One of the primary goals of many successful small businesses is to expand with a second location. However, opening another store does not guarantee an increase in revenue, even if the first one is a major success. Below are some important factors to consider before committing to a second location.
Make Sure Your Business is Strong Enough to Justify Expansion
When considering a second location for your business, it is crucial that your primary location is already showing signs of success. If your store isn’t generating positive cash flow, it is a sign that something isn’t working. On the other hand, if your first location is seeing consistent profits, ensure that you will be able to replicate the factors that make it successful in another location. Ask yourself the important questions – is the new location in an area with established competition for your business? Does it provide access to a new, ideally larger group of customers in your target market? Does the business depend on you to be present for things to run smoothly? If you can’t answer these questions, you may not be prepared to open a second location.
Do Your Research
Never underestimate the importance of doing proper market research when scouting a new location. It’s not only about identifying a target demographic; you also need to be sure that there is demand for your product and that competitors haven’t already saturated the market. Test marketing is an ideal way to discover whether or not your business can survive in a second location before making a costly mistake. If you do find a suitable location, be sure to have a plan for funding ahead of time. Look into loans and potential outside investment, and know exactly how much you can afford to spend to your expansion a reality.
Consider Alternatives
Before committing to a second location, take the time to consider alternative growth strategies that might mitigate the risks associated with a new store. If you provide a product or service that has appeal beyond your local area, an online business model is likely to be a much more successful and inexpensive alternative to physical expansion. The internet provides access to an enormous pool of potential customers, and social media platforms can be used to greatly extend the reach of your marketing. However, if your business relies on local patronage, or if your niche overlaps with a much larger established online business, the results of an online business push could be disappointing.
A successful small business depends on many factors, from accessibility to customer demand. While there is never going to a “perfect time” to open a second location, ensuring that your business meets the criteria above can help any small business decide whether or not a new venture is likely to succeed.