The outlook one has when starting a business differs from individual to individual. There are those who are content with opening one location or outlet and sticking to that. There is nothing particularly wrong with that. Yes, expansion is good, but someone may not be interested in it. Then there are those who are eager to open multiple business locations or outlets. There is nothing particularly wrong with that either. Expansion is good. However, it is important to know that you cannot just open a second business location or outlet anytime and anyhow. There are things you must consider before taking that step.
What is your goal?
It sounds like a simple question, but that should be the starting point. Once you contemplate opening a second location or outlet, why do you want to do so? An honest and objective answer to that question will put things into perspective. Many people tend to make the mistake of merely wanting to open a second location or outlet.
Are you looking to expand by entering or tapping into a new target market? Are you seeking to match your possibly growing market or market demand? These are two examples of questions denoting objective reasons for opening a second location or outlet. Do not just do it because you want to give a certain impression. Let your reasons be objective, not just mere or baseless.
Do You Now Have a Replicable Business Structure or Systems?
Running one business location or outlet is much easier. This is because there is no pressure to maintain the same standards elsewhere. Once you open a second location or outlet, consistency of standards becomes a key issue. Customers want to see or experience homogeneity when in any one of your outlets or locations. In order for homogeneity to be achieved, you first have to master the first outlet or location.
You have to work on its structure and systems to a point where they are replicable. This takes time and lots of systematic effort. As long as you cannot uniformly replicate your business structure and systems, opening a second location or outlet is a bad idea. Once you can replicate it, then you are ready to open a second business location or outlet.
Important Cash Flow Considerations
When it comes to this aspect, I have a real-life example I know. I know of someone who was running a successful consumer electronics shop several years back. At some point, they felt it was time to open a second outlet or location. They did so, but soon it became apparent something was wrong. The first outlet kept bankrolling the second location for way too long. This is because the second location was taking time to stand on its own; sales were not that good. Ultimately, the second outlet ended up hurting the first outlet. The sad outcome was that the second outlet was discontinued.
However, this was already at a time when the first outlet had been compromised. Plus, there were arrears of unpaid employee salaries for months; salaries that never got to be paid. There is a fundamental lesson to learn from this story. Never open a second outlet when the first outlet cannot bankroll the second one without undesirable consequences. The other issue is that you should be certain the second outlet will quickly build its independent cash flows. This is so that it quickly ceases to rely on the first outlet. All these aspects have to do with cash-flow considerations. Carefully factor in all of that before opening a second location or outlet.
Do Not Lose Sight of the Fundamentals
Remember the approaches you took in opening the first outlet or location. You most assuredly paid attention to areas such as market research, competitive analysis, and so on. Now you have established your first outlet, and it is doing well. In pursuit of opening the second location, you risk falling into the temptation of being too relaxed. By then, you will probably have the capital and resources to set up shop again. It is very easy to ignore the fundamentals and do things anyhow. Consider the prior example. It is evident that the second outlet was placed in a poorly picked location.
This is because the sales did not pick up as much momentum as would have been desired. That tells you that thorough market research was ignored. There were other players close to the second outlet who had been operational there for some time. They probably were not taken seriously, meaning competitive analysis was not really done. All this can easily happen because of the euphoria of basking in the glory of the first outlet’s success. Opening a second location requires approaches akin to starting a new business. Never lose sight of the fundamentals. You can and must only open a second location after adhering to all the fundamentals.
This is a very important subject, and I implore you to share this article with others. I have seen too many businesses failing because of using a poor approach to business expansion. Do not be in a hurry to open a second business location or outlet. You need to time your things meticulously. You also need to take calculated steps once you decide to expand. Remember, an idea can be good, but the timing and implementation can be wrong. Always be wary of that!
