Is it Time for a Second Location?

Growth and expansion are natural goals for most business owners. At some point, you’ll want to take things to the next level. But is it time for a second location? It’s wise to ask yourself a few key questions before taking the plunge.


Has your primary location reached its full potential?

Some business owners jump the gun and launch a second location without their flagship store ever truly reaching its peak. This is problematic because you may give less attention to your main moneymaker, which ultimately hurts your company as a whole.

Ideally, your primary location will have reached at least 80 percent of its potential before moving onto a second location. You’ll want things to be operating nearly flawlessly to minimize any painful setbacks.


Is your business model replicable?

Many business owners have experienced unbridled success at their first location only to fail at their second. To warrant the opening of a second location, your current business must be replicable. You’ll want to know for certain that you can duplicate the positive results you’ve seen initially.

Perhaps the most integral aspect of duplicating your business is having sound leadership at your second location. You can’t be at two places at once, so other managers will need to step up to the plate.


Is there enough demand for a second location?

Perform plenty of market research to gauge just how receptive consumers are likely to be to a second location. Will the projected revenue justify the additional investment, marketing, maintenance and overhead costs?

Be particularly diligent with your market research if you’re branching out to an entirely new city. Demand can fluctuate considerably depending on the locale.


Do you have adequate cash flow?

Cash flow is essential for getting things started out on the right foot. If you’re already struggling financially, it’s going to be an uphill battle the entire way. Ideally, stay away from partnering with outside investors and spending other peoples’ money because things can get messy in a hurry and diminish your long-term profit margin.

According to Jennifer Martin, principal consultant at Zest Business Consulting, “The ideal scenario for funding a second location is paying for it yourself.” But if you have to get outside funding, she suggests asking yourself whether you would invest that much in someone else’s business.

“Calculate your success rate thoroughly,” Martin advises, “then add 35 percent to whatever figure you come up with, because no matter how diligently you crunch the numbers, you will always have unexpected expenses.”


Are you prepared for the inevitable growing pains?

There are bound to be some curveballs with any type of business venture. It’s inevitable. Make sure that you’re prepared to handle any issues that come your way without them sabotaging either your flagship or second location.

Opening a second location definitely makes sense under certain circumstances and is the logical next step for building your brand. Just make sure that you think it all through before proceeding.


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