Opening a second location for your small business can be an exciting prospect, but this does not mean that it will be easy.
When you expand, you will have to make sure you're completely prepared to open up a second location. While it is normal to think in terms of growth, opening a new location takes a lot of work. Beforehand you should make sure that you are all ready to dedicate yourself and your business to such a task. You will have to make sure that your financial plan is secure, and that you are ready to delegate tasks out to other managers and employees at separate locations. In order to better understand what small business owners should prepare for before opening a new location, read the advice below:
1. Has your first location peaked?
Whether or not your first location has reached peak profitability is a question you will have to ask before moving into a second building, according to Intuit. Before you start taking steps to open a new location, make sure that your flagship business is making money and that the revenue stream is consistent. You will need the earnings from your first location until the second reaches the point when it breaks even. Design a financial plan before taking any actions that lays out how you will invest profits until the new store starts making money.
2. Have you documented workflow?
This isn't an exciting part of opening a second location, and you won't immediately earn anything extra for doing so, but it is important, Entrepreneur noted. Once your small business reaches the point when other people will be making important decisions besides you, it is vital to have certain processes mapped out. That is why it is critical to make sure that workflow is well-documented, so that employees know how to properly carry out each task and make choices relevant to your business. This way, the services you provide remain consistent in all locations.
3. How will you decide on the second location?
Deciding where you'd like to open up your next location is an important choice that will require some thorough research, Intuit suggested. Search for a neighborhood that is lacking in the products or services that your small business provides. Remember that you are trying to find customers similar to the ones you already have, but in a whole new area. Also check on what is required of businesses in certain neighborhoods – such as crime rates, rent prices and parking availability.
4. Are your metrics strong enough?
Metrics ensure that business owners know what is going on at all times. Make sure that your metrics are strong enough to track each of your business locations, so that you are aware of how each is performing no matter where you are. Collect daily, weekly and monthly data and track deliveries and sales. Anything you can check in on to better understand the progress of each business.
5. How will you fund the new location?
Besides the earnings from your flagship business, how will you fund your new location? If that's not possible, or you need more investment, then begin considering sources of outside investment. When searching for funding, consider how much you would invest in someone else's business, so that you make sure you're not requesting too much.
Remember to be honest about your business when determining its value, and realistic when settling upon an amount. Speak with a financial services expert for more information on funding your small business.