Blog:

Is your NZ business ready to open another location?

20 June 2018

Your business is growing fast, you're getting more and more customers and profits are rising. Perhaps it's time to open a second location. After all, it's a great way to expand, especially if you're at the stage where you're turning customers away because you can't meet demand. 

However, just because your first location is a success doesn't mean your second will be. There are significant risks with opening another store, and you must make sure your business is absolutely ready before you proceed.

If the answer is yes to the following three questions, your second location is much more likely to be a success.

1) Can your primary business survive?

Setting up shop at another location requires significant time, expense and energy. There's absolutely no point in opening another location if it sacrifices the success of your first business, so making sure it can survive without you is paramount.

Financials are obviously a key part of this. You need to have run a solid profit for a significant period of time (at least six months) and have positive cash flow that's projected to continue. When you do open your second location, it's a good idea to keep each business' financials separate so you can see the success of the individual stores more easily and make adjustments where necessary.

It's also important to ensure your staff are capable - they need to keep things running smoothly while you're away at the second location. 

If you're opening a location somewhere rural, you need to consider the longer delivery times and higher costs. Opening up a location in a rural area of New Zealand? Have you considered the extended delivery time and costs?

2) Have you done your research?

A careful balance of demographics, competition, local economy and a whole host of other factors have helped make your first store a success. The second store needs to have an equally beneficial mix of factors, and be far enough from your primary location that you're not competing with yourself. This requires you to do some research beforehand.

Find out basic information such as rental and licensing costs as well as tax or health and safety obligations. Talk to locals to find out whether there'll be a demand for your products, and take a look at potential competitors. 

You should also research delivery costs and times to your new location. It will take much longer for inventory to get delivered to New Zealand's more rural areas, especially if you import from overseas. 

3) Can you duplicate your business?

Think about all your systems and processes. Create manuals for everything - from your point of sale and warehouse management systems to processes for onboarding new staff and making a sale. If there's any element of the business that can't be duplicated or taught easily, this is a sign that a second location might not work as well as your first. 

Considering expansion? Want to find more opportunities for growth? Our BDODrive service will assess exactly where your business is at today, in order to find out how you can move forward tomorrow.

For more information, reach out to our business advisory team today.