Planning For Multiple Business Locations
Multiple locations can enhance opportunities for your business and your ability to make more money, but this path is not for everyone.
There are many economies of scale to be realized with growth, but retailers should not step forward and expand until they ask themselves some key questions. The following is a brief checklist that should be carefully considered before expanding.
Change your philosophy.
Having a second location is like having a second child. Somebody once said to me, “One is fun; two is work.” Many entrepreneurs believe that nobody can do the job as well as they can, but if you contemplate that extra location, you must be prepared to rely on other people to do part of the job for you.
If you take on a partner, have your attorney draft a “Bi-sell” agreement that spells out how the partnership will be dissolved if things don't work out. Employees or partners should be people that you can rely on, but accept that sometimes things will go wrong. If you cannot adopt an attitude of “acceptance,” you will experience dissatisfaction and undue stress. This realization is most important; I can’t emphasize it enough.
Train your staff.
Training is one of the most important aspects of an expansion program. If you have the ability to recognize and retain good people, you can accomplish almost anything and go to soaring heights. It's preferable to have employees on board and trained beforethe expansion takes place. Any business benefits when employees know what to do and when to do it.
Conduct business planning and organization.
Some people have the ability to run one location efficiently, but fail miserably when they expand to the second. Failure can often be avoided by very careful and extensive planning. It’s far better to “overkill” on planning and succeed than to plan poorly and fail.
You should also have a vision for what you hope to accomplish, including a goal for the amount of profit you want to generate. If your ambition is to expand for the sake of merely being bigger, and you don’t have any other goals, then you should stop right here. I have seen people squander millions of dollars to have a “big” business.
The more advanced planning you do, the easier it will be to guarantee the success of a second location. If you can’t do your own financial spreadsheets, employ a professional who fully understands all aspects of your business and who is capable of producing realistic projections for sales, expenses, and the bottom line. These projections should reflect each month’s activity for the first year and quarterly for the next three to five years. These can be translated into cash flow projections, indicating the accumulation or shortfall of cash and the resulting loans you’ll need. Also take into account expenditures required for capital equipment, inventory, etc. Financially, you're healthy if you don’t have to borrow funds and if the business can sustain itself.
In the planning stage, among the items to consider are the proximity of the second location to the first, computer systems, in-house stationery, inventory receipts and transfers, daily banking, payroll and overtime, daily staff scheduling, hours of operation, emergency calls at night, daily reporting to the head office, and authority for limits on check signing and purchasing. Usually, the more planning you do, the quicker your new business will break even or show a profit.
Opening a second location is not something you do often, and the feeling of satisfaction is a “buzz” seldom experienced if operations are well-orchestrated at the outset. The feeling can be similar to watching your child being born: It doesn’t happen often, but an uncomplicated delivery is like a prayer being answered.