The first question often asked by someone venturing into a new business is…How are the margins in this particular industry? While sales growth is something everyone desires, if it’s not profitable, it is going to cost you a lot more than you think. Before proceeding with a new business plan, entrepreneurs must consider the market size, degree of competition, and average profit margins. Business owners can enhance their profitability above the industry average depending on the skills and optimum resource utilization. Similarly, there are always some benchmarks that can help you make informed decisions about your potential business venture.
Most Profitable Small Business Sectors Moving into 2018
Accounting and Tax Services
Accounting and tax services remain as a front-runner with the highest profit margins. These businesses are hired for bookkeeping by many entrepreneurial ventures as they are better off outsourcing the accounting services rather than handling it internally. In many cases, it saves them hefty costs and also results in efficient handling of all of their financial matters. The profit margin for accounting services stands well above 18%, which is highest among other small businesses because of their steady demand, even in harsh economic conditions.
Private Holding Companies
Exclude some of the biggest players among holding companies such as Berkshire Hathaway and still the industry has a profit margin of above 15%. Holding companies own investments like stocks and mutual funds. Some of their other holdings include art pieces, real estate or anything that holds an intrinsic value. It is quite a lucrative business, however, you need specialized knowledge about the functionality of stock markets and how to keep it profitable in order to succeed.
Real Estate Brokerage
The real estate industry has recovered dramatically from recessions and is now among the top businesses in terms of net profit margins. The advantage you have with running a brokerage firm is their low operating costs. This allows you to reallocate the budget to marketing and other functions, which will ultimately reflect in your business growth.
All you need is a brokerage license and you are set to go. However, the industry is quite competitive and you need to do your homework before stepping in. Moreover, it has a direct relation to the state of the economy. A favorable environment will boost the profitability of businesses and vice versa.
Lawyers and Legal Services
Lawyers are some of the most prestigious members of our society and it is also not surprising that legal services offer a profit margin of 14.2%. High legal fees and low operating cost is a perfect remedy for profitable small businesses. Being a successful attorney requires great communication skills that lead to strong connections with community members. Most clients come from your connections, however, you must allocate marketing budgets as well because you can’t be everywhere.
A dental clinic is a great business for doctors who may not want an extremely stressful job in the medical field but aspire to earn good money. However, high start-up costs are a bit of hindrance as the equipment is quite expensive. If you can somehow raise the money through a loan or any other means, the net profit margin is quite lucrative. There are a high number of returning patients in dental clinics, which really helps in maintaining the profitability. Let’s be honest, we all have teeth that need to be cleaned.
Land and Real Estate Rentals
All types of commercial, industrial and real estate rentals are profitable businesses. High customer influx commercial properties generate outrageous profit margins and, even if the location is not so ideal, the profit margin is steady. The only issue can be the high cost of acquiring the land or construction costs. The average profit margin of the industry is 13.8 percent, which is quite reasonable for a fixed asset.
General Physicians and Healthcare Services
Just like other health consultants, attorneys, and dental services, physicians rely on repeat business. They incur significantly lower overhead costs, therefore, enhancing their profitability. Other profitable small businesses include healthcare services. There have been speculations about some malpractices by healthcare industries as they are linked to significant overcharging in order to offset insurance services, however, the demand for healthcare is still on the rise and businesses are booming.
Auto Renting and Leasing
The auto renting and leasing industry is still among the most rewarding businesses. While auto dealers seem to struggle, the renting and leasing business is booming as more people are preferring cheap means of mobility. The initial investment for a rental can be significantly high, however, the running costs are comparatively lower, provided you have the necessary experience. It is one of the most profitable small businesses and must be on your list, if you are considering to start an entrepreneurial venture.
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