11 'highest profit' businesses to start By Jan Norman, November 11, 2011 DENTISTS (NAICS code 6212) Pre-tax profit margin averages 13.84%, says Sageworks, which analyzed thousands of private companies' financial records. Orange County's new-business filings for the past year are 5.8% less than they were in the same period a year ago, according to data from the county Clerk-Recorder's Office. And California ranked last among the states in 2010 for new-business creation, according to Economic Modeling Specialists Inc. That's not good news if you agree with the Kauffman Foundation study that businesses less than 5 years old are the primary job creators in the country. And if there's one thing that's dominating the conversation in the United States it's the need for more jobs. That's especially serious for Orange County and California where the unemployment rate is 8.6% and 12.2% (second highest in the U.S.) respectively. A Gallup survey in 36 countries indicates that fear is a factor in not starting new businesses.
So maybe Orange County residents dreaming of starting businesses can ease that fear and improve their odds of success by focusing their startup energies in businesses with the highest profit margins. Sageworks, a financial information company, analyzed financial statements from thousands of privately held companies to find out which industries have been the most profitable in the past 12 months. Private companies are important to study because they account for as much as 70% of the nation's gross domestic product, Sageworks says, and most of the new jobs. On a pre-tax basis, the most profitable businesses were primarily services, according to Sageworks' analysis. CEO Brian Hamilton says the analysis suggests the truth of the old adage that the only sure things in life are death and taxes: Funeral homes and accountants/tax preparers both made the most-profitable list. Sageworks breaks out its data by companies' NAICS code, so some industries turn up several times, such as credit intermediation done by similar types of businesses (i.e. banks, nonbanks, and other related activities). We list this industry only once. The health industry is also among the most profitable, cutting across different NAICS codes, such as dentists, doctors, outpatient clinics and other health-related businesses such as chiropractors and optometrists. Hamilton says health care, technology companies and information companies will continue to grow, based on macro trends affecting the U.S. economy. "I think that over the long run, as you grow revenue, you're going to hire people," Hamilton says. "I don't believe that we will be permanently stuck at an unemployment rate that we all find unacceptable." CREDIT INTERMEDIATION (NAICS 5221, 5222 and 5223) Pre-tax profit margin averages range from 13.63% to 10.12%, according to Sageworks. Both individuals and companies have struggled with too much debt that have led to real estate foreclosures and bankruptcies.
ACCOUNTING, TAX PREPARATION, BOOKKEEPING (NAICS 5412) Pre-tax profit margin averages 13.61%, says Sageworks. The federal tax code has four times as many words as the Bible and accompanying regulations run 2.5 million pages. And that doesn't include state and local tax issues. No wonder so many Americans use pros to file their taxes. LAWYERS (NAICS 5411) Pre-tax profit margin averages 12.98%, Sageworks says. TECHNICAL AND TRADE SCHOOLS (NAICS 6115) Pre-tax profit margin averages 12.76%, says Sageworks. As millions of American jobs disappeared forever in the recent recession, the unemployed have sought retraining for new careers.
INSURANCE AGENCIES (NAICS 5242) Pre-tax profit margin averages 11.26%, according to Sageworks' analysis of private companies finances. DOCTORS (NAICS 6211) Pre-tax profit margin averages 10.84% says Sageworks. Increasing spending on health care plus the medical industry's move toward consolidation and technology help improve profits even as insurers and the government try to cut reimbursements.
OUTPATIENT CARE CENTERS (NAICS 6214) Pre-tax profit margin averages 10.50%, says Sageworks. Many insurers encourage the use of nonhospitals for simple procedures to save money. CEMETERIES AND FUNERAL HOMES (NAICS 8122) Pre-tax profit margin averages 9.59%, according to Sageworks' analysis. Two words explain the success of these types of businesses: aging population. SCIENCE RESEARCH & DEVELOPMENT SERVICES (NAICS 5417) Pre-tax profit margin averages 9.44%, Sageworks says. As global competition rises, U.S. companies work hard to develop new products, new drugs, new methods.
SOFTWARE PUBLISHERS (NAICS 5112) Pretax profit margin averages 9.30%, according to Sageworks, which analyzed private companies' financial records. Programs from video games to iphone apps have to be written by someone. For the full story featuring Sageworks private company data, please visit The Orange County Register 11 'highest profit' businesses to start.