Businesses I Wouldn't Start Today

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Franchise Opportunity? No Thanks

I'd avoid franchises. I've never seen a happy franchise owner, unless he owns 57 franchises and is sleeping under a barstool in the Florida Keys. The startup costs, including equipment purchases, training, and franchise payments, can be high. To me, it seems like you're just a glorified employee of the franchise. You have little flexibility in managing. You have to work within their policies and procedures. You're constantly trying to find teenagers to make sandwiches or man the cash register instead of doing the things teenagers like to do—like smoking pot and making out. And who's to stop headquarters from opening up a competing unit right across the street from yours? (Check out this story on legal wrangles between franchisors and franchisees.) I don't like throwing my entire life savings in with one company either, especially when I have little control over marketing and decision-making. Just ask Bennigan's franchisees and you'll see what I mean. To me, it seems that most franchises are too much hard work for too little net income and not enough control.

I've never understood the attraction of commodities businesses either. These are businesses that compete almost 100% on price only. They can't even determine their own prices because they're determined by the market. Service often seems like an afterthought. For example, I want to refinance my mortgage, so I get five quotes and go with the lowest. I want to buy a printer so I go online and find out where the model I want is sold the cheapest. I look for an insurance guy or a travel agent and there are 10,000 of them all selling the same Blue Cross plan or US Air (LCC) flight to Chicago. So I buy the least expensive. And when a market is saturated, and the buying decision is based on price, then the challenge is doing things cheaper than your competitor. Everything's about margins, overhead, receivables, and inventory turnover, so you can be the lowest-cost provider. Marketing oftentimes involves selling to the masses so you can cover your overhead with volume. I don't want to deal with people who haggle and buy on price only—I just don't have that thick a skin. Pass.

Financial Services I Can Do Without

Specialty shops that cater to an upscale crowd seem more like a hobby or an activity rather than an actual business that could support a family. Of course, I base my belief on anecdotal evidence. But I do know people who run shops catering to niches that don't seem to be making much money—even though some own the building where they operate. Others moonlight to make ends meet. And recessions tend to kill these shops.

There are a lot of services businesses I like, but not financial services. The volatility in the market has completely freaked me out. Of course, I base my belief on anecdotal evidence (like the high-end luggage boutique in my area that never seems to have any customers in it). It seems like a long, tough battle to convince ma and pa to invest money with me after they've just lost 70% of their life savings already. Exams and certifications are oppressive. The evening hours sitting in someone's kitchen watching couples bicker and listening to dogs barking isn't appealing to me either. I can get that at home. Building that customer base takes such a long time that it makes more sense to start this kind of business on the side while working somewhere else. Even so, I think there are easier businesses out there to attract customers and build a revenue stream.

I don't doubt there are plenty of harder-working and smarter people than me running businesses like these and making a great living. But there are plenty of ways to make money without being miserable. Stay tuned: I'll unveil a few in my next column.

Gene Marks, CPA, is the owner of the Marks Group, which sells customer relationship, service, and financial management tools to small and midsize businesses. Marks is the author of four best-selling small business books and writes the popular "Penny Pincher's Almanac" syndicated column. He frequently speaks to business groups on penny-pinching topics. More penny-pinching advice from Marks can be found at www.quickerbetterwiser.com.