When Hurricane Sandy hit the Northeast last year, thousands of businesses suffered devastating damages, prolonged power outages, and disrupted sales. Now, imagine a small business owner who operated at multiple locations, some far removed from the hurricane's path and you'll see an unexpected benefit from having several business locations.
Of course, avoiding a natural disaster is probably not the first reason that a small business owner would open secondary locations. But whether you set up in a distant geographical area or just across town, success in managing multiple sites ultimately comes down to formulating prudent strategies, installing competent people in leadership roles, communicating clearly and frequently with key team members, and tracking results.
Expanding your business provides many advantages, such as not starting from scratch. You can use some of your existing infrastructure and systems already in place for the satellite locations.
"If you open up another location, most likely you aren't going to have to duplicate everything that's in the company," says Tim Smith, principal of The Plaid Group, a Houston-based operations consultancy. "You could add sales by building on what you have without having to increase as much back office [support]."
Putting some standard operating procedures in place can result in a consistent, streamlined organization that delivers the same efficient response at each location. For example, Smith says, having a procedure for handling seven to ten core daily activities of the business is a great foundation.
Establishing measurable targets and making sure that every employee knows what the business owner expects is vital. "The person who is responsible for the second location needs to share the definition of what good performance looks like," Smith says. "It could be customer service, profitability, on-time performance—whatever criteria the owner uses to determine that the second location is doing well."
Small business owners must also stay in touch regularly with the teams in the branch locations. In one scenario that Smith was intimately involved with, the operations manager at an industrial distribution company has a conference call with the managers at all his locations every other week. On off weeks, the ops manager checks in with the branch managers individually. The calls serve multiple purposes: they announce initiatives that are underway, and they also allow managers the opportunity to talk about things that they might be wrestling with. "It creates collaboration," Smith explains. "The next time that a branch manager has a problem, they'll turn to their peers before they go to the owner to borrow his time."
This kind of collaboration and relationship building can lead to handsome payoffs. For example, Smith once worked with a company that was suffering because it had 15 locations, and each one had their own individual protocols. Smith got all the branch managers to hammer out consistent procedures for their core activities, document them, and train everyone uniformly across the company.
"One of the concrete benefits that came from that is we reduced inventory losses by 75 percent within two years," Smith says. "We also improved our relationship with our suppliers, because the accounting department now had proof that they received the product and could pay the invoice."
Besides a hedge against turbulent weather, having more than one location may increase your buying power.
"Since you're buying for multiple locations, you should be able to participate in some additional discounts from your vendors," says Bert Martinez, president of Bert Martinez Communications, who operates offices in both Houston and Phoenix.
In some instances, it may not be possible to come up with a mirror image of the main office in an outside location. "The mistake most people make is that they don't investigate the new area enough," Martinez says. "Opening up that second store needs to be treated like a brand new business—not like you're duplicating an existing business—because typically that new store has a new neighborhood and a new set of demographics. You might have to market that business slightly differently."
Still, like Smith, Martinez sees the big secret to success as having a documented system that can be replicated and taught to the key people in your workforce—then verified that they are using the system properly. For example, retail small business owners could send a secret shopper into a store location to see if sales members are following established selling procedures. Or, have a friend call a business site and take notes on the conversation to see how the in-office customer service team handles phone calls and other issues. Lastly, test your managers—literally.
"When you're having your weekly meeting, drop down a pop quiz," Martinez explains. "And be open-minded enough to know that you might have to make a system change. Little problems can be addressed and dovetailed right into the system."
Managers who depart from proven protocol on their own might be surprised at how fast things can turn sour. For example, Martinez was hired by a CBS affiliate in Los Angeles to improve the sales for one of their radio programs. After implementing a comprehensive new set of procedures, sales jumped from around $10,000 a month to $50,000 a month in only three months. But when Martinez did an audit of the program six months later, he discovered that the manager had begun to deviate from the system and to cancel the weekly meetings. Result: sales plummeted by almost half.
"Your results get better and better and better as long as you continue to get brilliant at the basics," Martinez says. "The system is responsible."
On a personal level, small business owners also need to be honest with themselves and accept that they will have to trust others to oversee operations without their direct supervision.
"If you like to micromanage, then you're probably going to be frustrated," says Randy Moon, president of RMoon Consulting in the Dallas-Fort Worth area. "Don't be afraid to hire someone smarter than you or better than you in other ways. Combined, you can be a powerful team."
When Moon consults with a business about expanding, he does an assessment on the industry itself to see if there are other cases of stores that operate multi-site locations in the same niche. He also recommends that small business owners take full advantage of technology to stay in touch, whether in a video chat on Skype, or by cell phone or email. That said, it is critical that owners still show up regularly at their various locations.
"You have to make your presence known periodically, especially in certain types of labor intensive businesses where there are a lot of employees," Moon says. "They expect to see the owner. When the owner shows up or has lunch with the employees, it makes people feel that they're not out there on an island."