Interesting news article today

12 replies
Saw this a little while ago and it dercetly talks about the Internet and marketing being a bad idea right now....thought you might like to see it.

Enterpryzman




The 7 Most Overrated Businesses
By Kelly K. Spors and Kevin Salwen
With roughly 6.7 million jobs lost since the start of the recession, it's tempting - and often a great idea - to launch your own business. That way, of course, you can take matters into your own hands. No more rolling your eyes at the boss; it's your show.

But many people do a lousy job of picking businesses they can realistically turn into a profitable operation.

"There's this very sad pattern about how people start businesses," says Scott Shane, an entrepreneurship professor at Case Western Reserve University in Cleveland, Ohio. "People are most likely to start businesses in industries where start-ups are most likely to fail."

The problem: Many would-be entrepreneurs are drawn to businesses they like to patronize or the ones that are cheapest and easiest to start. Instead, experts argue, aspiring entrepreneurs should create firms in which they have professional experience so they have a competitive advantage in the market.

So, what are most overrated businesses out there? We spoke with small business experts to find out. Here are seven you might want to think twice about - and then maybe twice more.

1. Restaurants. Dining out and cooking are among Americans' favorite pastimes. But "restaurants are among the toughest businesses to run," says Donna Ettenson, vice president of the Association of Small Business Development Centers in Burke, Va.

Far too many people assume their culinary abilities will lead to success in the restaurant business. Instead, about 60% of restaurants close in the first three years, according to a 2003 study at Ohio State University. That's quite a bit higher than the roughly half of all start-ups that close in the first five years.

The reason: Restaurants typically have low profit margins and need strong managers who can run an ultra-tight ship through seasonal fluctuations and other struggles. Most people don't have that kind of intense managerial ability to pull it off. By the way, the pitfalls are quite similar for restaurants' cousin - the catering business. In other words, Chef Emptor.

2. Direct Sales. It's a tempting pitch: Work from home and earn commissions by selling cosmetics, kitchen knives or cleaning products. But companies that recruit independent sales reps tend to attract new team members by pointing to the success of their highest earners.

A harder look shows that those high earners are making big money in large part by recruiting new reps into the organization and getting bonuses or a cut of their recruits' commissions, says Ken Yancey, chief executive of SCORE, a Herndon, Va., organization of current and retired business executives who volunteer time counseling entrepreneurs. The new reps then have a much harder job because they need to recruit more people on top of selling product even though the number of reps out there is increasing.

The result, Yancey says: "Most of them wind up with a bunch of jewelry or kitchen equipment sitting in their basement that they can't sell."

3. Online Retail. By far, one of the easiest businesses to start is selling items through online marketplaces such as eBay or Amazon. But as online commerce ages and these sites fill up with more established retailers, it's much harder for new, small sellers to compete for attention and generate a viable income.

"A lot of people are thinking it's the Web of five or 10 years ago and you stand out simply because you're on the Web," says Rieva Lesonsky, chief executive of GrowBiz Media, a content and consulting company for small businesses based in Irvine, Calif.

Instead, successful online retailers today must have a handle on sourcing their products at a low enough price, then layering on clever online marketing and fine-tuned logistics. These businesses won't generate much income if they can't be easily found in searches, maintain a good reputation among buyers or add enough value so that sellers can build profit margins high enough to take on bigger players and physical stores.

4. High-End Retail. Many people dream of opening a day spa, luxury jewelry store or designer clothing boutique - businesses they feel good patronizing. But specialty retail businesses close at higher rates than non-specialty stores, according to the Small Business Administration's Office of Advocacy, and are even riskier now that consumer discretionary spending has dried up and people are no longer spending money on little luxuries.

"It's going to be a long time before we return to the days of conspicuous consumption," says Ms. Lesonsky of GrowBiz Media. High-end retailers often suffer from poor locations and lack of understanding of how to source and market their products in an effective way. In today's economy and in coming years, she says, retail entrepreneurs should be looking to sell non-discretionary consumer goods or offer items at a value rather than high-end products.

5. Independent Consulting. Common advice for aspiring entrepreneurs is to stick with industries they know. So, for many looking to escape the corporate treadmill that means turning their professional expertise into a one-person consulting firm.

It seems practical - more companies are indeed relying on independent contractors and freelancers these days - but it's not as easy to pull off as many imagine, says Dennis Ceru, an entrepreneurship professor at Babson College in Babson Park, Mass. Many consultants struggle with time management problems, spending so much time scouting work that it's very difficult to earn steady income. "The difficulty many face is they go through peaks and valleys of having work," says Prof. Ceru. "When the engagement ends, they are frantically looking for work," which may take weeks or months.

A possible solution: "A successful consulting firm needs people to find the work, grind out the work and mind the work. Unless you know you can do all three yourself, you potentially expose your business to great risk."

6. Franchise Ownership. The idea of being handed a proven business plan without the uncertainties and headaches that come with building a business from scratch is understandably alluring. But too many people don't understand the risks associated with franchising and sign restrictive franchise agreements without thoroughly researching their franchisor and their contractual obligations, says SCORE's Yancey.

