By David Adams, founder of HomeSuite
As thrilling as the expansion journey can be, this is actually where many startups fail. While my business has had four successful expansions thus far, most startups aren’t so lucky.
To set the groundwork for success, consider these tips before expanding your business to a new location:
- Start smart with basic business analyses.
Just like any new business venture, begin with a basic SWOT analysis measuring strengths, weaknesses, opportunities, and threats. This process may seem archaic, but it’s a strong first step when forming an actionable plan.
You should also have your total market potential and total addressable market locked down when pitching an expansion. Be able to show the maximum potential for growth and how much market is available to own.
- Consider alternate locations and remote options.
When launching a physical location, make an actionable backup plan in case it doesn’t work. The contractor may take longer than expected, the landlord may back out of the deal, or the building inspector may find mold. There’s no way to predict those hurdles.
If a remote launch is an option for your business, this could be a viable plan B for your physical location. For our Washington D.C. launch, we decided not to set up a physical shop, as our model allows us to work remotely. It may take more travel to get things in place, but for the right business, it could prevent headaches in the long run.
- Research the red tape.
Get ready for unforeseen backlash from local and state officials. Disruption sends ripples through social, financial, and bureaucratic fabrics, so expect red tape waiting for you around every corner.
Uber learned this lesson when it launched in Las Vegas in October 2014. Even though it had the go-ahead to operate in Clark County, Uber received heavy backlash and fines from the city’s Taxicab and Transportation Authorities. All operations were suspended the following Thanksgiving. Fifty Uber cars were seized, and 1,000 jobs disappeared overnight.
- Set up supply well before launch.
Your teams need plenty of time to prepare and learn the market well before leads start coming in.
Our business model operates on both ends: Our supply team is responsible for bringing on landlords to list properties, and our sales team works to find tenants for them. We release our supply team to fill a new market with listings as far in advance as possible.
- Have a solid rainy day fund.
Ensure you’ve raised enough capital to support operations in your current markets (as well as in your new ones). There are plenty of reasons a stash of funds could mean the life or death of your business, and those fears rise exponentially when another office is added to the mix. Profitability should never be your fuel, as breaking even can sometimes be too far down the road to be tangible.
- Remember: Startups aren’t primary schools.
It can be tempting to hire junior-level people for your new location — they require less pay and often have more exuberance and passion than their more experienced, jaded counterparts.
But even if you have a killer college grad in mind, remind yourself that you can’t afford inexperience at this stage in the game. For now, you need experienced, senior-level people who can walk into an interview with a 90-day plan backed by data and anecdotes.
The launch of a new location is exciting but can also be discouraging if you’re unprepared for red tape and disappointing conversion rates. If you go into it with the proper tools and mindset, however, you’ll set your business up for success — and, hopefully, more expansions in the future.
David Adams is the founder of HomeSuite, an online marketplace for temporary furnished housing that uses technology, data, and customer service to provide the best possible experience for tenants and landlords. Connect with David on Twitter.
Categories: Best Practices FINANCES Goal Setting LEADERSHIP Productivity