Before starting their first small business, a burgeoning entrepreneur should know which industries have the highest profit margins. A slick logo and an impressively designed iphone app aren’t going to mean much if your company folds within a month. Here’s a look at three different types of high margin small businesses and the lessons that can be learned from each.
Filling an inevitable need makes your business recession proof
A few years ago, Forbes published an article listing the industries with the highest pretax profit margins for small business owners. While physicians and lawyers make the expected appearances, it turns out that certified public accountants, tax preparation professionals and bookkeepers have the best margins. The reason why is obvious. At some point, everyone will need some accounting help, regardless of how the economy is doing and the relatively lack of large corporations operating within that field means that independent companies don’t have to cut their margins to the bone to be competitive. So, instead of opening a third-wave coffee shop with the hope that it won’t be crushed by any one of America’s massive coffee chains, become a professional tax preparer.
Mailbox money is the best kind of money
Another type of business that did surprisingly well on the Forbes list is self-storage lessors. The reason self-storage companies have an average pretax margin of 12.3 percent is because of their minimal overhead. You only need to buy the storage units once and as long as you have comprehensive property insurance and a regular maintenance schedule, your monthly costs shouldn’t vary greatly. The self-storage industry has exploded over the last thirty years, partially because it’s remained steady during periods of economic growth and decline.
You don’t commute to a virtual job
As this Guardian article points out, the wide-spread adoption of technology like high-speed internet access, video conferencing and cloud-based file sharing has seen the traditional workplace migrate into the digital space. As such, anyone with strict self-discipline and a proficiency in commonly used IT software can break into the virtual personal assistance field. Startup costs are incredibly low and include a decent laptop, a smartphone with an unlimited everything plan and reliable internet service. It’ll take some time to build a professional reputation and a decent client list, but companies like Ask Sunday and Zirtual are helpful in that capacity. Also, one advantage of working online is that geography won’t limit your employment options. You can take calls for a tech company in Glasgow while also making travel arrangements for a Los Angeles-based design firm, without ever leaving your living room.
This article was written by Mario McKellop of Examiner.com for CBS Small Business Pulse.