How to Expand Your Business to New Locations

When you are ready to expand your business to new locations, you need to update your business plan, conduct market research, and more.

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As a business owner and entrepreneur, you might be asking yourself, When is the right time to expand my business? Expanding your business is exciting but also extremely difficult. You must perform your due diligence before taking the leap. You may not even know where to start.

Where do you begin?

Essentially, opening a second location for your business requires the same amount of planning that you did when you first started. You should know whether opening a new location for your business is feasible. Additionally, you must determine the best location for your business expansion. 

Which factors should you consider in deciding whether to expand your business?

You will have a lot to weigh when you ask yourself, Should I expand my small business? Some important considerations include:

  • The demographics of your proposed business;
  • How much foot traffic will enter your business;
  • Whether the location of your business is readily accessible in terms of parking, ease of access, and visibility;
  • The impact of zoning laws or ordinances on your new business;
  • Increased local and state taxes;
  • The necessity of obtaining the required permits and licenses to operate your new business; and
  • Whether the state and local government will offer you tax incentives to open a business.

Carefully examining these issues will help you determine where you should expand your business. Too many entrepreneurs rush to judgment and pick the wrong location for their business. Try to avoid that costly mistake.

Location, Location, Location

How do you know if the location you select supports business growth? Before you decide where you should move your business, you need to conduct market research. You need to know if the area you are considering will allow you to expand your customer base. You’ll want to understand whether the customers in your target market differ from your existing customers. You also need to know how your direct competitors are doing in the proposed market. Finally, consider the cost of advertising (among other expenses like rent, minimum wage, insurance, and fees). You may need to upgrade your marketing plan to capture the attention of your target audience.

Never underestimate the importance of cash flow when opening a second location

How much money will opening a new location cost? It may turn out that you can’t afford a new location. If your current location is performing well, you need to know whether it can support another location. If not, do you have access to financing? You could attract angel investors, get SBA financing, or obtain financing from a local bank or other lending institution.

Creating a forecast of expenses and revenue, based on realistic projections, should aid you when making your choice.

Another point to consider is whether either location could be without you. Since you can’t be in two places simultaneously, you need to know whether customers will deal only with you personally. You might ask yourself, Am I central to the growth of my business? If so, then you may have a hard time opening a second location. You will spend a lot of time getting your new place up and running. However, you can’t do that to the detriment of your primary location.

Updating your business plan will help you focus on your needs

The Small Business Administration (SBA) recommends that you create a business plan for your proposed location. You might need to update your plan from when you first opened your business. 

Writing out a detailed marketing plan will help you define your strategy closely. Additionally, you can plan how your business will grow by delineating your advertising plans, setting sales goals, and leveraging a competitive advantage. You should even detail which methods of payment you will accept.

You may encounter numerous legal hurdles before you can open your new location. Complying with your legal obligations is non-negotiable. 

Even opening your new store in the next town requires you to navigate a minefield of regulatory requirements. You need to know the zoning laws, licensing requirements, and permitting requirements of your new location. Additionally, you must comply with state and federal laws. 

Navigating the legal requirements is difficult and onerous, even if necessary. You will find that when you research the legal requirements for your area, the information you need is not contained within one source. That’s why ZenBusiness offers entrepreneurs our ZenBusiness license report service to assist with their research. We will create a customized report summarizing all the licensing and permit requirements you need to follow based on your location and type of business.

Opening Your Business in Another State

There are several formal steps you will need to complete before you can open your business in a new state.

Register Your Business

Opening your business in another state means you have to obtain a foreign entity qualification. Obtaining certification as a foreign entity requires filing documents with the Secretary of State in the state you’re planning to expand into. You must complete this step before you begin operations.

Each state in the U.S. has requirements for registering a business entity as a foreign corporation. At the outset, you must obtain a Certificate of Good Standing from the secretary of state of your home state. Naturally, both states will charge a fee to perform this service.

A Certificate of Good Standing issued by your home state lets the foreign state know that the business entity is in compliance with all statutory requirements of your home state. Some lenders require loan applicants to file a Certificate of Good Standing. Additionally, government agencies sometimes require Certificates of Good Standing to accompany permit applications and renewals. Depending on the jurisdiction, statutory requirements to obtain the certificate may include complying with mandatory reporting and ensuring all fees owed to the state are paid.

