7 Small-Business Markets Have High Profit Margins

Healthy profits are still possible for some small-business sectors. Here are the fields with the highest profit margins.
February 06, 2012

Businesses of all sizes have new challenges given the tight economy. Profit margins are on everyone’s mind, and small businesses are especially susceptible to hiccups in revenue. Any fluctuation can really impact the bottom line.

Owners need to find their market niche, be more innovative and more responsive. They have to be creative in how to source revenue.

But healthy profits are still possible. Using a combination of online data and research from Sageworks, we’ve identified seven small-business fields that enjoy the highest profit margins in today’s economy.

1. Dental services

Dentists are doing much better than just getting by. Emergency dental care is immune to most market vagaries. SMB dental professionals are working with a nearly 17 percent profit margin.

2. Accounting, tax and payroll services

Professionals who handle bookkeeping, payroll, tax and accounting services are faring well in the current economy, too. With a profit margin usually around 15.5 percent, they are consistently in the black.

3. Legal services

The offices of lawyers and mediators are going strong. Estate planners, litigators and corporate legal advisors are the most in-demand at the moment. Businesses that specialize in legal services have an average profit margin of just over 13 percent.

4. Health and wellness practitioners

Health practitioners managed to beat out physicians, probably because of lower liability-insurance costs. SMBs centered on nursing, skilled care, nutrition counseling and therapeutic services see an average profit margin slightly above 12 percent.

5. Physician-based health services

Small and medium-sized doctors’ offices offer their essential services with strict regulation and heavy insurance costs. Yet even after these costs are deducted from revenue, the businesses realize an 11.85 percent margin.

6. SEO marketing

In tight economies, advertisers are even more focused on making every dollar count. In the online world, it’s all about proper targeting. That’s where SEO services come in.

Small and medium-sized business pros like doctors and lawyers enlist the help of firms that specialize in SEO campaigns to increase their online presence and search rankings. With the field growing and few top SEO gurus to fill demand, profits remain strong and profit margins steady at 10.75 percent.

7. Insurance-related businesses

Insurance agencies and brokers enjoy consistent business in nearly every economic condition. Customers don’t want to add to financial worries by skipping the safety nets they already have in place. For this reason, insurance SMBs operate with an average profit margin of about 10.5 percent.

Successful niches

The margins above are based on averages, of course. The smartest businesses create a niche in the markets they serve and work to keep existing customers happy. That way they avoid the costs of replacing customers. Savvy owners from any background can achieve healthy margins regardless of business sector.

Minority-owned businesses like WebMetro, an advertising and SEO firm in Los Angeles, tap underserved markets and leverage expertise from a diverse set of partners, contractors and suppliers. WebMetro’s unique identity as one of the few minority-owned firms specializing in SEO services increases its exposure and helps maintain solid profits during a turbulent economy.

The legal firm Cumby + Weems is a woman-owned, 50 percent minority-owned business in New York City. The firm focuses on real estate law and works closely with developers, consulting firms, mortgage companies and commercial banks.

Each of these businesses positions themselves solidly in a classically high-profit area. Each is combining strong service offerings with clearly defined markets. By capitalizing on historically healthy profit margins and defending their unique market spaces, these firms only add to their success long term.

Kentin Waits is a freelance writer and marketing specialist in Portland, Oregon. His work has been featured in US Airways magazine and top-rated blogs such as Wise Bread, the Consumerist and MSN SmartMoney. When he's not writing, Kentin runs a small online antiques business.

Image credit: iStockphoto