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What Are the Hardest Small Businesses to Own

WHAT ARE THE HARDEST BUSINESSES TO OWN? Though small businesses comprise almost 98% of businesses in the U.S., they are also some of the most difficult to maintain. But are some harder to run than others? Below we examine which businesses have it the toughest. SURVIVAL RATE SMALL BUSINESS 34% AFTER 4 YEARS 9% Small businesses with fewer than 20 employees only have a 34% chance of surviving after 4 years and a 9% chance of surviving after 10 years. In short, it's easier to start a small business than it is it to maintain it. AFTER 10 YEARS WHY DO THEY CLOSE? THE BUSINESS WAS NOT SUCCESSFUL, DID NOT PROVIDE ENOUGH INCOME, OR WAS TOO MUCH WORK. 10% 90% BANKRUPTCY TOUGH MARGINS SOME SMALL BUSINESSES HAVE DIFFICULTY GENERATING THE REVENUE NEEDED TO SUSTAIN THEMSELVES. COMMUNITY CARE FACILITIES OTHER SUPPORT SERVICES This group of small businesses includes resi- dential care facilities, nursing homes, and other health services. If the overhead for these facilities wasn't daunting enough, many of these facilities get paid ├Ânly through Medicare or Medicaid. This group can include small businesses that handle anything from trade shows to wrapping gifts. Because of the low barriers for entry and the reliance on subcontractors, these businesses tend to fold very easily. -7.2% 2.6% AVERAGE PRETAX MARGIN AVERAGE PRETAX MARGIN -7,5% -5% -2.5% 0% -7.5% -5% -2.5% 0% BEVERAGE MANUFACTURING REAL ESTATE SERVICES Wineries, breweries, bottlers, distilleries, soft-drink makers, and water purifiers all have to face some hefty competition. Building a recognizable name is crucial in this field and sometimes small businesses don't have enough scale to compete. In this economy, real estate agents, appraisers, and property managers are all feeling the burn. With these services there is a low barrier of entry making for a large pool of competition and low profit margins. 2.2% 2.1% AVERAGE PRETAX MARGIN AVERAGE PRETAX MARGIN -7.5% -5% -2.5% 0% -7.5% -5% -2.5% 0% BAKERIES AMUSEMENT SERVICES The overhead for bakeries and tortilla manufacturing facilities is often far greater than expected. Many bakeries are unable to recoup this cost in the first three years. Scale and pricing power also play a role in determining success in this business. Fitness centers, ski resorts, and bowling alleys all qualify as amusement services. Staffing and maintenance often chew up revenue and many of the markets are saturated with options. -9% -9% AVERAGE PRETAX MARGIN AVERAGE PRETAX MARGIN -75% -5% -2.5% 0% -75% -5% -2.5% 0% AUTO PARTS MANUFACTURING SPECIALTY RETAILERS Even big businesses in this sector haven't been able to turn a reasonable profit, thanks in part to automakers who have demanded price cuts from parts suppliers, causing a ripple effect of profit loss. Sporting goods, musical instruments, or hobby-supply stores have found it hard to compete with large big-box stores such as Wal-Mart. 7% -5% AVERAGE PRETAX MARGIN AVERAGE PRETAX MARGIN -7.5% -5% -2.5% 0% -7.5% -5% -2.5% 0% LIQUOR RETAILERS TRAVELERS' ACCOMMODATIONS These businesses include the shops that actually sell liquor, beer, or wine. With strict laws regulating how quickly a distributor must be paid by the retailer, cash flow becomes hard to manage. HOTEL Although positive, margins in the travelers' accommodations industry run slim. Hoteliers face high fixed costs and many rely on a small window of opportunity (usually the summer) to make most of their yearly profit goals. 