When Is the Right Time to Open Another Location for My Current Business?
If given the chance, many growth-oriented business owners would consider opening another location for their business when resources are available and the market seems right. If this is your current vision, we probably don’t need to talk about challenges that come with entrepreneurship.
Whether you have only one business location or two and are considering to open another, you know that strategic business decisions involve much more than access to capital and market readiness.
There are different dimensions that must be put into consideration when deciding whether to open up another location for your current business. Many people only think about capital but in instances where you consider your employees to be your greatest assets, you must think about different aspects of HR before opening another branch.
The following questions can help you decide whether it’s the right time for you to open another branch for your business.
How Is Your Current Business Doing Financially?
If you’re considering an expansion, it should go without speculation that your business is doing well financially. That means a strong projected cash flow, overflow of customers, healthy sales, and happy customers.
It also means your customers are overflowing so much that you have to send away the potential customers, you frequently run out of inventory, and you no longer have enough space for staff and customers. These are good signs that you are ready for a second location.
But even with these indications, you should still ask yourself, is your first business capable of running well when you open a second location that requires your investment in money, energy and time?
Do You Have Enough Capital for a Second Location?
Starting up the second location is no different from starting up the first location. The second location still needs inventory, staff, and a business premise that you will most probably be paying rent for and your time. In fact, you may even find that opening a second location will be harder than opening the first one when it comes to juggling expenses.
You will have to pay bills for more licensing fees and additional business insurance, increase payroll for growing staff, spend more on advertising your new site, and invest in more inventory and equipment. All these expenses must be paid for while at the same time still sorting expenses for your location. This is not meant to scare you in any way, but you must keep in mind that you will be putting up most of the cash yourself even if you find someone willing to partner with you and share expenses.
Be careful not to expand when you don’t have enough savings for this sort of growth. According to some sources, expanding too far for example to another town might also expose your business to failure. If you don’t have any reasonable doubt of the return on investment that this second location will bring you then you can also consider taking a business loan.
Ask yourself the question, “Am I ready?”
No matter what advice you get or what you read, unless you can ask yourself and answer the question “Am I ready for it?” with all honesty, you will be unable to decide if this is the right step to take. Being ready means that you have already researched the market and are sure that the success you have with your current location is not just because of the location, but also because of demand. It also means you have already drawn a business plan and have a backup plan in case things don’t work as you anticipate. Furthermore, secure insurance quotes to determine the total cost of premium.
Being ready means you are aware of the financial and legal implications of the second location you want to put your business in. State laws vary and whereas some states will let you use the same employer identification number (EIN) for all the locations, in other states you will be asked to register the new business separately. Be aware of regulations like workplace posters, permits, dates on licenses, and others that may cause you a headache while running your second business.
Most importantly, being ready means you are psychologically ready to take your company to a higher level.
