The Best & the Worst Businesses to Start in 2018
Fifty percent of small businesses fail in the first five years. Don’t be one of them.
By: M. Callahan
The first small business I opened was an exhilarating experience, and exhausting. I kept thinking that once I navigated the permitting and build-out, loaded in the stock and blasted out my first advertising campaign, the rest would be smooth sailing by comparison. That was only partially true.
The sad truth is that only fifty percent of small businesses succeed in the first five years. That constitutes tens of thousands of shattered dreams, life savings, exhaustive toil, and despair. If you are going to open a small business, educate yourself in your chosen field, become more than knowledgeable, become an expert. You should also develop & nurture an extensive number of contacts in your industry and then complete comprehensive market research in your geographic area. Sweeping sales are being made though internet sites. What participation on behalf of your business would be possible? What are the costs and manpower requirements added to brick and mortar establishments to capture some of this market?
Next, look at potential competition and analyze how you fit into this market. If it is already saturated, find another field. You could be the best mousetrap on the block, but proceeding with an over subscribed industry, or with a declining even stagnating industry, will doom you to failure. Remember that many industries are disappearing as brick and mortar establishments. Newspapers and gifts are not going out of fashion but their availability and delivery have changed dramatically.
Here are some of the best and worst business ideas for the near future.
Restaurant-23% failure in first year. Large chains buy in bulk lowering food costs. Small bistros find it harder to compete. If you are determined to open a restaurant, look at the local competition. What cuisine is missing?
Why produce the same menu as twenty other local restaurants that have already attained customer loyalty? Find a niche, offer service for at least two meal times, think about adding a breakfast menu since most restaurants do not open before lunch. What office presence is within walking distance? Can you offer a menu for the health conscience millennium generation which is known to be a large restaurant purchase demographic?
Internet Café-with mobile phones and free Wi-Fi, café hook-ups are obsolete. Stay clear.
Travel Agency-travel & deeply discounted travel packages can easily be planned online Even airlines provide discounts for online bookings.
Frozen Yogurt/Ice Cream Shops have a half life meaning they are not as desirable a product come winter when sales drop off closer to nil. This market has been over saturated and with profit margins so small, it’s hard to see how you could make a living. Often these shops are opened under the egis of a large franchise. By the time you pay all the franchise fees, both upfront and ongoing, along with your normal operating expenses, where is your profit? Many a franchise produce a business plan with projected wages set at $7.50 –8.50 per hour including that of owner/operators who work behind the counter. Minimum wages are due to rise in many states this year (unfortunately, NOT in Virginia), but earning minimum wage with the far distant hope of retained earnings does not justify the huge outlay of a franchise buy-in fee. Let them prove the projected profit margins to your accountant first.
Office Supply Store-You can’t compete against the large office box stores or the discounted online sales offerings.
Taxi/Limo Service-Ever since 2009 when car-hiring companies became prevalent, limo and taxi services find profitability a huge challenge. These companies have large staffs and vehicles to support rather than referral services who hire independent drivers with their own cars. Stay well clear
Bookstores -e-Books have taken over as well as online print orders. Even the decades old book stores are shuttering.
Video Rental – An extinct industry as inexpensive (if not free) movies and T.V shows are now viewed online
Gift Shop-if you are in a prime tourist area, you may succeed better with some items reflecting the history and sites of the area, if you can source quality products that are unusual….not the normal tourist tat. However, general gift stores are suffering. Internet sales of every imaginable gift item, plus free shipping, and minimal cost for gift wrapping are making brick & mortar gift sales less relevant all the time. This and the restaurant industry take time to build client loyalty and if your competition is abundant, you may not have the time to build that loyalty before your finances are well into the red.
If you plan to go into gift sales, find spectacular products, expensive enough that customers wish to view in person first or source local artisan wares giving meaning to made locally and original design. You are going to need a niche.
A prime example of a successful gift retailer is Annandale's AnnSandra Gifts on John Marr Drive. This beautiful store regularly stocks high end table top and gift wares along with practical and whimsical options. They offer gorgeous gift wrapping and shipping with the most pleasant and attentive customer service. Their selections are not stocked widely and with the conveniences and service offered by their sales associates, you could not be in better hands. Another secret of AnnSandra's success is their willingness to move with the market. New lines, new ideas, new designs; they progress with the times. See for yourself at www.annsandra.com.
