Growing Your Business: 9 Tips for Opening a New LocationArticle originally posted on www.erieinsurance.com(opens in new tab)
You started your business with a dream. A vision for the future. And there’s no satisfaction like watching that dream come to fruition.
If business is booming and all your hard work is finally paying off, it’s natural to think about expansion. But how do you know when the timing is right to open a new location?
The truth is, there can be danger in growing your business too fast. According to the U.S. Bureau of Labor Statistics, about 20% of small businesses fail within the first year. And after five years, about half have closed up shop.
But time isn’t the only factor. Even if you’ve been operating for decades, scaling your business is still a difficult decision. Because a wrong move could jeopardize everything you’ve worked to build.
Are you ready to grow? Here are 9 things you should consider before opening your new location.
How to Expand Your Business to a New Location
Know your objective.
Before you get caught up in the excitement of looking for real estate and designing your new space, make sure you have a clear understanding of why you’re deciding to expand in the first place. This may sound like common sense. But you’d be surprised how easy it is to lose focus when adding a new location.
Are you wanting to move into a new market? Or is there so much demand at your current location that you’re unable to capture it all? Your answer to these questions will help you plan your next steps with clarity, enabling you to make decisions without losing sight of the end goal.
Consider the alternatives.
These first few tips may make it sound like we’re trying to talk you out of opening another location. We assure you, that’s not the case. However, you should be confident in your commitment to expand before taking on all those extra financial commitments and overhead expenses.
So after you’ve set your objectives, ask yourself if there are any other ways you could meet these growth goals. For example:
- Online sales: If you have a physical storefront, maybe you could beef up your online sales by investing in a new website and social media marketing.
- New services: Are you running a successful restaurant? Perhaps additional delivery and takeout services could be the key to increasing revenue without the added risk of opening a new location.
This exercise can help you squeeze the most revenue out of your existing business first. And there’s an added bonus: If you can’t think of less costly alternatives to physical expansion, you can move forward with confidence.
Choose your location wisely.
We’ve all heard the real estate mantra: “location, location, location.” And for good reason. Where you decide to open could be the difference between successful growth and a failed investment. Start by doing your research on the general area first. Ask yourself:
- Is the proposed new location close enough to build on your initial success and brand recognition?
- Is it far enough away that you can tap into a new market of potential customers?
- Are there nearby competitors that could threaten your profitability?
This type of market research can help you understand the potential demand before you make any commitments. Then, start looking for a physical space that meets your needs. Be sure to consider:
- Rental expenses
- Accessibility and traffic (foot and vehicle)
- Potential renovation costs
Repeat what works.
Opening a new location presents a tempting opportunity to try something new and different. But this type of experimentation has led to many failed expansion efforts.
Remember, your current success – the success that made this growth necessary in the first place – was built off your first location. Change it up too much, and you may lose the spark that made your business such a hit with customers.
Of course, that doesn’t mean your new location has to be a carbon copy of the first. You can always add new products, services or menu items to mix things up a little. Just don’t miss out on the opportunity to replicate your prior success.
Focus on culture.
Company culture is one of those things that can be hard to quantify. But we all know a good one when we experience it. And you should never discount its worth. Oftentimes, your culture is defined not only by your vision and values – but by the way you treat customers and employees. To make sure your existing culture isn’t lost during expansion:
- Take note of what makes your business special.
- Document important processes and incorporate them into your training efforts.
- Be sure the managers at your new location understand and embody the culture you’ve worked so hard to build.
Build your brand.
If your first location is a success, you may fall into the Field of Dreams trap – believing “if you build it, they will come.” Don’t make that mistake. Never underestimate the importance of marketing and communications in your growth efforts.
Instead, consider ways to get the word out – whether it’s through social media marketing or more traditional advertising efforts. And don’t ignore your biggest fans: your existing customer base. Empowering loyal customers to help spread the news of your expansion is another great way to build awareness and excitement.
Calculate cash flow.
Regardless of how much time and money you decide to invest in your new business location, it will probably cost more than you planned. That’s why it’s important to build a realistic projection of your profitability.
Since you’re deciding to grow, we’ll assume your first location is already profitable. But is it profitable enough to cash flow your other location if it takes longer than expected to break even? If it’s not, do you have access to the financing or capital needed to make things work?
If you’re not good with data and numbers, find someone who is. Because a mistake here could mean problems for not only your new location – but the first one, as well.
Find the right people.
As a business owner, you know good help is hard to find. But you’re going to need hard-working, dependable employees to grow your business across multiple locations.
The reasoning here is obvious. You can’t be in two places at once. And if you tried, you’d be spreading yourself too thin. So you’ll need to entrust the work of growing your business to others.
Before you branch out, it’s important to know you have others who can manage things in your absence. If you don’t have employees who are ready to take on this responsibility, or if customers insist on doing business with you alone, it may be wise to hold off on expansion for now.
Protect your investment.
Here’s another hard truth: As your business grows, so does your risk. And we’re not just talking about the risk of launching a successful business. This also includes risk associated with commercial property damage, workers’ compensation claims, theftand lawsuits.
Before you commit to opening a new location, give your Erie Insurance agent a call. Your agent can help you customize your business insurance policy to meet the exact needs of your growing business – whether you run an auto repair shop, restaurantor construction company.
As an ERIE customer, you also have access to assistance from a risk control consultant who can help you evaluate the potential risks your business faces – and recommend measures you can take to help reduce them.
Grow with confidence.
You’ve worked hard to build and grow your business. At ERIE, our mission is to help you help keep it safe – with custom solutions crafted from years of experience protecting businesses like yours.
To learn more about how an ERIE business insurance policy can help protect you, contact your local ERIE agent in your neighborhood today.
A better insurance experience starts with ERIE.
Haven’t heard of us? Erie Insurance started with humble beginnings in 1925 with a mission to emphasize customer service above all else. Though we’ve grown to reach the Fortune 500 list, we still haven’t lost the human touch.
Contact Peak Financial Group today to experience the ERIE difference for yourself.