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I started watching the TV show Shark Tank a few weeks ago.  It consists of an entrepreneur pitching his or her business model to five “sharks”, rich investors that can buy a piece of the entrepreneur’s company.  While there are some viable ideas, most of the time the sharks shoot down the entrepreneur’s plan.  Call it a wake-up call for a misguided dreamer.

In that vein, a recent Yahoo! Small Business Article listed the 7 most overrated businesses.  With the recent surge of layoffs, people have been tempted to start their own businesses.  Here’s the list:

Restaurants -60% of restaurants close in the first three years, due to low profit margins and the absence of strong, tight-ship-running managers.

Direct Sales -You’ve seen the ads on TV.  Work from home.  Be your own boss.  But beware of these pyramid schemes, where only the people at the top make the big bucks by getting a cut of their recruit’s commissions.

Online Retail -It’s harder for new sellers to compete with more established retailers.  Successful online retailers must have a handle on sourcing their products at a low enough price, and being able to market them effectively.

High-End Retail -Specialty retail businesses close at a higher rate than non-specialty stores.  With conspicuous consumption down due to the economy, people are spending less on luxuries.

Independent Consulting -Consultants must be able to navigate through the income peaks and valleys.  Professor Dennis Ceru of Boston College says:

“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.”

Franchise Ownership -There are risks to franchisees, such as restrictive agreements and market saturation.  It’s also a myth that franchises are more successful than independent businesses.  62% of franchises are open after 4 years, compared to 68% of independent businesses.

Traffic-Driven Web Sites - As the internet ages, it will be harder for blogs to generate all of their revenue from advertising (Note to self: start writing that eBook!).  Martin Zwilling, a start-up consultant, says:

“Until you get to the point where you have a million page views a day, you’re nowhere.”

Looks like I’ve got a long way to go.  But don’t count me out yet, I’m just getting started!

Have you tried starting your own business?  Were you successful?  What were your biggest challenges?  Let’s hear from my fellow bloggers about what worked and what didn’t.

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