If you are an entrepreneur and looking to start a new business venture, you have many different paths that you can go down. However, some of them are much riskier than others, and you should be aware of these risks before you get started. Here are the riskiest new business ventures to start.
Restaurants
Starting your own restaurant is tough and risky. There are so many costs associated with starting a restaurant: property rent, electricity and water, complying with city health codes, paying for staff, paying for food materials, décor, and advertising really just cover the bases. Most restaurant businesses fail because they are undercapitalized. Not to mention, the competition is stiff. And with the rise of review sites like Yelp, it’s easy to get buried among the crowd favorites.
If you are deadest on opening your own restaurant, then make sure you protect yourself and know what’s important for a restaurant’s security before getting started. This can help save you from unwelcome (and expensive) surprises down the line.
Clothing Stores
Clothing retailers are another touch industry to crack. One of the reasons that opening a clothing store is so risky is due to the seasonality. Especially when you’re starting out, it makes sense to specialize in a certain type of clothing or carve out a niche for yourself that gets people’s attentions. And many of these niches (like “sweaters” or “bathing suits” or “boots”) have a certain seasonality to that, where income can be hard to sustain year-round. Plus, there are so many industry giants in the clothing store space that competition is steep and prevalent no matter where you start your business.
In addition, inventory poses a tricky problem: you need to order enough clothing that you can fulfill customer demand, but not so much that you’re left with hundreds of unwanted product pieces. It’s a tough balance to strike, and is easy to get wrong.
Contracting
Contracting is a tough business to get started in, but more so, to stay successful in. With many contracting projects, whether it’s helping to finish a home, repair damage, or any other home improvement need, the name of the game for homeowners is price. And there’s always someone willing to do the job for cheaper (even though the quality might not be as high).
Plus, so many homeowners rely on word-of-mouth or a reference from their insurance provider to make a decision or inquiry on their potential contractor. So, until you get your foot in the door in this industry, you may have a hard time securing new business without severely undercutting your prices and cost of labor, which is a dangerous hole to dig yourself into. The result becomes taking on more projects for a lower cost, just to make ends meet, which can result in several years of just breaking even before you carve out enough of a name for yourself to become profitable. And you have to make sure you’re providing exceptional quality in that time as well.
