’s not just what’s outside your second location that matters. The building itself is just as important. Can you reasonably fit your operations there? Can you modify the space to resemble your first location and develop a unified brand? Does the landlord seem trustworthy and responsive? Make sure to answer these questions before committing to your second property.

“It’s always good to plan for your expansion and know what you’d be looking for in a new space,” Mitri recommended. “Are you looking for a workshop with a loading dock for easier access for shipping? Are you looking for more office space if you are hiring more people? Are you looking for a bigger retail space? Are you looking for more space for equipment? It’s good to just look around or even drive around the area you’re looking to expand to and see what there is for space, the pricing, etc. That way, when you are ready and the rent or purchase matches your budget, you can make the move.”

5. Estimate inventory needs.

Inventory needs change with expansion since every location will require its own stock. If a customer visits your new site and you’re out of a certain item, you usually can’t get it quickly enough to serve that customer. Use current analytics to make projections about the inventory required at a new location. Along with stock, review current and future supply chain and warehouse needs. [Read related article: How to Cash In on Your Excess Inventory]

6. Secure your cash flow.

When opening a second business location, it’s best to have the money on hand before you begin the process of expanding. If you don’t have ample cash flow, you can look for angel investors, Small Business Administration (SBA) loans or peer funding. Just be sure you can financially handle worst-case scenarios, like slow months while the new location gets established.

7. Evaluate the competition.

Your competition matters, and opening a second location may introduce you to competitors you don’t have at your primary site. Look at what other businesses are currently operating in the new area, and determine which ones could be competitors. From there, you can analyze their successes and setbacks. Then, you can determine how these companies present different challenges at your second location when it comes to keeping your business competitive.

8. Record your processes.

A second location should operate the same as your initial location. To account for this, create training manuals for everything from how to use the point-of-sale (POS) system to how to follow up with customers. Have someone else review these to be sure they are easy to understand even when you’re not around to explain. [See which high-quality POS systems we recommend.]

9. Find a good staff.

To staff this new location, you’ll need to recruit new employees and leaders invested in your company’s mission and way of doing business. If you’re opening in an unfamiliar area, finding a local who knows the people there can give you a leg up when establishing connections and adapting to the local culture. Start this networking process by contacting the area’s business association and attending some events.

10. Establish your training program.

Your new employees may need more training than those in your first location, mostly because you won’t be on hand all the time to catch and correct issues. You should also have evaluation standards in place so you can catch issues before they become problems. Schedule regular check-ins with the location’s manager to assess how the employees there are performing.

11. Prepare your marketing campaigns.

Just like when you opened your first business, you’ll want some pre-opening promotion for your second location — as well as a memorable grand-opening event. After that, you should plan on a year of consistent promotion to get your second location solidly established.

Mitri recommended utilizing emails, newsletters, local and national press and media, and announcing the new location on social media when you’re ready to open. Additionally, she said businesses should update their website and Google Business Profile.

One advantage unique to opening a second location is that you have customers at your first location who can help spread the word. Plus, they might live closer to your new store. You may also be able to promote your company to other businesses in your new market.

12. Open the right way.

While a grand opening is a crucial part of marketing your new location, you can also introduce your new spot with a soft opening. This smaller start is perfect for opening a second business location since it implies an incomplete opening. From there, you can gradually move resources and employees from one location to the other. Plus, a soft opening is a great trial run for full operations, as you might notice some gaps you need to fill.

Mitri suggested getting officials within the local community involved. “Invite your local and state representatives to do a ribbon cutting,” she said. “I would also have balloons and signs about the grand opening outside of your location and maybe provide a promotion for the grand opening to encourage customers to visit.”

13. Alert the local media.

Even if your company offers highly specific products or services, there’s no harm in reaching out to local journalists. They can help spread the word about your business to a particular or general audience. Some local writers may report on new businesses with a focus on the company and founder’s story. So, don’t be afraid to inject some personality and background into your pitches. Just be sure to avoid the PR mistakes that could kill your business.

14. Commit yourself.

You probably know from opening your first location that launching a company requires you to devote most of your time to the process. It’s no different with a second location. Keep your schedule free to tend to any needs that may arise. A second launch can move fast, and you should be prepared.

The success of a first location doesn’t guarantee the success of a second. The different demographics in each of your markets can make all the difference. However, careful research and planning can ensure your business has the funding, procedures and staff to carry on your mission. This practice increases your chance of success in your new locale and those that follow.

How to know when to expand your business to a new location

Opening a new location is a big decision, and you want to make sure it’s the right step for your business. If you don’t have a solid plan in place, operating multiple locations can do more harm than good.

Here are some signs that it may be time to expand your business to a new location:

• The business can’t meet customer demand. If your business is so successful that you’re unable to meet the full demand at your current location, it may be time to grow your footprint. When you constantly find yourself turning away new customers, then a second location could be the solution.
• You’re running out of space. Do you constantly find yourself short on space at your current location? Is your business constantly crowded with customers? If so, a second location may be an outright necessity.
• You have a documented process. Can you duplicate your current business processes at your new location? Documented procedures will allow you to mirror your operations and train your staff at the new store on what works. If you don’t have these, you’re not ready to expand.
• The brand has developed a good reputation. If your business is getting lots of buzz, that’s a good sign. Bigai said you might be ready to expand if “your business has a strong reputation and loyal consumer base that can extend to a new location. A well-established brand can easily make a new market easier, as consumers are already familiar with and trust your offerings.”
• You’ve identified a new opportunity. If you’ve identified a new market opportunity, time could be of the essence. While you never want to rush such a major decision, a chance to attract a new customer base and grow your business may warrant expansion.
• The business has a well-developed staff. Setting up a second location is going to take time and energy. So, you want to make sure your staff can handle the logistics at your primary site. If your current team has operations down pat, you’ll have the time to focus on expansion efforts. On the flip side, staffing and operational issues at your existing spot are a sign that it’s not the right time to add another location.

Take steps to expand your business the right way

Opening a new location can be a great way to grow your revenue and customer base — but only if the conditions are right. If you’re considering expansion, do your homework and follow these tips to make sure it’s the right time. When it’s time to expand, you want to be sure you’ve found a community that will welcome your business with open arms.

Natalie Hamingson and Jamie Johnson contributed to this article.