Transcription
All right, so running a small business is like super hard. The stats totally back that up. In fact, if you start one, the SBA notes that like 20% of them fail in the first year. And here, it even gets worse: 70% of small businesses fail within the first decade of founding.
So, I think a pretty obvious thing to do, and a lot of people do this, is go out and look and say, "Okay, what are the lowest failure rate businesses out there?" And you end up seeing kind of the same list over and over again. It's things like self-storage and trucking and laundromats and stuff like that. So, like, those keep coming up.
But what gives? Uh, by the way, my name is Michael Gley. Also, my staff makes me talk about how much of a badass I am, even though it's so painful to me. I'm a CEO of a holding company. I've bought and sold over 20 businesses. I've started numerous businesses. I've had lots of them go really well, and I've had a number of them go really poorly. So I'm in the same boat, I think, a lot of folks are who are watching this video, which is like, "Okay, well, if we're going to be in entrepreneurship, like, how do we be in the smartest entrepreneurship possible?" And after I kind of go through these lists of these low failure rate businesses, I'll talk about the type of business I really like, which are what I call "nice life" businesses. So let's get started.
I want to talk about why a lot of these like, quote unquote, "low failure rate" businesses, well, they actually kind of suck. I Googled low failure rate businesses like to come up with business ideas that I thought would be well, because they have low failure rates, like they have a high chance of succeeding. And like, this particular site came up, it's a v101.9 with six businesses with low, uh, low failure rates. So let's, let's kind of talk about each of these things.
Laundromats. Well, here's my problem with laundromats and why, why I would potentially stay away from them like the plague. And there's two problems. One is, uh, the reason laundromats have a pretty low failure rate is because it ends up being the owner is always there to, if they need to, work for free to keep the thing open and going. And the other part of that is, if you're the one that has to take care of these laundromats, that means when somebody comes in there and trashes the place at 2:00 AM on a Tuesday or barfs in your bathroom or the toilet packs up because somebody put something down there they're not supposed to, who's getting that phone call? You're coming in there and doing that. And I think that's a sucky life to have to deal with. That's like owning a bar, not fun.
But here's the bigger problem for me with a laundromat, why I'm not interested in owning one in the least, is capex. Just think about this idea of capex, is how much money you have to put up into the business before you even start to see any revenue whatsoever. So look at this picture here, for example. Look at how much money, just in this corner of the laundromat, the owner of this laundry business had to spend before they were able to see the first dollar of revenue. They had to go buy all these snacks, all these machines, they had to pay for all the permits, they had to go rent this space. Looks like they're showing MSNBC for some reason, like they had to get the cable hookup, like they had to go in hundreds of thousands of dollars just to be able to get door one and open up. And we haven't even talked about architects, engineers, permits, sales tax permits, and then the loan you're going to have to take out and probably personally guarantee to buy all of this equipment. Like, that kind of capex is not very fun.
All right. Self-storage facilities. The same problem that we had here with the laundromat is the same thing with self-storage facility. You got to go find the land, you got to get the land, you got to build the self-storage facility, you got to build all of these things, you get the permits, do advertising, marketing before you even know if the thing's going to be profitable. Uh, and that's why this stuff is like somewhat kind of risky. Like you have to really be able to bet that you're going to invest hundreds of thousands of dollars in capex to be able to say, "Like, should I own this self-storage facility?" Now, it's one thing if you're buying one that's already built, but if it's something like this one that appears to be a brand new ground-up one that you're expected to do in terms of developing a business, like that's a lot of capital expenditure and it's a big risk for a lot of people.
All right, let's talk about the third type of business that, um, has a low failure rate, which is transportation. So you can do human transportation, like driving, you know, private buses or tour buses around, uh, or you can move cargo and freight around. Um, here's the same deal with these other businesses. Like, "Okay, I want to deliver my first package. What do I have to do?" Well, I have to go get the correct permit, I have to go get the correct license, and I have to go buy a truck, and I have to find a driver to drive that truck. I got to get them set up, all that kind of stuff, pay sales tax on them, etc., etc. We're always going to need to drive stuff around, so I understand why there's consistent demand there. But it's the same thing. Like, I have to go spend $100,000 to borrow and buy a truck right before I can even go do day one of this type of transportation work.
