Have These 3 Essentials in Place Before Opening a Second Location

Reader Resource

Position yourself for growth in 2017—join us live at the Entrepreneur 360 Conference in Long Beach, Calif. on Nov. 16. Secure Your Seat »

Expanding your business to multiple locations can be exciting, and if done well, profitable. However, to succeed, you will need to do a few important things.

When you expand from a single location to multiple locations, your business automatically transitions from a small to a midsize business structure. A small business is one in which the owner makes, essentially, every important decision. Since you cannot be in two places at once, having multiple locations will require you to operate in a midsize structure - - at least some tactical decisions will have to be delegated to people on site.

Related: 6 Signs Your Startup Is Ready to Expand

Delegating tactical decision-making to others means that you will have to give up a measure of control. This can be a very scary thing for an entrepreneur, and it should be. Delegating before you construct the proper infrastructure can be disastrous. The business can veer off course without you knowing it.

In conducting the research for our book, Let Go to Grow: why some businesses thrive and others fail to reach their potential, we heard numerous stories of companies that failed because the owner trusted the wrong people and/or the proper systems were not in place to support delegation.

One small IT company almost had to file for bankruptcy as the owner delegated responsibility to an office manager who was not ready to accept it. There were no documented processes to tell the office manager how to perform her duties. No metrics existed to let the owner know if things got off track. After making a number of mistakes, the office manager attempted a cover-up. By the time the owner discovered this, the business was perilously close to the brink.

Safe delegation requires three things:

1. The right managers.

Delegating before the right people are in place is a recipe for disaster. Unfortunately, this requires difficult decisions. It can mean layering or replacing loyal employees, or even friends and family members who simply do not have the skill set to become managers.

Related: 7 Traits to Turn Good Managers Into Great Managers

2. Documented processes.

It’s not sexy and no one will pay a nickel more because you have well-documented processes. Even so, once a business reaches the point where the owner cannot be personally involved in every transaction, good process documentation is the best way to communicate to employees how things are to be done. For example, this will ensure that a business serves its customers consistently across multiple locations.

3. Robust metrics.

This is how business owners know what is going on in the bowels of the business without being there. It is what allows the owners of midsize businesses to sleep at night. These metrics are in addition to a profit and loss statement. They are specific to each business and may include daily or weekly numbers as well as monthly indicators. For instance, you may track on-time delivery, waste and same-day sales.

Opening additional locations can be an exciting time and it can significantly increase your profit. However, make sure that you have the right infrastructure in place before you expand. These three essentials will allow you to safely let go so that your business can grow.

Related: 5 Tips for Handling Rapid Expansion