When To Open A Second Location To Grow Your Small Business
Article by: Marcia Layton Turner for Forbes
“When you are completely booked solid, you have only two options: raise your rates or expand (or both!)” says Rachel Beider, licensed massage therapist and owner of Massage Williamsburg, in Brooklyn, NY. Beider’s solution to growing a small business was to add a second location in Brooklyn, named Massage Greenpoint.
“After raising our prices, we still had long waitlists of clients,” she explains, “and I knew that many were coming from the neighborhood just north of ours.” So Beider found real estate a little farther north from her original studio and opened her doors. Massage Greenpoint has been open now for six months and is continuing to grow. “It is the best investment that I’ve made,” she says.
Many business owners question whether it's time to open another location, wondering if they're creating new opportunities or spreading themselves too thin. While you can never know for certain before taking the leap, these entrepreneurs found that certain conditions were signs that the timing could be right.
For Beider, capacity was the factor that most impacted her decision to open another location – her first was fully booked. She was confident that opening a second location would in no way cannibalize her first, and would allow the business to continue to grow.
Opening a second location improved customer service, by making it possible for more clients to book appointments. Since many clients were traveling south to Williamsburg, opening a location closer to their homes and offices also improved customer satisfaction.
Establishing Growth Criteria
While Beider used the fact that her business was consistently full as a sign that it was time to expand, Jeff Shapiro, owner of Spindle Fitness, set specific milestones that his business needed to hit before the company would consider opening additional locations. While the company’s goal was to become a multi-location business, Shapiro first wanted to achieve a positive cash flow and have trained staff in place, ready to train others.
Reducing Shipping Times and Expenses
In contrast, OnlineLabels.com wasn’t having capacity issues – the company could produce labels quickly - the impediment to growth was shipping cost and speed, explains CEO Dave Carmany. “To ensure people all across the country received our labels on a timely basis without having to pay premium shipping rates, we looked into opening a second location.” Its original space in Florida yields quick shipping to East Coast customers but slower delivery to the West Coast.
Evaluating the Cost of Expansion
“When we calculated what it would take to create a second manufacturing facility, hire a new set of employees, and cover the additional overhead that comes with having two locations, the benefits didn’t offset the costs. While our volume was increasing, it wasn’t at a quick enough pace to justify such a substantial business move.” Instead, OnlineLabels turned to its shipping carriers to negotiate deals that would speed delivery at reduced costs. Carmany admits it’s not a permanent solution, but it “bought our company time.”
Attracting New Business
Once you’ve decided the time is right to open another location, begin to communicate frequently with your current and potential customer base to prime the pump for future sales. Beider kept her community informed about the build-out of the second location via social media. She also emailed current clients and prospects with an offer to try out the second location. Finally, she had postcards printed up with a new client discount that she left at local stores, yoga studios, gyms, and other complementary businesses to help attract more clients. And they did.
Marcia Layton Turner writes frequently for and about small business. She is the author of The Unofficial Guide to Starting a Small Business and many others.