Some franchisors, for instance, allow franchisees to open stores too close together, oversaturating the market. Or they simply require their franchisees pay so much in royalties and fees or other operational costs that it's very difficult to be profitable. Beyond that, when a franchisee fails, a franchisor may make it extremely difficult and costly to get out of its contract.

It's a myth that franchises are far more successful than independent businesses. A 1995 study by a researcher at Wayne State University found that 62% of franchises were open for business after four years, compared with 68% of independent businesses. And franchises were also found to be less profitable in those early years.

7. Traffic-Driven Web Sites. Everybody has witnessed the success of social-networking sites like Facebook and popular blogs that generate all their revenue off advertising. But as the Internet ages, that's much harder to accomplish, says Martin Zwilling, a start-up consultant in Fountain Hills, Ariz., who specializes in helping entrepreneurs find angel investors.

Zwilling says he hears pitches for new social-networking sites about once a week, but actively deters people from starting them. "I say, skip it," he says. "You need to invest $50 million to get any presence" in the social-networking space right now and it's very difficult to get people to leave established sites. What's more, he says, the amount of traffic needed to build a lucrative traffic-driven Web site is far more than most new Web entrepreneurs realize: "Until you get to the point where you have a million page views a day, you're nowhere."
#article #interesting #news #today
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    • Profile picture of the author enterpryzman
      Originally Posted by Kazooli View Post

      That is a very interesting article and it has some views, but may I ask; is this the actual article?

      Sincerely,
      Kazooli
      Yes, it is the entire article as seen today online. I agree it is very general and too short BUT, for those who are dealing here in the bizop arena, this is what your possible clients are reading.

      I just wanted to share it, it is on yahoo and one would consider that a fairly large venu for a news article.

      Enterpryzman
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  • Profile picture of the author yoshiko
    Interesting read. But it barely scraps the surface of the topics and issues. And just right here on this forum, already we have seen real success when we do things right.

    I seldom read these stuff for two reasons. First, they are too broad in perspective, hence lack depth and contain general sweeping statements. Also, written in a rather negative tone, they servs to depress rather than spur our drive.
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    • Profile picture of the author havplenty
      Originally Posted by yoshiko View Post

      Interesting read. But it barely scraps the surface of the topics and issues. And just right here on this forum, already we have seen real success when we do things right.

      I seldom read these stuff for two reasons. First, they are too broad in perspective, hence lack depth and contain general sweeping statements. Also, written in a rather negative tone, they servs to depress rather than spur our drive.
      I totally agree with you on this. When you look at the real numbers (and not some sceptical appraisal from a consulting firm), the internet has made more people financially independent in the last 10 years than any other medium.

      Of course it's not going to be easy, anyone with a modicum of common sense will see that straight away. The key here is the potential, and as long as one has the drive and determination to move forward, success is almost always certain.

      This is why I love the internet has a business model:

      Startup costs:

      x1 Computer $245 (second hand)

      Monthly internet access $20 (if that)

      That is pretty much all one needs to get started in this business.

      Compare that to trying to establish an offline brick and mortar business and you'll see why the net represents the best opportunity for the capital starved entrepreneur.

      Hav

      Mon
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  • Profile picture of the author David Chung
    If you do things like everybody else, and everybody else is failing, then there's a high chance you'll fail too. That doesn't mean you can't succeed, it just means you can't succeed by following the crowd.

    I do feel that this article is too overly negative, but I guess bad news always sells better than good news.
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  • Profile picture of the author michael_nguyen
    Agree with most but not the internet marketing bit. Too many opportunities online to possibly fail.
    Signature
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  • Profile picture of the author Mukul Verma
    I do not disagree this is a low start up cost and high failure business. However that is business and that is not a reason not to do it.

    Look at each of those business mentioned, they all have high-end income earners.

    The title should be "The 7 Most Safest, not going to make as much money Businesses"
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  • Profile picture of the author enterpryzman
    I think that the low cost and ease of entry enables too many to enter and not be forced to take it as serious as one in which the cost and/or sacrifice is higher.

    Just a thought,
    Enterpryzman
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  • Typical Internet Article. I saw it. And the sources they quote as experts are pretty weak.
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  • Profile picture of the author clarissa25
    Banned
    lol. don't believe anything u read. Why? I have worked for a magazine. I also worked for a newsletter as a writer. Writers are just looking for something to write about. They put any slant they want on it to make it interesting. Come on now...arent u an ezine articles expert? Lol....are u really?? Don't believe what you read. It's all someone elses opinion and they just find a few people to agree with them...besides generally the statistic is that like 4 out of 5 businesses fail or something like that. and that includes ALL businesses. Not just these few mentioned here. the author conveniently forgot to mention that one.
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    • Profile picture of the author geolt7
      The article is not helpful in anyway and serves such a broad perspective that it is almost distorted. But it is interesting where the media is getting advice from.
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  • Profile picture of the author scrofford
    You know they say that those that "can't" - teach...sounds like this so called professor expert is living up to that! Thats my opinion. You can make money regardless of the economy and a lot of those businesses are very good ones to start up. That's my take.
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