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What to Keep in Mind When Opening a New Business Location

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It’s estimated that nearly 7 out of 10 businesses will fail in ten years. If you’re in the position to even be thinking about opening a second location then congratulations. But it’s about twice as difficult to open a second location than it was your first.

With so many local factors at play, opening a second location all depends on your brand. For some businesses, it’s just the evolution of their model, while it’s cataclysmic for others. That’s why early stage testing and trial runs are so important to conduct before you entirely lose out on your investment. Before even getting there, here are five factors to consider before opening a second business location.

Local Market

Research is everything and location obviously plays an important factor in determining how you will reach customers and what labor you are looking to acquire.

Consider these factors that will affect your local market:
How much foot traffic does your current business receive?
How accessible will a second location be to commuters and major population centers?
What percentage of your budget do you allocate to offline marketing in your current area?
What are the demographics of the customer base you’ll be marketing toward?
How far away will your second location be from the first?

Ideally, your second location should fit your brand. If you’re a hip, thrift store then a second location in a downtown location or near a college would make sense.

Be sure to visit your target locations and ask business leaders and community members for feedback to get a feel for how well your brand will fit into the area.


Equally important to your customers is your workers. You need to conduct demographic research to see what you are looking for in management, as well as part time labor at your new store.

Will you pay to relocate current employees to a new location? What are housing prices like for target areas? Charleston real estate may be cheap and a great city for tech startups, but how does it compare to a larger metropolis like Austin. These factors will not only affect who you can hire, but how much you’ll need to pay to sustain the living cost of employees in a specific area.

Most importantly, you need to decide who will run the new location. Research does indicate that hiring within typically produces better results then outsourcing, but experience becomes a big factor.

Cash Flow

Of course, you need to figure out if you really have the right resources to support such an expensive move. A lack of cash flow remains the number one reason businesses fail, so you need to assess whether you’re profitable enough to justify a second location. Be sure to write up a business plan that can account for the massive cost it will take to sustain a second location after opening. Generally, this will be unprofitable in the short-term.


As entrepreneurs, most of us are aware of the hoops we must jump through to even open up our startup. So why not go through it again?

You need to be aware of local and state regulations, especially if moving across state lines. This also presents complex taxation issues, which makes hiring a good accountant pertinent to your operation.

Beyond this, you’ll need to stay up to date on permits, licences, and other compliance measures that are sure to be a thorn in your side.

Of course, you can use this an opportunity to find localities that actively support business growth through grants or tax free jurisdictions. Your business will be reluctant to open a second location in a city with a higher tax bracket.

What Time is the Right Time?

Once you have evaluated most of these factors, it’s time to decide whether now is the right time or not. Does your business plan and model justify this move or do you think it’s simply an opportunity to good to pass up? Just because you have two stores does not mean you will double your profit. In some cases, it could end up raising your costs or it could give your brand the one step it needed to become established and disruptive.

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