You started your business with a dream. A vision for the future. And there is no satisfaction like seeing that dream come true.
If the 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 time is right to open a new location?
The truth is, there can be a danger in growing your business too quickly. According to the US Bureau of Labor Statistics, about 20% of small businesses fail within the first year. And after five years, about half have closed shop.
But time is not the only factor. Even if you̵7;ve been in business for decades, scaling your business is still a difficult decision. Because one wrong move can jeopardize everything you’ve worked to build.
Are you ready to grow? Here are 9 things to consider before opening your new location.
How to expand your business to a new location
Know your goal
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.
Do you want to move into a new market? Or is your current location in such high demand that you can’t capture it all? Your answer to these questions will help you plan your next steps with clarity, allowing you to make decisions without losing sight of the end goal.
Consider the options
These initial tips may make it sound like we’re trying to talk you out of opening another location. We assure you, that is not the case. However, you should be sure of your commitment to expansion before taking on all these additional financial commitments and overheads.
So after you set your goals, ask yourself if there are any other ways to reach those growth goals. For example:
- Online sales: If you have a physical storefront, you may be able to increase your online sales by investing in a new website and social media marketing.
- New services: Do you run a successful restaurant? Perhaps additional delivery and pickup services could be the key to increasing revenue without the increased risk of opening a new location.
This exercise can help you get the most revenue out of your existing business first. And there’s an added bonus: If you can’t come up with cheaper 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 can be the difference between successful growth and a failed investment. Start by doing your research in 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 for you to 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 potential demand before making any commitments. Then start looking for a physical space that meets your needs. Be sure to consider:
- Rental costs
- Accessibility and traffic (by foot and vehicle)
- Potential renovation costs
Repeat what works
Opening a new location is a tempting opportunity to try something new and different. But this kind of experimentation has led to many failed expansion efforts.
Remember that your current success—the success that made this growth necessary in the first place—was built on your first place. Change it too much, and you can 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 copy of the first one. You can always add new products, services or menu items to mix things up a bit. Just don’t miss the opportunity to replicate your past success.
Focus on culture
Company culture is one of those things that can be difficult to quantify. But we all know a good one when we experience it. And you should never reduce its value. Often your culture is defined not only by your vision and values – but by how you treat customers and employees. Here’s how to make sure your existing culture isn’t lost during expansion:
- Notice what makes your business special.
- Document key processes and incorporate them into your training efforts.
- Make sure the managers in 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 that “if you build it, they will come.” Don’t make that mistake. Never underestimate the importance of marketing and communication 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 word about your expansion is another great way to build awareness and excitement.
Calculate cash flow
No matter how much time and money you decide to invest in your new business location, it will probably cost more than you planned. This is why it is important to build a realistic projection of your profitability.
Since you decide to grow, we assume that your first location is already profitable. But is it profitable enough to liquidate your second location if it takes longer than expected to reach out? If not, do you have access to the funding or capital needed to make things work?
If you are not good with data and numbers, find someone who is. Because a mistake here could spell trouble for not only your new location – but the first one as well.
Find the right people
As a business owner, you know that it is difficult to get good help. But you’ll need hard-working, reliable 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 spread yourself too thin. So you have to entrust the work of developing your business to others.
Before you branch out, it’s important to know that you have others who can handle things in your absence. If you don’t have employees 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 involved in starting a successful business. This also includes risks associated with damage to commercial property, claims for damages, theft and lawsuits.
Before you commit to opening a new location, call your Erie Insurance agent. Your agent can help you customize your business insurance to meet the exact needs of your growing business—whether you run an auto repair shop, restaurant, or construction company.
As an ERIE customer, you also have access to the assistance of a risk control consultant who can help you assess the potential risks your business faces – and recommend actions you can take to reduce them.
Grow with confidence
You’ve worked hard to build and grow your business. At ERIE, our mission is to help you keep it safe – with tailored solutions created from years of experience protecting businesses like yours.
To learn more about how ERIE business insurance can help protect you, contact us today.
ERIE® insurance products and services are provided by one or more of the following insurers: Erie Insurance Exchange, Erie Insurance Company, Erie Insurance Property & Casualty Company, Flagship City Insurance Company and Erie Family Life Insurance Company (home office: Erie, Pennsylvania) or Erie Insurance Company of New York (home office: Rochester, New York). The companies within the Erie Insurance Group are not licensed to do business in all states. See the company’s licensing and business information.
The insurance products and rates, if applicable, described in this blog are effective as of July 2022 and are subject to change at any time.
Insurance products are subject to conditions and exclusions not described in this blog. The policy contains the specific details of coverage, terms, conditions and exclusions.
The insurance products and services described in this blog are not offered in all states. ERIE life insurance and annuity products are not available in New York. ERIE Medicare supplement products are not available in the District of Columbia or New York. ERIE long-term care products are not available in the District of Columbia and New York.
Eligibility will be determined at the time of application based on applicable underwriting guidelines and rules in effect at that time.
Your ERIE agent can offer you practical guidance and answer any questions you may have before you buy.