Despite large corporations’ apparent dominance, small businesses are still the engines of the North American economy. The U.S. Small Business Administration estimates that approximately 550,000 small businesses are created each month in the U.S. and create two out of three new jobs. More than half of Americans are either employed or own a small business. You are an investor or entrepreneur looking for new profitable small businesses opportunity.
It is well-known that small businesses are most successful when they have a solid business plan and a great business idea. However, there are some profitable small businesses that offer higher profits than others. It is a great way to make sure you succeed by narrowing your search to the most profitable small businesses listed in this article.
Many of the listed Profitable small businesses have strong profitability potential due to the trend for corporations to outsource functions like accounting. Payroll, information technology, legal services, social media, and marketing. Due to outsourcing, many former employees of larger companies have gone into self-employment. This trend is not slowing down.
Profit Margin for each Sector
The following table shows that profit margins can vary significantly by sector. Professional services score the highest.
These are the 10 most profitable small businesses, ranked by Sageworks according to average profit margin. They are also listed in the North American Industry Classification Code (NAICS) code. The average profit margin for companies listed on the Standard and Poor’s 500 (S&P 500) was 11% in 2017.
1. Accounting, Tax Preparation, Bookkeeping, and Financial Planning
Accounting, tax preparation, bookkeeping, and financial planning Accounting/bookkeeping, tax preparation, and financial planning are essential activities for almost all businesses and individuals, guaranteeing a strong demand now and in the future for qualified service providers. Huh.
Capital Investment/Overhead: Startup costs are minimal with no overhead, other than office space or computing equipment. Many of the people in this industry work from home.
Education/Training & Barriers to Entry: Tax preparation and bookkeeping training are relatively simple to get, but accounting certifications such as CPA, CA, and others can be difficult to obtain. A bachelor’s degree is required, as well as additional training and relevant work experience.
Average Profit Margin: 18.4%
2. Real Estate Leasing
A report from the Pew Research Center shows that more American household heads (36.6%) rented their homes in 2016 than any other time in 50 years.
Capital Investment/Overhead: Leasing agents are able to work virtually anywhere. Therefore, overhead is limited to ongoing expenses such as advertising, vehicle maintenance, and phone calls.
Education/Training, and Barriers to Entry: The requirements depend on the jurisdiction. Some states require a license for a leasing agent while others require a license for a real estate agent. Both require completion of the licensing exam(s) and a training course.
Average Profit Margin for Leasing: 17.9%
3. Legal Services
A lawyer is required for almost all businesses and individuals, just like tax preparation and accounting. Here are some examples of legal services that businesses might need:
- Commercial/corporate law
- Employment law
- Technology and intellectual property law
- Bankruptcy law
Individual legal services include:
- Family law
- Criminal law
- Personal injury lawsuit
- Trusts and wills
Capital Investment/Overhead: Quality office space is essential for clients and consultants, whether they are working from home (as many solo attorneys do) or on commercial premises. Other costs include software and basic computing equipment. Malpractice insurance is also an option.
Education/Training/Badgers to Entry: To become a lawyer, you will need a four-year bachelor’s degree and three to four years of law school. After that, you must pass the bar exam in order to be licensed.
Average Profit Margin: 17.4%
4. Outpatient Clinics
Outpatient clinics offer non-overnight medical services, including diagnostic testing, treatment, and counseling.
Capital Investment/Overhead: It costs more than $100,000 to start a private, basic medical practice. A larger investment is required to add diagnostic equipment or surgical facilities.
Education/Training/Badgers to Entry: To become a doctor, you will need at least 10 years of education including an undergraduate degree and a residency program. Additional schooling and training is required for specialization.
Average Profit Margin: 15.9%
5. Property Managers and Appraisers
Real estate leasing is booming. As such, related services like property management and appraisals are high up on the list for small profitable businesses.
Capital Investment/Overhead: These services are great for home-based businesses that need minimal capital investment. Franchises are also available.
Education/Training, and Barriers to Entry: A property manager must have a real estate license in some jurisdictions. Before passing the licensing exam, appraisers must complete 100-150 hours in coursework and then 1000+ hours of work experience under a licensed appraiser.
Average Profit Margin: 14.9%
6. Dental Practices
The U.S. According to the U.S. Bureau of Labor Statistics, dentists are expected to see a 19% increase in demand through 2026. This is much more than for other occupations.
Capital Investment/Overhead: To open a dental practice, you will need a minimum of $400,000 to build a facility with basic equipment and properly construct it. The cost of advanced diagnostic and other equipment can easily be doubled. Additional overhead includes staff wages for dental assistants/hygienists, receptionists, etc.
Education/Training, Barriers to Entry: To become a dentist, you will need a bachelor’s degree along with four years of schooling. Specialization requires additional training and education.
Average Profit Margin: 14.8%
7. Offices of Real Estate Agents and Brokers
Real estate sales have steadily increased since 2008’s recession, along with property management and leasing. With more than 5.5 million homes being sold in the U.S.A in 2017, ( Statista.com). According to the U.S. Bureau of Labor Statistics, the demand for brokers and agents in real estate will grow by 6% between 2026 and 2026.
Capital Investment/Overhead: Office, vehicle and phone, internet, licensing fees, as well as professional attire.
Education/Training, Barriers to Entry: Realtors must complete a real estate course and pass the licensing exam in order to become members of their local real estate association. You must have at least one year of experience in sales before you can take the broker’s training program, pass the exam, and obtain a broker’s license.
Average Profit Margin: 14.3%
8. Other Health Care Practioners
This category also includes service providers like:
- Speech, occupational, and physical therapists
- Mental Health Practitioners (except Physicians)
Capital Investment/Overhead: The costs of Capital investment vary depending on the specialty. An Optometry practice may require more than $300,000. This includes equipment and inventory. A Mental Health Practitioner, on the other hand, can work remotely from a small office or at home.
Education/Training & Barriers to Entry: To become licensed practitioners, all health care providers must have a bachelor’s degree and a specialization degree.
Average Profit Margin: 13.3%
9. Management, Scientific, and Technical Consulting Services
Management, Scientific, and Technical Consulting firms provide specialized services to governments and businesses in a range of disciplines, including:
- Management consulting
- Consulting in Human Resources
- Corporate Strategy
- Environmental compliance
- Safety at work
- Information Technology
There are many sizes of firms, from small consulting businesses with one person to large companies that offer services across a range of industries.
Capital Investment/Overhead: Startup costs are low, except for certain scientific disciplines that might require specialized equipment. Many of these can be run from home.
Education/Training & Barriers to Entry: Minimum a bachelor’s degree, usually followed by specialized training or work experience.
Average Profit Margin: 12.1%
10. Warehousing and Storage
Both residential and commercial customers are constantly in need of warehouses and storage facilities. Many businesses don’t have the space to store inventory or equipment, while homeowners have more items than they have space.
Capital Investment/Overhead: Building or purchasing a warehouse or storage space requires substantial capital investment, especially in urban areas and other locations where real estate is highly sought after.
Training/Education and Barriers to Entry: To run a warehouse/storage facility, you don’t need any formal education. However, it is helpful to have some industry experience. These facilities offer no other services than storage space, utilities, and building maintenance. Customers can use the space as they please.
Average Profit Margin: 11.6%