Profitable Small Businesses To Model Your Own AfterBarb Weidner
Believe it or not, a profitable small business isn’t an oxymoron. When it comes to maximizing profits as a small business, it’s all about finding an in-demand service to sell or pinpointing a low-cost product that doesn’t require major upfront capital investments.
These days, profitable small businesses aren’t hard to come by. Today more than ever there are endless opportunities to break into the market thanks to the transformative potential of the share economy, the mobile sector, and other digital markets. Even the traditional brick-and-mortar storefront still holds lots of potential for new entrepreneurs to make their mark.
If you’re ready to start your own small business, you need to read ahead to find out what small businesses make the most money in today’s economy. By planning strategically, you can find success as a small business owner in 2019.
Choosing an Industry
Those aspiring to run a small business should first narrow down an industry. The most successful small business ideas originate when entrepreneurs find a highly profitable industry or niche and zero in on it.
It should come as no surprise that most profitable small businesses are in the highly skilled service sector of the economy. Service providers, especially those without a storefront, don’t need to make significant investments in raw materials and tangible assets.
The average entrepreneur can’t afford to put up hundreds of thousands of dollars in startup capital. That’s why choosing a profitable industry with low barriers to entry is so important for the fiscal health of your company.
Top 5 Most and Least Profitable Industries
According to a recent report on the most profitable industries for entrepreneurs, there are plenty of opportunities in the market for high-skilled business owners to strike it big. To help you find the best (and avoid the least) profitable industries for successful small businesses, we put together these lists of today’s most lucrative sectors of the economy:
- Accounting, tax prep, bookkeeping services
- Legal services
- Real estate leasing
- Outpatient care
- Offices of real estate agents and brokers
- Oil and gas extraction
- Mining support
- Beverage manufacturing
- Grocery wholesale
- Garden and lawn supplies
Predictably, capital-intensive industries that are costly to operate such as natural resource extraction don’t generate high returns for small businesses. Instead, we recommend finding a service niche like outpatient care, leasing, or online professional services that can be operated remotely from one’s home.
Net Profit Margins
When looking to make a profitable small business, you first should look at which industries generate the highest net profit margins. As an indicator of profit on sales, net profit margins is a simple metric generated by taking one’s profits and dividing it by total revenue—this way, you can find out how much of every dollar earned is converted into profit.
The average net profit margin across all industries currently sits at just below eight percent after adjusting for taxes. However, some service industries, such as accounting, financial services, and legal services generate net profits between 17.4 and 18.3 percent.
Generally, businesses with low net profit margins rely on selling in high volumes to generate sustainable profits and remain solvent. This is why beer and wine sales typically net between 3 and 4 percent margins but are sold in high enough quantities to justify the low markup.
The Most Lucrative Business Ideas in 2019
Profitable small businesses can be founded with minimal startup investments in today’s economy. The ubiquity of smart devices and online connectivity has made overhead costs a thing of the past for many businesses that once were held back by rent, payrolls, consulting fees, and other costs.
If you’re looking for profitable small business idea, the good news is that they aren’t hard to come by. Below, we’ll run through the five most profitable sectors of today’s economy, and their most profitable business ideas, that can be tapped into by just about anyone with enough dedication.
The mobile sector isn’t just about smartphone apps anymore. In fact, this industry refers to a much broader category of businesses that are physically mobile. That is, they arrive at their client’s doorstep to render services rather than the customer come to them.
Some of the most profitable small business ideas within the mobile business sector can be started on a shoestring budget if you already own a vehicle. A list of the most profitable small businesses includes:
- Pet grooming
- Food trucks
- Junk removal
- Personal training
- Cleaning services
These businesses offer a singular value proposition to customers: convenience. Today more than ever, the average consumer seeks convenience and expediency when hiring professional services. If you own a vehicle, you can transport yourself to the customer’s home and render the services there—in doing so, you take a major headache out of the experience for the customer.
Aspiring mobile business entrepreneurs should note that some states require mobile vendors to apply for licenses and permits before opening for business.
Most businesses aren’t a one-person show. However, employees are expensive and payroll taxes can be devastating for small and medium-sized businesses. This is where freelancers offer unique value to businesses.
Highly skilled freelancers offer a low-cost alternative to full-time employees without long-term commitments. Small businesses that make money often rely on in-demand freelancers to thrive. A few of the most sought-after freelancers in today’s market are:
- Graphic design
- Social media management
- Blockchain technology
- Data science
If any of the above niche specialties or skills apply to you, you might want to consider embarking on a lucrative business-to-business (B2B) freelancing career.
If you are an expert in any field, chances are there is a market out there that would be willing to offer you money for some specialized tutoring. In the knowledge economy, an increasing number of aspiring experts are eager to advance their skills by learning from those at the top.
Developing and managing an online course, including either videotaped lectures, written instructive essays, or animated videos, can be a highly profitable small business option. Many of the most successful small businesses, such as Udemy, are online education companies.
One of the main perks of an online education business is having the ability to telecommute and to offer your employees the chance to work from home. Not only is this super convenient for business owners living a fast-paced lifestyle, but it also saves tons of time and money.
The share economy is founded on the principle of a rentable business that offers a good or service for a limited time, such as how Uber offers transportation services. The opportunity for growth in the so-called “share economy” is massive thanks to the ubiquity of smartphones and smart technologies, which has created such juggernauts in the mobile economy as:
Last, child-oriented businesses offer plenty of small profitable business ideas due to the ongoing population spike that is responsible for a new baby boom. With children everywhere, it makes sense for small business owners to cater to and accommodate kids.
Child-centered businesses include everything from newborn and post-pregnancy services to child-focused app development and tutoring centers.
Free or Inexpensive Business Ideas
These days, the rise of affiliate marketing and drop-shipping have made zero-cost (or low cost) eCommerce a viable option for many capital-strapped entrepreneurs. The most profitable businesses to start with are those that require minimal startup capital—usually, these are online businesses that offer a service or a drop-shipped product.
There is a good deal of debate over whether eCommerce is a better choice for new entrepreneurs than affiliate marketing. The truth, however, is that both avenues offer dedicated entrepreneurs the ability to create highly profitable small businesses out of thin air.
Small Business Success: Margins Over Scale
Remember, the most profitable small businesses to start are those that can capture high margins. Unlike industries that thrive at scale, the most lucrative small businesses are those that focus on keeping the share of profits on every sale high (i.e., above 15 percent). This way, you can support yourself and the business even with modest sales.
In the early days of your venture, don’t be afraid to start small and tip-toe into the project on weekends and evenings. In today’s world, many lucrative small businesses don’t require a full-time effort. Rather, profitable small businesses are those that capitalize on a niche in the market, or an underserved market, and jump into the action strategically.
Digitization, the share economy, and changing demographic cohorts offer new avenues to success for tomorrow’s entrepreneurs. The only question is whether you can position your venture for success in an ever-changing economic landscape with new trends and opportunities around every corner.