What to consider when opening a 2nd business location

Although opening a second location for your business may not seem too complicated, expanding your business takes a lot of forethought and preparation. In some ways, it’s like starting a whole new business. If you’re evaluating this move yourself, make sure to ask yourself these questions before taking the leap:


1. Can you afford it?

Even if your first location is doing well, have you weighed the extra expenses that opening a second location requires? You’ll be footing the bills for more rent, more inventory and equipment, extra advertising to get the word out, payroll for your growing staff, insurance and licensing fees. The list goes on. Keep in mind that you’ll need to put all that cash up yourself, so make sure you’re doing well enough to afford big costs that probably won’t make returns for months. Expanding too far, especially to other cities, is one of the top three or four reasons why businesses fail, according to some sources. So, be careful not to overextend your funds. However, don’t forget that a business loan is always an option if you don’t have all that capital on hand, so long as you can prove, with a business plan and strong financials, that a second location will have a solid return on the investment.


2. What are the financial and legal implications?

You’ll find it useful for down the line if you keep the financials of each location separate. That way, you can monitor the successes and shortcomings of each spot independently to measure what’s working and what’s not. Also, make sure to follow all regulations regarding a second business location. Stay up to date on licenses, permits, workplace posters and all other regulations, too. Finally, you might need to change from a sole proprietorship to a corporation in order to open a second location (which would require you register for a different EIN). Make sure to research your area’s laws and consult an accountant or lawyer before expanding.


3. How is your current business doing?

Hopefully it goes without saying, but your business should be in a good place if you’re considering expansion. That means healthy sales, an overabundance of customers for your one location and a strong projected cash flow. If you’re running out of inventory, space or staff — and turning away customers who would otherwise be paying –that’s a good sign a second location could benefit you. And, importantly, will your first business continue to do well if you start pouring time, money and energy into a second location?


4. Have you researched the market?

You can’t ignore the possibility that at least a part of your current business’ success is due to its location. For example, maybe you’re right next to a few popular long-time hangouts or right off the busiest intersection. These factors could contribute more than you know. Plus, maybe your ideal second location has more competition or lower demand. And don’t forget about potentially different zoning regulations. The solution? Do some research. Visit the area, ask local store-owners and regular customers about their habits, take notes and learn about the competition. Consider the distance between your locations. If they’re too close, they might compete with each other. And there might not be enough demand. But if they’re too far from each other, you’ll spend time and money traveling. And running a business long-distance can be costly. It’s important to make sure that your second location keeps what’s special about your first one, too. What makes your loyal customers come back time and again? What sets your business apart? At the same time, your new location should reflect any differences in its neighbourhood.



We hope these tips have helped, and sending lots of luck to those opening another business location. Congrats!!


Thank you to Entrepreneur.