9 worst (and 7 good) businesses ideas

Which are the boom and which the bust industries in this economy?

We all think we know a can’t-miss opportunity from a bad one when we see it. But can we?

coffe cup next to pen and napkin with IDEA written on itAccording to the SBA, an estimated 552,600 businesses opened in 2009, the last year for which statistics are available; of these, half will close their doors in five years and two-thirds in 10 years.

Some business ideas — like a video rental store, typewriter repair or record store — come with obvious red flags. Others, like the ones below, may not be so obvious, but recent history has shown they might not work out very well.

  1. Frozen yogurt shop.
    These days there seems to be a frozen yogurt shop on every corner. The market is saturated! Option. A food shop that meets a genuine community need, such as a doughnut shop in a town that has none or a food truck that goes to areas with many workers and few nearby restaurants, may be better options.
  2. Deal a day.
    This industry exploded in the ’00s as firms like Woot, Groupon, Facebook and others created daily deal websites. But this industry sputtered, and the daily deal business began to slide in 2011 and through 2012. Many merchants no longer want to give up their margin to find new customers. Option. Social media contests or flash sales may be as effective, and you know they will at the very least be seen by existing customers.
  3. Restaurant.
    The restaurant business is notoriously iffy — customers are fickle, and it takes time to build up a loyal following. There are many codes and permits to be obtained, plus there’s high employee turnover and abundance of competition. Option. Consider instead the options of No. 1.
  4. Bookstore.
    In mid-2010, online bookseller Amazon.com reported sales of ebooks for its proprietary Kindle outnumbered sales of hardcover books for the first time — 140 e-books for every 100 hardcover books — even hardcovers for which there was no digital edition. By January 2011, Amazon ebook sales surpassed even paperback sales. Does that mean the paper book is dead? Hardly. It does mean the convenience of ebooks, the decreasing price of ereaders and their increasing quality have led to less emphasis on paper books. Option. Consider a niche selling specialty ebooks about something in which you are an expert.
  5. Internet café.
    So many retail establishments today offer free Wi-Fi that customers have come to expect it. Most people have independent Internet-enabled devices anyway. Option. Other Internet services may be a better bet: In one Missouri college town, there has been a proliferation of smartphone repair shops, often run by entrepreneurs from their homes.
  6. Card store/gift shop.
    Americans are increasingly turning away from greeting cards to ‘likes’ on Facebook, e-greeting cards or other methods, knocking down greeting card sales. In October 2012, Hallmark announced it would close its Kansas plant and lay off 300 workers. Option. Consider a shop in an area with a steady stream of individuals desperate to buy something, quickly. A hospital gift shop, for example, comes with a built-in clientele of well-wishers and family members looking for the perfect “thinking of you” present. Hospital systems vary, but some have shops run by outside entrepreneurs.
  7. Travel agency.
    Most travel today is being conducted on such sites as Orbitz, Expedia and Kayak or directly on an airline, rental car company or hotel website. Option. What customers still respond to in travel is service. Adventure, ecological and other packaged, high-end themed trips remain popular.
  8. Alcohol distributor.
    Unlike some states, alcohol is readily available in Missouri supermarkets, convenience stores and other high-traffic area stores. Yes, a liquor license only costs $500 in Missouri, but the field is simply too crowded. Option. Craft breweries and brewpubs have done well in Missouri cities and towns.
  9. Distributor.
    Most distributors today use a pre-Internet tradition of relying on sellers to develop and maintain a sales territory. But closer scrutiny demonstrates serious issues with costly duplication of effort, long ramp-ups of new people and rudimentary forecasting — plus almost anything can be purchased directly from a manufacturer today. Option. Consider carving out a niche in Internet sales, such as an e-catalog.

So what are some growth industries for 2013? The Internet is increasingly the vehicle for business, but there are other, far more basic fields that are blossoming:

  • The green industry.
    Almost anything that can be made environmentally friendly, from retailing efficient light bulbs, installing solar panels, conducting home energy audits or providing green building cleaning products and services have done well, even in the recession.
  • Discount services.
    Despite economic upticks, Americans are still spending 30 percent less than they did in 2008, according to a 2012 Gallup consumer spending poll. That’s just $63 a day. At the same time, they have been furiously dumping debt — more than $100 billion last year, according to one source — and are reluctant to assume more debt. Businesses selling value, such as dollar stores, discount services and retail shops, have thrived amid the penny-pinching, an attitude that seems to linger as the economy turns around.
  • Pets.
    It’s said no industry is truly recession-proof, but the numbers from the American Pet Products Association say otherwise: A whopping $45.5 billion was spent on pets in 2009, the most recent year for which statistics are available. According to one source, fashion sunglasses for dogs are a $3 million a year business.
  • Seniors.
    The population is aging, living longer and more comfortably, and its members are often bewildered by the tech revolution. Service firms, in-home health care, even senior dating sites have done well.
  • Domestic front.
    It’s no secret that harried parents are willing to pay for help in, around and near the home. In fact, child care, sports coaching and tutoring are expected to be a nearly $50 billion industry, according to the research group IBISWorld. Even lawn care services in non-drought areas survived the recession fairly well.
  • Handcrafted.
    The handmade, the small batch, the locally sustainable — the authentic movement has been hitting new heights in recent years as Americans grow weary of mass production. Like any business, a handcrafted small business has to be carefully calibrated. A fresh local food market or craft brewery in a small rural town will likely not do as well as one in a city or large college town.
  • Health and fitness.
    The national obsessions with healthcare reform, childhood obesity and exercise are generating an increasing number of customers for health and fitness businesses. Fitness clubs and health stores now amount to a $41.44 billion industry, according to Entrepreneur magazine, up a stunning $1 billion from the previous year.

For help with business ideas, marketing, management, finance or growing your business, contact your local Small Business & Technology Development Center.

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