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Weighing the Costs of Opening a Second Store
Deciding if it’s the right time to expand

If you’re an entrepreneur who’s worked hard to build a flourishing business, it may be tempting to open a second location in hopes of serving more clients and earning more profit. However, the process of opening and maintaining a second brick-and-mortar can add a wealth of complications to running your operation. Here’s a look at a few factors to consider before you take the plunge.

Consider your first location

Before you shop around for a new space to rent, consider the age, growth curve, and state of your current location. According to business consultant Lisa Starr, if your business is under three years old, it’s hard to judge whether its growth curve will be sustainable or indicative of your second location’s success. Starr also suggests looking at your current lease. If you’re coming up on the end of your lease, is it possible that your lease won’t be renewed? If you were forced to relocate your first location, could you handle the time, energy, and financial cost of managing your fledgling second store? If not, it may be a good idea to hold steady and continue strengthening your first location until a better time for growth arises.

Location is everything

Your second brick-and-mortar’s fate is heavily tied to its location. If your new store is too close to your first shop, the second location could leech business away. To ensure that both locations have plenty of room to attract customers and grow, Starr suggests drawing a 10-mile-radius circle around your current location, and scouting for a second location outside of that bubble. It’s also important to consider whether your second store is conveniently located in an area that’s accessible to your target demographic.

How long will it take to break even?

After you’ve signed on the dotted line for the lease, hired and trained new employees, and promoted your new store, you may be serving customers and receiving cash — but that doesn’t mean your new location is profitable yet. Startup costs are sizable for a second store, so consider how long it will take your shop to break even. In most cases, the profits and savings from the first store will go to support the second one until the newer location can support itself. Entrepreneur contributor Thomas Smale recommends having a backup plan in place if your second shop doesn’t break even as soon as projected due to slow growth or unforeseen economic circumstances. Consider seeking out additional financing to make sure your second store can stay afloat, but be aware of how much debt you’re taking on.

Alternatives to a second location

Instead of opening a second location to grow your enterprise, Starr suggests that you consider the goals you have for your second location and see whether you could accomplish those goals with your first location. If you’re looking for higher profits, you may be able to achieve this with a slight price hike on your best-selling products or services. You could also boost profits through expanding your operating hours, optimizing the way you schedule staff, or managing clients more efficiently.

Opening a second store could reap significant rewards, but it comes with a fair share of risks. Before you change the way you do business, hash out your ideas with your business partner or a professional consultant.


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