Adding a second (or third) office to your business delivers a lot of benefits: a more expansive service area, faster response times to customer calls, value added to your original business – there are a lot of good reasons to open a remote business site, but before you do…

…do the math, weigh contingencies and look for less expensive, less intrusive solutions to your operations. And ask lots and lots of questions.

When is it time to open a satellite office? Ask yourself a few basic questions.

1. Did you find the ideal location? Certainly external factors must be considered when weighing business expansion options. One of these factors is “location, location, location.” Before purchasing or leasing a property, conduct thorough research to make sure the location is right for you: volume of street traffic, proximity to competitors, ease of access and parking, and many other factors. Also consider real estate costs and lease rates. A business banker with experience in commercial real estate can be a valuable resource in helping you make an informed decision.

2. Are you the business? Many small businesses are companies with you, the owner, and a few support personnel. If the success of your business depends on people meeting with you face-to-face, you can’t be in two places at once. Scheduling customer or client meetings becomes troublesome, and you’re on the road between locations a lot more.

For example, if you’re an attorney or a Certified Financial Planner, your clients want to talk to you personally. They want your advice. If you have an office cleaning business, maybe you can’t find a good team leader to manage the additional work. If the business grinds to a halt when “the cat’s away…” rethink a satellite office.

3. Have you added up the costs? Sure, you want another location. However, you may not need the additional expense of running a second office. Be sure to add up the capital outlay:

  • Monthly rent, or additional mortgage outgo if you buy;
  • New fixtures – furniture, carpeting, manufacturing equipment, new signage, and so on;
  • More employees, meaning a bigger payroll and more demands on your time;
  • The competition is another factor; is there already a similar business with a well-established and loyal customer base?
  • Additional business overhead, including business insurance coverage on your new place, maintenance costs, utilities, communications between your office or business locations;
  • Higher advertising costs as you drive traffic to two different locations in two different areas.

Before you take the plunge, determine if a branch will drown your business with additional expenses. Remember, your branch office will drain business finances in the beginning. Make sure your headquarters location is stable and growing nicely before expanding.

4. Can you share operational systems? If you open a branch, chances are, you’ll still handle payroll through your bank, or handle it in-house to save. You probably won’t need a separate payroll department in your new space. You will need employees, telephones, data, a secure means of transmitting information, and other tools to take your new location grow faster.

Determine which business functions could be handled with current staff and which require new staff (and new overhead).

5. Can you maintain levels of quality? Maybe you’re a medical professional weighing the pros and cons of a satellite office. Your practice has grown smartly and you expect that to continue. However, if patients want to see you – the medical practice owner – in your main office, they may not appreciate being put on the back burner.

This is true for any business whose clients have come to expect a certain level of quality from you and your team. If quality drops when you open a satellite office, your reputation will suffer, and you stand to lose a lot of money from both locations.

6. Are there other ways to expand? Before you lease a new location, ask yourself if there’s a better, less risky way to add value to your business. You may be able to generate more business at your current location by hiring more people or outsourcing jobs to independent contractors working offsite. You could expand your product offerings or extend your hours of operation. Consider all the alternatives before deciding to take the plunge.

If the answer is yes… After you have completed your research, consulted the experts, and decided that expanding makes sense for your company, call your business banker to discuss financing your expansion plans. Financing can make or break any arrangement, and you want to make sure you have the rate and terms you need to make your expansion “pencil out.” Once financing is in place, you can confidently follow your plan to grow your business.

 


The information provided is presented for general informational purposes only and does not constitute tax, legal or business advice. Any views expressed in this article may not necessarily be those of Nevada State Bank, a division of ZB, N.A.