Thinking of starting a profitable small business? Looking to partner with or sell services to other profitable small businesses?
Or just hoping to avoid starting a business in an incredibly challenging industry?
Sageworks analyzed data from thousands of private company financial statements and used net profit margin as the metric to rank industries.
It's no surprise that a number of the most profitable industries provide services rather than sell products, which means their operations don't require significant capital investments or major investments in raw materials--which is good news for the average entrepreneur who can't afford to invest millions in a startup.
So while you may not be able--or interested--in starting a business in one of these areas, the following should at the very least give you some good ideas...and some good ideas for what types of businesses you might want to avoid.
Here are the 15 most profitable industries in 2016, ranked by net profit margin:
- Accounting, tax prep, bookkeeping, payroll services: 18.3%
- Legal services: 17.4%
- Lessors of real estate: 17.4%
- 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%
And now for 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%
Note: The average for all industries was 7.7 percent, and the data excludes taxes but does include owner compensation in excess of market-rate salaries.