VIEWPOINT
PLANNING A SUCCESSFUL BRANCH OPENING
Chris Maityard, CEO of building products distribution consultancy Moorgate Management, looks at what to consider when opening a new branch.
OPENING A NEW branch is a key step in the growth plan of any builders’ merchant. But once you’ve made the decision to expand (and to open a branch from scratch rather than by acquisition), how do you make sure it will be a success? Based on our experience supporting merchants with new branches, we want to share with you some of the key questions merchants should consider and make sure they get right, so they can maximise the existing opportunities that a new branch will bring.
Why do you need a new branch?
The very first question you should ask yourself is ‘why do you want to open a new branch?’ The answer might seem obvious, but any business expansion will only work if you are 100% focused on the goal and why a new branch is so important for both you and your customers. Are you looking to increase your geographical reach and find new customers? Or are you planning to ‘follow’ your existing customers when they work away from your current area? Before committing the time, cash and resources it takes to find and open a new branch, it helps to be clear why you are doing it, and whether you could achieve the same result by investing in your existing branch instead (perhaps by using central distribution).
Do you have the funding in place? All successful business expansions need to be carefully costed so that you have the funds in place before you start, and know the targets your new branch will need to meet to achieve your desired
return on investment, and over what period of time.
One of the main challenges faced by merchants is when a newly opened branch does not perform the way they expected, which then places financial and management strain on the entire business. Ensuring you use the right type of funding (for example, don’t use short-term cashflow funding if your new branch has an 18-month payback period) to increase the likelihood that your venture will succeed.
Where will the branch be located?
Again, it sounds obvious, but fully understanding why you want to open a new branch will help you identify the best location, as well as the size and type of branch that you need.
How far from your nearest branch should the new site be? Do you know the best size of trade counter, warehouse or yard that your target customers will need? You may need to do some work studying the market data in your desired area to establish the size of the customer opportunity available. There are several well- proven paths to follow regarding how to source new branch locations, with the most obvious being property surveyors who have access to both greenfield sites as well as divested sites from competitors.
Where will you find new staff?
The most important mantra for our industry is that ‘people buy from people’, so you must have the right people in place to make any new branch work. Depending on the size of the merchant, it is often the case that the people come first and then the site location follows, especially
September 2023
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if you’re promoting branch managers, etc, from within your existing team.
Whatever you choose, it’s important that the new branch team share your values and have a proven track record, something which can be supported from talking with both customers and suppliers. It can be tempting sometimes to hire on the basis of their contact book, but like all of us this only has so many pages, so make sure they have the core skills to grow the branch outside of their existing network. How will you attract customers? Reaching new customers (and encouraging existing customers to buy more) is almost always the reason behind opening a new branch, and can often dictate the payback period of the new branch investment. If you are following an existing customer base working out of area, the risk of your branch opening is mitigated slightly and payback times could be quicker. Where the branch is in an area where you have no existing customers the risk is higher, so it is important to have a clear marketing plan and identify
“The most
successful branch openings are those where there is a team of people, who each know what they have to do, and by when.”
how you will generate, nurture and convert new customers. Whatever your product area, advice from your existing supplier partners will prove invaluable in establishing what products to stock and what minimum range will sell well, based on the postcode of your new branch. This support, coupled with new branch stocking deals, allows merchants to offer extended ranges and better manage their working capital investment across their branches.
Get the products and processes right If you have documented processes in place in your existing branches, no matter how simple, implement them in your new branch to help the new team understand and become familiar with how your business operates. This will help avoid typical new branch opening issues such as incorrect end-of-day banking, one-legged inter-branch transfers (IBT) and Purchase Orders being addressed, or stock delivered, to the wrong branch.
The most successful branch openings are those where there is a team of people, who each know what they have to do and by when (milestones), working with a single timelined branch opening plan that details all of these workstreams, and is reviewed daily as you count down towards the opening day by someone who has overall responsibility for the branch opening on time. This will ensure your existing business, and its performance, remains unaffected. Although not exhaustive, these key areas will help you as you open your next new branch and develop your merchant business to better serve your valued customers.
BMJ
www.moorgatemanagement.com 21
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