How to Expand Your Business in Different States & Cities
Expanding your business is both exciting and nerve-wracking. After all, you already know it’s successful in one area, but what if it is not successful anywhere else? What do you need to do to expand your business successfully and confidently?
Developing your business into another city or state doesn’t have to be a guessing game. In this post, we’ll cover all the steps you need to take to help your company prosper while reaching even more customers. So what are you waiting for? Let’s begin.
Research the Market and the Laws in the New Area
The most important step you must take for your business expansion’s success is to do your research. Before you invest hundreds or thousands of dollars into a new business venture, make sure you know whether the area will allow the business to be successful. If you’re considering expanding your business into another state or city, you’ve likely begun some research already. However, there are many different questions that you might not have thought to cover in your initial research phase.
Start by conducting some market research. You already have one successful business, and you know the type of customers who use it the most. Are there those types of customers in the new area? Do they also need the services or products you offer?
If there is substantial demand for your business in the new state or city, there are still other questions to ask. For example, is the need for these services already being met by a different company? If so, how many companies in the area are competing for the customer base? If there’s too much competition in that location, you might consider expanding elsewhere. However, if you believe your business model is better than the current competition, you have the potential to beat out the competitors.
If this is your business’ first expansion, consider developing in an area where you already have a customer base. For example, some customers might travel about an hour to use your company’s products or services. Meet these customers’ needs by moving to them.
In addition to market research, you should research the new area’s laws. The laws regulating business operations vary by state and even by city sometimes. Make sure you understand how laws differ in the new location and decide if your business can modify to operate under them. If the local ordinances restrict your type of business, you’ll need to invest elsewhere. You may consider contacting the local chamber of commerce to learn more about operating businesses in the area.
Build a Website
Chances are, you already have a website for your business. For those who don’t, get one. Advertising in other areas costs a lot of money, but a website can help you reach audiences outside your business’ natural boundaries.
You can even use a website to help you determine which areas you should expand in. Regardless of what host site you use (ex. Word Press or Wix), they should provide you with a map showing where those who visit your website are from. If there is a significant number of searches in one area, this poses the perfect opportunity to meet an audience’s needs.
Another benefit of having a website is that you can make sales in other states or cities if you are a product-based company. This significantly expands your customer base, helping you to be more profitable. Additionally, if you tend to make a lot of online sales in one area, it could be the perfect place for a new location.
Keep in mind there are some laws regulating online commerce across state lines. In general, you only have to charge a state’s sales tax if your business has an “established presence” there. For example, if you have a store in Iowa and conduct online sales in the state, you must collect sales tax for those transactions. Another example would be traveling to that state frequently for business deals. Unfortunately, there isn’t one set of guidelines explaining what an established presence means in all 50 states. Instead, every state uses its unique interpretation. This can make conducting online sales more complicated.
Before you leap into expanding your business, decide if it is a profitable venture or not. To do so, you need to organize your business’ finances.
First and foremost, you need to know if you can afford to expand. To do this, determine what your current business expenses are. Then, calculate how much your business makes. If you plan on using these revenues to help buffer the opening costs of another location, will it be enough to keep both open?
Before expanding, your business should have at least a year of successful business under its belt. This will help you understand what costs and income you can expect. Additionally, you should either have the savings to fund the expansion or the backing of a loan to do so.
Costs of opening a new location include purchasing land and building, renting an existing location, or purchasing a structure. All three of these options can be quite costly. Also, consider how many employees will work in the new store. Does the minimum wage rate differ at this new location from your current one? Will that impact what you pay employees? Use these figures and facts to determine how much you’ll spend each month to pay employees.
Also, consider increased taxes for operating in a new location.
Once you know your business’ expansion expenses, calculate how many sales you need to make each month or year to break even.
Never go into a new business venture while turning a blind eye to finances. You may have included some financial questions in the initial research phase; however, it is never a bad idea to run the numbers twice.
Register as a Foreign Business
When you think of the word “foreign,” you probably think about different countries. However, the law uses “foreign” to describe any business not originally located in the area. This means if you’re expanding into another city, or especially another state, you need to register as a foreign business.
