When Do You Open Your Second Shop?

Ellen Rohr
Contributing Writer
Bare Bones Biz

I picked up my phone, “Welcome to Bare Bones Biz…ready to make more money?” That’s our standard greeting.

“Yes, I am. I called you because you may be able to help me achieve my goal.”

“Why, I would be happy to help you reach your goal,” I replied. Then, we introduced ourselves and visited for a few minutes about life and weather.

“OK, what’s your goal?” I asked.

“To be the biggest plumbing company in the world,” he replied.

“Great. Good for you. How many employees do you have now?” I asked.

“It’s just me. My wife helps with the bookkeeping.”

“It’s a start. Let’s set up a time to visit for a half hour. I’ll send over a brief Questionnaire. Just fill it out and fax it back and that will help me get an understanding of your business as it stands now. Please, send over your financial reports, too, and we can hit the ground running when we visit on our next call.” I do this so that I don’t get caught up in the heat of the moment. If he is committed to his goal, he’ll do this much.

He did as requested and I was excited to visit with him when our half hour phone meeting time arrived. He shared his hopes and dreams and ideas for branding and world dominance. It seemed like an aggressive plan, however, I am not one to rain on a man’s parade.

I shared a bit of what I knew about creating a multi-shop organization. And, I presented the truth about his financial situation.

“You are going to need money to grow this empire. There are three ways to get it. One – put your own money into the company. Two – take on investors…in the form of venture capital or banking partners. Three – grow through profits. Right now, you have no money. You can find the money. Pick a path and take action.”

That’s when he blinked.

“Well, I think you have to move slowly. If this is meant to be, it will be. Slow and steady wins the race.”

Sigh. It’s not going to happen for this fellow. He is not going to create the world’s largest plumbing company by being slow or steady.

Now, this is not a judgmental statement. There are all kinds of paths to success. You can choose to be a small shop and enjoy all the success that you imagine and create for yourself. This industry provides opportunities to match your dreams…big, small, diversified, specialized, multiple-shop or expert services delivered by one talented craftsman. You get to pick. However, if you want to be a BIG shop, you are going to need a special set of skills and a full bucket of courage. And you are going to have to move fast.

Scores of people have told me that they have a dream of creating a multi-shop empire. I can count on my fingers the folks I know who have successfully pulled it off. Even within franchise systems, there are very few owners who have successfully launched the Second Shop.

It’s not my job to tell you what to be when you grow up or tell you why you should launch the Second Shop. It’s your job to craft your own vision. If you are drooling to go go grow, I can help you.

What’s to love about the Second Shop…

There are a lot of cool reasons to expand to the next location. First, it makes sense from a financial standpoint. You can spin off a satellite location with a team of plumbers and a field supervisor. Keep the administrative, financial and marketing functions based at the “Mother Ship” location. When you crunch the numbers, they get downright delicious with the Second Shop.

Second, the Second Shop provides life-enhancing opportunities for the ambitious, entrepreneurial people at the First Shop. Have you ever had an employee leave your shop to start a business of his own? The Second Shop can be a win-win alternative. Consider a profit sharing or stock opportunity for a successful Second Shop launch.

One more consideration…“Line extension” is a popular approach to business growth. I am not a big fan of expanding your offerings to the same customer base. For each trade, you’ll need operations manuals, training center, marketing and branding strategy, financial models, etc. Whew. If you are located in an area with small population, you may be well served to diversify. However, if you have a hefty market area (200,000 population) consider the Second Shop to expand your core competency. Even as a franchisee, consider what would make more sense for your expansion…a different franchise or another location with the same franchise? With a Second Shop, you can take your established systems and replicate them. Your brightest and best team members can train, or become, the new team at the Second Shop. Easy. At least, relatively easy.

So why do so few Second Shops exist?

Here’s what I can share about why very few pull it off and how to beat the odds.

The pull of the river…

There is a river of inertia in this industry. Most shops are small. I guesstimate that 80% of all shops have 3 or fewer trucks. Of that 80%, most are one person outfits. Should you put your boat in the river of this industry, that’s where inertia will take you. Should you decide to grow a multi-shop company, you’ll have turn your boat around and paddle up-river. Unfortunately, you’ll have to bear the taunts of your fellow plumbers. They may call you a gouger or a sell out. It may be easier to go with the flow.

The success of the First Shop…

Suppose you succeed at growing the First Shop to 5-7 trucks. That would mean that you have systems and good people willing to use those systems. That requires that you delegate and manage and work on your business…instead of in your business every day. You may be enjoying your hard-earned success. You don’t have to go into the office every day. You’ve got some money socked away. Life is pretty darn good at this point and you may just lose the fizz to tackle that Second Shop. There’s nothing wrong with this scenario. You may lose interest as your current level of success eclipses anything you thought you would achieve in this lifetime. A Second Shop could get your juices flowing again. Especially when you consider the opportunities you would be creating for your wonderful, hardworking team members.

The lure of Perfection…

Author Jim Collins says, “Good is the enemy of Great.” He suggests you fight being just good enough and pursue greatness. Makes sense. I would add…

“Perfect is another enemy of Great.”

So often, with a really kickin’ 5-7 truck outfit, the lure of Perfection starts to complicate the company. Simple systems that can be easily trained and duplicated crumble under the development of even-better systems. Basic, functional financial statements become 30 page affairs with each account sliced into a dozen sub-accounts. Simple Sales tracking (a check if you sold it, a zero if you didn’t) become multi-page spreadsheets that require a CPA and an audit before the results can be posted on the “Jumbo-tron” in the break room. If you want to expand, you have got to keep it simple. Ask ask ask these questions every time you or a team member is tempted to get fancy with your current, working systems…

“If I didn’t have this detail of information, what would I lose?”

“Could I easily replicate this system at a remote location?”

“What decision will I make with this new information?” If it is only interesting, but not leading to a better, faster, more profitable decision…skip it. You’ll have to fight fancy every step of the way to your Second Shop.

If you want to, you could create the Second Shop. And the Third, Fourth, etc. You could apply a sound strategy that includes Business Planning, Financial Management, Marketing, Acquisition, Operating Manuals…a Customer Serivce and Sales-focused culture…and an undaunted determinism. Does this idea get your attention?

What do you think? Ready to expand to the Second Shop? Let me know. I’d love to help you pull it off.

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