Should You Open a Second Location?

by John Burke

2 min read

As the owner of a successful small business, you might want to increase your revenue stream by opening a second location. Before making that decision, consider the reasons why your current location contributes to the success of your business. Ask yourself whether those same conditions would exist at a new location. A careful analysis might reveal that the advantages of opening a new location wouldn’t justify the investment of time and money necessary for such an effort.

Why a Second Location Might Not Be a Good Idea

A second business location requires more than a financial investment. The increased demands on your time from operating two business locations could become quite stressful. If most of your customers expect personal interaction with you, operating your business at two different addresses would make those interactions impossible. Your company’s existing systems, such as information technology and payroll, might be stressed beyond their existing capacity. The additional location might require a complete replacement of those systems. The cost of extra insurance coverage for the new address could be another significant factor against expansion.

Finding the Right Address

If your current location has convenient parking and is easy to get to via public transportation, it might be difficult to find a new address offering those same conveniences. Competing businesses near the new branch could impair its profitability. You shouldn’t make this investment for the sole purpose of spreading the same customer base over two locations. Expanding your number of customers by opening a new facility should directs your search to a particular locale.

Small Business Alternatives to a Second Location

The experience of other small business owners might lead you to decide against expanding to a new location. Learning the lessons from their mistakes could help you avoid wasting your time and money. Comparing the situations of these other businesses to your own could inspire you to make your existing business more profitable. Simply hiring additional employees or outsourcing specific tasks to independent contractors could boost your company’s productivity and raise revenue far beyond those modest investments. Before deciding to hire more employees, consider using performance management software to manage your existing team more effectively. Another approach to increasing your customer base could involve expanding your product line or generating another revenue stream within your existing business by offering additional services.

Advantages of Opening a Second Location

A second location for your business could help you reach new customers who didn’t find your existing location to be convenient for them. You might find a new location with a population demographic consistent with your target market. You could improve the experience for your customers if existing space limitations prevent further expansion. If your business is actually turning away customers due to inadequate space, you have a strong reason for opening a new facility. If you decide to expand, your experience at the current address can provide insight about the important characteristics of a superior location. A carefully planned second business location could make your existing business even more profitable. The idea of potentially doubling your revenue might make it difficult to remain objective about the decision to expand. The advantages and disadvantages of doing business at your current address are your best guidelines for making that decision.

References & Resources

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