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Business trends & research roundup: The 4 most and least profitable small business industries

April 19, 2018

Starting a small business will always come with risk.

Those first years, new business owners must fight for survival as they juggle to secure financing, build a team, attract customers and so much more. It’s no wonder that 20 percent of small businesses fail before their first year and about a third won’t survive through their second year.

But aspiring merchants can set themselves up for success by launching a business in a strong industry with the best profits.

Read on to learn more about the most profitable and least profitable industries for small businesses in 2018.

MOST PROFITABLE:

Accounting and financial services
From serving individuals and businesses, there will always be demand for accounting services, making this a stable business in a variety of economic environments.

Additionally, as baby boomers move toward retirement, demand for financial planning services are expected to grow at a much faster rate than other occupations, according to the U.S. Bureau of Labor Statistics. While these services require a bachelor’s degree and additional training, the overhead for these businesses are minimal. The median pay is about $90,000 per year and the industry is expected to grow 15 percent from 2016 to 2026.

Landlords
Today, there are more renters in the U.S. than any point in the last 50 years, giving a major boost to the rental market. Landlords must invest significant capital to purchase and manage properties, but once established, the business can be profitable.

Home improvements
The average household spends about $3,000 per year on home renovations, which creates business opportunities for those skilled in fixing and updating houses. Startup costs include tools, training and licensing, which are much lower than for businesses like new home construction. Since the work takes you onsite to customer homes, that eliminates the need for renting a space for your business, too. You can scale up your business with time by starting off as an individual contractor and then, as you build your reputation and network, you can act as a general contractor, hiring or subcontracting work to others.

And when you’re taking in business on the go, you’ll want to use products like Clover Go, a portable device that lets you securely accept all forms of payment – swipe, “chip” and NFC contactless mobile payments like Apple Pay, Samsung Pay, and Google Pay. And you won’t have to worry about consolidating all of your transactions; with Clover Go, all of your data gets centralized in your Clover POS.

Vaping retailer
As consumers seek alternatives to tobacco, the e-cigarette industry has begun to boom. A Wells Fargo tobacco analyst predicts the industry in the U.S. will expand around 15 percent to $5.1 billion in retail sales this year.

Aspiring merchants should keep in mind that opening a vape shop could could cost between about $7,000 to $10,000 per month—and that doesn’t include the cost of the product. Another challenge: banks put vape shops in a riskiest category, which means they charge more for your loan and make it harder to get a loan in the first place. But for merchants who plan wisely, research the market and tap into the right customer base, this could be a profitable venture.

LEAST PROFITABLE

Real estate services
Buying a new house requires spending money on inspectors, appraisers, title companies, loan brokers and more. An aspiring entrepreneur may think: why not put myself on the receiving end of all that cash?

Those services can be very lucrative and they require little capital and training to get started, but you’d be up against a crowded marketplace and tremendous competition, according to Fundera. Home buyers tend to rely on their realtors for recommendations, and the bulk of a market is controlled by a few top realtors who already have their referral relationships established. As most of your revenue will be commission-based, you’ll need a high volume of customers to keep your business running. That means you’ll need to work extra hard to break into an already crowded market.

Recreation services
Running an amusement park, movie theater or golf course may seem like a dream – pleasure and profit all at the same time! But this can be a tough industry to survive in, according to Funderea. The high costs to run these kinds of operations don’t go away. Recreation businesses also face tough competition, as a wide variety of services are vying for the limited free time of consumers. And of course, when the economy dips, spending on fun is the one of the first thing customers cut from their budgets.

Furniture store
Even if you have the most stylish house and a passion for furniture design, think twice about opening a furniture store. It’s a business that pairs high overhead costs with measly mark-up rates. On top of that, you’ll be dealing with stiff competition from online discount shops like Overstock and Wayfair. On average, furniture retailers bring in a paltry 3.3% pre-tax profits.

Travel lodging
Similar to recreational services, opening a bed and breakfast or a boutique hotel loses some appeal when faced with its narrow profit margin. When dealing with steep fixed costs coupled with competition from cheaper options like motels and Airbnb, profits take a hit, leading to average pretax profits of independent inns and hotels at a mere 0.26 percent.

Now that you have a lay of the land, you’re better equipped to start a small business in a robust industry. But you’ll need many tools to get you from idea to launch day, and your friends at Clover have you covered. First off, you’ll want to decide on the formal structure of your business. S-Corp, DBA, LLC? We decode these for you here. Next, you’ll need to understand the vital due diligence steps you’ll need to take for a successful start. If you’re looking to open a franchise, be sure to ask these key questions.


Clover is sold by leading U.S. banks including Bank of America, BBVA, Citi, PNC, Sun Trust and Wells Fargo. You’ll also find Clover at our trusted partners including Ignite Payments, Restaurant Depot, and Sam’s Club. For more information, visit us at clover.com.