Expanding your business: When to add a second locationDate posted: 5/10/17 09:00:00 AM
If you are a small-business owner, you have likely contemplated how to best expand your business. Depending on your size and success, the technique for growing your operation can vary. Adding a second location might be the right choice for you, but you'll need to consider a few things before investing in another location.
Reflect on your current location's performance
Before you decide to expand with a second location, you'll need to evaluate how your first is doing. Entrepreneur suggested asking yourself whether your current location is generating enough profit for your business. If yes, what is contributing to this success and can you recreate this at a new location?
In addition, Small Business Trends indicated another subsequent question you should ask is whether your first location is capable of operating successfully without you. Do customers specifically ask for you and your help? Do your employees require your assistance on a daily basis? If you are a vital component to your current location's triumph, it likely isn't a good idea to expand and add another location.
Have a second location in mind
To ensure success, you'll need to find the perfect second location. Do you have a place in mind? Research possible markets and the competition in the new area. How will you address your new competition? Is there a large enough market to succeed in this second spot?
When considering your second location, decide what makes it special. How will this new location mimic the best parts of your first, and is there anything new you should incorporate into the second location to meet the needs of customers in this area?
Determine the cost of a second location
There are several expenses associated with investing in another location for your growing business. Not only do you need to worry about buying or leasing the physical building, but you'll also need to budget for any modifications to the design or layout of the location. In addition, you'll also need to set aside money for marketing and advertising efforts in the new region.
However, the physical location is likely going to be your most substantial cost when expanding your business.
Having buying and leasing options available is great because you can make your final decision and ensure it fits your specific needs and budget. Quickbooks noted that leasing allows you to save money up front as you don't need to provide a down payment. In addition, repairs and maintenance are the responsibility of the landlord. However, leasing means your business won't be able to build equity, and rent may change as the market does.
Should you decide to buy the space, you will also build equity over time, and payments will remain steady over time.
When expanding, it's critical you pull money from the appropriate source. Small Business Trends warns against using profit from your first location as it can harm your overall business. Instead, research other alternatives with your financial advisor and tax professional.
Ask yourself what you aim to achieve by adding another location. From there, determine if you can reach your goal in a less expensive way. In some instances, your business might be ready to grow, but a second business location may not be the right move. It's a huge step, so you'll want to ensure you are 100 percent prepared to take on this challenge.
Should you decide you might not be ready to add a second location, consider hiring more employees, moving online or acquiring other established businesses. These are just a few alternatives that will also help prepare you for a future expansion.
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