Forbes magazine has published a fairly interesting article on where the profits are, and where they ain’t, in small business (< $10 mil. a year).
Thanks to Up the Ladder for pointing the way.
So, in extremely short form (I promise, the article is worth reading), here’s the list based on pre-tax profit margin averages.
The Most Profitable Small Businesses:
- Accounting services – I guess it pays to love spreadsheets.
- Legal services – I guess it pays to figure out ways to bend the rules.
- Dental services – Didn’t Seinfeld once wonder if they were actual doctors, then fell victim to a horrible “anti-Dentite” label?
- Designers – They make it a broad category – interior design, architects, graphic designers – but it’s still good news for all you freelancers.
- “Other” health professionals – like chiropractors.
- Outpatient care – It seems like there’s a new one popping up on another corner every other weekend in Dallas (along with nail salons).
- Insurance brokers – I really have nothing to say about this.
- Doctors – Surprisingly low, actually, but I guess they shell it out in payroll and insurance.
- Medical and Diagnostic Labs – Couldn’t they have put all the health businesses in one category?
- Depository Credit Intermediary – This one is surprising, and ironic. People who help people with their credit troubles are one of the most profitable small businesses you can start.
The Least Profitable Small Businesses to Start:
- Community Care Facilities – high payrolls, run by Medicare, Medicaid and a shortage in nurses
- “Other Support” Services – OK, that’s a little broad, but this goes mostly to all those services that are in highly competitive fields where the low price always wins.
- Beverage Manufacturers – includes soft drinks, juices and wineries, where there are so many competitors that the new guy can’t cut through.
- Real Estate Related Services – the market is down, what more needs to be said?
- Bakeries and Tortilla Manufacturing – huh?
- Recreation and Amusement Centers – gyms, ski resorts, etc. High, high payroll just to keep it open.
- Auto Vehicle Parts Manufacturing – again, only the low-cost wins, and there can only be one of those.
- Specialty Retailers – your niche markets like music stores. Yes, Big Box retailers are taking over here, but at the same time, if you can really, really nail the niche in a location that wants it, I actually think specialty retail could be very profitable. But that’s a lot of ifs.
- Alcohol resellers – kinda surprises me. You’d think this is a high profit, high traffic business, with relatively little needs for manpower. Maybe it’s the extensive inventory necessary to be open that actually makes you close.
- Hotels – If a room ain’t filled, they ain’t making money. That’s why there’s really no such thing as a set rate these days.
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