18% 2.5% AVERAGE PRETAX MARGIN AVERAGE PRETAX MARGIN -75% -5% -2.5% 0% -2.5% 0% 2.5% 5% SMALL BUSINESSES IN THESE INDUSTRIES ARE FACING RATES OF FAILURE STEEP COMPETITION AND RISING COSTS CAUSING HIGH FAILURE RATES IN 04 2010. CLOSED FAILURE INDEX Index runs from 0 to 2, with 2 being most likely to fail. INDUSTRY PERCENTAGE THAT ARE SMALL BUSINESS 1.69 TRANSPORTATION 43.9% 15 2 1.54 CONSTRUCTION 85% 1.5 2 1.4 FINANCIAL SERVICES 42% 15 1.38 AUTOMOTIVE 500/* 15 2 1.26 MANUFACTURING 44% 15 "includes other parts manufacturers and suppliers PAST DUE BILLS, BILLS, BILLS SMALL BUSINESSES IN THESE INDUSTRIES HAVE HAD HIGH DELINQUENCY RATES FROM JAN.-DEC. 2010. MOST OF THESE BUSINESSES ARE MORE THAN 91 DAYS PAST DUE. INDUSTRY DELINQUENCY PERCENTAGE Percent of businesses with payments 91+ days past due PERCENTAGE THAT ARE SMALL BUSINESS (8.8% MANUFACTURING 44% 20% 17.3% AUTOMOTIVE 58% 10% 20% 17.1% 0E0/** TELECOMMUNICATIONS 85% 10% 20% (16.6% CONSTRUCTION 05/ 85% 10% 20% 16.6% WHOLESALE 61.2% I0% 20% *includes other parts manufacturers and suppliers *includes smal businesses labelled as 'other services' HEALTH GRADE HIGH OPERATING FEES, TAXES, OR LICENSES MAKE THESE SOME FEES MAY APPLY BUSINESSES DOOMED TO FAILURE FROM THE GET GO. TAXIS & LIMOS RESTAURANTS Restaurants have a survival rate of 20%. This is Besides the sky rocketing cost of gasoline and car maintenance, the price of the license or medallion to operate in major cities could be as high as $400,000. due to the high overhead costs of starting a new restaurant. Liquor licenses, equipment, furniture, and passing the health code could run into the hundreds of thousands of dollars. WHERE THE PROFITS ARE HOWEVER, THERE ARE SOME BUSINESSES THAT ARE FRUITFUL IN THIS ECONOMY DESPITE THE HARDSHIPS OF RUNNING THEM. ACCOUNTING DENTAL SERVICES Bookkeeping, designing accounting systems, payroll billing, and preparing tax returns all have the benefit of pricing power, low overhead and marketing scale. Dentists have more pricing power relative to other medical providers largely because many patients end up paying out of pocket. While some of the equipment is expensive, staff is relatively cheap. AVERAGE PRETAX MARGIN AVERAGE PRETAX MARGIN 25% 20.9% 0% I0% 20% 30% 0% 10% 20% 30% SPECIALIZED DESIGN SERVICES LEGAL SERVICES This includes specialized interior designers, industrial designers, and graphic designers. Given that the field is specialized, these services tend to make use of the latest technology. There is limited overhead, and great pricing power. Not just lawyers but even paralegals and legal book keeping all see high pretax margins. Overhead is relatively low aside from possible office leasing. Businesses tend to run on referrals, keeping marketing expenses down and repeat business high. AVERAGE PRETAX MARGIN AVERAGE PRETAX MARGIN 17.6% 21.6 0% 10% 20% 30% 0% I0% 20% 30% QuickBooks Online SOURCES FORBES 2010I SBA "SMALL BUSINESS ECONOMY 2010I DUN & BRADSTREET I BLS.GOV I CFO.COM I CCSMALLBUISINESS.COM intuit.

What Are the Hardest Small Businesses to Own

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Small business comprise 98% of businesses in the U.S, but some are a lot harder to own than others. This infographic shows the survival rate of small businesses and percentage of businesses that close...

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Quickbooks Online

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