What to consider when expanding your small business
The process of opening your business was long and difficult, but of course, totally worth it. The doors are open, the staff has been hired, customers are coming in, and your eyes are on the bottom line. Now what?
For most business owners the next natural step is expansion. As the success of your business builds and the need for more workers, more space, and the want for more profit, sits in the back of your mind the growing pains become more evident. Before you sit down and start to map out a new location, there are some important factors you need to consider.
Should I open a new location?
Opening the first location was hard enough. Now imagine trying to do that again but while trying to run a fully functioning business at the same time. You can’t be in two places at once, so don’t plan on opening a new location while still doing the work you do at the first. If your first location is operational without you and you have employees, procedures, and a cash-flow stability you trust, then you have the ability to start working towards that second location. Just make sure that you aren’t removing the managerial foundation out from underneath the first location while you make yourself unavailable for the second.
Can I afford to expand?
With a new location comes new workers, supplying product for the new store, and the need for a larger operational budget. You likely had to dip into your own personal finances at the opening if the first storefront, can you afford to do so again? This will depend upon how well the first business is running. If profits are doing well and you can afford opening a new location, with every worst case scenario thought out, then it might be time. Make sure you’re accounting for the loss of key-employees at the first location to train new hires for the second and your budget is cushioned for construction costs (foreseen and unforeseen).
When you start reviewing location possibilities be sure to take into account the competitors in the area and the customer range of your first location. Spacing out your storefronts will ensure that neither location is cannibalizing the customers of the other.
Ready to expand
You’ve thought it over and you are ready to expand into a new location. What are your next steps?
1. Review your business continuity plan. Do you have a business continuity plan? This is a plan for in the case of any major changes within your business, or that could affect your business (such as a natural disaster). In the case of adding a new location, your business continuity plan should detail who to staff at a new site, procedures that train staff on the use of old/new equipment, and training for junior employees to be put in a senior position. Continually update your business continuity plan to accommodate for multiple locations.
2. Talk to your financial advisor. During the planning of your first business location, you most likely enlisted financial help from a trusted institution. Approach the advisor that helped you with the first location, you will have prior experience working together and the advisor can anticipate funding needs having worked on the first business with you. Don’t underestimate the insight that your lender can give you, and have a preplanned way to fund the project of the second business.
3. Plan for management. For both locations of your storefronts, you need to decide on the chain-of-command when you are not there. In an ideal situation, both storefronts should be able to operate without you. This may mean hiring on another manager, or training a trusted employee for the management position at the new store.
4. Location is everything. As stated above, when considering opening a new location make sure both storefronts are spaced a good distance apart from each other. Then, as you review heavy traffic locations make a decision on whether you will be building from the ground up or if you will rent out an available store space.
The information provided in these articles is intended for informational purposes only. It is not to be construed as the opinion of Central Bancompany, Inc., and/or its affiliates and does not imply endorsement or support of any of the mentioned information, products, services, or providers. All information presented is without any representation, guaranty, or warranty regarding the accuracy, relevance, or completeness of the information.