7 Factors to Consider Before Opening a New Business Location


After years of hard work spent developing your business, you’re finally ready to expand your empire. And what better way to do so than expanding to a new location?

Whether you’re opening your second or 22nd location, the goal is to gradually increase your profits, garner a larger customer base, and become the go-to authority in your industry. But expanding your domain and opening new branches can have the exact opposite effect if you’re not prepared. Before letting your ambition and excitement take over, you need to conduct ample research and financial planning. Deciding to expand your business—even if you already have multiple locations—should involve thorough consideration of these seven factors.

1. Market Research

Market research should be the first item on your checklist. It’s how you make sure you have a client-base to buy your products or services. Before you open in a new location, you need detailed market research reports to determine whether the population fits your ideal buyer persona. The same applies to expanding your already-existing establishment, as you might’ve exhausted the market resources of your current area.

2. Location-specific Expenses and Economic Factors

Opening a new location requires capital, and where you decide to plant the new branch of your business will dictate the cost. Factors like rent and real estate rates, utility expenses, and material costs can vary dramatically, even within the same state or region.

You also need to consider the average income for workers in the area. After all, this affects both the median salary you’d have to pay new employees, as well as the purchasing power of the area’s residents.

3. Legal Implications

While there might not be much of a difference in legal requirements if you open a branch down the street, moving to a different state is a whole other story. States have different laws concerning workers’ rights, taxes, and safety regulations, to name a few. By studying the legal implication of opening a new branch in a specific location, you can predict and prepare for possible changes in regulations and any paperwork the state requires.

4. Insurance Costs

Even if you carbon-copied your store and opened it in a different location, the new store’s insurance needs would differ from the original. External factors influence the risks and liabilities that each business location faces. For example, property insurance rates correlate to the area’s crime rates, weather and natural disaster patterns, and proximity to emergency services.

If your business’s expansion crosses state lines, you’ll also have to deal with a completely different set of insurance laws. For example, commercial auto insurance minimums are set at the state, not the federal level. Similarly, different states have very different requirements and options for workers’ compensation insurance. In one state, you may be able to purchase a policy from a private insurer, but in another state, you may be legally obligated to get coverage through the state fund for workers comp insurance.

5. Management and Staffing

You, your managers, and your current staff can’t be in two places at once. Before opening a new branch, you need to find suitable employees to fill all the same positions at your new location.

While this step is relatively straightforward, it’s resource and time-consuming. You have to create and post job descriptions and interview multiple candidates for each role until you find the right one. When it comes to managerial positions, it can take a long time and energy to find and train someone you trust enough to run the location on their own.

6. Expanding Production and Inventory

The primary reason for opening a new branch is increasing your business’s revenue by providing more services or manufacturing and selling more products. To increase sales, you need to increase production and overall inventory.

You may be able to rely on your current facilities if they can meet the demand and focus your capital on storage and transportation. On the other hand, you may have to move or replicate production somewhere closer to your new location, incurring all new expenses.

7. Marketing Campaigns for the Expansion

Even before your new branch is ready to open its doors, you need to promote it and build up the hype. Advertising new locations with different demographics often requires unique marketing campaign strategies that appeal to the local population’s spending habits and interests.

Calculated Risks

Opening a new branch and expanding your business is hard work, and it isn’t guaranteed to pay off if you don’t make decisions based on market research and careful cost analysis. But if you do the groundwork and only take calculated risks, you could be well on your way to growing a regional or even national business empire.


Leave A Reply