What local businesses have high profit margins?
When scouting new clients, it makes sense to avoid ones struggling to make ends meet.
You are looking for business clients. It makes sense to avoid ones struggling to make ends meet. Far better to pick businesses with plump profit margins. Years ago, Forbes looked at most profitable businesses. It’s unlikely the list has changed much.
In no particular order, here are 10 businesses they mentioned with high profit margins. If businesses in these fields are doing well, you can see the logic they will be expanding, hiring more staff and opening new locations.
- Insurance brokers. Let’s make that nine businesses, because this category describes you! The people who set up an insurance agency and sell multi-line insurance to businesses and individuals do well for themselves. A key benefit is the stickiness factor. Once new homeowners buy the necessary insurance before closing, it’s rare they change insurance brokers.
- Accountants. Although people can file their own tax returns, the tax code is notoriously complicated. For individuals, the logic of working with an accountant is to pay what you owe, not what a simple filing tells you the government asking for. For businesses, they absolutely need an accountant or accounting firm to keep up with the paperwork.
- Lawyers. You see their ads on TV. There are many more lawyers in your local area than you thought. They have many specialties or niches. Imagine the business model of the personal injury attorney – you represent the client after an accident, then take a slice of the settlement.
- Specialized design services. This broad category includes interior design for businesses and individuals. Offices need layouts. They need to conform to ADA rules. Relocated senior executives might also get interior design services for their home as a perk. There’s lots of money in wallpaper and window treatments. Remember when they used to be called drapes and curtains?
- Medical practices. You’ve seen the proliferation of family practitioner groups. You probably belong to one. They have huge patient numbers and their revenue comes from Medicare, insurance companies and co-pays. You know how hard it is to see a doctor – that’s probably because they have so many patients.
- Diagnostic labs. Years ago, you visited your doctor’s office before your physical for a blood test. Now they send you elsewhere because it’s been outsourced. They also do drug testing as part of the employment process at various companies. It can be a high volume business, a fact you realize when you try getting an appointment.
- Smaller banks. You know your area has multi-state banks with familiar names. There’s also another tier of community banks, some might be described as “one-offs.” These little guys sometimes get bought by the bigger guys seeking to grow market share. Why are there so many banks? Because it can be a profitable business.
- Dentists. When did dentistry get to be so expensive? You likely carry dental insurance and discover the threshold for annual coverage isn’t that high. Lots of treatments aren’t included in your plan. When you exceed your coverage, you pay out of pocket, but often at the negotiated rate between the dentist and the insurance provider.
- Outpatient care. This logically includes critical care centers and those walkup medical offices you see in shopping malls. It’s an alternative to going to a hospital where everything seems to cost a fortune. When people with injuries need attention, cost is often secondary. Physical therapy might also fit into this category.
- Specialized healthcare. Orthodontists are a good example. Years ago, when telephones had cords and rotary dials, your dentist was a one-stop shop. Today, your dentist does certain procedures and sends you to a specialist for others. Your family medical practice likely refers patients to specialists too. These businesses aren’t actively looking for clients, they are being sent clients by other practitioners.
There are many successful business models in your local area. Who is new? They might be ideal prospects.
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