5 Worst Businesses to Start in 2025: A Harsh Reality Check

Entrepreneurship is a battlefield, and choosing the right business can make or break your success.

The worst businesses to start in 2025 are lurking around every corner, waiting to trap unsuspecting entrepreneurs.

As someone who’s been in the trenches, I’ve seen firsthand how certain ventures can drain your resources, time, and spirit.

Let’s dive into the nitty-gritty of these money-pit enterprises and explore why they’re best avoided.

By understanding these pitfalls, you’ll be better equipped to make informed decisions and steer clear of potential disasters.

So, buckle up as we embark on this eye-opening journey through the treacherous landscape of ill-fated business ventures.

We strongly recommend that you check out our guide on how to take advantage of AI in today’s passive income economy.

The Importance of Choosing Wisely

Before we delve into the worst businesses to start, let’s take a moment to appreciate the gravity of our choices.

In the world of entrepreneurship, selecting the right venture is paramount.

It’s not just about avoiding failure; it’s about maximizing your chances of success and fulfillment.

The businesses we’re about to discuss aren’t just challenging – they’re statistical nightmares.

These are the ventures where even the most dedicated entrepreneurs often find themselves struggling to stay afloat.

By identifying these pitfalls, we can focus our energy and resources on more promising opportunities.

Remember, in business, it’s not just about working hard – it’s about working smart and choosing battles you can win.

The Five Worst Businesses to Start in 2025

1. ATM Routes: A Cash Trap

ATM Routes: A Risky Business Venture

Key Challenges:

1. Low Transaction Volume

• Average of 3-5 transactions per day
• Average withdrawal of $80-$100

1. Minimal Profit Margins

• Only 1-3% profit per transaction
• Insufficient to cover operational costs

1. High Operational Costs

• Weekly maintenance at $20 per visit
• Additional business operating expenses

1. Extended Payback Period

• Individual ATMs take 7+ years to break even
• Investment funds don’t pay out for 4+ years

1. High Initial Investment

• $1,500 to $10,000 per machine
• Hundreds of machines needed for profitability

1. Uncertain Future of Cash

• Increasing use of digital payment methods
• Potential decrease in cash transactions

Potential Exceptions:

• Cannabis stores (cash-only businesses)
• High-traffic bar areas with limited card payment options

Conclusion:

ATM routes present significant financial risks and uncertain long-term viability, making them one of the worst businesses to start in 2025.

ATM routes may seem like a straightforward way to generate passive income, but they’re one of the worst businesses to start in 2025.

The math simply doesn’t add up, and the long-term prospects are grim.

Let’s break down why ATM routes are a cash trap waiting to ensnare unsuspecting entrepreneurs.

Firstly, the transaction volume is painfully low.

Most ATMs only see 3-5 transactions per day, with average withdrawals ranging from $80 to $100.

Your cut? A measly 1-3% of that amount.

It doesn’t take a financial genius to see that these numbers spell trouble.

The operational costs further compound the issue.

You’ll need someone to service the machines at least weekly, costing around $20 per visit.

Add in the other business expenses, and you’re looking at razor-thin margins – if any at all.

But here’s the real kicker: the payback period is excruciatingly long.

Most ATMs won’t break even for seven years or more.

That means if you invest $1,500 to $10,000 per machine, you’re looking at nearly a decade before you see a return.

And let’s not forget about the uncertain future of cash.

As we move towards a more digital economy, the relevance of ATMs is increasingly questionable.

Unless you’re placing machines in cannabis stores or busy bar districts where cash is king, you’re fighting an uphill battle.

In essence, ATM routes are one of the worst businesses to start because they offer low returns, high risks, and a questionable future.

It’s a perfect storm of unfavorable conditions that savvy entrepreneurs would do well to avoid.