A second gift retailer in Annandale that deserves your attention is Artisans United. This gallery of gifts offers hand created wares sold at their Craft Gallery off Hummer Road in the Annandale Community Park. www.augallery.org. Annandale is extremely fortunate to herald two great gift retailers at our fingertips.
Retail-This industry is dominated by superstores, discount department stores, and internet offerings. Alternately, you might consider a secondhand store where no up front inventory investment is required if you operate on a consignment basis. Remember you will still need a sizeable mark-up if you are going to cover all the brick and mortar expenses but your cash flow will not vary that dramatically making your planning far easier.
Service Related Businesses have a bright future. We will always need to have our appliances repaired, new electrical sockets installed, and homes remodeled. Building client loyalty, repeat business, and client referrals are the only way to insure a substantial client base in what are quite personal services. Clients are allowing you INTO their homes which demands a great deal of trust on their part, excellent service and cleanliness on yours. Regularly keep in touch with your clients by email cards, or messages to remind them that you are ready to provide your skills when they decide to remodel their bath. Subtle, friendly, but ongoing communications can work wonders.
Health Care and Social Service –This industry has shown a good survival rate, so-much-so that every Tom, Dick, and Harry think they can run one. This is a field that requires excellent business skills and a social conscience.
Although government departments provide a great deal of these services, non-profit organizations, especially faith based groups, have contributed appreciably. Now, profit organizations are being established especially in the areas of job training, community management, and health care.
Multiple emergency care facilities have opened in most communities including Annandale. The ready access as opposed to the traditionally long waits at hospitals, quality medical staff, and ease of parking are all reasons these facilities have been welcomed and utilized. Most will also perform routine medical exams and treatments making it far easier to receive well care without booking appointments months in advance.
With a large graying population, Elder Care facilities from retirement and nursing homes to day care facilities are opening in record number. States regulate elder care facilities and have strictly enforced rigid standards in order to obtain and maintain a license to operate. You will have a larger than normal staff with the accompanying payroll. You will need a significant amount of square footage to accommodate the many interior requirement with handicap able access throughout the facility and a much larger number and size of lavatories. Stringent regulations on employee training, certification, and record keeping is required, medical and professional staff on site, regulated outdoor space and multiple activities. A commercial kitchen will also have to be built for the requisite hot meals.
Don’t go into this field unless you view this work as a true vocation, not simply a business. You are dealing with vulnerable individuals who deserve the best possible care, not the least. If run correctly, there is ample profit to be made. If a center is not run well, you will be closed down within two years if you ever get a license to open in the first place.
What sinks businesses? Very often it is simply incompetence, lack of managerial experience or financial responsibility. Insufficient planning and undercapitalization from the start are massive ice burghs especially in ever shifting financial markets. If you are not skilled in finance or bookkeeping you had best find a partner that is. You can hire help, but that help will have no skin in the game and will not be holding your hand. Even with help, you need to understand what they are explaining. The greatest incompetence is thinking someone will rescue you. This is your business and you must bring all the requisite skills with you to succeed. It won’t be enough to be the best chef, the best buyer, the best of anything unless you comprehend the finances.
Ask yourself, “ Why are you going into business?” Many will say they know they can be a better boss than the one they are leaving behind. How do you know? Is it because your family and friends keep flattering you? Being the boss (owner) means the business now becomes your first commitment. How will your family respond to taking a back seat day after day? Are you prepared to give up 95% of your social life for many years? Are you prepared to forego vacations, and are you flexible to change? Businesses go through maturity phases. If you are stuck with one businesses concept and that’s it; you will fail.
And then there is advertising...you MUST advertise. In the beginning hire a consultant since advertising can be expensive; don’t throw your budget away on ineffective vehicles.
A professional will develop a customer profile and will know what techniques will appeal to them. Professionals will research the best local and specialty advertising vehicles. Joining your Chamber of Commerce will provide an immediate introduction to the local business community and a vast referral network. They often offer tested marketing vehicles that can kick start your advertising.
Finally, become imbedded in your community, local charities, local police and fire departments, and local activities. Your customer base will see your name associated with the activities that are already dear to them and think of you as a kindred spirit. Support your community, the community you need to support your business. It’s a win-win for everyone.
For more news and articles of local interest: ANNANDALE NEWS
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