You've built a successful business in your home state, and now you're ready to take it to the next level by expanding to another state. But before you open up shop in a new location, there are a few things you need to know first.
Here's what to consider before expanding your business to another state:
- The cost of doing business
- The market potential in the new state
- The competition you'll face
- The regulations and red tape you'll need to navigate
- The availability of talent and resources
- Your company's culture
- Your considerations
The cost of doing business
This includes the cost of setting up a new office or retail space, the costs associated with hiring new employees, marketing and advertising in the new market, and any other operational costs.
To get an idea of the cost of doing business in your target state, check the Small Business Administration's (SBA) Small Business Profiles, which provide data on startup costs, operating costs, and other economic indicators for small businesses in each state.
The market potential in the new state
Before you expand your business to another state, it's important to do your research and understand the market potential in that state. This includes understanding the state's demographics and the size and growth of the economy.
You can get a good overview of a state's economy by visiting the SBA's website and checking out their State Economic Snapshots. These snapshots provide information on a state's GDP, job growth, entrepreneurship, and other key economic indicators.
The competition you'll face
If you're expanding your business to another state, chances are you'll be facing some new competition. This is why it's important to research the competition in your target market before moving.
One way to research the competition is to visit their websites and see how they're marketing themselves. You can also search for news articles about the companies and see what people say about them on social media.
Another way to get insights into your competition is to talk to your customers and ask why they choose your business over others. This feedback can give you valuable insights into what you're doing well and where you can improve.
The regulations and red tape you'll need to navigate
When expanding your business to another state, you'll need to be aware of the different regulations and red tape you'll need to navigate. This includes things like business licenses, permits, taxes, and zoning regulations.
To better understand the regulations in your target state, contact the state's department of commerce or small business association. They should be able to provide you with a list of the requirements you'll need to meet.
The availability of talent and resources
When expanding your business to another state, it's important to consider the available talent and resources in that market. This includes things like skilled workers, suppliers, and vendors.
To better understand the talent and resources in your target state, contact the state's economic development department or workforce agency. They should be able to provide you with information on the availability of different types of workers in the state.
Your company's culture
As you expand your business to another state, it's important to consider how your company's culture will be affected. This includes things like your company values, work-life balance, and communication style.
You can talk to employees who have relocated to that state to ensure that your company's culture is a good fit for the new state. They can give you insights into what it's like to live and work there and how your company culture will be received.
Your expansion plans
Once you've done your research and are ready to move forward with your expansion, create a detailed plan outlining your goals, strategies and milestones. This plan will be your roadmap for expanding your business to another state.
Some things that you'll need to consider in your expansion plan include:
- Your target market in the new state
- The competition you'll face in the new state
- The regulations and red tape you'll need to navigate
- The availability of talent and resources in the new state
- Your company's culture and how it will be affected by the expansion
- Your financial goals for the expansion
- Costs in the new location, including rents, minimum wage rates, and insurance rates
- Your timeline for expanding to the new state
If you need help creating your expansion plan, contact a small business consultant or the SBA. They can provide you with templates and resources that will make starting easier.
Additional things which you need to do:
1. Register your business
You'll need to register your company with the state's Secretary of State to do business in another state. This is often called "Foreign Qualification." As a part of doing this, you'll also need a Registered Agent in the new state. For example, if you're in Indiana and are expanding your business to Texas, you'll need to research registered agents in Texas and then hire one.
The process of Foreign Qualification is different in every state, so check with the Secretary of State's office in the state you're expanding to for specific instructions.
2. Open a bank account (optional)
You don't have to open a new bank account in the new state (you can use your existing bank account), however, depending on your business, some people may want to open a new, separate bank account to keep each location/branch's finances separate from the others. This is a personal decision though, and it's not required.
3. Get insurance
Depending on your business, you may want to get insurance for your business in the new state, or extend your existing coverage. This includes liability insurance, which protects your business from claims arising from injuries or damage caused by your business, and property insurance, which protects your business from damage to your office or other property.
4. Get a business license
Your business may need to get a license from the state or local government where it will operate in the new state. The requirements for business licenses vary from state to state – county by county – and city by city, so check with the appropriate government agency in the state you're expanding to.
5. Comply with tax laws
If expanding your business to another state, you'll need to comply with that state's tax laws. If applicable, this may include registering for a sales tax permit and collecting and remitting sales taxes on all taxable transactions – as well as filing a state tax return. We recommend speaking with an accountant for details.
Expanding your business to another state can be a great way to grow your company and reach new customers. But before you make a move, do your research and create a detailed plan. This will help you avoid expanding your business to another state.