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Starting A Business

What’s the Risk of Opening a Restaurant? Restaurateurs Weigh In



If you’re a whiz in the kitchen who’s been complimented thousands of times about your cooking, you’ve probably toyed around with the idea of opening a restaurant. You think, “I can cook, my food is delicious, so a restaurant would be a no-brainer.” But what’s the risk of opening a restaurant?

You conduct research only to find out that the restaurant business is notorious for failure. Some statistics put the food service business failure rates as high as 60% within the first year.

If you look deeper into the numbers, you’ll find there are a more promising statistics around the restaurant business. The U.S. Bureau of Labor Statistics (BLS) puts the number of failed restaurants at closer to 17% within the first year.

This rate is actually lower than the 19% failure rate for other service-based businesses. According to the same study, the median lifespan of a food service business is 4.5 years, slightly longer than other service-based businesses, which last about 4.25 years.

What’s the risk of opening a restaurant? 

Consider these statistics:

  • According to the National Restaurant Association, the number of restaurant jobs in the U.S. increased 25% from 2010 to 2017.

  • Restaurant middle-class job growth was almost four times stronger than the entire economy from 2010-2015.

  • The BLS also reported that, in 2014, the average American household spent $2,787 on restaurant meals and takeout, compared to $3,971 on groceries.

Bottom line: the food service is a strong, growing sector of the economy, and many restaurateurs have mastered the art of creating, running, and growing food-service operations.

Though no business is without risk, it’s helpful to know what challenges you’re up against and how to handle those challenges to stay afloat longer. While the risk of opening a restaurant may be high, understanding common challenges and create appropriate fail safes, you could increase your chance of having a successful restaurant.

The risk of no access to capital

Any business short on capital is doomed for failure. This is especially so with restaurants. This cash-intensive business requires enough liquidity to cover employee paychecks, supplies, and other operating costs. In fact, cash is one of the biggest risks of opening a restaurant.

Generally, the pool of traditional institutions that lend to restaurants is slim. Even though the statistics show that restaurants are no more inclined to failure than other service-based businesses, banks still tend to stay away.

There’s usually no other way to finance restaurant capital needs outside of venture capital, business profits, or credit cards. In some instances, restaurants can get alternative types of financing like equipment loans, working capital loans, food truck financing, and lines of credit, but this doesn’t mean these options are always available.

Keith Zust, co-owner of Nashville-based restaurant Sea Salt, says food service entrepreneurs should “have a realistic and accurate business plan.”

He goes on to emphasize the need for sufficient resources: “Restaurant owners should have enough capital for the unexpected to weather the first year. The most common issue is not enough capital to withstand the chaos of the unknown.”

Risk management move

This risk of opening a restaurant can be mitigated by creating a cash-crunch contingency plan. Have sufficient cash reserves in place in cases of emergency. Work with lending partners before you need them to increase your chances of getting help. Keep good accounting records and be ready to present them for loans or credit applications.

The risk of high costs

The amount of money it takes to start a food service business can be daunting: leasehold improvements, food, payroll, waste, insurance, and the list goes on. If costs are not controlled, then cash resources can be a serious risk of opening a restaurant.

  • Ancillary costs (think utilities, marketing, rent, etc.)

Portland has one of the “hottest” food markets in the U.S. but has recently been hit with minimum wage hikes and rising real-estate prices. Though it’s a food lover’s town and foodie tourist destination, Portland is getting difficult for the foodservice industry to operate as profitably as before.

Brandt says the creative nature of Portlanders comes through when dealing with this challenge: “Rising labor costs have caused many restaurants to adopt a counter service model.” This is where customers order their food at a counter, then a server brings it to their table. More often than not, the customer will also bus their own table.

According to Brandt, the counter service model lends itself to lower labor costs, which could help more businesses stay in business longer.

We can also learn another valuable lesson from Portland: The food truck and food carts have helped many people break into the food-service business with lower barriers to entry.

Risk management move

This risk of opening a restaurant can be mitigated by operating as “lean” as possible. Use discretion dealing with suppliers and choosing a location. Be creative and open to changing things like your menu, service model, or even operating hours to control costs. The restaurateurs of Portland are a great example of cost-saving creativity in a pinch.

