While a number of small businesses flop in their first year, a safe way to help your new venture be a success is by tapping into the right industry.
From accounting to legal services to real estate -- there are certain industries that tend to see higher profits than others. By analyzing net profit margins of privately held companies over the past 12 months, financial information company Sageworks sought to uncover exactly which industries are the most profitable.
For the second year in a row, accounting and tax services takes the cake for the most profitable industry. Real estate, legal services and management of companies and enterprises follows closely behind, also landing on the top of the list for most profitable types of small businesses.
“Many of the top performers are service industries in which certifications and education requirements are barriers to entry,” Sageworks analyst Libby Bierman said in a press release.
However, that doesn’t mean other major industries didn’t see higher profitability over the past year either. From healthcare to manufacturing, check out this year’s list of the most profitable industries for small businesses.
Accounting, tax preparation, bookkeeping and payroll services
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Finances are a part of everyone’s lives, so here’s an industry that will remain important no matter what. Not only that, but these types of businesses don’t need to purchase or maintain any expensive equipment, thus have few overhead costs. Accounting, tax preparation, bookkeeping and payroll services are all great choices.
Lessors of real estate
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Up from eighth place last year, lessors of real estate -- also known as landlords -- made its way to second place on this year’s list. While purchasing land can be costly at first, renting it out to people or companies has major benefits and is a great way to bring in the big bucks -- especially during a time when many people are turning to renting instead of buying.
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Like accounting and taxes, here’s another industry that requires specialized training and certifications. While you may have to invest in degrees and training, you can charge a considerable amount for specialized services.
This industry, which consists of small privately owned offices of bank holding companies, help out other businesses in influencing management decisions and organizational strategies.
Activities related to real estate
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This category includes appraisals and construction and has also been found to have higher profitability thanks to high sales growth this year in the construction and real estate industries. “The higher sales volume, within reason, the faster they can cover fixed costs and boost profit levels,” Bierman said.
Offices of dentists
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Taking sixth place for the second year in a row, the dental industry continues to be one of the most profitable for small businesses. While overhead costs might be high, these offices manage to do well because they have consistent and recurring patients.
Offices of real estate agents and brokers
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Despite a slight drop from last year, real estate continues to be a large money-making industry. And the barriers to entry in real estate are also quite low -- all you really need is a brokerage license to get started.
With strong construction markets and manufacturing, the nonmetallic mineral mining and quarrying industry has seen a rise in profits over the past year. While there are a number of jobs within the industry, common ones include mining machine operators, truck drivers, sales workers and construction supervisors.
From physical therapists to psychiatrists to podiatrists -- there’s always a need for niche health practitioners.
“Healthcare and dental practices do have to invest considerably in technology and supplies, but their services are inevitably in demand even during slow economic times, which reduces pressure on their profitability levels,” Bierman says.
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These organizations need money, and it turns out they tend to get it. However, unlike most businesses, rather than profits going to shareholders, they go back into the organizations to further their missions and reach their goals.
Medical and diagnostic laboratories
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No matter the economic climate, services in the health industry will always remain in demand. That’s why medical and diagnostic laboratories made this year’s list of most profitable industries.
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According to Sageworks, businesses in construction-related industries have seen high sales growth over the year. That’s why land subdivision, which is comprised of companies that service land and divy properties into lots, has seen high profitability over the past year.
Down by more than a 2.5 percent net profit margin compared to 2016, the automotive industry still managed to make its way onto this year’s list. Perhaps thanks to companies such as Uber and Lyft, people are not investing as much in cars. However, they are continuing to rent and lease them.
Warehousing and storage
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Similar to being a landlord or real estate lessor, warehousing and storage businesses are also highly profitable, providing a rental and leasing service for people and companies to stow away items, equipment, belongings and more.
Death care services
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Like other healthcare related industries, death care services is also an industry that won’t be affected by slow economic times.
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