Thoughts on the 7 most Over Rated Business Ideas

Today I was forwarded this article that discusses the 7 most overrated businesses. http://smallbusinessanswers.yahoo.com/overrated

Here are my comments:

1. The first on the list is Restaurants. I tend to agree with this one. As a SCORE business consultant, I tend to see a lot of start up restaurant owners in our seminars. People tend to think that opening a restaurnt will be an easy way of leaving their current job and becoming an entreprenuer. What they don't tend to do is research. Who are the competitors? Why will someone want to go to your restaurant and not another...or just stay home for that matter? A fantastic marketing plan is key, especially when you are entering the Restaurant market. After all, 60% of these types of businesses fail in the first 3 years. That's a pretty high risk margin.

2. The second, Direct Sales, could have been more aptly named Multi Level Marketing. If the person who is getting you into the business is going to be getting a cut on you, plus who you recruit, think twice. Are the products going to be priced where the consumer can't just go down the street and buy a similar product for half the cost? In today's tough economic times keep this in mind. Consumers are smart. They know that a "party" that has XXX in front of it means that they are going to have to shell out some money--Normally a lot more money than they would have to pay at their local mall. Some people do well in this type of business, but the majority just give up after a few months because they aren't cut out to recruit their friends to sell products themselves. Although, one of the benefits to this type of business is that you do not need to keep high quantities of inventory, you normally do have some inventory costs. When going into this type of business, be sure to find out what your out of pocket costs are going to be up front.

3. Online Retail. This might have been fantastic 5 years ago, but before delving into this type of business today, you are going to have to have a marketing plan, and a marketing budget. I agree that you can't just put a website up today and think that your market will find you. Also, most people who go online today are shopping price. If you can't compete with prices from around the globe, you may not do well in this marketplace. Just make sure that if you do start an online store, that you have a well laid plan to get eyeballs to your site.

4. High End Retail. My husband and I walked into a lighting store a few weeks ago and we couldn't believe the prices. We were shopping for some lamps to put on our desks, but I would also like to get a new chandelier for our dining room. We went to four or five places before we stopped in to this VERY high end store. I couldn't believe the price differential. You could tell that the quality was better, but to be honest, I didn't think that it was 10 times better. Today's consumer, no matter how wealthy, is looking for a deal. It is also very difficult to keep your inventory costs under control in these types of stores. One of the biggest mistakes that business owners make is to have too much inventory. If you start a business like this, make sure that you keep a close watch on your inventory.

5. Independent Consulting. Although I have not seen a huge volume of this type of business coming through the SCORE doors, I do know lots of people who are in this business. The great thing about becoming a consultant is that there are very little start up costs. Many people just go to the local printer and print up some cards, and now they are a consultant. However, one of the main issues here is clients. How are you going to get your clients? This is something that many consultants do not consider. Not only do you have to be good at what you do, but you have to be excellent at marketing and sales. Be sure to think this through before embarking on a consulting business.

6. Franchises. I agree that just because you are buying a franchise, you are not guaranteed a profit. Make sure you work with someone who is an expert in this area. Read the information before you sign the paperwork. Have an attorney with franchise expertise look it over to point out any areas of concern. Talk to existing franchise owners and LISTEN to what they have to say. Take a look at their marketing plan and find out what assistance they will be giving you versus what you will have to do yourself. Ask questions. Why should you go with their franchise versus setting up a similar business on your own?


7. Traffic Driven Web Sites: Being in San Diego where we have a lot of high tech businesses here, I have listened to a lot of pitches about the next best Facebook or the next best this or that. Yes, the internet has spawned some fantastic websites (like Blogger) and you can make a lot of money. You will need to have an excellent idea and get yourself in front of some Venture Capitalists. Listen to what they say. This type of business is difficult to get off the ground, but if you have an idea that is good, chances are if you get in front of enough VCs you can make your case. You will have a long road ahead of you, but if you have the right idea it can pay off.

As with any business, the main thing that you should do before starting a business is to have a good marketing and business plan. You can obtain assistance with this by visiting your local SCORE office or by obtaining the services of a good business consultant who has experience in the business that you would like to start.