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4 Things to Keep in Mind When Opening a New Location

You’ve launched your small business, poured heart and sweat in to grow a foothold, and now are approaching the limits to revenues… now what? Perhaps opening a new location crossed your mind along the way?

Wide angle view of Dundee Scotland cityscape
Dundee, Scotland - One of the best places on Earth

If you have a thriving small business and established brand, then it's only natural to want to capitalize on it. Most business owners believe that the next step is to open a new location to achieve small business growth. It is the natural, smart next step. However, there are some critical risks and you should think carefully before making any decision.


Just because your business is successful doesn’t guarantee profitability somewhere geographically new. A new location brings many, sometimes unexpected, challenges in which to overcome.


Let's explore 4 things you should consider before opening a new location:

 

1. Can You Replicate the Business?


There's a reason large fast-food chains such as McDonald's are a success. The process is exactly the same in each store all over the world and, it doesn't rely on a single person.


Business owners celebrating with some beers

While replication isn’t exactly a requirement, if your business relies on the customer experience or specific product “tastes”, if you will, then replicating that “taste” may, but not always, be key to success. Another great example is Budweiser. When you partake in an ice-cold Bud Light anywhere in the U.S. the flavor is always the same. This is in spite of the fact that Budweiser has several manufacturing plants, any of which product the EXACT same Bud Light.


Off subject for a moment, I strongly recommend trying an Erdinger Dunkel if you want to enjoy a truly wonderful alcoholic beverage - Ryan, Owner

With respect to replication, you need to consider whether you, personally, are critical to the day to day running of your business. Typically, a small business owner will always lean towards a yes on this question. Call it a bit of entrepreneurial pride. However, with a bit of effort you can likely train a talented employee up to run the second location. After all, if you plan on opening new locations, you'll likely also need to transition yourself into a more executive role rather than day-to-day manager.


Loyal dog laying with his sleeping business owner, owner
Loyalty is Priceless

One thing that we often are asked is about the loyalty of a customer base to specific employees. Think something along a mechanic or hair stylist in which their customers come to the business specifically for that person. Our response to that is to liberally ignore this concern. The customers that you’re worried about will likely maintain their loyalty at the original location. What you’ll be concerned about is creating a new customer base related directly with the new location.



2. Carry Out Market Research for the New Location


It may sound appealing to move to a much busier, populated location, but this will not always guarantee success. New locations always come with exciting challenges.


Before opening up a new shop, you'll need to carry out thorough market research. The top two items on the research docket is to determine your new or expanded competition set as well as any differentiation in your customer demographics.


Competition:


This item is often massively under-researched by business owners.

Surf Coffee shop casual location

The biggest culprit is by overlooking the secondary and tertiary competitors. If you own a coffee shop for example, it’s obvious to identify the other local shops plus the ‘Starbucks’ of the world. However, what about the breakfast place down the street that also provides coffee (secondary)? Or suppose that the new location has a much denser residential population. Under that scenario then the potential customer’s own home would be your competitor. They could simply make the coffee and/or work from home rather than purchase from you (tertiary).


If you’re having trouble identifying any ‘real’ competitors, don't assume it's going to be a home run. There could be a hidden reason competitors have not moved into the area that you have yet to discover.


Customer Demographics:


This one is a bit more nebulous in terms of determining the success of your future location.