A second location costs money every month long before its panel can carry it. Work out what it adds in monthly costs, how many members it needs to cover them, how fast you can realistically get there, and how much cash the gap will take.
Add up what it costs each month
List every monthly cost the new site adds: rent, staff, utilities, phones, software seats, insurance, supplies and loan payments on any buildout. Include your own time if you'll be splitting your week between the two.
Then list the one-time costs: deposits, buildout, equipment and furniture. Those come out of cash before the doors open. This post compares ways to pay for equipment.
Find its break-even panel
Divide the added monthly costs by what each member leaves you after their direct costs. This post walks through break-even.
In a made-up example, the new site adds $18,000 a month in costs, and each member leaves $70. That's about 258 members before the site covers itself.
Be honest about the ramp
If the new site adds 15 members a month, reaching 258 takes about 17 months. Every month before that, the gap comes out of the first location's cash or a loan.
In the same made-up example, the shortfall starts near $17,000 in month one and shrinks as members join. Added up over those 17 months, it comes to roughly $145,000. That's the cash you need on hand, on top of the one-time costs, if growth goes as planned.
Test it against a slow case
Run the same numbers at half the growth. If the plan only works at the fast pace, it's a risky plan. I'd want the slow case to fit inside your cash too, or a clear point where you'd pause.
Keep the locations apart in your books
Ask your bookkeeper to tag income and costs by location. Otherwise the new site's losses blend into the first site's profit, and you can't see whether either one is working.
Check the first location can run without you
A second site pulls your time away from the first. Before you sign a lease, ask whether the first location's panel and revenue would hold if you were there half as much. If it depends on you being in the room every day, the second site can hurt the first before it helps.
What I'd do this week
- List the monthly and one-time costs of the new site.
- Work out its break-even panel.
- Estimate the ramp at your expected pace and at half of it.
- Check both against your current cash and reserve.
Common questions
Should the first location's profit fund the second?
It often does, but only after your reserve and tax set-aside are covered. Don't let the new site drain the cash the first one needs.
Is a loan a good way to fund it?
It can be, if the payments fit your cash during the slow case. Count loan payments in the monthly costs.
Can I share staff between sites?
Many practices do. Split their cost between the locations in your books so each site's numbers are honest.
Want each location's numbers on their own?
We reconcile every account every month and send your P&L and Balance Sheet by the 15th, so decisions like this start from real numbers. If that's what you need, apply to work with us.