If you’re the proud owner of a flourishing brick and mortar business in Los Angeles, you deserve a standing ovation. In today’s competitive market, in which physical businesses must compete with ecommerce enterprises, sustaining a baby business is more difficult than ever. Couple that with the fact that many banks are still reluctant to engage in small business lending, and it’s no wonder that cash flow problems cause most small businesses to close their doors within the first five years of operation.

The Commercial Finance Group wants to help keep your doors open. We have multiple custom lending solutions for small to medium-sized businesses.

But you’re not one of those failed businesses. You’re one of the lucky ones. You’ve not only managed to survive in a difficult and crowded market, you’re thriving! Now’s the time to think about opening a second business location that could help to solidify your entrepreneurial legacy.

Opening a new location is a big undertaking, and many people fool themselves into thinking that it’ll be easier just because it’s the second time around. It’s not. In fact, failure to think about the financial implications of opening a second location is the biggest reason that even successful entrepreneurs have trouble expanding. Let’s take a look at some of them now.

Financial Considerations Of Opening A Second Location

  • Mortgage/Rent – One of the biggest financial considerations when opening a second location is, well, that you’ll have to pay for a second location. Whether you buy, lease, or build your own place of business, it’s going to mean a large chunk of money cutting into your profits every month. And it’s important to remember that second locations generally don’t start making money right off the bat (even though it’s just an extension of an already established business).
  • Additional Inventory – In addition to financing a place for your new business, you’ll need to foot the bill for completely stocking it with all the inventory you carry at your original location. The big difference here is that while you may have slowly built up the inventory of your first location over time, as you could afford it, you’ll need to get the second location up to speed right away. You wouldn’t want to lose customers because you’re not carrying a consistent variety of products across locations.
  • New Fixtures – At the same time that you’re doubling your inventory, you’ll also need to double down on the equipment necessary to carry out your business. Again, with your first location you may have slowly added or upgraded equipment over time as your revenues grew, but this as-needed luxury won’t be present for your second location.
  • Additional Staff Members – Once you’ve got a building, inventory, and all the fixtures you need to carry out the daily operations of your business, you’ll need to hire new employees to staff it. These employees will have to be in place even before you know what kind of volume your new location will encounter, and they’ll have to be paid even during the first few slow months when people are still realizing you have a second location. For some entrepreneurs, this may cause payroll problems.
  • Marketing & Advertising – So now you’ve got a new location, it’s full of inventory waiting to be sold and equipment waiting to be used. Your new staff members are trained up and ready to go. But how do you get people to come into your new location when they’re used to going to the old one? Marketing and advertising, of course! You’ll want to engage in both print and digital marketing, with short and long-term tactics that will sustain the flow of revenue to both of your locations.
  • Loss Of Business – One thing you might not have expected to happen as a result of opening a second location is loss of revenue at your current location. Many entrepreneurs assume that two locations mean twice as much revenue, but what typically happens, at least at first, is that the same revenue divides itself between the two locations.

Asset-Based Lending Helps Businesses Grow Without Debt!

With all of these financial unknowns lurking in the future for businesses that choose to open a second location, it’s not surprise that taking out a huge loan to cover the costs isn’t always a safe decision. The last thing you need when revenue projections are uncertain is a massive load of debt weighing down your balance sheet. That’s why asset based-lending can be a smarter alternative for expanding businesses in Los Angeles. Instead of going into debt, The Commercial Finance Group can help you turn your existing accounts receivable into cash that can be used to fund the purchase of new equipment, hiring of new staff, and more! Contact us today. We’d be more than happy to discuss our custom lending solutions and come up with a plan for growing your business.