Getting a new small business off the ground with your first location is a daunting task. It takes a remarkable amount of planning, a great team, and a willingness to take a risk. So for those of you who have successfully opened your own small business, congratulations!
For the ambitious business owner, perhaps at this point you’re thinking about opening a second shop and expanding your retail business. After all, scaling your company is the next big step. And you’ve gotten the hardest part out of the way: developed a reliable customer base and figured out your cash flow. But it’s important to know when and how to open a second business location. You’ll have a second team, a second set of costs, a second shop to manage your inventory, and a whole lot more to worry about.
So let’s start by examining if your business is ready to expand and then go over the steps to turn your operation into a multi-store business.
- Know If You’re Ready to Open a Second Location
- Be Sure That Opening a Second Location Is Necessary
- Look at Other Sales Channels First
- You Need Managers That You Can Trust
- Replicate Success But Make It New
- Conduct Basic Market Research at Potential New Locations
- Secure All Necessary Funding
1. Know If You’re Ready to Open a Second Location
Before starting the process of opening a new location, it’s important to be sure that it’s the right time to do so. Start by asking yourself a few questions:
- Do you need more space? Maybe your retail space has become too small for the number of customers that come through or an expanded catalog of products.
- Is there a market for your product or services in a different location? Remember, what works in one neighborhood, city, or state may not work elsewhere.
- How’s your cash flow? Opening a second location is expensive so you need to have the cash on hand, or secure financing of some sort.
- Can you manage the new obligations and stress of growing your business? Remember how hard it was to open your first store? Get ready to do it all over again!
Carefully consider each of these items prior to making any big commitments.
2. Be Sure That Opening a Second Location is Necessary
Again, carefully consider the questions above. Prematurely opening a second location for your business can be catastrophic, even ruining the success of your first shop.
Be aware of false signs that you may need to expand:
- Consider increasing your team so that they can serve more customers.
- Add new products to your inventory to attract a larger customer base.
- Target new demographics and continue to build your current location.
- Add better access and parking if possible.
It’s critical to open a new shop at the right time. And it’s better to err on the side of caution by waiting too long to open than doing so too early.
3. Look at Other Sales Channels First
Another way to make sure that you’re ready to open a new location is to first exhaust all alternative sales channels. Selling your product or service solely at your brick and mortar store is not enough. First, look at creating an omnichannel shopping experience:
- Partner with other local businesses to test out new products or a new market. It’s a great way to meet other retailers and become a deeper part of the community.
- Try out a pop-up shop or kiosk to test out a new area and market.
- Sell on social channels. More and more shoppers are buying directly from Facebook, Instagram, and Pinterest.
- Open an eCommerce store. With your POS system integrated to both your brick and mortar and eCommerce platform, selling on both channels has never been easier.
4. You Need Managers That You Can Trust
So once you do decide that it’s time to open a second location for your business, you need to prepare yourself for certain facts.
One of the hardest things that small business owners face is the fact that they simply have to cede some control and responsibilities to their team. You won’t be able to be at two locations at once. While a cloud-based POS system makes it easier to manage your business remotely, you’ll still need to put trust in your team at each location.
A lot of businesses promote internally so that existing team members move on to bigger roles as your business expands. This helps give owners the peace of mind that their management are people that they can trust and rely on.
5. Replicate Success But Make It New
Of course, if you’re expanding your business, you’ve already established a successful shop. So make sure you capitalize on the success that you’ve already found.
- Keep your best sellers and any items that define your brand. If you’re a QSR, for instance, any staples that your customers have come to expect should stay on the menu.
- Use your existing operational tools, including the same POS system. You need your sales reporting and inventory management to be under one system, so keeping a uniform point of sale for multiple locations is critical.
- Make all lines of communication streamlined by using the same service for each location.
- Your prices shouldn’t vary too much. Shoppers who have been to your first location will be turned off if the new shop is more expensive.
- Implement the same CRM system so that shoppers can receive the same loyalty benefits at any of your businesses.
- Make all branding on point and design similar enough so that customers recognize each store as being related.
At the same time, you want your new location to stand out. Add new menu items and some differences in your layout to make the experience unique. It’s good if you have shoppers who prefer one location over another. This means that they have a personal connection to your business and will likely be back.
6. Conduct Basic Market Research at Potential New Locations
You are likely to have a hunch on most factors that go into creating your new location. But make sure you confirm these with actual objective research into each matter.
- Build a separate business plan and start by defining a narrow target market.
- Consider the demand for your product and services while also taking into account the expected competition in the areas you’re looking.
- Gauge your marketing costs and the best advertising outlets for your target audience.
- Run some basic tests so that you can confirm all of this. As we mentioned earlier, pop-up shops are a great way to try out new products or test new markets. It’s a far lower investment than an actual full retail space, but will most closely mimic an actual retail environment, giving you a more accurate picture of your future business.
7. Secure All Necessary Funding
Opening a new shop is going to be expensive. Retail space leases are not cheap and putting together the infrastructure of an entirely new store adds up fast.
So it’s necessary to get all financials in order from the beginning. In part, this will be an aspect of your business plan.
- Determine how much liquid cash you have to invest yourself. You don’t want to starve your existing location or yourself, but investing some of your money into the project is wise.
- Look for outside investments from friends, other business owners, or people excited about what you’ve created. Individual investors can go a long way towards funding a second location.
- Peer-to-peer lending options online are starting to replace traditional bank loans. Check out our blog on this alternative financing to learn more.
- And banks are still an option, too. There are typically better solutions for most businesses, but a local credit union or bank can also finance your new store.
How to Open a Second Business Location with KORONA
As we talked about above, it’s important that you have a uniform point of sale solution between all of your locations. And for businesses with a single location, you’ll need a POS system that can help your business scale. POS inventory management and sales reporting provide you with remarkable insight into your business. You’ll be able to identify problem areas and the necessary changes to fix them.
If you’re interested in growing your business and expanding to new locations, try out KORONA. It’s built for to help retailers grow and become multi-store operations. Sign up today for a no commitment free trial!