Considering a second location for your Business?
Growing your business is your number one priority. Business owners spend lots of time thinking about the next big move to keep growing. Expanding to a second location, on the surface, seems like a sure fire way to get more business. But before you expand do some careful analysis.
First, if your business has reached or is nearing the point when location expansion is a consideration, congratulations. But use caution. You’ve clearly done a great job with growth, but that doesn’t necessarily mean you’re ready to expand. Here are a few points to keep in mind.
Make sure you have the right ingredients for success
Among the most fundamental questions to ask is: Can we duplicate the success of our current location? If your first location is doing well, it’s likely because you’ve put the people and processes in place to keep the business running smoothly. It’s also because you’ve developed a culture that resonates with your customers. You need to feel confident you can do the same at subsequent locations.
Another important question is: How might expansion affect business at both locations? Ideally, the two locations will have strong, independent markets. So be careful to design your second location in a market that will not compete with the first. Placing the two operations near each other can make it easier to manage both, but it also can lead to one operation cannibalizing the other.
Finances and taxes
Of course, you’ll also need to consider the financial aspects. Look at how you’re going to fund the expansion. Ideally, the first location will generate enough revenue so that it can both sustain itself and help fund the second. But it’s not uncommon for construction costs and timelines to exceed initial projections. You’ll want to include some extra dollars in your budget for delays or surprises. If you have to starve your first location of capital to fund the second, you’ll risk the success of both.
It’s important to account for the tax ramifications as well. Property taxes on two locations will affect your cash flow and bottom line. You may be able to cut your tax bill with various tax breaks or by placing the second location in an Enterprise Zone. But, naturally, the location will need to make sense from a business perspective. There may be other tax issues as well — particularly if you’re crossing state lines.
A significant step
Opening another location is a significant step, to say the least. Ciuni & Panichi professionals have been helping businesses achieve their definition of success for more than 45 years. We welcome an opportunity to help you. Contact Brett Benjamin, CPA, Audit and Accounting Services Department Manager, at 216-831-7171 or by email here, to learn more about how we can help your business.
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