Is a Second Location in Your Business Growth Plan?

Business growth is the entrepreneurial dream. With success and sustained growth, many retailers eventually reach a point where they must consider an additional location in their business growth plan. Even though expansion is the goal of most all businesses, identifying when it’s time to grow beyond that original footprint is hard for some owners to recognize. Inc. magazine experts agree that there are a few basic questions entrepreneurs need to ask themselves before considering a second location. 

Do your sales justify expansion? Businesses with steady growth over a significant period are ripe for expansion. On the other hand, business owners considering additional locations after better-than-expected openings or terrific seasonal growth might be betting the future on a trend that won’t last. 

Is your business running smoothly enough to replicate? Success isn’t all about how quickly customers buy products. It’s often several factors that make a business successful: A pleasing atmosphere and comfortable shopping experience, responsive staff, and the proper mix of products are often why customers patronize a business. Those factors lead to success and growth. 

An entrepreneur tends to bite off a little more than he can chew hoping he’ll quickly learn how to chew it.

Roy Ash

co-founder of Litton Industries and former director of U.S. Office of Management and Budget

How strong is your market? This question has a couple of answers. First, you need to determine how strong your business is in its existing market. If your store has a large local following and there aren’t a lot of additional customers in the neighborhood, region, et cetera, maybe it’s time to add a second store in a different location to your business growth plan. 

Second, you need to consider how your industry is growing. The hardware and building materials industry, for instance, has companies recording record growth this year. Ace Hardware reported record first quarter revenues of $1.38 billion, a 5.1% increase from 2018. Home Depot also reported sales of $26.4 billion over the first quarter, a 5.7% increase over last year. 

Can your business handle a second location? Both time and money need to be factored into this answer. A second location must be able to stand on its own in terms of cash flow and personnel. It must live or die independent of your original store. You shouldn’t cannibalize your first store to feed your second and you don’t want to lose customers from one location to the other. A new location is about adding customers and profits. 

I’m convinced that about half of what separates the successful entrepreneurs from the non-successful ones is pure perseverance.

Steve Jobs

chairman and CEO, Apple Inc.

Have More Answers than Questions 

Once those questions are affirmatively answered it’s time to write them into your business growth plan. 

“Do you have a dream of having $10 million dollars in sales this year, or $20 million dollars in sales this year? Or do you have a goal,” says Wanda McCullers, who owns Farmers Feed Service in Wetumpka, Alabama with her husband Clint. “Dreams are great. I can have one of those when I go to sleep tonight. You have to have a plan that’s written down. If it’s not written down, it’s not a plan.”  

Planning for success means determining why you’re opening another location. Are you:

  • Moving into a market?
  • Expanding your product line? 
  • Growing into an underserved neighborhood, city or region? 
  • Looking to meet existing customer need?  

Having answers to those questions means you have a good idea about your new clientele. The goal is that these customers will be new to your business, so you might need to consider adjusting your product line, altering your marketing tactics, and maybe even changing up the formula that made the first store successful. 

Best Laid Plans 

Business growth plans cover all the bases: From concept to completion. They should: 

  • Outline the business and its industry 
  • Explain how it will make money 
  • Analyze the competition
  • Outline its market strategy, target market and projection of market share 
  • Contain a pricing strategy 
  • Feature a promotional plan including advertising, marketing and sales promotions 
  • Have a projection of sales potential 
  • Contain a budget that includes everything from storefront and equipment to staffing and overhead 
  • Determine organizational structure 
  • Have financial data to back up the overall business plan 
  • Forecast income and cash flow 
  • Contain a balance sheet 

When opening a second location, the foundation for much of this information is already available at the successful startup through its performance data.

Planning for Growth

Seek advice in your network. It never hurts to consult someone who has “been there and done that.” Business associations, chambers of commerce and industry cooperatives are filled with people who know how to grow and expand a business. Asking questions doesn’t hurt. 

TJ and Kami Comstock own five hardware stores in Montana and TJ has been involved with North American Retail Hardware Association leadership for several years. He says his experience on the board of directors has been invaluable in running his business. 

The board is comprised of hardware guys from all different kinds of stores and co-ops. So, you get to sit around the table with a lot of people who are pretty well versed on what’s happening in our industry,” TJ explains. “You hear a lot of ideas, what’s been successful for them, the kind of areas they’re succeeding and struggling in. So, the networking alone is a value. The insight my fellow board members give me is worth a ton of value. If I’m having a problem, I can call them and they’ll share ideas, share information, stuff like that.” 

TJ adds that many industry associations like the NRHA also offer information and training that help members build their businesses.  

Make sure there’s enough cash. Duh! Obviously, the first location must be successful, or a second wouldn’t be under consideration. It’s important to have enough cash or financing so the second location doesn’t threaten the viability of your original store. 

Standardize your operational procedures. Since your first location is running successfully and smoothly enough to expand, use that store and its operations as the baseline for your new store. Procedures that are easily replicated are: 

  • Store layout and merchandising  
  • Recording sales transactions 
  • Customer service policies 
  • Security and safety standards 

Employee training and HR documents are easily transferable, although some amount of customization may be necessary. Merchandise return policies, rewards programs and how to handle complaints can also be used in multiple stores. 

Get the right people. Depending on how closely your stores are located, some employees might be able and willing to move from store to store. Those current employees could also be candidates for supervisorial or managerial positions at the new location. Having a reliable store manager is crucial to a new location because the owner can’t be in two locations at the same time. 

Use technology to simplify operations. Whether you’re opening a second location of your existing business or expanding your company by purchasing a similar business in another region, having scalable retail technology can simplify operations and make opening that new store easier. Retail management platforms come in all sizes, but sophisticated systems allow business owners to manage multiple stores from a single location. 

They allow stores to communicate and share information such as inventory, customer activity and rewards programs incentives. They also consolidate information to provide you a global view on how the stores are performing individually and as a unit. And they allow you to manage multiple locations with inventory management tools, time-tracking and accounting software, mobile applications and marketing integrations. 

One for All, All for One 

Communication is the key to managing multiple stores. Once your second or third or fourth locations are established, they need good communication to work cohesively.

Weekly or even daily communication is valuable to share information on sales or marketing promotions, store policies and any news that might affect business. 

Be so good they can’t ignore you.

Steve Martin

actor, comedian, musician

Good communication is necessary, too, because stores can share inventory, personnel or other resources if they in near each other. Experts suggest owners make new stores their home base until they are up and running. This allows them to see how operations are going and fix any malfunctions before they become ingrained in store operations. 

Whether you’re considering opening your second location or your sixth, business growth is key to success and building on a solid foundation is the best way to start. 

Brian Bullock

Author