Despite its lure of higher sales and profit the multi-unit operation is hard work and can be prone to failure. If you are not careful you may end up losing it all. In our previous blog we laid out the pros and cons of multi-unit operations. Here we will outline some of the steps you can take to make multi-unit operation succeed. I will say it again – operating multi-unit business is challenging. At the same time if you take care of the pitfalls that come with it you can not only succeed; but thrive.
The basic philosophy you have to adopt when moving from single unit to multi-unit operation is to take advantage of your scale; while at the same time standardize and apply the proven formula at multiple locations. These are the principles behind the concept of franchise; which is essentially multi-unit operation on steroids. If you want to learn how to succeed at multi-unit business; study how any franchise you operates.
Let’s look at the steps you need to take in more detail:
- Leverage Economies of Scale
To put it in simple terms; the price of an item will go down when you buy it in larger quantities. You should apply this formula to everything you buy for your business. Look into opportunities to negotiate the price of everything from raw materials to advertising and marketing to services such as telephone, linens and more. Even if you have a contract in place you can ask to renegotiate it when you sign up for additional items. Just remember – EVERYTHING IS NEGOTIABLE IN BUSINESS. My rule of thumb is that the price should go down by at least 5% every time the purchase quantity doubles. - Standardize Operations
This is one thing you have to take care of if you have any chance of succeeding at multi-unit operations. If you do things differently at different locations providing the same service; your operations will be in chaos and you will not be able to take advantage of the benefits I laid out in previous blog. That is why the franchises have standard operating procedures and send inspectors to ensure all locations are doing things the same way. - Delegate
Once you have standardized operation across all units you can delegate many tasks to the employees and still feel comfortable that the work will get done and quality and customer service will not suffer. If you are a hands-on person who does not like to delegate to others the chances of you succeeding at multi-unit business are very slim. You are better off running a single unit and focusing on improving profits there. - Report at Individual Unit Levels
If you are not carefully watching how individual units are performing on their own you may overlook the problems lurking at the units that are not doing well. For example, if one unit is making $20K and the other $100K the total profit of $120K does not look too bad. However, only when you look at the individual unit that you realize that there are some significant issues you need to take care of at the unit making $20K. Bringing it to the same level as the other unit can increase your profit by $80K!! The reporting does not simply apply to sales or profit you have to monitor all the metrics and operations this way; otherwise it will be too late before you can figure out that there are problems with certain units. - Cross –train and Rotate Employees
One of the benefits of having multi-unit operations is that you are in a better position to handle crisis situations. For this to materialize, however, you have to train and rotate your employees and managers at multiple locations to begin with. You don’t to go overboard with this; but have your employees work at different locations one day a week. This also has added benefit of learning what works well at certain locations and applying it at other units to improve your sales and profit.
If you are the owner of multi-unit business; I’d love to hear your experience. What has worked well for you? What are the lessons learned?
