Marshall Reddy
Codie Sanchez is a YouTube business coach with over 1.2 million followers (including me.) She posted a video with over 5 million views on businesses that rarely fail. Sanchez always recommends businesses with a low startup cost, low involvement requirement from an owner (being able to be run remotely, for example), and low failure rate. She also wants new business owners to choose a business that can’t bankrupt them.
Average success rates are important because 94% of U.S. startups fail within five years. Even a business that’s not a startup has a strong risk of failing: 20% fail during the first year, 50% by year 5, and nearly 66% by year 10. Those aren’t great odds, no matter how smart and hardworking you are.
She says starting small and learning the business is the key to most owners’ success, and early successes are critical. She says once a business owner experiences even a small failure (like a product that didn’t take, or an event that wasn’t a success), the recency bias kicks in. Recency bias is our hard-wired tendency to give greater meaning to recent events over historical ones. That means owners start feeling risk-averse when they don’t feel successful, which sets off a cycle of smaller and more timid decision-making. That’s a sure way to increase your odds of failure.
Sanchez mentions several businesses in her video, including laundromats (almost 95% success rate), self-storage facilities (97% success rate), vending machine routes (90% success rate), and last-mile delivery services (76% success rate).
Here’s what I would add to the mix: the success rate of a business is also tied to how much the owner is interested in the business itself. (Running a laundromat may not thrill everyone.) That’s why I do an intensive profile with my clients; we come to a clear understanding of what kind of business and ownership model is the best fit for them. That boosts their chances of success significantly.
That’s also why I’m in the franchise space. Franchises offer a proven business model that can be scaled up when the owner is ready. The franchisor provides training and support, including marketing and peer-to-peer mentoring. The performance of the business is disclosed and fully transparent (by law) for the buyer, and buyers are welcome to (and encouraged to) contact current franchisees and those who have recently left the business to get their advice and perspective.
Franchises have a 90% success rate overall, because they’ve already proven that the business model is profitable and meets the needs of its customers. Prospective owners are carefully screened and required to spend some time inside a franchise unit before being approved for a purchase.
There’s no such thing as guaranteed success, but choosing ownership within the right franchise comes pretty darn close.
If I can help you decide what franchise concept is a right fit for you, let’s chat!
Whatthefranchise is a Strategic franchise consulting firm that has helped people for over 30 years to find the best franchise via proprietary assessment tools.
Marshall’s background includes over 41 years of business ownership, sales, marketing, and consulting experience. His first endeavor as an entrepreneur was as an independent contractor for the southeastern United States, with the Optyl International Eyewear company based in Austria. During his tenure with Optyl, he was awarded the Consultant of the Year for the United States. Marshall parlayed his success with Optyl into a successful partnership of optical retail superstores in Jacksonville. His company also worked as an outside consultant for Vistakon, a Johnson & Johnson company.