The first thing I will tell you is that expanding is scary. Are your systems good enough to handle more locations? Are you good enough? Obviously, you’ve had success up to this point, which is why you got the knucklehead idea to expand. But, once you do it, you’re in this new market and reality has set in (along with the onslaught of bills, which always seem to outpace the income), it’s easy to wonder if you are up to the challenge. Chip Averwater, in his excellent book, “Retail Truths,” writes, “Multiple stores are a separate skill set.” That is absolutely true. In our case, our rapid expansion showed that not only were our systems not up to the task, but, to be honest, neither was I. Both things had to be improved, and quickly.
Your business becomes more ‘corporate’ and less local.
The other thing that happens is that your little, local business is now considered a “chain,” and it’s tough to keep that local feel. There was a time when it was a benefit to have your customers think of you as a large chain. However, it seems that that time passed immediately after I purchased my second store. To counteract a “corporate” feel, I’ve generally kept the names of the stores that I’ve acquired, and I work to get each one to operate on the front lines as a local store. The back office stuff is shared corporately, but, in most senses, I want people to think of my store in their market as their “local” store.
Building culture and managing people is much harder when you aren’t on site.
You created a great local business with your hard work, time and passion. You were there every day when the business needed you. You lived, breathed and bled for its success. And all those things take time. But, once you have two locations, you quickly find that it’s very difficult to be in two places at once. The culture you built at your original location, which now makes it operate like a well-oiled machine, making things happen so easily, is hard to implement at the new location. And, you’re apt to grossly underestimate how long it took to actually build that culture in the first place.
People Centric Consulting, a firm based in Springfield MO, says that your systems create your culture. Seeing as how multiple locations represent a stress test for your systems, you can see how it substantially influences your culture. By using tools like Google Apps for Business (including Gmail, Calendar, Hangouts, etc.), we’ve been able to improve communication. And, with the video-sharing capabilities of Google Hangouts or Appear.in, where you can have multiple people on the same video conference, you can be in multiple places at the same time! A good point of sale system—we use Tri-Technical Systems’ AIMsi—can also help with inventory control and accounting functions.
Ninety-nine problems, and cash flow is a big one!
Often, the new locations don’t have good cash flow (or aren’t profitable) right away, thus causing a cash drain. This then creates burdens across the entire company while you try to improve the situation at the new store. You must have some capital reserves to weather the storm, as well as a proven plan to get you back in the black. Knowing exactly where you make your profits is critical.
You aren’t just buying their assets; you’re also buying their mistakes….
If you decide to expand by purchasing another store (my preferred method), you aren’t just purchasing its inventory and assets; you are also buying its mistakes. Inventory mistakes, location mistakes, design mistakes, customer mistakes, etc. Although a motivated seller that is in a cash-rich position might be able to give you a discount or agreeable financing to help make up for those problems, most times, they aren’t. You have to get them out of the business, and get yourself in at a price you can justify. And, although you always try to find those mistakes during your due-diligence investigation, inevitably, there are things that you couldn’t have seen.
You’re completely dependent on your people.
You are more reliant than ever on the people who run your remote locations. With one location, you know how to do every job, and you can fill in at a moment’s notice if needed. But, with multiple locations, you will quickly learn that that isn’t feasible. That fact will quickly expose how inadequate your training and hiring procedures truly are. Plus, you have to make sure that your staff feels appreciated. Trust me when I say that, as a whole, you need them more than they need you.
New competition tries tactics that you’ve never seen.
You’ve licked all the competition at your main location, and you think you are pretty smart. Then, you step into a new market and find out there are some smart cookies out there, and they aren’t going to let you walk in and just take away their market share. And, although some of the things you’ve done in the past will work in the new market, you will find that some won’t. The fun is discovering which is which.
‘Not because they are easy, but because they are hard.’
So, if it’s so difficult and scary, then why do it? The reward of an increased income certainly is a big reason; for me, though, half of it is enjoying the thrill of the risk and taking the challenge! I’m not too keen on jumping out of airplanes or cliff diving, but opening new stores and expanding into new markets, even with the steady mix of failures and successes, is exhilarating. And I’ve learned so much from the new friends I’ve made that it’s hard to imagine my life without them. At some point, I will be rewarded with fame and fortune for my accomplishments, right? Right?