2. Amazon FBA: A Risky Proposition

Amazon FBA: A High-Risk Business Model

Key Risks:

1. Platform Dependency

• Amazon controls all aspects of the business
• Risk of account suspension or banning

1. Data Exploitation

• Amazon may use seller data to create competing products
• Potential for undercutting prices

1. Low Barriers to Entry

• Saturated market with numerous competitors
• Difficulty in standing out

1. Copycat Products

• Rapid replication of successful products by competitors
• Especially challenging with Chinese manufacturers

1. Price Control

• Amazon’s algorithms influence pricing
• Risk of shadowbanning for higher-priced products

1. Data Security Concerns

• Historical issues with employee data leaks
• Potential exposure of business information on black markets

Conclusion:

Amazon FBA presents significant risks due to lack of control, intense competition, and potential for data misuse, making it one of the worst businesses to start in 2025.

Next on our list of the worst businesses to start is Amazon FBA (Fulfillment by Amazon).

While it may seem like a golden opportunity to leverage Amazon’s massive infrastructure, the reality is far less rosy.

Let’s unpack why Amazon FBA is a risky proposition that smart entrepreneurs should approach with extreme caution.

First and foremost, the platform risk is enormous.

Amazon holds all the cards, and they’re not afraid to play them.

Your entire business exists at their mercy.

One algorithm change, one policy update, or one false flag on your account, and you could see your livelihood vanish overnight.

Then there’s the data game.

Amazon has access to all your sales data, and they’re not shy about using it.

If your product starts performing well, don’t be surprised if Amazon suddenly launches a competing product at a lower price point.

The barriers to entry for Amazon FBA are also disturbingly low.

Thanks to countless online gurus selling get-rich-quick schemes, the market is flooded with me-too sellers.

Standing out in this sea of sameness is an uphill battle that many lose.

Copycat products are another thorn in your side.

The speed at which Chinese manufacturers can replicate successful products is mind-boggling.

Your unique offering today could be tomorrow’s commodity, with dozens of near-identical listings undercutting your prices.

Price control is yet another issue.

Amazon’s algorithms are constantly scraping the web for pricing information.

If they deem your prices too high, you might find your listings shadowbanned, killing your sales without warning.

Perhaps most alarmingly, there have been instances of Amazon employee data breaches.

Sensitive business information has been found on black markets, providing a cheat sheet for competitors to undercut and outmaneuver legitimate businesses.

In conclusion, Amazon FBA stands out as one of the worst businesses to start due to its high risks, lack of control, and cutthroat competition.

It’s a game where the odds are stacked against you from the start.

3. Retail Stores: A Fading Dream

Retail Stores: A Challenging Business Model

Key Challenges:

1. Declining Foot Traffic

• Shift towards online shopping
• Reduced customer base for physical stores

1. High Upfront Costs

• Inventory purchases required before sales
• 90+ days of cash needed for seasonal items

1. Expensive Real Estate

• High rent costs in high-traffic areas
• Pressure to maintain high sales per square foot

1. Inventory Management

• Risk of unsold stock
• Balancing new arrivals with clearance items

1. Staffing Issues

• Managing low-wage employees
• Potential for theft and shrinkage

1. Financial Struggles

• Difficulty obtaining loans from banks
• Thin profit margins

1. Competition

• Online retailers
• Other physical stores in the area

Potential Exceptions:

• High-traffic, experience-based retail locations
• Stores backed by significant financial resources

Conclusion:

Retail stores face numerous challenges in the current economic climate, making them one of the worst businesses to start in 2025 for most entrepreneurs.

Retail stores hold a special place in many entrepreneurs’ hearts, but they’re undeniably one of the worst businesses to start in 2025.

The romantic notion of owning a quaint boutique or a specialty shop often clouds judgment, leading many to overlook the harsh realities of this struggling industry.

The first red flag is the visible decline of physical retail spaces.

Walk into any shopping mall, and you’ll see the scars: empty storefronts, clearance sales, and ‘For Lease’ signs.

This isn’t just anecdotal; it’s a trend that’s been accelerating for years.

One of the biggest hurdles in retail is the upfront costs.

Unlike many modern businesses, retail requires you to buy inventory before you make a single sale.

This creates a significant cash flow challenge, especially for seasonal items that may sit unsold for months.

High rent is another killer.

To get the foot traffic you need, you often have to pay premium prices for prime locations.

