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."

yahoo!

New Zealand man's love runs deep in search for ring

Wed Aug 19, 11:26 pm ET
WELLINGTON (Reuters) – A New Zealand man has been dubbed the Lord of the Ring after he searched and found his wedding ring more than a year after it slipped off his finger and sank to the sea floor.

The ring was lost for 16 months in the harbor of the country's capital city, Wellington, before Aleki Taumoepeau found it shining on the sea floor, the DominionPost newspaper reported on Thursday.

"The whole top surface of the ring was glowing," Taumoepeau, an ecologist, said.

Taumoepeau had been married for just three months when he lost the wedding ring while conducting an environmental sweep of the harbor.

He roughly marked the spot where the ring had flown from his finger, but was unable to find it despite returning to the area many times.

Taumoepeau's wife offered to buy another ring, but he refused, pledging to find the ring.

But, equipped with new global satellite based coordinates and offering up a quick prayer, he found the ring after an hour's search.

"I couldn't believe that I could see the ring so perfectly," Taumoepeau said.

He said those with him on the boat at the time the ring flew off his finger had likened it to a similar, slow motion shot from The Lord of the Rings, much of which was filmed in Wellington by local director Peter Jackson.

(Reporting by Michael Dickison; Editing by Sanjeev Miglani)

Celebrity Business Busts

Celebrity Business Busts
by Katie Adams
Tuesday, August 18, 2009

provided by


If you're one of the thousands of small business owners and entrepreneurs who have had to close shop since the recession began you're in good company. And, although they probably have better hair than you do, more than a few celebrities have experienced personal business failures, too. Only they tend to have more to lose - and they have to eat way more crow.


The Real World

Lauren Conrad hoped to parlay her MTV "The Hills" fame into high fashion success, launching the Lauren Conrad Collection in March 2008. The new venture barely got off the ground; it was shut down this spring. At least she can take comfort in knowing that her famed "frenemy", Heidi Montag, suffered the same fate. Her barely-there clothing line - Heidiwood - also tanked just seven months after its launch.


Investors Put the Squeeze on Somersized Venture

Suzanne Somers, best known as the blond, beautiful and often bubble-headed "Chrissy" on the 1970s TV show Three's Company, made a bundle with her uber-successful Thigh Master, but didn't find as much support for "Suzanne's Kitchen" -- a make-it-yourself meal preparation franchise that provided ingredients and recipes from Somers' cookbooks. The business was open for less than three months before changes in the business plan and a disagreement with investors led to a quick closing.


Bo Derek Scores a Perfect Zero on Business Venture

Bo Derek may have been a "10" on-screen but she scored a big zero with former business investor Fort Worth Magnolia Media Group over her decision to abruptly drop a pet-care product business launch in 1998.


Car Dealership Runs Out the Clock

Former New Orleans Saint all-time rusher and two-time Pro Bowl star Deuce McAllister fumbled in business and was unable to bring his on-field success to his Nissan car dealership. The First Tennessee Bank foreclosed on the property in July, after McAllister defaulted on a loan and exceeded his credit line by $7 million. The dealership filed for Chapter 11 bankruptcy, and was subsequently sued by Nissan for breaking an agreement in which Nissan Finance would receive a certain amount of money for financing the dealership's cars.

A Chicken Only Kramer Could Love

Country musician Kenny Rogers has won numerous platinum records for crooning about losing love but it was chicken - roasted chicken - that caused him to lose a bundle in the late '90s. Even an entire Seinfeld episode devoted to Rogers' fast food chicken restaurant, Kenny Rogers Roasters, couldn't save the business from failing in 1998. It probably didn't help that Rogers failed to recognize his own chicken in a blind taste test between Kenny Rogers Roasters and NBC cafeteria chicken on The Late Show with Conan O'Brian in 1997.


Stick a Fork in It - It's Over

Britney Spears has dealt with a lot of criticism in her career but perhaps the most stinging was for her NYLA restaurant. The restaurant opened in New York's Dylan Hotel in 2002, and was supposed to mix Spears' down-home Southern roots with high-class New York fare. Unfortunately, NYLA floundered from the start, suffering management changes and health food violations. And the food? Picky New York reviewers were not impressed; they booed the food and the restaurant's concept. Spears walked away from NYLA in 2002.


"Posh" Jeans Fail to Appeal

Victoria Beckham is tentatively replacing Paula Abdul on "American Idol" but her line of jeans - dVb jeans - failed to impress consumers. The pricey vintage-style pants (think $300 for a pair of jeans) sat on shelves and were dropped by U.S. stores, which claimed that Beckham refused to make appearances to promote the line.


"Jenny from the Block" Backs Out

Jennifer Lopez ("JLo") is a mega recording star and big-ticket actress but she's faltered in a few other business ventures. Her California restaurant, Madres, shut its doors in July 2008 after a six-year run. Her street wear line of clothing - Sweetface - also halted production in 2009. This is the second clothing line that has sputtered for the pop star - her first line (JLO) closed in the U.S. more than two years ago.


Nicky Uh Oh...

You would think that someone with the last name Hilton - Nicky Hilton - would have the hotel business down to a science. You'd be wrong. Nick's "Nicky O" hotels, which boasted elevators entertainment news tickers in the elevators, a signature scent and rooms designed by friends - including $5,000-a-night penthouse by clothing designer Roberto Cavalli, went bankrupt in 2007; all Hilton was left with was angry investors. The courts got the properties, which were put up for auction.

It's a Bust for Da Bear's Quarterback

Former Chicago Bears quarterback Jim McMahon was part of the '80s Bears Super Bowl-winning team, but his themed restaurant, "McMahon's Steakhouse", failed to impress diners. At least he can take comfort in knowing that more than a few other Windy City celebs have "failed restaurateur" on their resumes, including Michael Jordan, Mike Ditka, Dennis Rodman, and the late Walter Payton.


Ramsay's Personal Kitchen Nightmare

Chef and TV star of "Hell's Kitchen" Gordon Ramsay is suffering through this recession like everyone else, although he's likely more vocal about it than most! His multistar restaurants across the U.S. and Europe aren't drawing the crowds they used to, forcing Ramsay to slash his staff and hand a few of his properties back to the hotels where they're housed. If that doesn't work, he's considering selling his palatial home in London to avoid having to file for bankruptcy.


No, YOU'RE Fired

While Donald Trump most recently gained fame by yelling "you're fired!" to his potential apprentices, Trump has had to walk away from a few jobs and business ventures himself. Most recently, he had to cancel publication of "Trump" magazine after two-year run and now he's fending off a lawsuit for allegedly letting his Marina Hotel Casino physically deteriorate after tentatively agreeing to sell it to investors as part of a restructuring agreement included in his Chapter 11 bankruptcy protection filing.


That's a Wrap!

Take a cue from these celebs and don't let one failure keep you down. Regroup and look for another opportunity to build a business of your own...you may just strike it big enough to become a celebrity in your own right!