In the business world, growth can take multiple forms. Your company can begin to offer a different product or service, one that is similar to, yet distinct from, your initial product or service. You can increase income and revenue by increasing the amount you charge for your services or products. Or, you can open an additional location, potentially expanding into a new, untapped market. If you are considering opening a second location of your business, here are a few questions that are worth asking first.
Why Are You Expanding?
It’s worth taking a close look at your goals for expansion and it’s worth understanding why you want to open an additional location. It could be that your first location is regularly full of customers or your appointments are usually completely booked. If that’s the case, opening a new location would give you the space to accommodate more customers at once and would allow you to meet demand.
Another reason businesses decide to expand is to reach a new market. Your first location might serve a particular demographic or customer base, but might be inaccessible or too much of a hassle for another group of people to reach. Adding an additional branch or location might better enable you to connect with a currently unserved or underserved market.
How Is Your First Location Doing?
Often, when a business opens its second space, the first location needs to do the heavy lifting while the second location finds its bearings. It’s worth taking a look at how your current space is doing before you decide to expand. Ideally, it will be earning a profit each month and will have a relatively stable and steady stream of revenue.
It’s also worth considering whether opening a second location will take away from or otherwise impact the first location. Will some of your customers visit the second branch once it’s open, potentially leading to a drop in revenue for the first one? If so, can you estimate how much of a loss in revenue the first location experience and whether that loss will be substantial enough to affect your business?
Where Will Your Second Location Be?
It’s also worth considering the location of your new branch, store or office. Knowing your goals for the expansion will help you determine the ideal place for opening your second space. You’ll also want to think about the market at that second location. Is it full of companies like yours or is there a gap in the market? If the market is saturated, why do you think your business would do well in the new area? It could be that you’ve had numerous customers tell you they live over there and are willing to travel for what your business has to offer, for example.
Who Will Be at the Second Location?
Ideally, when people walk into the new location, their experience will be identical to (or as close as possible) their experience walking into your primary location. For that reason, it’s important to think about who will staff your new space. Will you have some of your current employees transfer over to the second space or do you plan on hiring from the ground up? Hiring a new team can present some challenges, as you’ll need to spend additional time training that team so that they are capable of and willing to provide an experience to your customers that’s what people at your first location have come to expect.
How Will You Finance the New Location?
What mix of financing will you use to pay for the expansion? Do you see your company taking on debt to open a new branch or office or do you have investors on board who think expansion is a good idea and who are willing to pay for it? It might be that your business has earned enough profit to cover the cost of expansion on your own, without seeking outside financing.
Whether you are unsure about financing or have other questions about opening a new location, the team at New Direction Capital is here to help. Our virtual CFO services can help you determine whether a new location will your business grow and meet its goals. To learn more, contact us today.