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For entrepreneurs wanting to expand their businesses, do they know at which point expansion is justified?
Do you as a business owner/CEO consider opening multiple locations a viable business strategy? Or do you want to perfect your skills over time at your lone office?
Mentalities regarding growth models differ among strategic advisors, and there is no wrong decision when deciding whether to either run one location or multiply a similar model among multiple units. The ultimate criteria is whether or not you, the entrepreneur initiating the decision, have the criteria to succeed at either business model.
The Model for Multiple Business Units
If you as a business owner/CEO want to execute a growth model built around either the creation or acquisition of multiple locations, then you need to make sure of the following:
- The population and its growth prospects will facilitate your plans for the offices that you operate in.
While it’s true that the relationship between a business and customer is one built on trust and not easily severed, the majority of customers will (usually) live within a certain radius of a location. It’s essential to study the population at present and growth prospects that the municipality has for the area. One CEO took this one item literally and purchased a small business in a lightly developed area, knowing that infrastructure planning was happening in the area and eventually would result in an additional 50,000 household being built within a half kilometer radius within the next 5 years (ie: site development would begin within the next 5 years). Admittedly, it may take 15 years to se the full 50,000 households, but at least he’s positioned to gain from it and is seeing benefits already.
Competition of course is everywhere, but in our experience a new entrant does not necessary mean that business is split equally between all participants. The extent to which the office implements a comprehensive marketing plan and exposes it’s name among its existing customers will incubate it from the overtures of competitors. That plan has to be executed – it doesn’t have to be perfect. In fact, the lessons on how to make the marketing plan better for the market that you serve are only realized when you get out there and try your marketing ideas.
It may be vital to your growth strategy to built multiple units that focus on a specialty product/service, so that your marketing can be more specialized.
- Getting the Right Staff
When operating the multiple unit model, you as the CEO engage less in day to day operations, and delegate the operational tasks of running each location. Understand also, that you can’t be in more than one place at one time, but the computers at all the locations can be networked so that at least you can see what is happening at each location.
You need to find administrators for each office who feel that they have a vested interest in the success of the office. This may come in the form of bonuses based on established performance metrics and/or office production, or how well they’re able to keep expenses or receivables within a certain variable range.
You’ll have to find the right staff who can work independently and who function efficiently and effectively. Such staff and upper management personnel themselves probably have aspirations to eventually own their own businesses, so you may want to provide compensation packages that outweigh the extra work they’ll inevitably go through making their own businesses successful.
Above is but an abbreviated list of the criteria aspiring business owners need to consider if they want to open multiple locations. Business owners/CEO’s transitioning to a multiple business unit model need to change their thinking from one of exclusively start-up entrepreneur to one of business owner. For some, this may be impossible to do, but each business owner needs to assess their own likelihood of success by going with this type of business model.
If you’re a business owner/CEO, we welcome your insights at www.burgesskilpatrick.com or on any of our social sites:
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and let us know what you think.
Nicholas Kilpatrick is a partner at the accounting firm of Burgess Kilpatrick in Vancouver, B.C. He specializes in business development, and has worked with business owners to increase profitability at all stages of their businesses. He can be reached at firstname.lastname@example.org or at 604-327-9234.