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Costs and Benefits of Opening Multiple Locations
Determine if you and your business are ready for the next level

There’s no denying that starting your own business is difficult, but once you get the ball rolling and you establish yourself in your market, things settle into a successful routine. Once your business has one thriving location, it can be tempting to open up a second location, especially if you are in retail or food service and your customers routinely fill the space to capacity. Before you sign another lease, however, consider the costs and benefits of adding on to your business empire.

Benefit: Opportunity to reach more people

Depending on what kind of business you operate, opening a new location will give you an opportunity to reach more people previously outside the physical range of your business. In the case of service businesses, a new location can expand your coverage map or make working with you more convenient for customers. For retail locations, a new storefront gives you a way to become part of a large shopping district or to charm residents of the latest up-and-coming neighborhood. Before you make a final location decision, cautions you to do the same market research you conducted before you opened your first storefront, making sure that these new areas have the interest and the customers to support your enterprise.

Cost: Two locations of expenses

As you consider growing your business, remember that adding a new location will mean new bills. This refers to things like rent and utilities as well as staff. You might be managing your current place by yourself, but a new store will require its own set of managers to take charge. QuickBooks points out that staff need an on-site manager to help them reach their full potential and perform the tasks that need to be done to ensure a successful business. You might think that you can easily manage both stores yourself, but since each store has its own sets of challenges and opportunities, it’s best to have management in-house at both locations.

Benefit: Shared costs

While costs for employees and utilities will go up considerably with a second location, some of your other costs may stay fairly constant or even drop. For instance, if you own retail or dining businesses, you might be able to negotiate a lower price per unit because you are buying more products to fill two locations. Sam Ashe-Edmunds of the Houston Chronicle recommends reaching out to vendors for cable, internet or office supplies to see if you are eligible for a bulk discount. If your two locations are in the same general marketing area, it’s possible that they can also share marketing costs to bring in new customers without launching a new ad campaign.

In the end, it is up to you, the business owner, to make the decision about adding a second location. If you study what made your business a success and you’re confident that you can replicate that success somewhere else, it is a possibility worth exploring. As always, it is best to discuss any major business expansions with your accountant or financial manger to be sure the numbers add up.

Published by East Boston Savings Bank
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All content contained in this newsletter is for informational purposes only and should not be relied upon to make any financial, accounting, tax, legal or other related decisions. Each person must consider his or her objectives, risk tolerances and level of comfort when making financial decisions and should consult a competent professional advisor prior to making any such decisions. Any opinions expressed through the content in this newsletter are the opinions of the particular author only.  

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