Top 8 Most Profitable Small Business Industries
Sageworks, the highly respected financial data company, has released its analysis of the most profitable industries in the United States and a separate list that focuses on small business industries with annual revenues of under $5 million. We will take a closer look at the top 8 industries on the small business list. You can view their full listings and analyses here.
- Physicians: Physicians come in eighth on the small business list with an average net profit margin of 14.1%. The Affordable Care Act (ACA) of 2010 has brought some new challenges to this industry in the areas of compliance and administrative requirements, but physicians with their own practices still earn a healthy profit.
- Offices of Health Practitioners (other than Physicians and Dentists): Health practitioners other than physicians and dentists came in just barely ahead of physicians with an average net profit of 14.4%. Chiropractors are the best known professionals in this category, and since these practitioners tend to provide “alternative” health services, the industry is not impacted as heavily by the ACA.
- Real Estate Agencies and Brokerages: Real estate agents and brokers are number six on the small business list with an average profit margin of 14.7%. Real estate agents run the gamut from part-time agents that sell one or two properties a year to those who earn deep into the six and even seven figure range. Either way, the industry is easy to enter, overhead is low and many agents even operate out of a home office.
- Legal Services: Legal services include attorneys, paralegals, and the growing industry of affordable legal document preparation services. Coming in at number five on the small business list, the average legal practice earns a net profit of 15.2%.
- Dental Offices: Dentists, orthodontists, and other dental professionals come in fourth on the small business list with an average annual profit of 15.4%. The dental professional has not been impacted as much by the ACA as other areas of the health care market, and essential services such as cleanings and other basics are still relatively affordable for most consumers.
- Lessors of Real Estate: Real estate lessors come in number three on the small business list with an average net profit of 16%. Included in this category are lessors of residential and commercial property, mini-warehouses and self-storage units. Though the cost of entry is much higher in this industry than most others on the list, real estate leasing provides the potential for a very stable and passive long-term income stream.
- Automotive Equipment Rental and Leasing: Equipment rental and leasing, particularly in the automotive industry, has seen healthy growth for the past several years. This is largely driven by the preference of many in our society (particularly millennials) to rent or lease rather than buy. At number two on the small business list, automotive equipment rental and leasing enjoys an average annual profit of 20.4%.
- Accounting, Bookkeeping, Tax Preparation and Payroll Services: Topping the list of the most profitable small businesses for 2016 with an average net profit of 20.5% is accounting, bookkeeping, tax preparation and payroll services. This industry has enormous advantages; such as low overhead, numerous potential revenue streams and relatively low barrier to entry. You can start a business in this industry out of a home office, and you do not even have to be a CPA to offer many of these services. For those that have the available funding, perhaps the best strategy is to purchase an existing accounting practice with an established track record, and capitalize on the most profitable small business industry for 2016.
Before proceeding, it is always best to work with a business intermediary, particularly one who specializes in accounting practice sales. This will give you valuable insights on how to enter the accounting industry and establish a profitable business.