The risk of low sales

Many restaurant owners believe their idea is unique. This is a huge risk of opening a restaurant. Because of this, they should have no problem attracting customers. Perhaps the menu is quirky and the decor is slick. The staff is super genial and attentive not to mention the great location with ample foot traffic. They’ve got systems in place to update social media accounts with awesome food pics. This restaurant is awesome!

The reality of the restaurant business is that you could do everything right and still have dismal sales. Many variables come into play for restaurant receipts. Your food sales could vary based on the time of day or year or even changed based on the food or type of food category. For example, your cafe might sell more drinks in the morning and more sandwiches in the afternoon but  on weekdays only.

Melissa Stewart, executive director of the Greater Houston Restaurant Association (GHRA), is also in a “hot” food service market. In fact, Zagat  named Houston the top eating out city of 2013 (meaning the city’s population eats out the most often).

The GHRA sees restaurateurs fall prey to slow sales all too often. “A restaurant will open three locations and get tons of media attention in the beginning which causes an initial income spike,” Stewart says.

However, many restaurants do too much too soon. “Once the buzz dies down and the traffic is slower,” she says, “many owners end up closing their doors.”

Risk management move

Avoid this risk of opening a restaurant by researching your market thoroughly. Don’t be afraid to start small and nimble. Catering, food carts/trucks, and farmer’s markets are all good ways to test a market before going full-monty. Don’t forget to put an emphasis on marketing: hire someone to manage Yelp and Google listings and promote your business on social media.

The risk of inexperience

If you are a newbie restaurateur all of the risk factors can be magnified with inexperience. In fact, Stanford researchers who studied small businesses in Texas between 1990 and 2011 concluded that entrepreneurs who failed once in business were more likely to succeed the second time around. If some didn’t reach success on the second go round, each successive attempt at business was garnered more success.

The sobering reality is that newer business owners will make mistakes. Sometimes they’ll affect the business in inconvenient or disastrous ways. It’s a risk that is inevitable, however we know every business owner has to start somewhere.

Risk management move

Get a mentor or a more experienced partner to help run the restaurant. Running ideas by someone else and being open to feedback can help you get your feet wet in the food service business before you’re ready to take it on yourself.

Starting a restaurant, or any business, can be risky. There is considerable risk of opening a restaurant—if you’re not prepared to mitigate the common challenges.

There’s no guarantee that things will work out. But these risks are not unique to food service. As you can see, there are many ways you can handle those risks and be successful in food service after all.

This article originally appeared on JustBusiness, a subsidiary of NerdWallet.


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Starting A Business

Everything You Need for Starting a Pressure Washing Business



If you have an entrepreneurial spirit and feel ready to go into business yourself, the pressure washing business could be the best option for you.

Starting a power washing business doesn’t require lengthy learning and the startup costs are relatively low. Since the demand for such services is always high, this business can provide a solid flow of income if mastered and managed properly.

Like any other business, a successful power washing business requires proper preparation and planning and this article offers a step-by-step guide for embarking on such an entrepreneurial journey.

Research the Market

Doing some in-depth research about the pressure washing market, what customers you want to target, and how many similar businesses are already operating in your area is essential. Even though this business is expected to register decent growth in the coming years, you should still dig a little deeper to see if there’s more work than the existing pressure washers can take on.

You can choose to focus on residential accounts or take on commercial clients. If you feel that you can manage more work, explore opportunities for pressure washing in surrounding neighborhoods and towns.

Proper research and identifying what opportunities exist is a crucial step in establishing a flourishing pressure washing business.

Get Your License

The moment you decide that this type of business is a golden opportunity, you need to check the local requirements for doing business as a pressure washer.

Depending on the state you live in, you may or may not need a business license. However, you should apply and obtain one before getting started as it will cover you legally. Make sure to check with your local authorities on what the rules and regulations are to stay on the right side of the law. 

This is also a major plus when attracting potential customers as they’ll feel more comfortable and it will help establish trust in your business. It may also help in meeting the requirements of other parties, such as vendors, who might want to see your license before deciding to do business.

Get Insurance

Even though it sounds easy to start a pressure washing business, make sure that you develop the proper skills on how to pressure wash without destroying the surrounding area, damaging your client’s siding, and causing an injury to yourself or somebody else.  

