Businesses had to pivot or shut down during the pandemic. With no sales, demand, and a host of restrictions, small businesses that could transition to a digital platform and still operate took that route while many others ceased to exist.
According to the U.S. Bureau of Labor Statistics (BLS), 20% of small businesses fail within the first year. This rate jumps up to 50% in five years. After ten years, two-thirds of all companies have gone under.
"Not good odds. Not great odds at all," said former Wall Street investment banker and financial expert Codie Sanchez.
She ran through the numbers on the top six businesses with the highest success rates on her popular YouTube podcast. She believes having the correct data to understand the businesses with the lowest failure rates helps decide if you want to jump into these "pools."
Sanchez said the most crucial decision is starting your first business. If it fails, your likelihood of trying again is incredibly diminished, a phenomenon called recency bias.
She recommended aiming for small wins, which prepares you for bigger risks. If your recency bias is losing or things that feel bad, you are less likely to continue to take risks.
1. Running a Laundromat Business
Data from Laundrylux showed that laundromats have had about a 94.8% success rate over five years. Sanchez also highlighted a Chamber of Commerce study that found a 93% success rate for laundromats.
Sanchez pointed out that laundromats are affordable, recession-resistant, have a low failure rate, and are simple to understand. "Quarters, machines, a little bit of a dryer, bit of a washer; they don't take millions to start or buy...people need to wash their clothes even during a recession," she added.
There's also a passive component. "If you do laundromats as an absentee business, you can remotely or with very few employees," she added.
According to the Coin Laundry Association, the annual turnover for a laundromat ranges between $30,000 and $1 million.
2. Managing Rental Properties
Sanchez opined there's more money in real estate than almost all industrial investments combined, evidenced by the fact that real estate businesses have an 85.3% success rate.
Buying rental homes for a passive income stream is very common. Today, you can purchase portions of properties for a nominal price via real estate investment trusts and earn a monthly rental income as your net worth appreciates over time.
You can buy a whole house entirely online from legit online marketplaces that offer verified listings you wouldn't find elsewhere. You can buy one entirely online.
Sanchez said the reason for a high success rate in real estate is that it's a simple business model with hard assets. Real estate properties have delivered an average annual property appreciation rate of 4%.
You can even structure your rental income to save some extra bucks after paying upfront costs like mortgage payments.
There are a host of tax benefits as well. You can deduct the interest payments on your mortgage, home insurance premiums, and property management costs from your annual taxable income.
One can sell a property to buy another via 1031 exchanges to defer capital gains tax. There are also tax benefits to securing a real estate investor license, such as commissions from property sales.
Another passive component is that you can hire a property manager, Sanchez said. "There's no money without no work. Real estate prices are interesting if you are on the right market cycle," she added.
3. Maintaining Self Storage Units
There are several types of real estate properties you can invest in. It can be an office space, research centre, warehouse, farmland, or self-storage unit. If you don't like investing in a multi-family property to "avoid tenants, trash, and toilets," self-storage has fewer of these things, said Sanchez.
According to her, self-storage units have a high "value-add" component and have been one of the leading asset classes in real estate since 2008. She also highlighted a few studies indicating that these businesses have an average success rate of 92%.
Furthermore, technological advancements like keyless entries, tracking and security systems, and automated bill pay or contracts enable you to run these businesses remotely.
One "caveat" here is that there are many storage facilities, she noted. Currently, Sanchez wants to observe what happens in the industry shortly but said her friends, including Nick Huber, operate self-storage sites to pocket millions.
The $44 billion market will reach $50 billion by 2029 on high demand, enhanced security, and rapid commercialization. The self-storage market was highly resilient and the top performer among asset classes in 2023 despite falling transaction volumes on solid market fundamentals.
4. Trucking Business With a Focus on Last-mile Delivery
Sanchez said last-mile delivery has undergone the most significant overhaul in the economy over the last decade.
With e-commerce surging since the onset of the pandemic alongside the growing gig economy and widespread use of online platforms, demand for better transportation and logistics continues to rise for secure and timely delivery of products.
Running a trucking business has a high success rate of 76.4%, per AdvisorSmith. Sanchez explains that trucking is transporting goods or people to their destination for a fee. It can be a full-fledged, long-haul trucking business or a side hustle like driving in an Uber over the weekend.
She said you can buy a truck starting at $70,000 that will undergo some depreciation, especially if it's new. You have to start running the routes or have somebody else, but there are no high upfront expenses to run this business.
Sanchez was fascinated because she assumed that these businesses could become very complex. At the same time, revenues vary depending on whether it's a short and long-haul trucking business.
Overall, these businesses have a high success rate. Given the demand for drivers, scaling can be an issue. However, trucking could be exciting and relatively low risk as a job turned into a business.
5. Vending Machine Businesses
Sanchez sees running vending machine routes as her favourite "intro-starter" business since starting doesn't require much cash or space. Put in "$3,000 to $5,000...You buy a vending machine and get started," she said, adding that second-hand machines come as low as $800.
Her friends earn $5,270 daily, running vending machines that store healthy food and beverages. Parking machines at strategic locations with high foot traffic, like malls or office spaces, are vital in this business.
Also, negotiating a fixed or rental fee for space to place the machine and storing inventory can make a huge difference.
This business is good for up to $100,000 but may not work for pros looking to earn above that, said Sanchez. It can, however, help inexperienced entrepreneurs learn about running operations, logistics, and margins.
"You start small... It's not going to bankrupt you...you figure out how the business works, and then you slowly expand...then this business has more than a 90% success rate," she explained, citing data from Drop's Vending.
However, the BLS indicated the success rate of a vending business hovers around 82%. She pointed out the range of billion-dollar vending companies, which is interesting because it shows you can scale this business, but it could be a "hard slog."
6. Senior Care Centers Offer Subsidies
Sanchez was surprised about this niche. Senior care centres have low failure rates as people leverage government, state, and city subsidies to run these centres. The subsidies help offset operating, equipment, and housing costs for seniors.
The second reason that makes it a viable business is the U.S. demographics. It is rapidly shifting with a rising number of older people who need more care. However, acquiring a facility and overhauling it can be costly.
Moreover, traditional banks may require you to make a 40% downpayment on your purchases before disbursing loans.
Steady demand and a strong foundation of financial support align with Statista's projection that the revenue of continuing U.S. care retirement communities and assisted living facilities could reach $76.8 billion this year.
