Jan 03, 2018

The Most and Least Profitable Businesses to Start This Year

As entrepreneurship continues to expand across America, many who have caught the small business bug are desperate to find a profitable field to make their mark. A recent study released by Sageworks ranked small business industries according to their profitability. The overall winner was financial services, with accounting, tax prep, bookkeeping, and payroll processing coming out on top with an 18.3% growth in sales this year.

Rising Trend: Accounting and Legal Firms

Accounting firms have a number of built-in benefits that make them perfect for small business. They are low-cost enterprises, requiring little capital to get started. All firms really need are trained employees who can crunch numbers. There are no inventory costs and, with the rise in popularity of coworking spaces, finding office space is much more affordable.

Accounting is not the only field, however, that has these built-in benefits. Legal firms also lack inventory costs and require only well-trained employees. The legal services field saw a 17.4% growth this year.

Legal firms can rake in significant sums of money depending on their specialty. The highest paying legal fields at the moment are litigation and intellectual property. Litigators handle high-dollar, high-profile, and high-stakes cases that usually end in large settlements.

Intellectual property law protects ideas: patents, copyrights, trademarks and other profitable concepts. As technology innovations continue, the demand for patent lawyers increases. Because of this, intellectual property law is also the fastest-growing sector in the law field.

Other Highly Profitable Industries

While accounting and legal firms made the largest profit strides this year, they aren’t the only industries on the rise. Here are some other profitable industries from the Sageworks study:

  • Lessors of real estate: 17.4%
  • Management of companies and enterprises 16%
  • Outpatient care centers: 15.9%
  • Offices of real estate agents and brokers: 14.8%
  • Offices of other health practitioners: 14.2%
  • Offices of dentists: 14.1%
  • Specialized design services: 12.8%
  • Automotive equipment rental and leasing: 12.5%
  • Activities related to real estate: 12.3%
  • Warehouse and storage: 11.6%
  • Offices of physicians: 11.5%
  • Nonmetallic mineral mining and quarrying: 11.2%
  • Medical and diagnostic laboratories: 11.1%
  • Other schools and instruction: 10.5%

The Least Profitable Industries

  • Oil and gas extraction: -7.6%
  • Support activities for mining: 0.6%
  • Beverage manufacturing: 0.8%
  • Grocery and related product merchant wholesalers: 1.9%
  • Lawn and garden equipment and supplies stores: 2.0%
  • Miscellaneous durable goods merchant wholesalers: 2.3%
  • Petroleum and petroleum products merchant wholesalers: 2.4%
  • Grocery stores: 2.5%
  • Automobile dealers: 3.2%
  • Building material and supplies dealers: 3.2%
  • Continuing care retirement communities and assisted living facilities for the elderly: 3.3%
  • Other motor vehicle dealers: 3.3%
  • Home furnishings stores: 3.3%
  • Furniture stores: 3.4%
  • Beer, wine, and liquor stores: 3.4%

Many of the least profitable fields have huge inventory and overhead costs. The Sageworks study qualifies their research by saying, “not all private companies are necessarily shooting for high profitability; maybe their industry is price sensitive and relies on volume for growth or maybe they are sinking profits back into the business for R&D.”

Nevertheless, profitability is an important consideration for entrepreneurs, and is a good indicator of potential success. If growth in the aforementioned industries continues, there will be significant upticks in small businesses seeking opportunities in those fields this year.

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About the author

Andrew Mosteller
Andrew Mosteller is a freelance writer and regular contributor to Lendio News. His upbringing in an entrepreneurial family nurtured a passion for small business at a young age. Andrew's father, an equity fund manager, taught him the ins and outs of investment financing. Now, Andrew spends his time writing copy for business owners, helping them expand and advertise their unique brands. He's also studying Strategic Communications at the University of Utah. When Andrew's fingers aren't glued to the keyboard, he spends his time reading, podcasting, composing music, and bombing down the ski slopes.

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