One of the most difficult parts of managing your small business is deciding if you should expand. Going from an independent enterprise to a small chain with multiple branches is a massive undertaking that cannot be taken lightly. It can take years before your company is ready to support two or three satellite establishments, so you need to ensure that you’re not setting yourself up for failure.
Opening a new establishment can be a momentous occasion if the time is right and if you’ve performed your due diligence. There are certain factors you must consider before making the final decision about a second branch. Ask yourself these three questions before opening another location.
Is a second establishment financially feasible?
Deciding if a new branch is fiscally possible is based on more than your savings. In addition to startup funding, you’ll need steady revenue to ensure that you’re not losing money by supporting a lagging establishment. According to The New York Times, you have to scale your basic processes and evaluate operating expenses. Remember that a new location likely won’t have the same earning power as your flagship during the early stages, so you need to decide if long-term gains are worth the short-term losses. If your business model isn’t replicable or it will take too long to break even, a second location would only hurt your business.
Is there a demand for my products or services?
When choosing a location, you need to determine if nearby consumers actually want your products or services. If you’re entering a crowded market, other businesses likely already fill your niche so there isn’t a significant demand for what you have to offer. For instance, if you own a restaurant, you need to determine if there are too many establishments with similar menus. If consumers think you’re more of the same, they’ll likely remain loyal to other businesses and ignore yours.
Would I have access to the necessary resources?
Entrepreneur Magazine points out that you’ll need necessary resources in a second location. Employees, technology and merchandise are all essential assets that your new branch will need to thrive. If your success is predicated on you and few key team members, you cannot expand without spreading your resources thin. If you have a reliable assistant or believe your original establishment is sustainable without your supervision, you can open another business without worrying about its long-term health.
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