Looking for Stable Business Ideas? Here Are 12 Types of Companies With Healthy Cash Flow. Private companies in these fields tend to pay their bills on time.

By Tanya Benedicto Klich

Opinions expressed by Entrepreneur contributors are their own.

Shutterstock

Land subdivision and funeral businesses may not be the sexiest small-business ideas when compared to, let's say, a web startup or a local coffee shop. But private companies in these fields tend to have the healthiest cash flow, according to new data from Sageworks, a Raleigh, N.C.-based financial data company.

For entrepreneurs seeking new ventures, businesses with a track record of stability and solvency may be a good place to start. Sageworks used highest average current ratios to generate a ranking of 12 business types with healthy cash flow for the year ending Aug. 31, 2014. [See list below.]

Related: The Small-Business Guide to Getting the Cash You Need

Cash flow is a leading indicator of financial strength because if a company has sufficient cash on hand, it will likely meet its short-term obligations -- like accounts receivables and employee salaries -- on time.

Sageworks analyst Jenna Weaver says the businesses listed "have the ability to pay their bills and they tend to, on average, have positive cash flow." She adds that while these businesses aren't necessarily fun or flashy, understanding why certain industries or business models are more inclined toward solvency than others is useful for any entrepreneur.

Following land subdivision and death-care services, this year's ranking also includes grocery stores, real-estate businesses, clothing stores, liquor stores, gas stations, dry cleaning and laundry services, specialty-food stores, employment services, health and personal care stores, and investigation and security services.

Land-subdivision companies divide land into plots to make selling the property easier. Weaver explains that its top ranking may reflect the strong real estate/construction market recovery since 2009.

The rest of the results show themes: half of the list represented the retail sector. While giants like Walmart are known to operate with a low current ratio because of their ability to turn inventory quickly into cash, small private retailers may have difficulty predicting consumer behavior and may therefore stockpile inventory to meet any unexpected consumer demand. Weaver explains that the ability for these smaller establishments to then turn these inventory levels into receivables, and receivables into cash plays a big role. Also, she says a third of the industries on the list are service-related businesses, which usually have lower or no inventory needs.

While every industry operates on different business cycles and models, entrepreneurs brainstorming on stable business ideas should always keep solvency in mind.

Related: Time for a Bank Loan? What Lenders Are Looking For in Small-Business Owners.

"Often, when businesses fail, they fail because of their inability to manage these ratios and generate positive cash flow," Weaver says.

It's important to note that a current ratio that is too high is not always ideal. A company wants to keep enough cash or liquid assets available to be able to meet its short term debts, but it doesn't want to sit on too much cash or inventory, so that its assets are still being productive for the business.

Related: Launch Your Quest for Capital With Entrepreneur Bank Search

Click to Enlarge+
12 Types of Business With Healthy Cash Flow (Infographic)

Related: The Most Profitable Types of Small Businesses

Wavy Line
Tanya Benedicto Klich

Data & Featured Lists Editor

Tanya Benedicto Klich is a data and lists editor at Entrepreneur.com.

Editor's Pick

She's Been Coding Since Age 7 and Presented Her Life-Saving App to Tim Cook Last Year. Now 17, She's on Track to Solve Even Bigger Problems.
Lock
I Helped Grow 4 Unicorns Over 10 Years That Generated $18 Billion in Online Revenues. Here's What I've Learned.
Lock
Want to Break Bad Habits and Supercharge Your Business? Use This Technique.
Lock
Don't Have Any Clients But Need Customer Testimonials? Follow These 3 Tricks To Boost Your Rep.
Why Are Some Wines More Expensive Than Others? A Top Winemaker Gives a Full-Bodied Explanation.

Related Topics

Business News

California Woman Arrested For $60 Million Postal Service Scam

Lijuan "Angela" Chen faces two charges that each carry a maximum sentence of five years in prison.

Starting a Business

Ask Marc | Free Business Advice Session with the Co-Founder of Netflix

Get free business advice during our next Ask Marc, live Q&A, on 6/21/23 at 3 p.m. EDT. You don't want to miss it—send in your questions now.

Leadership

How to Get Unstuck From Stress and Find Solutions Inside Yourself

Executive coach and author Susan S. Freeman discusses finding a healthy problem-solving mindset in her new book, 'Inner Switch: 7 Timeless Principles to Transform Modern Leadership.'

Business News

Jefferies CEO Shares 15 Pieces of Advice He Wishes He Knew as a Summer Intern on Wall Street

Interns at Jefferies embark on a 10-week program with a pro-rated salary of $110,000 for the internship period.

Growing a Business

Sam Fonseca of Roll-Em-Up Taquitos on Simplicity for Successful Restaurants

Interview with Roll-Em-Up Taquitos COO Sam Fonseca about the power of social media, adjusting for customer expectations, and keeping Mama Karen's legacy alive.