New Business Location Checklist
May 21, 2019 | Tools & Tips
Expanding your business to a new location can be a lucrative growth opportunity, but there are risks and costs associated with opening a new store. Here is a checklist to help ensure your new business location is a success.
Considerations Before Opening a New Business Location
1. Develop and Document Solid Processes and Procedures: Does your business operate smoothly without you? If the answer is no, you’re probably not ready to expand. The ability for your team members to duplicate what you are currently doing in another location without your physical presence or explicit instruction is critical to its success.
Look to see if your business runs well even if you are not there. Do customers insist on working directly with you or are your employees able to handle daily operations? This will give you a good idea if you are ready to expand to a second location.
2. Communication is Key: How is current communication within your team? Take into consideration any communication issues you have now and evaluate how those might increase with the addition of a new location.
As you assess your communication structure, use it as an opportunity to make improvements. If you see holes, work toward solutions now so that when you are ready to expand, these issues are resolved.
3. Identify a Suitable Location: Work with a commercial real estate broker — preferably one that specializes in representing tenants and who knows the local market you are considering entering and can share demographic information to ensure there is significant overlap with your target customer. The broker can also help you negotiate your lease.
4. Count the Costs: As you make plans, take into consideration business expansion costs. There will be expenses like moving costs, new office furniture, office supplies, additional rent or mortgage, a business insurance policy change (which means increased premiums), potential local licensing fees and state taxes, new hires, training, and extra inventory, just to name a few.
5. Track Your Expenses: Keep great records of what you invest in your new location so that you will be able to write off many of the expenses during tax time. Share your expansion plans and expense records with your accountant early in the process so they can guide you through maximizing the tax benefits of investing in your new location.
In addition to the actual costs of building out your new unit, some of the initial expenses that you incur as you scout a new location may also be tax deductible, such as surveys, market studies, and consultant fees. Use apps like Freshbooks, Big Time, Accelo, and Replicon to keep excellent records.
6. Define Your Culture: In other words, don’t depend solely on new hires to set the tone for how your new location will operate. Of course, you will have to hire new people to help run the business, but don’t forget that they don’t know the culture of your business yet.
Be sure to bring along people who have been with your company long enough to understand the culture themselves, so that they can train and mentor the new hires. Not only will this help alleviate pressure on new team members and allow them to get a better understanding of how your business runs, but it will help set them up to operate successfully and independently in the long-term.
7. Stay True to Your Customer: The most important thing to remember is your customer. As you begin moving forward with your plans to expand, don’t forget that creating an excellent customer experience is crucial for your company. You want them to enjoy the time they spend interacting with your business so that they become repeat buyers, recommend your business to friends, and write great online reviews.
8. Market Research: Doing due diligence will help you discover if the location you are considering is really a good spot. Back it up with hard data. Consider hiring a location consultant who will help you analyze local competition and demand trends.
Taking a look at the competition and evaluating how it is doing will help you know if entering a specific location is a good move. Is the market saturated already or does this move make sense in your business expansion strategy?
Useful Resources During Market Research:
- County and City Handbook: These handbooks have important data about the education, employment, housing, and income trends of the local population, as well as other useful information.
- Focus Groups and Surveys: By hearing directly from prospective customers, these activities can help you uncover specific information about your products or services, including the features your customers value most. The purpose of this exercise is to understand how the local population will receive your product.
- Census Bureau: This provides information on local industry statistics, including sales figures and buying trends. This data also includes survey reports about different economic sectors that can help you understand the latest trends in your industry.
Promotional Tools to Create a Strong Impact on the Local Market
Once you decide to move ahead with opening a new location, you’ll need to make sure to spread the word around the community. A couple ways to do this are:
- Grand Opening: Advertise the grand opening of your new location and provide extra incentives on the first day. This will be an opportunity for you to introduce your product or service to the local population. The first impression you make on your target market will last for a long time. If you begin well, it can set you up for repeat business, which can turn into increased profits.
- Stay Active in the Local Community: Expanding into new geographical locations is not just about increasing your sales, but it is also about building relationships with the local community. Start supporting community events and publish details on your website and social media pages.
Measuring the Performance of Your New Location
After your location is open and customers are aware that you exist, it is important to measure your performance in the new geographic area. Your key performance indicators could include sales volume, market share, and profitability. As you measure your business performance, you should identify areas of improvement and analyze changing trends in the new market.
You can find useful research through:
- Portfolio Tracking Reports: You should have a tracking mechanism in place to view your sales trends and figure out your revenue and expense numbers by product line. This will also help in preparing future forecasts for your business. These reports are often available from within your accounting system and can be customized to meet your specific needs.
- Customer Satisfaction Survey: Customer feedback is an important tool for understanding how your target market perceives your product or service. It also helps you identify areas of improvement and notice any change in trends, such as buying habits or product preferences. A popular measure for customer satisfaction is Net Promoter Score (NPS), which is a method of determining what percentage of your customers would recommend your service to a friend.
Lastly, Consider an eCommerce Expansion
If your business expansion budget is too small to support a physical location, another option to grow your business could be to increase your online presence. Businesses are flocking to eCommerce because it’s a much more inexpensive way to expand without the overhead of a new location.
You can add limitless products online, sell all over the world, and reach a huge audience through online ads and search engine keywords. There are various ways to create your storefront through platforms like Shopify, WordPress, and Squarespace. These storefronts are user-friendly and help create a great customer experience.
Even if you’re planning to expand to a brick-and-mortar location, considering the eCommerce option is wise for product and service-based businesses. It allows you to create passive income as shoppers can purchase at all hours of the day, rather than only during business hours.
Regardless of how you decide to move forward, there are many business expansion advantages. Yes, it does mean taking some risks, but it also has the potential for great financial reward.