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Interview Patty

When to Open a Second Location

If you build it, will they come?

1. Your existing location is running smoothly. - While the existing store doesn't need items flying off shelves it certainly helps.

"You want to have the operation fairly well-running, because companies trying to expand, especially when it's out of normal range in other words, if you're opening up in another city is one of the three or four main causes of a company going under," says Randy Moon, consultant and co-owner at RMoon Consulting, based in Dallas. "So it is a big decision."

The reason for ensuring a healthy first location before considering another is an issue of security. Opening a second location is much more involved than simply "expanding" the first store.

2. You have sufficient cash flow. - "Every small businessman is best off to use his own cash flow and to stay away from other people's money as much as possible," says entrepreneur and business consultant Adam Hartung, based out of Chicago. "There's a lot of places to go get other people's money. People go to banks, they go to [angel investors] like me, but when you do that, what's really hard for most owner-operators to realize is the rate of return that other people want."

Investors will typically ask for a 40 percent rate of return, but even if you manage to pay them back in full, they still own 40 percent of your company. Most banks, on the other hand, will only ask for 10 percent return on a loan.

3. There's a current market trend. - "Let's say you have a business, and let's say you love tuning pianos. You're passionate about it, you love it, you're really good at it, but there's no big trend to it," says Hartung. "Opening up your second piano tuning shop just because you love it isn't going to matter because there's no trend driving people in the direction you're trying to go."

Whether or not you're passionate about your business, it's important to be realistic about the chances of a second store actually succeeding. The way to discover whether or not your business will prosper is to observe the market, research your competitors, and analyze the mood.

4. You have a reliable person to run the second location. - Since opening a second location is actually more like starting up an entirely new business, Loos believes it's important that the owner is present during the early stages of the second location to help it launch.

"It's more beneficial for [the owner] to be at the new location because you want to start to identify what the challenges are early on, and if he can spot those, then he can take action to correct those," Loos says. "Having the new owner there really instills a sense that there's some importance for the success of that second location, and I think the new employees there also feel that as well."

5. There's a region with unfulfilled demand for your product. - If you decide to open in an already-competitive region right off the bat, you have one of two choices: Hold your turf and try to drive the competition out of business, or move one or two towns over, get your old customers to come visit, and attract new local customers.

Read the full article at: guides

Patty Block, President and Founder of The Block Group, established her company to advocate for women-owned businesses, helping them position their companies for strategic growth. Charting the course for impactful, sustainable, profitable businesses, the beacon is control: of your strategic direction, your money, your time, your staffing, and your ability to bring in business. The Block Group brings together the people, resources and ideas that build results.

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