What Businesses Get Hit Hardest In a Recession?

When US News published my list of five Most Overrated Small Businesses, I knew I was getting into controversial territory. Restaurant associations are not pleased with the number of people who call the restaurant industry a bad area of business for the small-business owner.

They have some good points. Claims about the failure rate for restaurants are often grossly overstated.  It's not around ninety percent, but around two-thirds for restaurants in their first few years.  Still high, but not much higher than for your average small business.

But it's still a difficult business, as almost anyone involved in it will tell you. And in today's economy, it's only getting more difficult.

Check out yesterday's Reuters report on how small businesses are shedding jobs (25,000 jobs last month, according to ADP data.)

Higher-priced eateries have been worst hit, said Peter Christie, chief executive of the 5,000-member Massachusetts Restaurant Association. "Monday and Tuesday nights have gotten quiet as the economy has slowed," Christie said, pointing to dearth of business travelers looking for sustenance.

Massachusetts restaurants posted their first sales decline in years in October as meal tax payments dropped 3.5 percent from a year earlier, according to state Department of Revenue data.

When people cut back on discretionary income, eating out is one of the first expenses to go.  So if you still have you heart set on opening a restaurant, considering budget rather than fine dining.

Decorators, contractors, and freelance entertainers (like musicians for corporate events) were also singled out in the report.