8 Questions To Ask Before Opening a Second Location for Your Business

Planning to open a second location for your business? Here are a few suggestions to help make the process easier and smoother.
Contributing Writer, SmallBizTrends.com
April 25, 2016

Picture this: Your business has really taken off. Profits are rolling in, and now customers are asking if you're going to open a second location. But before you think about expanding locations and opening a second location, you may want to consider asking yourself—and answering—these eight questions.

Before You Open a Second Location, Ask What Made Your First Location Work in the First Place?

Opening a second location before you can identify what made your first location work may make expanding locations difficult. Is the secret to your success the amazing customer service your employees provide, the beautiful setting of your restaurant or the convenient location of your store in a high-traffic area? Make sure your success factors can translate to a new location, whether by training employees and replicating procedures or by finding a location with similar physical features.

How Will You Finance Your Second Location?

Create a budget that incorporates padding for unexpected expenditures that can lead to financial problems for both locations if the first location’s income starts to decline. (A cushion of at least 20 percent to 30 percent may be a good amount. Ideally, you don't want to finance your second location with cash flow from the first location.) Instead, consider keeping it separated by obtaining a business loan or getting financing from another source.

Is Your First Location Running Smoothly?

If your first location is working like a well-oiled machine before expanding locations, think about systematizing those procedures and implementing them in your second location as well. This may save time and prevents you from having to reinvent the wheel. It also means your first location will require less attention during this busy time.

If your first location is working like a well-oiled machine before expanding locations, think about systematizing those procedures and implementing them in your second location as well. 

Do You Have the Right Technology in Place?

Can your accounting, HR, CRM, time-tracking and other software scale up to deal with a second location and additional employees? If you need to make changes to your technology, now may be the right time for an update.

Do You Really Need to Open a Physical Location?

There could be other ways to expand your business that are more affordable than investing in a second physical location. For example, if you have a retail store, launching an e-commerce component to your business may be more profitable and cost much less. Even a location-based business such as a restaurant or beauty salon may expand by selling products online rather than expanding locations.

Will the Market Support Expanding Locations?

Conduct the same type of market research you did when choosing your first location. Your commercial real estate agent should have information such as demographics of the local area, available labor force in the region, and traffic flow in the specific locations you’re considering.

Does This Space Meet My Needs?

There is almost always room for negotiation in a commercial lease. Carefully review the lease terms, then consider working with your attorney and commercial real estate agent to negotiate the best deal with the landlord. Be sure you know what is included and what isn't, such as utilities and fees for common area maintenance. You may want to ask and see if you can get restrictions on possible competitors moving into the same space.

Will I Have a Reliable Second In Command?

When it comes to expanding locations and managing multiple stores, you may want to consider these two options: You can hire someone to run the new location while you continue focusing on the first location, or you can hire someone to manage the first location while you focus on the second. Either way, you'll need a trusted employee with the management and decision-making skills to take on a leadership role. If you don't already have such a person on staff, you may want to start looking for one before expanding locations.

If you've already opened a second location, what do you wish you'd done differently?

Read more articles on business expansion.

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