By Gary Cohen - Principal

Many companies start with a single location, a great product or service, and over a period of years grow so big and strong that they take the next step and open a second location. Success replicates and more and more locations are added until there are offices or retail establishments all over town, throughout a state or in several states. Revenues are growing, profits are increasing and no one pays too much attention to whether or not the company is maximizing its potential operationally and financially. There also may not be a structured plan for reviewing and evaluating its current locations and for consideration of when and where to expand. When times are good, this isn't often a concern, but when the economy heads south, it can be disastrous. If your company has numerous locations, is considering expanding to more locales, and you don't really know the 'whats, whys, and hows' of your business, you should slow down and analyze where you are and where you should go. It is time to be proactive rather than reactive.

First, you must understand financially and operationally what is happening at your many locations. The operational knowledge will come from direct observations. You must visit periodically to see first-hand how each place works. Financial knowledge is only as good as the numbers that are produced. Your finance professionals must properly account for revenue and expenses on an accrual basis for you to have a sound understanding of current profitability and trends. If prepaid revenue, deferred income and accrued expenses are not accounted for accurately then you may not be reviewing meaningful financial information. When you are confident that accounting is being handled properly, then it is time to compare your locations to each other and to industry norms.

Second, you need to figure out why your different locations have similarities and differences in types of revenue, cost percentages, seasonality and other indicators. As Corporate Controller for an airport services company with dozens of locations, I soon realized that revenue was much smoother in warm places in the south than in northern cities where de-icing during winter storms caused huge swings in revenue and profits. On an episode of 'Undercover Boss' a company President went to a convenience store in one city to determine why they sold five times as much coffee as an average store. He found that a clerk was very welcoming and knew every customer by name. She was soon promoted to customer relations at the home office. The bottom line is that you have to learn why locations have variations in revenue, costs and profitability.

Third, armed with the knowledge of the 'what and why', operational and financially across your company's locations, the next step is 'how' to proceed with implementing successful strategies and minimizing ineffective policies or approaches. Great plans and tactics can be replicated throughout your company, but first they must be identified. This sounds simple, but in the busy-ness of business, they are often overlooked.

A final area of concern is determining where to expand. When I was CFO for a multi-location medical practice, there were several instances of a desire by one or more of the doctor-owners to open a new location. Quite a few times, when a thorough analysis was made of the area, current medical practices serving that locale, demographics and projected growth trends, a decision to invest over a million dollars in fixed costs and professional staff over an initial five year period was deemed inappropriate. At other times the analysis allowed us to go ahead smartly. Key was to proceed equipped with a plan that had a much higher chance of success.

If I were to summarize the financial management of companies with multiple locations with one word, that word is 'proactive.' Be proactive in ensuring that your financial numbers reflect what is happening at each location, be proactive in understanding why various locations are both similar and different, be proactive in planning how to improve each location operationally and financially and be proactive in implementing a sound expansion plan based on passion tempered by structure and discipline. If you implement these four stratagems, your business will have a much greater chance of continued and increasing success.

Nperspective has assisted many clients in improving their business results through implementing or helping with their strategic planning process.  Gary Cohen has served in corporate financial management roles for over thirty years and for three multi-location companies with up to five dozen locations with a focus on improving operational efficiencies and financial results.  

If your company or one of your clients may benefit by our experience and knowledge, contact Russell Slappey at 407.448.1781 or rslappey@npcfo.com  for a complimentary consultation.