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How to Decide if a Second Location Makes Sense

By Daniel B. Kline - Sep 11, 2018 at 8:31AM

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It's a decision that could make or break your business.

Taking the leap from operating a single location to opening up a second one is a major step. It's not just putting capital at risk, it's also betting that your business model can succeed without your physical presence.

It's a risk that could take your entire operation down. Of course, it's also an opportunity that could allow you to grow your business, make more money, and maybe eventually run your own empire.

Opening a second location can make you or break you. That's why it's not a move you should make without really thinking it through and asking yourself some tough questions.

People are happy in front of a grand opening sign.

Opening a second location is a major step. Image source: Getty Images.

1. Do the important people agree?

Back when I served as general manager of the largest toy/hobby store in the northeast, the owner and I decided to open a second location. It was something I wanted to do because growing the company made my job bigger.

For my boss, however, looking at locations and planning a second store was enjoyable. Actually opening one was not what he really wanted.

Since he worked a normal job and the store was his hobby, he had no goal of building a major chain. Instead, he enjoyed puttering around and making changes in the main store. Getting bigger wasn't something he needed financially, nor was the added stress.

2. Can your success be repeated?

Some businesses succeed because they have become a part of the community. Others are willed to success by the personality of their owners. And, of course, there are concepts and companies that fill a niche that exists in other places.

You need to honestly examine where your business fits in. Will a new location bring in its own customers, or will it be a drain on resources? Can you repeat your success without hurting your first location by dividing your time?

3. Do you have the people?

You can't be two places at once. That means you either have to devote yourself to the new location, split your time between the two, or send someone else to operate the new business.

In each of those scenarios, you need at least one person who can operate in your absence. That's not always something that's easy to come by.

4. Location, location, location

Part of our success at the toy store came from our location. We were off the beaten path, but people knew we existed because the model train part of our business had a long history in the community. Our rent was low because the building was likely useless if we were to leave.

Those conditions would have been difficult, if not impossible, to replicate. That did not entirely rule out opening a new location (we actually did open one), but it did increase our costs.

Consider what makes your current location work and whether that model can be duplicated. If it can't, factor in the changed circumstances to your business plan.

Expect the best, plan for the worst

In theory, opening a second location should be easier because of the lessons you learned the first time around. It's possible, however, that new things will go wrong and unexpected problems will emerge. Plan for things to go wrong. Expect that you will face the unexpected and budget accordingly.

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