If you need help securing a Certificate of Good Standing (also known by other names like “Certificate of Existence” or “Certificate of Status”), ZenBusiness can help with our Certificate of Good Standing service

Reserve your name

Next, you need to perform a name search. You can do this by contacting the Secretary of State’s office in the new location and inquiring whether the current name of your business is already registered. If so, you might need to operate under a new name by registering a DBA (“doing business as”) name with the state and/or local government. Operating under a new name could be problematic, especially if your business relies on name recognition to attract customers. 

Most states allow you to reserve a name in advance to ensure that someone else doesn’t take it while you are in the planning process. If that sounds complicated, ZenBusiness offers a name reservation service. We will conduct a name search and get your name reserved with the state as you contemplate moving your business.

Designate a registered agent 

Every state requires business entities registered with the state (such as limited liability companies and corporations) to have a person or entity within its borders to receive service of legal process. Therefore, you must designate a registered agent before commencing business. 

If you already have a business registered with your home state, you’ll already have a registered agent (if you’re following the law). However, you must have a registered agent for each state your business expands into because the agent must have a physical address within that state’s borders.

If you need a registered agent, ZenBusiness has a solution for you. ZenBusiness operates a registered agent service to assist you in retaining a registered agent quickly, so you can get up and running as soon as possible.

File annual reports

Nearly all states require every registered business (such as limited liability companies and corporations) to file an annual or biennial report with the Secretary of State office, regardless of whether the business is domestic (formed within the state) or foreign (formed outside of the state). The state in which you are doing business could have other compliance requirements as well. 

ZenBusiness understands that fulfilling the statutory requirements required of corporations can be tough. Availing yourself of ZenBusiness’s Worry Free Compliance Service will help you stay on top of your filing and compliance needs and keep your business running smoothly.

Stay on top of your taxes

Registering for taxes is another obligation that can be a headache for business owners looking to branch out into a new state. When moving into a new state, you must be aware of taxation issues such as:

  • Income tax,
  • Sales tax,
  • Municipal taxes,
  • Use taxes, and
  • Unemployment taxes.

Moving your business to a new location within your home state does not alleviate the burden to register to pay the appropriate taxes. Moving to a new town means you might need to pay municipal or other local taxes and real estate taxes, among other assessments.

Should you consider franchising?

Franchising could be the solution you need to grow your profits. You could either franchise your business or purchase an existing franchise. Either way, franchising could help you achieve the growth you desire.

Building a franchise out of your business is risky. When you create your franchise, you need a business that:

  • Duplicates processes easily;
  • Has an operation that is easy to teach to new employees; and
  • Offers a superior product or service.

Otherwise, the risk you take may not be worth the reward. 

Franchising is difficult. There are many additional legal and valuation requirements a franchisee must meet under an agreement. Therefore, you might need the advice of lawyers and accountants to help you run your business. However, owning the right franchise unlocks tremendous growth potential.

Let ZenBusiness Help You Seamlessly Expand Your Growing Business

Expanding your business can be daunting, time-consuming, and fraught with uncertainty. At ZenBusiness, we are here to help you with many of the issues confronting small business owners who are wondering, When should I expand my business? 
Don’t let yourself get bogged down in rules and regulations. Instead, rely on our unique Worry Free Compliance Service and other business services to help ease the burden, so you can focus on doing what you do best — growing your business.

Frequently Asked Questions

  • Understanding when is the right time to expand your business requires careful analysis of several factors. You should not decide to expand your business on a whim. Rather, you should carefully study the market you wish to enter, how your competitors are doing in that market, the expense of entering the market in your new location, and whether you have the financial resources to support a new location. Additionally, you should consider whether you have an alternative like creating an internet-based business to grow your brand instead of opening a second location.

  • The location for your business is tremendously important. Selecting the right location for your business could make the difference between profitability and insolvency. Choose a location that will benefit your business’s needs, rather than just selecting a place with the lowest rent.

  • You should address this question in your marketing plan. Local media love new business announcements. Sending a press release to your local newspaper telling readers about your business, its location, and hours of operation could earn you free publicity. You should dedicate some resources to advertising your new location as well.

  • Researching the best day to open a new location can help you make an immediate impact. You want to avoid state and local holidays. Additionally, you might try a soft opening rather than a grand opening, so you have a chance to work out some of the problems before you open completely.

  • Researching the demographics of your target location will help you identify the best way to reach your target audience. You should understand if the demographics differ between your target locale and your primary location and determine how you should pivot your marketing efforts to meet the new demand.

Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.

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Written by Team ZenBusiness

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