However, accidents happen, so in order to protect your new business from claims of negligence, injuries, accidents, financial risks, and legal fees, you should purchase insurance coverage. Nowadays, insurance companies can provide you with a quote for pressure washing insurance online, so you don’t have to waste time standing in lines.

Not only is pressure washing insurance a safety net for your business, but new potential clients will also take this as a positive sign that you’re a professional who takes their job seriously and ensures customer satisfaction.  

Choose Equipment

Depending on your service offering and scope, the type of equipment you’ll need might vary. If you only intend on working for residential clients, then you’ll be good to go with a pressure washer with a force of up to around 4,000 PSI, but for commercial work, you’ll need stronger equipment that offers more functionalities. Since this business is physically demanding, choose equipment that is fast but safe and helps you get certain jobs done efficiently.

Practicing also plays a big role as you don’t want to accidentally damage someone’s landscape while power washing their siding. Regardless of how technologically advanced your equipment is, not knowing how to efficiently handle it can get you bad reviews and cause unwanted accidents and lawsuits.

Before making any big investments, rent a pressure washer and practice on your friends’ patios, or driveways as this will give you the best hands-on experience.

Price Your Services

Once you’re done with all the administrative work, decide on your pressure washing service prices. Since you’re a new business owner, you should start with lower prices while trying to attract new clients.

Test what hourly rate gets you most jobs and try to slowly but surely bump the price up every year as your expertise gets better.

It might feel overwhelming at the beginning but focus on mastering few services first and settle on a rate that works for you. As you improve your skills and your business grows, you can adjust your prices accordingly.

Final Thoughts

Market research, obtaining the right pressure washing insurance, choosing the right equipment, and pricing your services, are all important aspects on the road to becoming a successful business owner.

We’re sure that you’ll be glad to have considered all the above-mentioned steps once your pressure washing business is set up and running.

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Starting A Business

A Basic Guide to Starting a Home-Based Business



Starting a business in 2021 is much easier than it was twenty years ago. With advanced technology and digital marketing, anyone can step into the role of an entrepreneur. In some cases, all you need is an idea and a computer.

Becoming a business owner is a path to financial security. Even if you don’t give up your day job, starting a home-based business can lead to financial freedom down the road. 

Are you wondering how to start a business? Keep reading for an essential guide to getting started.

Choosing a Home-based Business

Choosing a business that’s right for you is vital to your success. You want something you’ll stick to for the long run. The best home-based businesses are those you can operate from the comfort of your home. 

Start looking at things you are good at and research to learn if there is a market for what you want to offer. For example, if you have certification in accounting, you can start a business performing accounting services for other small businesses.

Creating a Business Plan

Like any business, it’s essential to create a business plan. This document outlines what your business offers, competitor analysis, marketing strategy, and financial goals.   

The business plan is a great way to measure success and to remain focused on reaching your goals. If you’re starting a business and require financial backing, you’ll need a business plan to show lenders. 

You can maximize solar savings by creating a green business.

Incorporate Your Business

A home-based business is no different from starting any other business model. You want to incorporate your business to add a layer of protection. It’s also valuable for opening a business bank account. 

Separating your business from your personal assets is essential in growing a business. It will help you build business credit. Plus, if you are ever sued, you don’t want someone going after your personal property. 

Get an ECommerce Website

Once the paperwork is done and your finances are in order, it’s time to get your business website up and running. Most businesses can benefit from an eCommerce website. These websites help grow efficient businesses that do not require a physical location or multiple employees.

With an eCommerce website, you can sell products, take deposits on bookings, and so much more. 


A powerful marketing strategy is essential to a home-based business. Determine which social media platforms have the greatest reach for getting noticed by your target audience. 

Use your website’s blog options and photo storage as a launching pad for the information you’ll share on online platforms. 

Don’t be afraid to try different marketing trends, including digital ads.

It’s Time to Invest in a Business

A home-based business is an excellent investment. Once your business is up and running and turning a profit, consider a second start-up. The potential is limitless.

If you need more great tips and information on business start-up trends, we have you covered. Continue to browse our site and check back often for new content.

