Gaudy revenue figures may get a business a lot of attention, but profits are where companies live and die.
As a part of Inc.'s annual look at the best industries for starting a business, we decided to highlight the niche sectors that may not make as many headlines based on revenue, but that have higher-than-usual profit margins.
The selections come from IBISWorld's exhaustive list of U.S. sectors, which looks at everything from projected revenue growth to labor requirements. Here are the five best industries for starting a business in the U.S. based on profit margin.
Note: Because of high barriers to entry, the following industries were excluded from the below list: high frequency trading, private equity and hedge funds, trusts and estates, and oil pipeline transportation.
5. Urban planning software.
Average profit margin: 36 percent
2014 industry revenue: $1.7 billion
Urban planning software includes computer programs for city and regional planning, topography modeling, and map analytics. Demand for these services is driven primarily by state and local governments, as well as private companies in the construction sector. Industry revenue is expected to grow to $1.9 billion this year, while average profit margins should increase to 39 percent by 2020, according to IBISWorld.
4. Business analytics and enterprise software publishing.
Average profit margin: 37 percent
2014 industry revenue: $28.2 billion (estimated)
Two of the most widely used products to come out of this industry are customer relationship management systems (commonly known as CRM) and enterprise resource planning systems, both of which are standard tools at many of the largest U.S. companies. IBISWorld predicts industry revenue could reach $33.3 billion by 2019, driven by an increasing variety of businesses using these systems to manage data.
3. Fantasy sports services.
Average profit margin: 38 percent
2014 industry revenue: $1.4 billion
Growth in the fantasy sports services industry is being driven by rapidly spreading interest in fantasy sports and the increasing number of broadband and mobile connections. Internet advertising spending is also rising steadily, which translates into growing revenue for this industry. IBISWorld predicts fantasy sports services revenue will reach $2 billion by 2019.
2. Human resources and payroll software.
Average profit margin: 40 percent
2014 industry revenue: $6.3 billion
The human resources and payroll software industry has benefited in recent years from more companies automating their back-office HR tasks. This has in turn led to an increase in the number of software companies entering the market with lucrative cloud-based offerings. IBISWorld predicts revenue for this sector will reach $9.2 billion in 2019.
1. Online survey software.
Average profit margin: 55 percent
2014 industry revenue: $2.7 billion
The online survey software industry has very low labor and capital requirements, giving the sector an unusually high average profit margin. Low barriers to entry and skill requirements also are helping new companies enter the space. IBISWorld predicts revenue for this sector will reach $3.6 billion in 2019.