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I'm interested in opening a second location. What do I need to run the new store?

First a bit of advice -- Is two stores one too many for your operation? Consider these factors carefully.

Two stores is twice the work for half the money – do the math.
Create a true business plan with breakeven analysis and worst-case scenario forecasts.
Make sure your accountant is involved regarding your cash flow and cash reserves versus monthly projections.

Specialty stores aren’t convenience stores or Starbucks. Adding a location in the same market area is not a viable business expansion for a specialty/destination store. The exception might be a seasonal second location that focuses on tourist traffic with limited employee and inventory requirements.

Here is some quotes from multi-store independent retailers who've been there, done that.

"If you aren’t doing $1M at your first location, there isn't a real good reason to open a second."
"If you don’t expect to do $1M at the second location within its own market area, there is a good chance it will be a drain upon the first store."

The average two-store expansion that doesn’t meet these financial goals, goes out of business within 3-5 years. In most cases both stores must close since store #2 drained all resources for the enterprise.

If you aren't diligent about managing problems with a single store business, it will only get worse with two locations. For example, if you don't manage physical inventories on a regular basis, monitor committed quantities and sales orders, enter price/cost corrections, etc. at your current store, practice basic merchandising -- these problems will multiply exponentially with the addition of another location. 

If you are dead set on forging ahead and potentially hurting your current business, make sure each location is incorporated separately so the fleet's flagship doesn’t sink when one boat goes down.

Just remember – There is plenty of hard evidence to back this up including comments from ex-retailers --

"If you feel stretched thin from taking care of one baby, try raising two kids and wait for the terrible twos."

"If you have ever robbed Peter to pay Paul (aka the "supplier shuffle") that juggling practice ain’t gonna work no more."

“I wish I’d listened to a financial advisor instead of my gut feeling to expand without a good business plan.”

Or worse case -- "Please cancel our support plan and software updates. We are closing all of our stores."

Still not convinced? Here's a quick research step to help you decide.
Run V.I.P. Zone from the desktop shortcut, click the Export tab, then the Zip Code histogram icon in upper right. Does your new store location fall into any zip codes shown? If yes, you are about to cannabalize your current store's sales.

Specialty stores are not c-stores nor should they act like one. Independent retailers are most successful as destination stores within a defined market region, not multiple stores within the same region.

If you are going to open another location, it should lie outside your current market area. In a densely populated area, that could be 30 minutes away. But in rural areas, an hour or more distant is more likely to succeed as long as it represents a new market area you are not currently serving. The population base should be as large as you are currently serving, or larger. In other words, if current customers don't mind traveling up to an hour to reach your "destination" store now, don't open a store to fill a gap that doesn't exist.

The power of two? That is not often the case. For example, every time you send an employee to pick-up or deliver products between stores, that is an employee not waiting on customers. You've added a distribution cost to your business for little or no gain. Unless the economy of scale justifies it, the expense simply means less net revenue at the end of the day.

If you meet the requirements above and understand the pitfalls, and the cash flow projections looks solid, and you are willing to take the plunge, here's what you'll need system-wise for the software components.

  • A POS lane license for each register station at the 2nd store ($1000+).
  • A Headquarters license to run at your corporate office or main store location ($3000+).
  • A comptroller position to manage multi-store operations using HQ Manager (an overseer for both locations who make decisions overall).
  • Someone responsible at each store location to manage day to day chores in Store Operations Manager and POS. 

Is there a low-budget alternative if you are just opening a small satellite store or seasonal location?

Option A: Run the second store separately as a 1 POS lane license ($1000+).
Option B: Add another POS lane and PC to main store location and remotely run the satellite store as Register X using GotoMyPC or LogMeIn from the second store.

Option A means maintaining separate inventories at each location (add new items, receive, transfer, etc., for each location).
Option B simply runs off one database and tracks sales for Register X as the second store's activity. Inventory by location is not supported other than by manual tabulation.

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  1. Dave J

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