Don’t grow too fast, or do

Let the I told you so’s start.

Starbucks said today they are closing down 600 nonperforming stores.  I expect the pundits will start the Monday morning Quarterbacking.  I don’t think we should judge so soon.

An assumption will be made over the next few days.  The assumption will be that since there’s “two Starbucks on every corner”, on of them will be closing.  Now this may be the case, but I expect we’ll still see stores across the street from each other.

What does this mean to the normal small business.  We can take a few things from this.  While most will be concerned about expanding, That’s not my advice.

The decision to expand should be made keeping one main thing in mind.  How long will it take the new location to start making a profit?  No doubt Starbucks made the decision to expand on this premece.  Let’s dig a little deeper.  Could it be that most of the Starbucks locations closing are older or smaller stores.  Maybe they are even stores that where geographically placed to out preform the older store across the street.  An example of this is present here in our small town of Castle Rock, CO.

At one time the only Starbucks in town was at the end of a grocery store’s strip mall.  This location was always busy.  At only about 900 sq ft they had a lot traffic to move through that place.  Recently a drive-thru location was opened less than 1/4 mile a way.  Starbucks left the older location open.  I assume knowing it would loose volume.  How much volume would it have lost if they closed that location when the other opened?  Probably a lot more.  For some Starbucks is not about the coffee, it’s about the experience.  Closing the first location would have killed the routine for some customers.  Causing them to change their routine.  Some changed right away and started using the new drive through location.  Other customers are continuing to use the old location.

So was expanding a bad thing?  Should they have closed the smaller location right after the new one opened?

The leason here is go forward with expanding your business.  The new location might just replace your old one when times get lean.

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