This fixed cost eats into your profits month after month, regardless of how well (or poorly) you’re doing.

The financials of retail are tough to swallow.

You’re constantly juggling inventory turnover, trying to predict trends, and managing staff.

All while hoping that your slim margins will be enough to cover your hefty overhead.

Speaking of staff, retail often relies on lower-wage employees.

This can lead to high turnover and potential issues with theft, adding another layer of complexity to your operations.

Banks are well aware of these challenges, which is why they’re often reluctant to provide loans for retail businesses.

This lack of financial support can make it even harder to get your store off the ground.

In essence, retail stores represent one of the worst businesses to start because they combine high costs, thin margins, and intense competition.

Unless you have deep pockets and a unique angle, the odds are stacked against you in this fading industry.

4. Restaurants: A Recipe for Financial Stress

Restaurants: Navigating a Challenging Industry

Key Challenges:

1. High Failure Rate

• 60% fail in the first year
• 80% fail within 4 years

1. Low Profit Margins

• Average net profit of 3-5%
• Vulnerable to minor setbacks

1. Intense Competition

• Saturated market in most locations
• Difficulty in standing out

1. Complex Operations

• Procurement and inventory management
• Demand forecasting
• Food waste and spoilage
• Staff management

1. High Initial Costs

• Average buildout costs: $95,000 to $2 million
• Significant upfront investment required

1. Staffing Challenges

• High turnover rates
• Managing a diverse workforce

1. Regulatory Compliance

• Health and safety regulations
• Licensing requirements

Financial Realities:

• Average small business selling price: $800,000
• Average restaurant selling price: $198,000

Potential for Success:

Despite challenges, successful restaurant groups do exist, but they are the exception rather than the rule.

Conclusion:

Restaurants present significant financial and operational risks, making them one of the worst businesses to start in 2025 for most entrepreneurs.

Restaurants might seem like a dream business for food lovers, but they’re actually one of the worst businesses to start in 2025.

The allure of creating culinary masterpieces and hosting happy diners often blinds aspiring restaurateurs to the harsh realities of this industry.

Let’s start with the sobering statistics.

Did you know that 60% of restaurants fail in their first year?

And if you make it past that, you’re not out of the woods – 80% close their doors within four years.

These numbers alone should give any potential restaurant owner pause.

The financials of the restaurant business are equally grim.

The average small business in the U.S. sells for around $800,000.

Restaurants? A measly $198,000.

This massive discrepancy speaks volumes about the perceived value and sustainability of restaurant businesses.

Even if you beat the odds and stay afloat, the profit margins are painfully thin.

Successful restaurants typically net about 3-5% profit.

That’s a razor-thin margin that leaves no room for error.

One bad month, one equipment failure, or one negative review could push you into the red.

Competition in the restaurant industry is fierce.

In New York City alone, it would take you over 22 years to eat at every restaurant if you tried a new one each day.

Standing out in such a crowded market is an uphill battle that many lose.

The complexity of running a restaurant is often underestimated.

You’re juggling procurement, demand forecasting, storage, waste management, staff turnover, and a host of other issues daily.

It’s a logistical nightmare that requires constant attention and problem-solving.

The upfront costs are another major hurdle.

An average restaurant buildout can cost anywhere from $95,000 to $2 million.

That’s a significant investment before you’ve served your first customer.

In conclusion, restaurants stand out as one of the worst businesses to start due to their high failure rates, complex operations, and razor-thin margins.

Unless you have deep pockets, extensive experience, and an indomitable spirit, the restaurant business is a recipe for financial stress.

5. Hotels: Real Estate Masquerading as Business

Hotels: Navigating the Challenges of Hospitality

Key Challenges:

1. Poor Financial Performance

• Average annual revenue: $94,400
• Average annual expenses: $96,600
• Net profit margin: -2% (before tax considerations)

1. Asset-Heavy Business Model

• High initial investment in real estate and equipment
• Ongoing maintenance and renovation costs

1. 24/7 Operations

• Constant demand for service and availability
• Unpredictable customer needs and emergencies

1. Short-Term Revenue Streams

• Daily or weekly bookings vs. long-term leases
• Difficulty in predicting and stabilizing revenue

1. Demand Fluctuations

• Seasonal variations
• Dependence on external factors (events, tourism, etc.)

