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5 Worst Businesses to Start in 2023 by Codie Sanchez

Codie Sanchez is a reformed journalist, turned. institutional investor to now a Managing Director and. Partner at Entourage Effect Capital, a private equity. firm focused specifically on investing in the legalized. cannabis industry. (@Codie_Sanchez) Founder and CEO of Contrarian Thinking.

In the ever-changing landscape of entrepreneurship, identifying the right business to invest in is crucial. While there are numerous opportunities to explore, some businesses are best avoided. Codie Sanchez’s video “5 Worst Businesses to Start in 2023” delves into the data and reasoning behind why certain businesses are unattractive investments. This article summarizes the insights from the video, providing a comprehensive analysis of the five worst businesses to start or buy in 2023.

5 Key Takeaways

  1. ATM Routes: The math doesn’t add up, with low margins, long payback periods, and the uncertain future of cash.
  2. Amazon FBA: High platform risk, low barriers to entry, and Amazon’s control over pricing make it a risky venture.
  3. Retail Stores: High rent, tough financials, and the shift towards online shopping make retail a challenging business.
  4. Restaurants: High failure rates, low net profit, and intense competition make restaurants a complex and risky business.
  5. Hotels: With negative net profit, 24/7 demands, and the complexity of managing both property and people, hotels are a challenging investment.

ATM Routes

ATM routes, despite seeming like a simple vending machine business, are fraught with challenges. The average ATM only yields a few hundred bucks a month, with a break-even period of seven years. The future of cash is also uncertain, making ATMs a risky investment.

Amazon FBA

Amazon FBA, or Fulfillment by Amazon, is a popular business model where Amazon handles logistics. However, the platform risk, competition, and Amazon’s control over pricing make it a precarious venture. The low barriers to entry have flooded the market with sellers, and Amazon’s ability to duplicate successful products adds to the risk.

Retail Stores

Retail stores, once a dream for many entrepreneurs, are now a challenging business. High rent, upfront product costs, and the shift to online shopping have made retail a tough game. The financials are hard to manage, and the need to continuously stock new items adds to the complexity.

Restaurants

Restaurants are known for their complexity and high failure rates. With 60% failing in the first year and 80% after four years, the restaurant business is not for the faint-hearted. The intense competition, low net profit, and the complexity of managing various aspects make it a challenging endeavor.

Hotels

Hotels, masquerading as businesses, are essentially real estate with too many parts. The cash flow is often not enough to cover the real estate transaction, and the 24/7 demands make it a hard market. Managing hundreds of employees, unpredictable revenue, and the complexity of the business make hotels an unattractive investment.

Lessons Learned

  1. Understand the Numbers: Always analyze the financials, payback periods, and potential risks before investing in a business.
  2. Avoid Red Ocean Markets: Steer clear of markets flooded with competition, as they often lead to low profits and high risks.
  3. Consider Future Trends: Assess the future relevance of the business, such as the declining use of physical cash or the shift to online shopping.
  4. Beware of Platform Risks: If a business relies heavily on a platform like Amazon, understand the risks and control the platform has over your venture.

Final Thoughts

Investing in a business requires careful consideration of various factors, including financials, competition, future trends, and inherent risks. While some businesses may seem attractive on the surface, a deeper analysis may reveal underlying challenges. The insights provided in this article, based on Codie Sanchez’s video, serve as a valuable guide for entrepreneurs and investors looking to make informed decisions. Avoiding the pitfalls of these five worst businesses can lead to more profitable and sustainable investment opportunities. Always question everything, analyze the data, and protect your investment by choosing the right business to start or buy.

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