Maximizing the Chances of Success: Identifying Low-Risk Business Ventures

  Maximizing the Chances of Success: Identifying Low-Risk Business Ventures

It is a well-known fact that a majority of businesses do not succeed. The question then becomes, how can one ensure that their business avoids this unfortunate fate? After conducting research, we have identified three types of businesses that tend to have a lower failure rate. These types of businesses are those that have proven to be more resilient in the face of challenges and less prone to failure. By considering these options and implementing effective strategies, it is possible to increase the chances of success for one's business

The unfortunate reality is that a significant number of businesses do not survive the test of time. According to various studies, the rate of failure among small businesses within the first year of operation is alarmingly high, with estimates ranging from 20% to as much as 50%. This trend persists, with the likelihood of failure increasing over time. In fact, it is estimated that after a decade in operation, the majority of businesses, approximately two-thirds, will have gone under. While these statistics may be disheartening, it is crucial to remember that they do not paint the entire picture and that success is still possible with careful planning and diligent execution.

If we examine the data to determine which ventures have the greatest likelihood of success, we can make informed decisions about whether to pursue them. The initial business or deal that we undertake is of paramount importance, as if it fails, our willingness to take risks in the future may be severely compromised. This is known as recency bias - if we experience recent wins, we are more inclined to take on additional risk, but if we have recently encountered losses or unpleasant experiences, we are less likely to do so. Therefore, it is important to carefully consider the data and choose ventures with a low probability of leading to bankruptcy.

Here are businesses that have a low failure rate:

1. Rental Properties: Rental property businesses have a high success rate, with estimates indicating that 85.3% of these ventures are successful. This may be due, in part, to the fact that real estate investing has a long history of producing wealth, with many millionaires having made their fortune through ownership of real property. Additionally, the real estate market is generally efficient, and properties tend to be worth what the market says they are, providing a degree of predictability. 

Furthermore, rental properties offer the potential for monthly cash flow in the form of rental income, and the market often experiences appreciation, which can increase the value of the property over time. Leverage, in the form of mortgages, allows investors to purchase property using someone else's money, and real estate investing offers a range of tax benefits, including the ability to defer capital gains through 1031 exchanges and to take write-offs on taxes through depreciation and amortization. 

Finally, rental property businesses can offer passive income streams, as property managers can be hired to handle the day-to-day management of the property. However, it is important to carefully consider market conditions and one's ability to qualify for a loan and cover the mortgage before entering into a rental property venture

2. Self Storage Facilities: Self storage facilities have become a leading asset class in real estate since 2008, boasting a high success rate of 92%. However, it is worth noting that the market is becoming increasingly saturated with self storage options, so it remains to be seen whether this success rate will continue in the coming months and years. Despite this, self storage can be a lucrative investment, as evidenced by the success of individuals such as Nick Huber who have made millions through absentee self storage sites.

One of the key advantages of self storage is the use of technology, which allows for keyless entry, tracking systems, security systems, and automated contract and billing processes. This means that these facilities can be run remotely, without the need for a manager on site. Additionally, there is potential for value-add opportunities, such as making renovations or improvements to the property that can increase its value. Even something as simple as painting the front of a self storage unit can lead to a significant increase in property value

 3. Laundromats: Laundromats have long been known for their remarkably low failure rate. According to industry reports, laundromats have a success rate of around 94.8% over a five-year period. This information has been corroborated by the Chamber of Commerce, which conducted a study in partnership with Speed Queen and found a success rate of around 93%. These impressive figures are just one of the reasons that laundromats are often considered a gateway drug to entrepreneurship. Not only do they have a low risk of failure, but they are also relatively simple to understand, requiring only quarters, machines, and a little bit of maintenance. Additionally, the demand for laundromats is relatively stable, as people need to wash their clothes even during economic downturns. Finally, laundromats can be run as a passive business, with the option to operate remotely or with minimal employees. Overall, laundromats offer a low-risk opportunity with the potential for substantial financial rewards.

Summary

Starting a business is a risky endeavor, and the failure rate is particularly high in the first year of operation. However, certain types of businesses tend to have a lower failure rate, and may be a safer bet for aspiring entrepreneurs. These include rental properties, which offer the potential for monthly cash flow, appreciation, leverage, and tax benefits, and have a success rate of around 85.3%. Self storage facilities, which can be run remotely through the use of technology, have a success rate of around 92%. Laundromats, which offer a simple business model with low overhead and passive income potential, have a success rate in the 90s. Meal prep businesses, which cater to the growing demand for healthy, convenient meals, have a success rate of around 70%. Mobile services, such as mobile car washing and detailing, have a success rate of around 75% and offer the convenience of being able to take the business to the customer. 

By carefully considering these options and implementing effective strategies, it is possible to increase the chances of success for one's business.

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