All right, let's go on to the next thing listed here. Uh, rental property. You buy a piece of property and you rent that out to people, right? Okay, well, same kind of problem as before. Like, I have to go risk, let's say, $300 or $400,000 to buy one of these rental properties. I have to go borrow the money, I have to put all my equity at risk that I'm going to put into this thing. I have to go get it ready, I have to market it, do photos on Airbnb or do photos on whatever service I'm use to market the thing. I have to put all that money in to know if I'm going to succeed or not. And then second thing, you want to double your capacity or you want to grow your business. What do you have to go do? You got to keep buying houses. And eventually, you get there and, well, like you got a lot of wealth, but not a lot of profit and a lot of like cash. Which, look, I own a lot of real estate too. I'm just trying to tell you the downside of it. The awesome side of real estate is awesome. They're not making any more of it. You get huge tax benefits from owning real estate. Like, definitely recommend it. But thinking about it as like, "Oh, this is a way to get started when I don't have much capital," really kind of bothers me.
All right, let's talk about vending machines. There's a problem with vending machines, though. If I want to put out a vending machine, like I got to go invest a lot of capital based on, you know, what return I might expect. Any one of these machines can cost thousands of, if not more. And the landlords who allow you to put out vending machines in good places, they know this. Uh, they are typically not going to let you put a vending machine in these places for cheap. And while they may have a high success rate because, again, it's the same thing as the laundromats, a lot of times businesses like this, they end up leveraging the owner working for free and not really accounting for how much they're working. If, if you want to grow again, what do you have to do? Buy more machines, go sign more leases and get into new places. And then hope that landlord doesn't figure out you're doing well, raise your rent, or allow somebody else to rent it out from under you and take all your profits that you built up by having your machine on that space. So to me, man, heavy capex, high risk, and again, like, just a big chance that I'm going to get competed out by somebody who comes in and tries to, you know, take my spot over from me. So don't love vending machines either.
Senior care centers. Heavy capex business. You got to come up with all this money before the business even makes day one dollar or becomes profitable. And then on top of that risk, you have the kind of the kicker risk, the karma of being responsible for somebody else's invalid parent. And man, I just don't love it. But I think it's also important to remember one last thing: the population of baby boomers who are aging right now and getting into their mid-60s and late 60s, the generation behind them, my generation, Gen X, is pretty small. So based on the demographic trends, like this will peak and slow down as those baby boomers start passing away. So it's just something to think about over the next 20 to 30 years if you get heavy into this, you know, into this senior care area.
So look, I've been around business for a while. And like, if I was to tell somebody who's a mid-career professional or whatever, there are some better businesses to be in with reasonably low failure rates, but also more importantly, like low risk-reward ratios. And the other thing I like about a lot of these businesses I'm about to tell you about is they can meet criteria where they can grow bigger. And so these are criteria: $200,000 plus a year, low capital, time requirements, enter good work-life balance, you get to spend time with your family, defensible, durable, and inflation-resistant, and medium to low risk in terms of putting them together. So with that out of the way, here are the businesses.
Uh, so number one business type I love: Niche consultant. A consultant is basically somebody that gets paid to deliver services, either on a project-based or a time-based system, to somebody else, right? Um, and so what I would do here, and I've seen people do it, is you pick like a winning platform and you be a service provider for it. So that's like EOS, which is like one of the business systems out there. There's tons of people doing well that are helping companies deploy that system.
All right, let's talk about the next type of nice life business that I really like. Uh, it's starting in a digital agency. So examples there are like coding agencies, SEO agencies, digital ad agencies. Um, there's people that do Twitter ghostwriting, which I'm not a fan of, but anyway, it's all this kind of specific service that you offer to other businesses or individuals, kind of almost as a product. Um, and you basically act as an intermediary between the talent that you have and then the customers wanting you to do something for them. So the cool thing about this is like low barriers to entry. Like you can get started as a side hustle while you're doing it as your day job. Uh, you can basically almost have infinite demand for some of this stuff. People, uh, need SEO like almost universally because they want their websites to show up in Google. Lots of demand there. And look, it doesn't require much capital to get started. You can basically just start for a few weeks of your own, like work time, right? And go sell your first couple deals and then you staff them up and then you go make some stuff happen.
The next category of business that I like for this nice life business is being a franchise owner. And look, franchise owners generally have the same problem as the previous sets of businesses, which high capex is a problem. But I think there's an opportunity here where high capex gets better. Like the amount of capital you have to invest in order to build that business gets better and more like appealing as you start to de-risk the business. And what could be like less risk than like opening a McDonald's or an Orange Theory or, well, Chili's or any one of these like super winning franchises? And the people selling the franchise to you, like they know very well where to put a McDonald's and they know very well where to put an Orange Theory and what's going to make one work or not. And then your job is just to run that playbook. There's lots of government funding opportunities that are available for you to get into that system. The SBA and all those kinds of loans are very good to help people fund and grow franchised businesses.