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Starting A Business

How To Set Up a Successful Electronic Business



Consumers can purchase a range of mechanical items and parts from an electronics company, such as cell phones, televisions, computers, peripherals, and components. If you aim to create this type of business, you should arm yourself with knowledge so you don’t end up like huge electronic retailers that collapse. Read on!

1.Examine Other Electronic  Businesses

Examine and comprehend the business models of existing electronics businesses before starting your own. This comprises the typical markup on commodities, overall consumer satisfaction strategies, and managing supplier relationships. You’ll need this information to determine competitive store policies and prices. Compare and contrast the success of successful electronics stores with those that have closed or failed.

2.Research Your Interest Area of Establishment

If you’re just starting, you’ll focus on the local industry first. It’s also possible that you won’t be the first to play the electronic game. You may be competing with a lot of other small businesses in addition to big stores.

Make sure you do your homework before deciding where you want to locate your business and whether it is a good idea to do so. If your neighbourhood is densely packed with stores, consider looking on the opposite side of town or imagining how you may stand out. People may be hesitant to go through your doors if you come in and offer nothing more than another store.

3.Obtain The Necessary Permits

Check with your state and city to determine if there are any additional criteria for opening your store. If you repair computers, you may be required to pass a state-licensed test to ensure that you are aware and capable of providing proper care.

You’ll also need to check into various business licenses and other forms of documents to ensure that you’re following all of the rules.

4.Have a Competitive Business Plan

Due to the competitive nature of the electronics retail industry and the high risk of failure, you must develop a comprehensive business strategy that focuses on your competitive advantages. Use the information you acquired from your initial case study in the market and business profiles, as well as any personal experience you have with electronics, to show why your electronics company would thrive. 

If you’ve managed an electronics store, for example, you’ll be familiar with the inner workings of this type of retail operation and may have an advantage over other new stores.

In your plan, you need to include the brands you’ll be selling. You need to ensure that they are of both quality and outstanding market performance. For instance, working with certified wholesalers of closures and boxes, guarantee you offer the consumers new brands that are outstanding.

Also, don’t forget to include other regular but essential products such as lights and screens. This is because it is always good to offer a pool of varied products to your customers.

5.Choose a Brand For Yourself


Your company’s brand is both what it stands for and how it is regarded by the broader public. Your company will stand out from the neighbourhood competition if it has a strong brand.

So, while naming your firm, don’t go with a generic name like most electrical stores these days. Try to come up with a distinctive name because the right name is really important. You can begin by considering the business’s nature. In your absence, your chosen name will operate as an extension of your brand, representing you. Part of your brand representation in what you sell. You can add some wire connectors. They are always widely in demand by everyone.

We recommend checking to see if the business name you want is available as a web domain and securing it as soon as possible so that no one else does.

6.Get Startup Funds


For starters, you’ll need thousands of dollars to launch an electronic business in the first few months, with a large portion of that money going for rent. A significant portion of the funds will be spent on getting certain in-demand electrical goods as well as marketing your new business.

Personal cash, such as savings, loans from financial institutions, and borrowing from friends and family who are interested in assisting you in starting your business are all options for raising capital for your business.

7.Promote Your Store

Starting a business takes time and effort, as well as determination and vision. If you’ve already decided to work in this field, you should first check into legal and technical issues. After you’ve successfully achieved the first two responsibilities, you should build your brand and sell it. 

You must stay up with the most recent advances and maintain high standards at all times. It isn’t enough to have good items. To expand and develop revenue, it must be adequately publicized. The advertising team must be ready to provide you with a marketing strategy that will interest the audience.

As a result, the two key techniques of attracting new clients are word of mouth and local advertising. Many electronic stores promote in local media and provide first-time customers discounts and advertising billboards. Keep in mind that customer retention is crucial. Take extra precautions with the newcomer. 

They are your billboards. They are ecstatic and will brag about your store for hours. Be friendly to everyone that walks into the store. It’s more difficult to keep customers than it is to get them.

The Bottom Line

Starting and maintaining a business to its success is not an easy task. You need to be dedicated to the course and understand that however hard things get, you need to surpass them. Electronic stores are quite demanding, but a nice business to invest in altogether. Best of luck!

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