1. Complex Workforce Management

• Large number of employees across various departments
• High turnover rates in hospitality industry

1. Customer Service Challenges

• High expectations for cleanliness and service quality
• Potential for negative reviews impacting business

Financial Realities:

• Reliance on depreciation for tax benefits
• Thin margins even with tax considerations

Potential for Success:

While challenging, some hotel businesses can be profitable with the right location, management, and market conditions.

Conclusion:

Hotels present significant financial, operational, and management challenges, making them one of the worst businesses to start in 2025 for most entrepreneurs.

Hotels might seem like a glamorous business venture, but they’re actually one of the worst businesses to start in 2025.

The allure of owning a beautiful property and providing hospitality often overshadows the harsh realities of this complex industry.

Let’s start with the shocking financials.

According to IRS data from about 61,000 tax returns filed by hotel businesses, the average annual revenue for sole proprietorship hotels in the U.S. was a mere $94,400.

But here’s the kicker – their average annual expenses were $96,600.

You don’t need to be a math whiz to see that’s a losing proposition.

The average net profit for a hotel business is -2% per year.

Yes, you read that right – negative two percent.

Hotels often rely on tax wizardry like depreciation to turn that into a positive 12% on paper, but the underlying business is still losing money.

One of the biggest challenges with hotels is that they’re essentially real estate investments masquerading as businesses.

They’re asset-heavy, requiring massive upfront investments and ongoing maintenance costs.

This makes them incredibly difficult to manage profitably.

The 24/7 nature of hotel operations is another major hurdle.

Imagine getting phone calls at midnight because a guest is unhappy with their room.

This constant demand for attention makes hotels one of the worst businesses to start for those seeking work-life balance.

Revenue prediction in the hotel industry is a nightmare.

Unlike apartments with year-long leases, hotel stays are typically just a few days.

This makes forecasting incredibly challenging.

Did the local sports team not make the playoffs? Did a major concert get cancelled?

Your revenue could drop 20% overnight through no fault of your own.

Staffing is another massive challenge.

Hotels require a small army of employees – from front desk staff to housekeepers to managers.

Managing this workforce, often comprised of low-skilled, minimum wage workers, is like herding cats.

In conclusion, hotels stand out as one of the worst businesses to start due to their complex operations, unpredictable revenue streams, and razor-thin (often negative) profit margins.

Unless you have deep pockets and a passion for hospitality that borders on masochism, the hotel business is a path fraught with financial peril.

The Hidden Costs of Bad Business Choices

When we talk about the worst businesses to start, it’s not just about the immediate financial risks.

There are hidden costs that can impact your life in ways you might not expect.

Let’s delve into these often-overlooked consequences of choosing the wrong business venture.

First and foremost, there’s the opportunity cost.

Every moment you spend struggling with a failing business is time you could have invested in a more promising venture.

This lost time is something you can never get back, making it one of the most significant hidden costs of choosing one of the worst businesses to start.

Then there’s the emotional toll.

Running a business that’s constantly on the brink of failure can be incredibly stressful.

This stress can seep into every aspect of your life, affecting your relationships, health, and overall well-being.

It’s a cost that’s hard to quantify but impossible to ignore.

Financial stress can also lead to a cascade of personal problems.

Maxed-out credit cards, depleted savings, and potential bankruptcy are just the tip of the iceberg.

These financial woes can haunt you long after you’ve closed the doors on your failed business.

There’s also the impact on your professional reputation to consider.

A failed business venture, especially in industries known to be challenging, can make it harder to secure funding or partnerships for future endeavors.

It’s an invisible cost that can limit your options down the road.

Lastly, there’s the psychological impact of failure.

While failure can be a great teacher, repeated failures in one of the worst businesses to start can shake your confidence and dampen your entrepreneurial spirit.