All right, so let's talk about this next low capex business that I love. Um, it's called real estate private equity. And basically, the way this works is you take investor money, you deploy it into real estate deals, and you get paid fees and upside by doing that. The cool thing about this is you get to magnify your level of ownership of real estate by using other people's money, and then you share in the upside. Uh, real estate is a ginormous market. It's super tax-advantaged. Uh, and you can start to scale. A lot of, a lot of these folks, um, who've started from very small or humble beginnings as real estate private equity by buying or selling, uh, a couple different single-family home rentals, have scaled to multi-million or multi-hundred million or multi-billion dollar portfolios that they manage over time. Uh, and they do that by combining their own money, which may be small at the beginning, with investor money to really scale that. So can be super good, uh, and super, super great over time.
All right, let's talk about this next nice life business. Uh, a staffing firm. Staffing is a huge business. Staffing is where you provide a firm that does staff augmentation or recruiting for other businesses. Other businesses are often very good at their core business, but they suck at bringing staff in to their business. So, uh, I've actually started and own one of these businesses that helps companies staff, uh, people overseas. It's called Near. Put the link to that below. There's other ones out there like Growth Assistant, Aerotech. They can grow enormously big. A lot of people don't know the guys that own, uh, the NFL franchise, uh, in Baltimore, the Baltimore Ravens, they came from the staffing industry. Staffing can get really, really big because basically the market for companies to hire and the demand there is just enormous. Companies just want and need good talent, and it's getting harder and harder, especially with the demographics that we have in the United States right now, where there are fewer and fewer people looking for jobs and in the labor market.
All right, so let's talk about this next, uh, nice life business that I like. This is a little harder to get started, but it's what's called a commercial real estate broker. And a commercial real estate broker just acts as a listing agent or a broker for commercial real estate. And I'm not talking about residential real estate. Most of us know those people that do residential real estate. In my mind, that's, it's an okay business to be in. I would much rather be a commercial real estate broker, personally. The cool thing about buying and selling and listing commercial real estate is the clients are very professional. You're not dealing with people like trying to rent, like a cheap apartment or anything like that. And the numbers that get thrown around and done in deals for commercial real estate is are really good. Uh, and it's kind of like, if you're going to be in a residential real estate brokerage or residential realtor kind of idea, do you want to sell $100,000 houses or you want to sell million dollar houses? Right? And the cool thing is, a lot of commercial real estate trades at the $1, $2, $5, $10, $15, $20 million or more valuation for those businesses. And your commissions can be a lot better when the deals are bigger.
All right, the last one, and I know a lot of people that made a lot of money doing this, is financial or a wealth planning advisor. And basically, it's just like getting in the wealth management business. And your job in the wealth management business is just going to people and helping them plan for retirement. Uh, basically, the way the business works is you go and you build up your book of business and you work at a Merrill Lynch or one of these type of financial firms, and you become an agent whose job is to consult with your customers and help them plan for retirement and savings over time. Um, the cool stuff about this, like you got to feel good about helping people prepare for their dreams, but it's also cool that the market is enormous. Like the amount of savings that people have is gigantic. You get to build great relationships with people, they can become your friends and colleagues over time, especially as you see them start just getting started out and then over decades, you watch and eventually see their kids get to, get to graduate college and stuff like that. And then the thing economically that's to love about this business is it's recurring revenue. Oftentimes, you get paid a percentage of the assets under management that you have as part of the wealth planning, and you also get fees and that sort of thing. Um, and it can just be a nice thing that pays you year after year, and it feels very consistent and and very safe in terms of going that direction.
Look, so at the end of the day, you're going to see a lot of stuff on the internet. It's number one rule: like, don't believe most things you read on the internet. You go, you gotta, you gotta keep your eyes open when on that type of stuff. But to me, as I've gotten exposed to more and more types of businesses, like I would much rather do these nice life but low failure rate businesses than I would want to do these ones that are very commonly known and maybe they have relatively low failure rates, but like I have to risk so much money just to try and see if they'll work out. And to me, like that's why I don't want anything to do with the first part of the list that we talked about. But the second part of the list is much more interesting.
So anyway, tell me what you think. Thanks for checking out this video. I'm a business nerd. I love talking about this stuff and would be happy to read your comments. If you want to see more content centered around being a better business person, being a better human, all that kind of stuff, being a healthier business owner, uh, I'm your guy. Subscribe, notify, and, uh, we'll talk to you soon.