How risky is starting a Small Business?

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When I was 17 my maths teacher gave me some advice for starting a small business. He said - "Don't start a small business because the majority of them fail".

So you can imagine my horror when my girlfriend signed a three year lease on a shop for $22,000 per year. What if she doesn't get any customers? At that rate she could burn through her savings in only a few years.

Her plan it to open a massage parlour. She has a business partner but the partner's name doesn't appear on the lease (risky). I nearly told her not to start but I didn't want to stamp on her dreams. I know that for Chinese people, having their own shop is a big aspiration in their culture.

Also I know of her struggles in finding full-time employment and they say that if no company is hiring, you should start your own company. I'd prefer the security of a regular salary but I guess this is better than having her sitting at home all the time not earning any money.

I suppose there's a nanoscopic chance that they might get enough customers to break even. Am I just being paranoid? I'm just scared she's going to lose her shirt. Are my fears unwarranted?

Asians are better at running businesses because they get capital from friends and family, just as your girlfriend did. Its a cultural thing that helps them succeed without help from the government.

I know that she's getting capital from her family but I'm concerned that eventually her family will run out of money.

I've been a part of a few small buisness's on the ground floor, and own my own atm. It's not easy by any stretch of the mind. I work 12-16 hour days, It's stressful and it requires you to sacrifice a lot of expierence's. Not sure i would agree with "if no one is hiring, start your own company". You need to know the market, know demand, and have advertising. Though having a partner is often unavoidable, it's also is a major cause of failure. If your worried about clients, Fliers in Gym's is a good start. Wish your friend luck...

Exactly! A few times she said she wants to start a bussiness so she'll have more free time as compared to working. I told her she was living in a fantasy if she thought running a shop is easy.

Now she's talking about buying out her partner, which mean more work and more debt for her. I think she just doesn't have any concept of risk.

She's been talking about buying a house in the next few months and I told her that's impossible because all her and her mother's savings are tied up in the shop (mostly her mom's) and she's been talking about traveling home for 3 weeks for Chinese New Year. I told her she can't g on a 3 week holiday because she has a f*cking shop to run!!

She also wants to have kids some time in the frighteningly near future. Did I mention she has a shop to run?

She just has no concept of risk. She signed a 3 year lease before she had a business plan and before she knew whether or not she'd get any customers. She spent about $10,000 renovating a rented shop and when she's done she'll have to pay to have all the renovations removed.

While setting up the shop she's being complaining that she's exhausted. I'd like to say that I didn't say I told ya so but I said I told ya so. Now that she's seen that setting up a shop requires some actual effort and that running a shop that has a sign outfront saying "trading hours: 10:00 AM to 9:00 PM" might also entail some effort she's been talking about trying to get out of the shop and doing something else. Did she forget about the 3 year lease? Did she forget about the $10,000 in renovations?

And if she doesn't pay back the $40,000 her mother gave her, she'll have to pay tax on it. She's already spent half her mum's savings on a master's degree she's never going to use so why'd she have to waste the other half?

She keeps saying she's better at saving and better with money than me. I told her that her "savings" doesn't count when her mum gave it to her. Anyway when she runs out of money (probably some time in the next few months) I'm going to be there to tell her that she's not better at saving than me because my saving a thousand per month is better than her losing ten thousand per month.

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Last edited by B19 on 14 Nov 2019, 10:48 pm, edited 1 time in total.: spammer

You have to ask, how risky is it for your girlfriend to set up a small business

Skill, location, marketing, whatever

Case by case business

I don't have to ask that anymore. She made a ton of money and gave most of it to me.

Great to hear she is good at starting and running a small business!

I plan to eventually start my own business (after many years of underemployment I am getting burned out) and am fully aware that is very risky. I hopefully can leverage my advantages of having formal business training and a understanding of the importance of marketing.

Without giving away what industry let me just say it is dominated by men who work alone and while they are probably more skilled than I are nothing short of dreadful when it comes to marketing their business. I figure if they can make a solid living with such poor marketing (seriously, some of them I still cannot find almost a year later) then with a solid plan I can be successful. This isn't even getting into how with my technical skills I can create my own software rather than the expensive templates most use and can use my business knowledge to avoid personal legal liabilities.

I will say though that most entrepreneurs are downright delusional, especially in the restaurant business. That is why I have avoided going on my own for so long. Glad to hear things work out but I know of so many entrepreneurs who started off well, got overconfident and crashed and burned due to laziness or complacency.

Maybe restaurants are too risky. There are already so many restaurants around anyway. The next time GF talks about starting a restaurant I'll advise against it.

Very risky---especially in this day and age.

Always risky. Just find out what you like, get good at it, figure out a way to make money with it. Debt isn't necessary, just a good way to help you fail.

Just because you are a good chef or love to cook doesn't mean you know anything about running a successful restaurant. There are things such as balance sheets, payroll taxes, labor laws, incorporation vs partnership, supplier negotiations, not having too much or too little stock, what hours to open, having a plan to ensure equipment is well maintained, saving for emergencies, etc.. Some restaurants in my city have failed in less than 2 weeks and other spots are a revolving door to the point you wonder how insane someone has to be to try again in that location (and how a bank could possibly approve a loan!). When I was younger and more naïve I would offer friendly suggestions to these entrepreneurs and the attitude I got was always along the lines of "we don't need negative people like you around". Almost all of them failed within a year. I recently got into a bit of a heated discussion when I called someone online an idiot for opening 5 chain restaurants at once without any significant experience and everyone trying to convince me I just had a bad attitude and praising his entrepreneurial spirit. All 5 locations failed in less than 6 months, re-opened briefly and failed again. The guy was still trying to re-open 2 locations for a third time last I checked.

I've seen many people go into entrepreneurship and very few are successful at it. Restaurants and retail in particular are practically financial suicide unless you are highly trained and experienced in the industry and even then you can still fail despite doing everything right. For example, the highway going to the family cabin as a child had 4 very successful restaurants. Guess what happened when that highway was straightened, twinned and the speed limit increased?

I still laugh to this day that my brother (who is supposedly genius level smart) was actually seriously considering quitting his high paying (close to $100,000/yr) job and applying for a major chain restaurant franchise while never having set foot in a professional kitchen! I should also mention it is a huge family secret that my late uncle opened a roadside snack bar at the age of 18 with his wife and it completely, utterly bombed in just a few months despite the fact my well off grandfather financed it. They didn't even know how to cook food safely and picked a location that at the time was on the main road 30 minutes outside the city but with nothing else around it.

You have to do your research.....

It's not easy starting your own business. I want to be a writer, but I've talked to other published authors in the industry and know what the reality is like. With the exception of the top 5% who make it to the mainstream publishing, Most other people who don't work with the mainstream publishers make an average of $2,000/year. For this reason, I'm also planning on earning a living through other means while simultaneously working on my writing projects, even though I'll still aim high and eventually take a shot at marketing and possibly advertising to see where it goes. Though, my life is busy. It's a lot of work.
I know your girlfriend's industry is different; but either way, having a startup can still be a challenge. However, the risk is still worth it as long as she has done her homework and sees what she needs to see (as opposed to seeing only what she wants to see), and knows what she's getting involved in.