Opening a second location for your business is an extremely exciting time. That being said, there are also numerous factors to consider before you sign a lease. It’s important to make sure you think through the following points before opening a second location to ensure no mishaps arise.
Cash Flow
The number one factor to consider is your cash flow and if it can support two locations for your business. Opening a second location is an accomplishment, but it’s important to consider the factors that will keep your business afloat. Instead of jumping into a second location early in your business, aim for slow and steady growth. Manage your growth so it is sustainable long term.
Location
Many businesses depend on walk-in traffic. When considering where to open your second location, consider if the area has high foot traffic. Be aware of your surroundings and what's driving that walk-in traffic and what could affect it. It’s important to also be mindful if walk-in traffic is essential to your business.
For an example, if you own a restaurant that is located next to a very busy popular restaurant and you always get the overflow customers, then suddenly, they go out of business, your business will also be affected. There won’t be the same amount of people going to that location anymore.
Outgrowing
Working in-office isn’t as common as it used to be. However, there are some offices that are still outgrowing their space. If you feel that your business is outgrowing the space, consider if all your staff need to, or want to work in-house. For an example, if your business has space for 20 employees, consider if you actually have to provide physical seats for all 20 of them to be in-office at the same time.
Another reason you may outgrow your space is because of the COVID restrictions. If you have the cash flow to support it, opening another location can support you in socially distancing your employees.
Rental Prices
Additionally, due to the current global climate, rent is comparatively low. It’s important to be mindful that even though rent is low, that you still need to have the historical revenue to justify opening a second location. If COVID has negatively affected your business, opening a second location to take advantage of low rent prices is likely not a sustainable option. Many businesses that opened a second location are still struggling and applying for loans to stay afloat.
Negotiating Leases
Given that rent prices are low and businesses are closing, it gives business owners the opportunity to negotiate their lease for their second location. You are able to get good deals on spaces because landlords are willing to negotiate right now as they would rather have someone rent the space than leave it unoccupied. Make sure you're outsourcing negotiations to people that are professionals and educated in real estate to make sure you're getting the best deal and you're not overpaying.
Some questions to consider are:
Will this new location bring in the required amount of revenue?
Do you have historical revenue to support the additional rent?
If you get this space, will your business be this busy after opening? Or is it just temporary?
Should you take this year to focus on recovery instead of expansion?
It’s crucial to take the time to fully consider all your options before opening a second location. Although it can be exciting, it’s a large business decision and investment.
