Most Profitable Small-Business Industries
If you are looking to start a profitable business being talented with numbers can really pay off.
Tax and accounting services take the top spot on the list of the most profitable type of small business with a generous 18.4 percent net profit margin followed by real-estate services (15.2 percent), doctor’s offices (13 percent) and law firms (14.5 percent) report Sageworks. A financial data service that analyzed the net profit margin of more than 16,000 small businesses that earned less than $10 million between September 2014 and August 2015.
The average net profit across all industries for this report’s time period was 7.2 percent.
Do you know what makes these industries profitable? For one, they are driven by human capital.
Sageworks analyst Jenna Weaver says “Service industries are very common to find on the most profitable small business list. Generally, this is due to lower overhead and startup costs. You can start a lot of these industries from your house.”
While the profit is not the only matter for an entrepreneur to consider. Other factors consider are whether the business matches his or her skills. The sort of training or licensing is required and how the business would fare during a recession. It’s an important place to start.
The list of the 15 most profitable types of small businesses and their net profit margins are here.
1. Accounting, Tax Preparation, Bookkeeping and Payroll Services: 18.4%
Sageworks Weaver says “The accounting industry is consistently a top performer on our list.”
How the economy is doing is not important, everyone needs accountants. This industry tends to have repeat clients and low overhead.
2. Management of Companies and Enterprises: 15.5%
The industry is made up of privately-owned and small offices of bank holding companies. The other types of holding companies.
Some well-known examples of holding companies that don’t fall into the small-business category are Carl Icahn’s ICahn Enterprises and Warren Buffet’s Berkshire Hathaway.
3. Offices of Real Estate Agents and Brokers: 15.19%
While the real-estate market is largely dependent on the health of the economy. Real-estate agents and brokers have low operating costs. All you need to get started is brokerage license or an agent.
4. Automotive Equipment Rental and Leasing: 14.55%
Sageworks analyst Libby Bierman with the on-demand economy on the rise says that people may be renting and leasing more cars using on-demand services just like Zipcar. Along with that more traditional rental services just like Herz.
5. Legal Services: 14.48%
Anyone who has ever hired a lawyer knows it’s not cheap. Generally, Law such as accounting operating costs as well as repeat clients. Nevertheless, this business category includes not only lawyers. But settlement officers, notaries who deal in the title search agents in real estate and transaction of securities.
6. Offices of Dentists: 14.41%
Dentists such as Physicians benefit from recurring patients. While startup costs can be expensive, dental equipment is quite costly. The profession has the advantage of handling several patients at a time. Additionally, many pay out of pocket.
7. Electric Power Generation, Transmission and Distribution: 14.02%
This category of privately-held electric power and small companies include not just your fossil fuel electric powers, traditional but also nuclear, wind, solar, geothermal, hydroelectric and more.
8. Lessors of Real Estate: 14.01%
Lessors are also known as landlords. Once you recover the initial costs of purchase, show that renting both residential and nonresidential properties is a profitable gig.
9. Offices of Other Health Practitioners: 13.30%
How is this category different from physicians? There is a census delineation between optometrists, chiropractors, mental health podiatrists and practitioners who fall under this category of “other health practitioners” and all other types of physicians.
10. Offices of Physicians: 13.01%
Being a doctor requires years of certification, training, and similarly medical school debt. Nevertheless, doctors also benefit from regular clients and relatively low overhead costs.
11. Commercial and Industrial Machinery and Equipment Rental and Leasing: 12.58%
It pays to lease or rent. Typically these businesses lease or rent commercial machinery and equipment across industries.
12. Religious Organizations: 12.41%
13. Management, Scientific and Technical Consulting Services: 12.05%
Businesses that provide either consulting or managing on a range of expertise are some types of businesses that fall under this category. This includes human resources, environmental issues, and marketing.
14. Specialized Design Services: 11.4%
Small businesses that specialize in interior, graphic and industrial design are flourishing. As the value of business’s function or a product has become inextricably linked to design and appearance.
15. Office Administrative Services: 11.3%
These administrative businesses are the backbone of business operations across a variety of industries from food services to physicians offices. It provides the day-to-day administrative services such as financial planning and billing, record keeping.
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