Educated Professions Make the Most Profitable Businesses

It should come as no surprise that the most profitable small businesses include professional services firms including Accountants, Dentists, and Legal services. So says Maureen Farrell @ Forbes.com in a January 18 article entitled "The Most and Least Profitable Businesses to Start" (look for the article at lower left). Also high on the profitability list, Specialized Health services, Industrial and Graphic designers, and Insurance Brokers. These high performers were drawn from a list of 100,000 private business, most with less than $10 million of revenue per year. The pre-tax profit margins within this group ranged from a high of 25% to a low of 13%.

The worst performing businesses included commodity providers like bakeries, beverage manufacturers, and hotels. Their margins ranged from a low of -7.2% to 0.12%.

Economies of scale do come into play, that is covering overhead becomes easier once revenues clear the $3 million level, and further still over $10 million.

Interestingly, she writes that the profitability characteristics of these business groups tend to hold throughout the globe. Ergo education is the key to higher profitability. It makes for some deep strategic thinking when investing your time and money in a new or existing business, as bankers and CFO's can well attest.