For all the talk about the death of brick-and-mortar, a physical location is still the heart of many small businesses.
It's true that e-commerce sales continue to skyrocket. But the vast majority of total sales in the US are still made in physical stores. And many types of businesses -- from restaurants and dentists to laundromats and dance studios -- can never go 100 percent digital.
For these businesses, a common question is if, and when, to open a second location. Taking this step can open up new revenue streams, boost your brand awareness, and help you gain new customers. But there are plenty of ways it can go wrong. This big decision will require some careful planning -- maybe even more than it took to launch your business initially. Now you have something to lose.
My company, Funding Circle, helps businesses access financing for growth. After working with thousands of business owners over the years, we've found that these four questions can help determine if you're ready to make the big leap:
1. Is a new location really the best strategy for growth?
It's always helpful to take a step back and think about your goals and motivations for a major decision like this. What are you trying to achieve? If the answer is "growth," remember that there are many ways to achieve this besides new space. And you'll need to ensure that if you do expand to a new location, it will showcase the strengths of your business.
When Yogibo, a maker of ultra-comfy bean bags, pillows and other products, decided to expand to Japan, CEO Eyal Levy knew he had to give potential customers the chance to touch and experience his products to fall in love with them. Despite initial hesitations, he took the route of establishing pop-up stores in high-traffic areas. Today, Japanese sales account for 15 percent of Yogibo's revenue.
2. Are you ready for the impact on your existing business?
Having an existing location is an obvious advantage. All the work you did the first time around -- from hiring to securing vendors -- will make it that much easier the second time. You'll probably also be able to share resources like staff and inventory to get your new location off the ground.
However, opening another location will stretch the most valuable resource you have as a business owner: your time. While your business's headcount, expenses, and (hopefully) revenues will double, the hours you have in a day to manage it all will not. You'll need to ensure there are no major negative consequences for your original business, and this will require thoughtful planning and delegation.
3. Where should you expand?
As the owner of one successful business, you already know how important location can be. Take what you've learned and apply it to your search for a new space.
If factors like high foot traffic, parking availability, or proximity to a highway were important to your original success, make sure your new location can offer the same benefits. You could also do a survey of your existing customers and see what other parts of town they'd like to see you in.
Restaurateur Samir Changela noted the importance of digging into psychographics, not just demographics, for choosing the location of a new restaurant. While demographics can tell you where to find your target customers, psychographics gives you the "'why" -- their habits, hobbies and routines -- which are just as important.
You'll also need to consider the new location's proximity to your existing business. Too close and you might cannibalize your existing customer base. Too far and it won't be as easy to share staff or inventory between locations -- and you'll probably waste a lot of time traveling between them as well.
4. Who will manage it?
Unless you've found a way to clone yourself (in which case, you should make that your business), you will need to hire someone to manage the new location -- or manage the old one while you focus your attention on the new one. Either way, it's critical to find someone you can trust to keep everything on course.
This may be a case where it's best to promote from within, so you can ensure the person understands the intricacies of your business and will keep everything up to your standards. If they'll be taking on responsibility for your new location, bring them in early so they can take ownership of some of the decisions.
These are just a few of the many questions to consider as you think about opening a new location. And remember, it's okay to decide that now is not the right time. A little patience now could pay off in spades in the future.