The second site is judged against a P&L that includes free labour

Most expansion cases are built by trimming the first site's numbers for caution: which quietly assumes the first site's numbers were ever real.

By Steve 5 min read
Abstract bridge artwork for The second site is judged against a P&L that includes free labour

A business with one profitable location and more demand than it can serve tends to build the expansion case the same way: take the existing site’s P&L, trim it a little for caution, assume a few months of ramp, and see whether the return justifies the fitout. It is a reasonable-looking method. It is also wrong in two places at once, and both errors push in the same direction: flattering the second site while understating what it will consume. The first error is in the benchmark. The second is in…

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