File a Certificate of Authority and a Certificate of Good Standing if the state you’re hoping to conduct business in requires it. You will have to pay a licensing fee; however, every state charges a different amount for various business types.
In addition to registering as a foreign business, you should consider incorporating or forming a Limited Liability Company (LLC). As an incorporation or an LLC, you can take loans out in the business’ name rather than in your own. This could protect you from many of the financial burdens and risks of owning a business.
During this step, you should also obtain all the licenses and permits you need to conduct business in this new state. Not sure where you need to go to get permits for your business type? Check out the following table from the Small Business Administration to learn more about which agencies issue permits for various types of businesses.
Source: Small Business Administration
Other agencies offer permits as well. Make sure you’re well informed about the requirements to do business in a new area. The city you plan to operate in may require certain licenses or permits too.
Decide Whether to Franchise or Not
Franchising your business is an excellent way to get others involved and share some of the profits. However, you’ll probably need to own several locations for other people to be interested in buying into the company.
The Small Business Administration suggests working with an attorney to franchise your business.
The SBA recommends that only businesses with easy to duplicate and teach strategies franchise. Additionally, a business considering franchising should provide a product or service that business owners want to invest in.
If you choose not to franchise, you should consider other expansion strategies, such as the following:
- Market penetration
- Market expansion
- Geographical expansion
- New distribution channels
- Product development
- Market segmentation
You could also purchase an existing business in the location and rebrand it or merge it with your current company.
Involve the Business (and Yourself) in the Community
The best way to get your company’s name out in the community is to get involved in it! Get involved long before your business opens its doors. But how can you do that without doing actual business?
The first thing you could do is donate to local charities or organizations. You could also help sponsor some local sporting teams. Doing this helps get your business’ name into the community in a positive light.
Another option is to participate in any local parades or farmers’ markets. At these events, you can hand out advertising material such as pens, bracelets, or business cards. If your business sells a product, a farmers’ market is an excellent way to introduce it without committing financially to the area first.
At a parade, consider using Oppizi’s leaflet and flyer distribution services to successfully expand your customer base. Oppizi can also deliver flyers and leaflets door to door or in the mail to let customers in an area know about your business.
As you involve yourself and your business in the community, the citizens will grow to trust you. When your business opens, they’ll be more likely to use your products or services.
Join Local Business Networking Organizations
No matter where you plan on expanding to, there is some form of business network. Getting involved with these organizations can make the transition/expansion go much smoother. Even if the only network available is the local chamber of commerce, they can help you understand the business culture, types of licenses needed, and offer assistance through their businesses’ services.
Hire the Locals
Another way to help your business expansion be more successful is to hire locals to do the work. You should adhere to this principle from the very beginning of the expansion process through the end. For example, if you plan on building a new structure for your business, recruit reputable contractors and construction companies from the area to do the work.
Once your business is built and you’re ready to hire employees, find people from the community looking for work. You may consider having an employee from an existing location work there temporarily to help train the new employees. However, your main source of employment should be from residents in the area. After all, building a business isn’t just about making more money, it’s also about creating more jobs.
You’ll also benefit from hiring in the community as the employees will tell their friends, families, and other acquaintances about where they work. It is an excellent way to get your business’ name spread around. Additionally, the community is more likely to trust a new company run by their peers than one with mostly outsiders as employees.
Commit to the Same Quality Services
Expanding is a great way to increase profits and your customer base. However, the process can be hard on both the existing location as well as the new one if not done properly.
Since you’re considering expanding, it is safe to assume that you have a returning clientele base. These customers return to you because they favor the quality of your product or service. If expanding will impact the quality of the business you do with your existing customers, you should reconsider.
As you open your new location, commit to providing your new customers with the same high-quality services that your existing stores provide. Don’t focus on serving as many people as possible. Doing so could lead to decreased quality and fewer returning clients.
Remember, your business has a reputation, and this new location should uphold it.