As we celebrate our 150th anniversary this year, it’s rewarding to look back and reflect on the local businesses we’ve partnered with as they grew and expanded into thriving organizations. Take Brookfield Cleaners and Tailors, a dry cleaning business that was founded in Connecticut in 1991 by Angelo DaCunha. We’ve been Angelo’s banking and financial partner for the past 30 years as he grew his facility from 1,700 square feet to 5,000 square feet and expanded his services beyond dry cleaning to include custom tailoring, gown preservation, tuxedo rentals and a men’s shop.
Angelo successfully navigated that daunting question every business owner ponders (usually late at night) at some point in their company’s lifecycle: should I expand? Deciding to open a second (or third, or tenth) location can make or break a business, and there are many variables that should be taken into consideration. Here are three tips to guide your own late-night ponderings.
1.Treat a second location as if it’s a stand-alone business
When your business is performing well, it’s tempting to think that what worked for your first location can simply be repeated for the opening of a second location. However, many businesses operate in the red for the first couple of years, and the same can happen after an expansion. You’ll need a complete business plan that treats a new location like an entirely separate entity. Having a sound plan in place will help you secure a funding source through your banking and financial partners so you don’t have to rely solely on your cashflow and profits to open the doors to that new location or facility.
In addition to securing funding, developing a full business plan will ensure that you identify all the roadblocks you may encounter running a second location. For example, if your dream space sits on a state border then you may have to adjust certain practices to comply with entirely different taxes and laws. You’ll also have to conduct thorough market research to ensure you’re fulfilling a need in the community that will drive business to your new location. That new strip mall in your neighboring town may be calling your name, but make sure you’ve scoped out any competitive businesses before you sign the lease.
2.Prepare your staff for success
Small businesses thrive on customer loyalty, so it’s critical that a new location provide the same authentic experience that drove success at your original location. If your current success is a result of customers wanting to do business with you personally, then it will be difficult to achieve similar results in a second location. After all, you can’t be in two places at once to nurture clientele relationships.
However, if your customer experience is the result of a team effort from your staff, then you can take steps to transport that culture through employee training. Once you’ve identified who will manage the day-to-day operations of your new location, you’ll have to decide whether to split up your current staff or work from the ground up to build a second team. If you go with the former route, then you can trust your seasoned employees to bring the rookies up to speed on what makes your business special. If you go with the latter route, then you should consider bringing in your new employees to shadow your current staff for a few days and learn the ropes.
3.Consider alternatives to a brick-and-mortar location
If your business is selling goods and your first store or boutique is booming, you may be anxious to introduce your products in another town. However, the better path may be to expand into e-commerce by building a website (or enhancing your existing one) to reach customers beyond your community. Let’s face it, traditional storefronts large and small are having a tough time and customers prefer the ease and convenience of shopping online.
One of the upsides to expanding into online retail rather than a physical location is that the costs are much more manageable. If a brick-and-mortar store doesn’t take off, then you’ll be left with double the expenses you’re used to dealing with as a business, including everything from a new lease to equipment rentals and payroll. There’s less risk involved with moving into e-commerce, and better yet, it could be the additional revenue stream that you need to establish a new physical location.
There’s a lot to consider when faced with the prospect of expansion, but success can turn your business into a pillar of the community providing goods, services and much-needed jobs for years to come. Our own team has gone through this process with every branch we’ve open across Connecticut during the past 150 years, and we’re ready to help you do the same.
Written by Paul Bruce
Executive Vice President and Chief Financial Officer, Union Savings Bank