3 Business Ideas You Should Avoid Starting [Choosing The Right Business Idea]

3 Business Ideas You Should Avoid Starting

Starting a business is difficult.

Most people who ever dream of starting and building successful companies quickly find their hopes and dreams crushed by the never-ending burden that comes with this commitment.

It takes much more than a great idea to build a successful business.

It takes years of courage, years of learning, and years of commitment to finally start seeing some traction.

Not only will you be working on a new business, but you will also be working on yourself and your mindset simultaneously.

90% of people, maybe closer to 99% of people, never make it through the adversity.

Most people give up at the first sign of resistance. As soon as the going gets tough, they're wooed back into their comfort zones.

The remaining bunch usually end up giving up some time down the line.

While all business ideas are different, there are some that can literally turn your life into a living hell.

Some businesses are nothing but energy, time, and cash-churning monsters that most entrepreneurs should avoid.

Luckily, the number of these businesses is limited.

Unless you've got a deep passion, I would suggest you stay away from these business ideas we're about to discuss in the article today.

At the end of the article, I'm going to hall suggestions at you, pointing you in a better direction.

Restaurant businesses

Restaurants seem like great businesses on the outside.

Making great food, serving tons of customers, and earning a living from it? Sign me up!

Many people who have a passion for cooking end up going down this path, however, only a select few ever make it out.

The restaurant industry is unforgiving and can kill more dreams than anything else before it.

Building a completely new restaurant business is much different from choosing to franchise an existing business.

It's also different from carrying on the family business - something some entrepreneurs fall into at some point.

Franchising is much safer, much more reliable, and can prove to be much more fulfilling.

However, building a new restaurant business that no one has ever heard of is much harder than it looks.

There are many problems with restaurant businesses.

Firstly, the startup costs are insane.

A Google search shows that starting a restaurant business can cost up to $425,000, if not more in various parts of the world.

Most entrepreneurs don't have $100 to spend on their business idea, let alone almost half a million.

Even if the capital was available, there are many businesses with much more appealing risk to reward ratios.

Next, it can take years on years to finally break even and start achieving a profit with your restaurant business.

The low margins make it difficult to scale your business, and build it up into a massive, well-known brand.

It's taken McDonald's almost 70 years to reach the scale it has today - even then, it's one of the only restaurant/fast-food chains that's managed to reach this level of scale.

The global profit margins for restaurants varies between 2% and 6%, which is much lower than some businesses we'll discuss later on.

These margins mean that for every dollar you make, you're only keeping 2-6 cents.

Finally, restaurants are physical experiences, places people visit to sit down and eat at.

This means that you'll find yourself paying rent, which can cost a lot, and bump up your overhead costs dramatically.

The fact that your business is not digital makes it difficult to scale to different locations in your city, let alone internationally.

Arbitrage businesses

A lot of people may have tried arbitrage without knowing exactly what it is.

Arbitrage, in Leyman's terms, is the process of buying and selling products for a small profit.

Assume that you have a local supermarket near your house.

The supermarket is selling products at a small, 10% discounted rate.

You decided to pick these items up for a discounted rate, and sell them for their original (or slightly higher) price online, effectively keeping the tiny change left over.

However, when we sell online, there are 'hidden' fees we must be aware of.

Firstly, there are platforms fees that are taken when you make a sale on the marketplace of your choice.

Etsy, eBay, Amazon - all of these marketplaces take a 'referral fee.'

On top of this, payment processors also take their cut, which is around 2.9% + 30c for PayPal.

Chewing away at the already minuscule margins we had, we're leftover with, well not much.

Assume you pick up a product that costs $50 retail, but has been discounted 10%, leaving it at $45.

You can choose to sell this product for $55, netting you a $10 gross margin.

However, after the total fees (for eBay, they're currently 12.8% of the final sale price + 30c), we're left with $2.66 in profit.

The margin, however, is not the only problem.

Many people find it difficult to scale their arbitrage businesses into anything bigger.

When I worked at Amazon during 2020, I also sold products on the side following the arbitrage method.

While I managed to make a good living during this period of time, I found it unreliable - finding products on offer, or having a reliable supplier is difficult for arbitrage.

As soon as I lost my supplier, I lost one of my biggest source of income.

All plans of ever scaling the 'business' were shut down, and I was left in the same situation I was in not long ago.

Arbitrage is a constant grind, a hustle that you need to escape as soon as you can or your whole business will cease to exist.

The closest alternative to arbitrage business is eCommerce dropshipping and/or white labelling.

I suggest you have a read over my articles on starting an eCommerce dropshipping business to learn more. 

Manufacturing businesses

Did you know that Elon Musk almost declared bankruptcy for Tesla in 2008?

He mentioned how the company was one month away from going bankrupt, and that year, which was the same year as a major financial crash, was one of the hardest years he's ever endured.

While Elon Musk pulled through and has now built one of the most successful car manufacturing companies in the world, not everyone can share this happy ending.

For most, the story goes south, and ends in tears and a lot of crushed hopes and dreams.

Starting a manufacturing company is very expensive, and has a very high risk of failure.

Whether you're creating cars or normal, low-ticket products, it's difficult to maintain a manufacturing business.

Many large companies have set up their manufacturing overseas, in places such as India, China, Pakistan and more.

Not only is labour much cheaper in these places, but the price for raw goods and materials is much more affordable too.

The cost of living in these locations is noticeably lower than 1st world countries like the USA or the UK.

With all that said, starting a manufacturing company anywhere else other than these overseas countries is near impossible.

Not only will you be paying premium prices for labour and material, but you'd also need to charge clients a premium which will be difficult, seeing as there are tons of overseas competitors charging half your rates.

It's important to understand that companies that might end up being clients are also looking to keep their already slim margins as high as possible.

Paying double, or even triple, for their goods is not a smart business decision.

So what should you start?

Now that we've discussed 3 major business ideas you should avoid starting, what businesses should you look into instead?

There are tons of businesses opportunities available.

If you look hard enough, you'll realise that there are lucrative business ideas all around you.

Finding the right idea is not difficult - the challenge is committing to one idea long enough to see it sprout.

Some of the most popular and most lucrative business models are service-based businesses.

These are digital businesses where you help businesses or consumers with services they might struggle to handle alone.

An example of this could be a marketing agency.

This is a business I've spoken about a ton on my blog and would suggest beginners start here.

It's simple to begin, and costs close to nothing - all you need is to pick a niche, pick a service, and learn how to deliver results.

Everything can be found online or on my blog.

If you decide to pursue this route, I suggest you hire a team to save you the time and trouble of learning to serve clients and failing.

You can't learn marketing overnight. It's a skill you build over years and years of experience.

Another business model I've grown fond of is software and SaaS businesses.

Software businesses are great because you can build an online tool and sell it infinitely to as many people as you want.

It can get to the point where you'd need to upgrade your servers, however, there are things like Amazon AWS that can help you run large businesses and operations.

Dropbox, a massively successful business, once ran completely on Amazon AWS servers.

Today, Dropbox still uses AWS for less than 10 percent of its storage needs.

Scalability is much simpler and faster with software businesses - the ability to sell products or services with high margins and to a larger market, gives you the ability to grow rapidly.

Those are 3 business ideas you should avoid starting.

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Till next time,

Mohamad