Question: I”m thinking of opening another location. What are the most important considerations to keep in mind before taking this big step?
In my previous post, I recommended taking a long hard look at your business ― well before taking the plunge to open a second business location.
After your self-assessment, if you can honestly answer that your business is built on systems ― that your business would function efficiently and effectively without you being there — then, in my opinion, you are ready to seriously consider opening a second business place. In this post, I’ll cover some of themust-have elements to successful expansion and the benefits of running a multi-location business.
Based on historical information, owners opening another business location must lay out a very detailed business plan
I sit on a board of directors for CDR (Community Development Resources) and for the SBA … and I am still shocked at how many small businesses apply for a loan and do NOT have a business plan. The same is true with most martial arts schools and fitness businesses … they have an idea but not a true business plan. Some put together detailed class plans and curriculum, but then leave the business to chance. You can still have a profitable (though not maximized) operation in this way, but it will definitely be built around you, not the system or a plan, and this can be even more dangerous as it leads to false assumptions and beliefs.
As part of the business plan, the owners must carefully consider the actual budget
A unique benefit to opening multiple locations in a surrounding area is the concept of cost sharing. For example, two locations that are somewhat close to one another can share:
• Advertising expenses
• Operational staff expenses (some duties can be handled by the same staff for both locations)
• Event and seminar expenses
• Insurance expenses
• Inventory expenses
• Legal expenses
• Accounting expenses
• And more
Of course, some of these areas depend on the actual ownership and business structure so be sure to check with your CPA and attorney in planning this process.
If the locations are not in a close proximity to share some of these expenses, the second location can still benefit from the historical data and records of the first in the business plan. Additionally, the first location can serve as a source for more staff, instructors, and support for the second location. Take advantage of what you know from your first location to provide for a very realistic and accurate plan for your new facility and location. The more planning and preparation that goes into the second location, the greater your chances of success will be.
The final area I will mention is the idea of capital. Though there are some cost savings in shared expenses and efficiencies we have developed through experience (also known as making costly mistakes in our past), we all get the idea that we will be able to do our next location “cheaper.” This is good in theory, but it rarely happens.
We need to be sure we have enough capital up front to really make things happen
Lease space, utilities, build-out, advertising costs and other expenses are always on the rise. These areas offset many of the savings.
I opened my first part-time club in 1994 and my first full-time “school” in 1997. The cost comparison to my more recent openings or moving facilities to new locations is an increase of about 3-5 TIMES the amount it cost before! Then consider the potential cost of employee turnover which generally has a greater risk of occurrence with multiple locations.
Ask yourself what roles must be filled to make that new location fully functional. If you put a key person into a role at the new facility and that person quits, do you have a contingency plan? These can be alarmingly large costs of doing business, so I would generally recommend that once you figure your capital needs to make the second location happen, double it, or at least raise it by 50% because experience in multiple industries shows that this is generally the reality. This is not a negative thing, but rather a positive because when you are fully prepared for a new location and have the capital you need, you can fire off the marketing campaigns you need and do the things necessary to make it successful versus cutting corners and hoping that you somehow make it.
In summary, plan for the worst, budget for the worst, realize you will not likely be doubling your profits, and then get ready for a lot of work to make your next location a real success story
I say these things not to be “Mr. Doom and Gloom,” but mainly because I know that when you prepare properly, you come out the other end a lot better off and can avoid stepping on the land mines that destroy all the hard work we have put in to get to where we are now.
Some people imagine becoming Black Belts and that when they are Black Belts they will be able to fight off one, and maybe even multiple attackers and never even get hit! Reality says that in a fight you are going to get hit, and it’s those of us who are prepared to deal with the hits and keep fighting who make it through. Business is much the same way. We are all going to take hits, we just need to be prepared and train our people to win whether it’s a fight or a sale or the grand opening of your next location!
One of my favorite quotes I will leave you with is from Rocky:
“The world ain”t all sunshine and rainbows. It is a very mean and nasty place and it will beat you to your knees and keep you there permanently if you let it. You, me, or nobody is gonna hit as hard as life. But it ain”t how hard you hit; it”s about how hard you can get hit, and keep moving forward. How much you can take, and keep moving forward. That”s how winning is done. Now, if you know what you”re worth, then go out and get what you’2013-10-17 18:50:44’re worth. But you gotta be willing to take the hit, and not pointing fingers saying you ain”t where you are because of him, or her, or anybody. Cowards do that and that ain”t you. You”re better than that!”
Rocky Balboa Speaking to his son in Rocky Balboa (2006)
About the author: Jeff Dousharm began his martial arts training over 22 years ago with Senior Grand Master Bert Kollars, one of the founders of Tiger Rock Martial Arts International. He’s a 7th Degree Black Belt and a certified instructor in different programs ranging from Taekwondo to CDT. He currently operates seven Tiger Rock Academies in Nebraska and Florida, www.tigerrockmarialarts.com.
Jeff is also a member of the Member Solutions Business Advisory Team and owns several companies outside of the martial arts field including: Tomorrow”s Online Marketing (websites, SEO and online marketing), Paradigm Impact Group (speakers, professional development and business consulting), J. Victorian Development (commercial properties), Point Blank Tactical Safety and Firearms Training, and a few other startup companies being launched in 2012. He can be reached at JDousharm@windstream.net or Jeff@paradigmimpactgroup.com