Small businesses have always been the foundation of a growing economy. It’s no wonder the American Dream itself is often a vision of owning your own business and developing it into a successful venture. Perhaps the most important piece to a successful small business is planning your path before starting.
In this article, we will discuss the seven most profitable small business types that are trending today. We will also provide you with tips on how to get started in each industry, as well as some key takeaways for small business owners.
Which Industries Are Most Profitable?
Before determining which small business is the most profitable, it’s important to note the industries that have the highest average profitability. According to a report published by New York University, the following industries have the highest net profit margins:
- Accounting and Bookkeeping: 16.5%
- Financial Advisor: 20.34% – 25.18%
- Software as a Service (SaaS): 19.66%
- Real Estate Rentals: 6% or more
- E-Commerce Store: 10%
It’s important to note that profit margins are averages and may be much more or less depending on the product or service it provides. As a small business owner, you can use the average industry net profit margins to identify areas of opportunity.
Accounting and Bookkeeping
All businesses should keep a record of their accounting and finance management. That said, the opportunity to provide accounting and bookkeeping services to local small businesses is virtually limitless. Services include bank account reconciliation, tax preparation, managing accounts payable and accounts receivable, and financial statement preparation.
How To Get Started
First, you need to have a basic understanding of how a business runs, understand financial statements, and have access to the appropriate accounting software. If you go as far as providing auditing services, then you’ll need to obtain your Certified Public Accountant (CPA) designation.
Financial Advisor
Financial advisors are financial professionals who provide advice and plans to their clients. This can range from investment management, financial planning, insurance planning, and estate planning services. They make money by charging a fixed fee, a commission fee on products they sell, or a mix of these fee structures.
How To Get Started
Financial advisors are required to obtain proper licensing through FINRA, which includes passing one or more relevant licensing exams. Once proper licensing is obtained, you’ll need the appropriate financial software to manage clients’ money as well as sources to obtain new clients.
Software as a Service (SaaS)
Software as a Service (SaaS) allows developers to create software and provide it to customers over the internet rather than via software downloads. SaaS companies are potentially very profitable businesses. Software developers can create a useful software product, then sell that product to businesses or consumers with little overhead.
How To Get Started
First, you need an idea or plan for a software product that solves a common problem. Next, you need to be a well-versed software developer or have the capital to hire a skilled developer to develop your software or app. You then need to sell the product to businesses or consumers and continually develop your product to better meet the needs of your clients.
Real Estate Rentals
A popular small business is buying and renting out real estate property. Everyone needs a place to live, which creates a great business opportunity for entrepreneurs. You can start with just one rental property and grow slowly by purchasing more over the years, or you can buy multiple properties upfront and rent them all out. Some real estate rental businesses will list their properties for rent on popular short-term rental platforms such as Airbnb or Vrbo.
