Run a business! Be your own boss! Then pay your own wages, wind up with a second mortgage, and go home every night wondering why death won’t just take you. I’m all for entrepreneurship; but when your business is driven by the equivalent of a sportswear Slogan (Just Do It, yeah?) trouble is brewing. In this article, I look at five business ideas that aren’t the best fit for Singapore. Not right now, anyways:
You’ve probably heard the old saying that 70% of new businesses fail in the first year.
It makes sense: There’s only so much money in any one market. And the winning businesses take money from the losing ones, in a zero sum game. So just as some businesses must win, more of them must lose. Neither I nor any expert can tell you, with 100% certainty, that your business will be a failure or success.
But what we can do is point out the ones that will probably flop right now:
1. Small Cafes
I’ve been in F&B (Food & Beverage) before, and there are more pleasant experiences. Like digging your eyes out with a fork.
(Don’t jump at me SHATEC people, I’m just saying your job is incredibly hard.)
Running a small cafe is a typical Uni student’s idea. Or the sort of idea that occurs to food bloggers, amateur chefs, and hipsters. After all, Singapore’s a food paradise right?
Yes, yes it is. And that’s why you need to think twice before opening a small cafe. Just look at your competition: Cafe Cartel, Cafe Del Mar, Settlers, etc. Your customer can’t even walk to your place without 10,000+ distractions.
And we haven’t taken into account the operating costs. Commercial property in Singapore is notorious for high rents; I speak from experience when I say this: If your business is doing well, your landlord will raise your rent.
If you can’t afford a significant space (I’m talking restaurant sized), you’re playing with fire. Assuming you charge average cafe prices (around $20 per head), you’re pushing your luck with fewer than 10 tables. Don’t forget that, in cafes, people tend to order coffee and sit down for an hour.
A quick general rule: If you make back your rent in four working days, you’re profitable. Make it back in a week, you’re probably breaking even. Anything less and you better start worrying. It’s not an easy performance standard.
A restaurant might stand a decent chance. But a small cafe…that’s a risky proposition. Unless, of course, you can afford to buy the property.
2. Private Gyms
Yes, some private gyms are successful. “They succeed because of hard work, dedication, and quality time with customers,” says the liar I interviewed, shortly before we both exploded with laughter.
Seriously, companies like Fitness First or California Fitness succeed because they have more capital than small African nations. Without solid funding and high cost marketing, don’t dream of replicating their success.
I spoke to Anson Lye, who ran a private gym that folded in ’02:
“Rent is the main problem with gyms. Can you start charging clients more because your landlord raises the rent? Of course not. I don’t think private gyms are a viable business model any more. Not with the high rent, and not with so many condos already having gyms.”
3. General Bookstores
So you’ve seen successful niche bookstores, like Books Actually, and think you can do the same. Well maybe…provided you have a target demographic.
Recall Page One, and how they took a hit when they deviated from design books. Fact is, general bookstores require too much inventory. A huge company like Kinokuniya, with their advanced logistics, can handle it. But for a smaller bookstore, inventory is a nightmare.
You might successfully run a store that sells books on gardening, or books on politics and history. But try to run a general bookstore that sells everything, and you’re in trouble.
Germaine Mok, who ran a campus book store, tells me:
“People will buy a book over an E-book if it’s a subject they’re really into. If they’re just slightly interested, they’ll look for an alternative; like wait for the book to enter the discount bin, or find an E-book version.
So if your all your books deal with, say, politics in Asia, then everyone who walks into your store is already into that subject. They’re more likely to walk out with something. If you have a general bookstore, maybe one in ten visitors will buy something.”
4. Interior Decorating
Don’t even think about it. The renovations market is saturated with Interior Designers and contractors, both of whom can do FF&E (Fittings, Furnishings, & Equipment).
When I asked about the Interior Decorating business, I mostly got blank stares. And remarks like “I think they’re all gone by now.”
I spoke to a sales designer, who only wanted to be known as Andrea:
“You want to be an interior decorator, my advice is just forget it. In Singapore you can’t survive on interior decorating only. People have tried, but it’s never taken off.
It’s very hard to place a value on FF&E because it’s so subjective. You can justify a price for painting a wall, but how to justify a price for choosing the colour? They may as well pay a contractor or designer; we can do both for one price.
Interior decorators can try to handle things like space planning, or shop fronts for retail stores. But most Singaporeans will not pay you for your good taste.”
The temptation to start an interior decorating business comes from ease of market entry. It’s a a step into the lucrative reno market, and one which requires no formal training. It sounds too good to be true because it is.
5. Small Tuition Agencies
You can make money as a private tutor. But small tuition agencies are a different matter.
I spoke to three last weekend. One of them, which is located near Parkway Parade, gave me a response that’s a sigh-on-legs:
“We used to make a decent amount working with schools, for enrichment classes. But if you look at it now, so many agencies are fighting for such jobs. Prices have gone down to almost $2 per student. It’s really ridiculous.”
But hold on. These agencies have hordes of private students right? An agency manager, who only wanted to be known as Lim, said:
“The market is too crowded. I admit it was good money for many years, especially maths and second language. But now more and more people are jumping on the bandwagon. And we have former MOE teachers who have quit to set up agencies, and they’ve stepped up the competition.
Nowadays parents only want tutors with MOE qualifications. When ex-teachers form an agency, they have a very big advantage over the existing ones.”
Lim mentioned that the agency’s profits decreased noticeably since 2007.
Do you know of any businesses to avoid right now? Comment and tell us why!