This loss of self-belief is perhaps the most insidious hidden cost of all.

In essence, choosing one of the worst businesses to start isn’t just about losing money – it’s about potentially losing time, health, relationships, and opportunities.

It’s a stark reminder of why it’s crucial to thoroughly research and carefully consider any business venture before diving in.

Alternatives: Where to Focus Your Entrepreneurial Energy

Now that we’ve explored the worst businesses to start, you might be wondering where to direct your entrepreneurial spirit.

While every business has its challenges, some sectors offer better odds for success and fulfillment.

Let’s explore some alternatives that could be more rewarding than the riskiest ventures we’ve discussed.

One area to consider is the digital service industry.

With low overhead costs and the ability to work remotely, businesses like web design, digital marketing, or content creation can be lucrative without the risks associated with physical inventory or real estate.

Another promising field is specialized consulting.

If you have expertise in a particular industry or skill set, offering your knowledge to other businesses can be a low-risk, high-reward venture.

This is especially true in niche markets where specialized knowledge is in high demand.

Tech startups, while risky, can offer huge potential returns if you have a truly innovative idea.

The key is to focus on solving real problems and creating value, rather than just chasing the latest trends.

E-commerce, when done right, can also be a viable alternative to traditional retail.

By focusing on dropshipping or print-on-demand models, you can minimize inventory risks while still tapping into the growing online shopping market.

If you’re passionate about food but wary of the restaurant industry, consider alternatives like meal prep services, food trucks, or specialty food production.

These options allow you to share your culinary skills without the overhead of a full-scale restaurant.

For those drawn to the hospitality industry, consider vacation rentals or experience-based tourism.

These sectors can offer the satisfaction of hosting guests without the massive overhead of traditional hotels.

Lastly, don’t overlook the potential of skilled trades.

As more people pursue college degrees, there’s a growing shortage of skilled tradespeople.

Businesses in plumbing, electrical work, or carpentry can be highly profitable with the right skills and business acumen.

Remember, the key to avoiding the worst businesses to start is to thoroughly research your chosen field, understand the risks, and play to your strengths.

By focusing on industries with lower barriers to entry, higher profit margins, and growing demand, you can significantly increase your chances of entrepreneurial success.

Conclusion: Navigating the Entrepreneurial Landscape

As we wrap up our exploration of the worst businesses to start in 2025, it’s crucial to remember that entrepreneurship is not for the faint of heart.

The journey is fraught with challenges, and even the most promising ventures come with their share of risks.

We’ve delved into the pitfalls of ATM routes, Amazon FBA, retail stores, restaurants, and hotels.

These industries, while alluring on the surface, often prove to be treacherous waters for aspiring entrepreneurs.

The common thread among these worst businesses to start is their combination of high initial costs, razor-thin margins, and intense competition.

However, understanding these risks is not meant to discourage you from pursuing your entrepreneurial dreams.

Rather, it’s about equipping you with the knowledge to make informed decisions.

By recognizing the potential pitfalls, you can either steer clear of these risky ventures or approach them with a clear-eyed understanding of the challenges ahead.

Remember, the key to success in any business venture is thorough research, careful planning, and a willingness to adapt.

Don’t be swayed by get-rich-quick schemes or romanticized notions of certain industries.

Instead, focus on identifying genuine market needs and leveraging your unique skills and resources to meet them.

As you chart your course in the business world, consider the alternatives we’ve discussed.

Look for opportunities in growing industries, digital services, or niche markets where your expertise can truly shine.

And above all, never stop learning and evolving as an entrepreneur.

In the end, the worst businesses to start are often those that don’t align with your skills, passions, or the current market realities.

By avoiding these pitfalls and focusing on more promising opportunities, you can increase your chances of not just surviving, but thriving in the competitive world of entrepreneurship.

So, as you embark on your entrepreneurial journey, keep these lessons in mind.

Stay informed, stay adaptable, and most importantly, stay true to your vision.

The road may be challenging, but with the right approach, your business dreams can become a successful reality.

We strongly recommend that you check out our guide on how to take advantage of AI in today’s passive income economy.