Types of Businesses Most Likely to Fail in 2015

Business.com / Starting a Business / Last Modified: February 22, 2017

The best businesses start from passion. But take into consideration that some businesses have a greater chance of failing than others.

So you want to start a business.

The best business ventures are ones that derive from a sense of passion, with a desire and vision to change the way the world does things.

Maybe that’s overstating it a bit. Such passion was behind the founding of such disparate companies as Apple, Google, McDonald’s, Ford and Edison Electric Company, and passion is certainly a requirement for business success. But for most entrepreneurs, the reasons for starting a business are a little more prosaic.

They include:

  • The ability to be your own boss
  • The potential to make more money than you would while working for someone else
  • The possibility of providing a legacy for your children
  • The ability to pursue something you are interested in and always wanted to try
  • The potential to run your business better than others you’ve seen
  • The thought that maybe starting our own business in the wake of unemployment is better than enduring a series of job interviews that never lead to anything
  • The possibility that it might be fun

Related Article: The Top 10 Qualities that Define an Entrepreneur

The Reality of Starting Your Own Business

Of course, starting your own business is hard work. If you need extensive capital investment and/or you have employees, there are money worries involved beyond making enough to pay yourself a living wage.

And here’s some further discouraging news: Research on Small Business reports that 80 percent of new businesses fail within their first year, and also cites the Small Business Administration in saying that more than half of new businesses disappear in the first five years.

That isn’t to say that your business won’t be part of that 20 percent that makes it to the second year as well as the half that survives past five years. But there are certain businesses we’d recommend not starting, as the chances for ending up in the half-empty part of the glass are greater than in the half-full part.

Related Article: 5 Things to Invest in When Starting Your Business

Types of Businesses Most Likely to Fail

Here, in no particular order, are businesses with a high likelihood of failure.

Taxi Company

Maybe you haven’t heard of Uber or Lyft, on which case you might think starting a taxi company is a good idea. It’s not. If you like the idea of providing ride services, you’ll make more money as an Uber or Lyft contractor than as a company that tries to compete against them. Plus, you get the advantage of essentially being your own boss with almost no capital investment and a flexible schedule you can work or not work as you like. Why do it any other way?

Related Article: Top 3 Mistakes Small Business Owners Make When Starting Up

Restaurant 

So you like to eat and cook. Wouldn’t it be great to provide great meals to paying customers and not just house guests? Famous last words. Life in a commercial kitchen is a lot more complicated than cooking as a hobby.

The restaurant business depends on managing a supply chain that involves perishable goods, adhering to a host of local health and other operating requirements and investing substantial capital. Not to mention that restaurants rely on a workforce characterized by high turnover in an industry that greatly depends on maintaining consistently high levels of customer service. Which is why one in four restaurants close or sell to other owners within their first year of business, according to About Money.

Travel Agency

Haven’t you heard of Expedia? You get better deals booking it yourself online; in fact, airlines give you discounts for making travel arrangements online. The travel industry argues that agents who specialize in exotic or customized tours offer value beyond just finding the cheapest fares. While that may be true, and even though a travel agency has relatively low-cost barriers (if only because you can run it out of your home), unless you have a lot of travel experience and the necessary contacts to provide a unique experience no one else can offer, we’d suggest you keep your day job.

Bookstore

It’s true that independent bookstores are not disappearing, any more than printed books are. In fact, according to Yahoo, the American Booksellers Association grew modestly in 2015 from 1664 companies to 1712. But 25 years ago, membership levels were over 5,000. Then Amazon came along. Borders, once thought of as the enemy of bookstores, went out of business and Barnes and Noble is constantly closing stores.

This is a niche business that is as much a labor of love for recovering English majors as it is a business venture, which is why novelists such as Ann Patchett operate bookshops. “Everyone said I had to be an idiot for opening a bookstore in the age of Amazon and e-readers, but I was never deterred. I was in it for love, not logic.” The typical high overhead costs of bookselling require you to sell a hardcover book every 3.45 minutes, or a paperback every 2.38 minutes, to remain in business.

We realize many English majors aren’t fond of math, but, trust us, the numbers aren’t attractive. Some are making it work. But as Lila Sliwa points out, “Turning this idea [of a bookstore] from dream to reality may appear to be simply too hard for the average book lover to give it any serious consideration.”

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