Top 10 most profitable business industries in the World

Large companies with enormous sizes do offer economies of scale, but, profitability is what matters in the end. The most important aspect to examine or evaluate in a business is its profit margins.

Companies across the world are evaluated periodically by various agencies like Forbes, Fortune Global, etc. basis, Service standards, profitability, sustainability, etc.

Forbes is well known for its rankings related to entrepreneurs & industries. Ranking of Companies by Forbes is one of the finest works appreciated & referred across countries. Their basis of ranking is simple: fastest growing, skillful & well-managed companies that set an example for other companies in the same industry. Companies are evaluated basis their sales, profits, overall assets & market value.

Other significant work done by Sageworks is Ranking of Industries basis profitability. Sageworks is a financial information company that has analyzed thousands of Private companies to rank them on the profitability basis their last 12 months financial statements. Sageworks has a proprietary database of privately held company financial statements.

As per research conducted by Sageworks the most profitable industries were primarily in service based businesses. Rather, such industries are constantly holding the top position. That is; most of the profit making companies deal in providing services rather than the product that saves huge costs for them like, storage, transportation, etc. According to Sageworks, accounting services tops the chart with 19.8% pre-tax net profit margin ended July 2014. Industries that follow are legal services, Oil & gas extraction, and equipment leasing & rental & health service industries like dentistry.

In words of Sageworks CEO Brian Hamilton, health care, technology & information companies will continue to grow and despite the high unemployment rate Hamilton sees an improvement in demand for workers in the US.

As per analysis conducted by Sageworks, based on profitability of privately-held businesses, 40 percent of the top ten most profitable industries are healthcare related: dentists, chiropractors etc., Health based companies are a big contributor to employment too. In recent years, there is a rise in certification programs for medical assistant and medical billing & coding specialists.

It was found during the research that the Top ten industries were making net profit margins ranging between 16 percent and 10 percent. Where the Investment & portfolio advisors are on the top with about 16 percent net margins, photography and translation services earn about 10 percent.

Top Ten Industries as per Sageworks

Source: Sageworks July, 2014

1. Accounting, Tax preparation, book-keeping & payroll services – This industry on the whole declared an average annual net profit of margin of 19.8 percent during the 12 months period ended July 2014.
   
2. Legal Services- The second most profitable business industry. Legal services industry also is encashing the benefit of no overhead cost &NIL machinery & equipment required. This industry comprises of lawyers, title searchers and examiners & patent agents etc.,

Apart from lower costs in both of the above service related industries, what directly affects the profitability are expertise in the services that gives them the potential to demand more at times and these specialised services remain unaffected in the times of recession.

1. Oil & gas extraction- This sector includes production of crude petroleum, mining & extraction of oil, production of natural gas, etc. In US, this industry is the most profitable & derives a net profit margin of 24.1% but surprisingly, profit margins of the top companies in this industry varies with high margins. Highest profit margin is reported by Gazprom from Russia i.e, 24% whereas Sinopee from China is at the lowest 2% profit margins. Exxon Mobile is the largest of the world Oil & gas companies.
   
2. Commercial & Industrial machinery & equip rental - Companies in this industry rent or lease products including aircrafts, bulldozers, cranes, etc. They cover all kind of transport including air, water and land. This industry is protected or sheltered by businesses that use these equipment & machinery, thus has little impact of market fluctuations. At net profit margin of 18.5%, this industry also benefits from demand increment in transportation & construction industries.
   
3. Dental offices- This is one of the important aspect of healthcare industry that has landed in Top ten profitable industries research by Sageworks. Schein, in US, is the largest distributor of dental products & rules this market with 32% market share. Another global supplier of dental equipments is Sirona Dental systems Inc.
   
4. Lessors of real estates- Real estate is one sector that has made a come-back after the financial crisis. Going forward, with ever increasing rentals this industry is expected to become more profitable.
   
5. Physicians or outpatient care industry- Another industry whose bottom line will always outperform is of physicians or outpatient care centers. Outpatient care refers to medical care where the patient does not have to spend the night at hospital or stay back for the treatment. Here the treatments are quite cheaper in comparison to hospital.
   
6. Real estate agents & brokers- Real estate agents & brokers have largely benefited from the consistent rise in residential real estate prices. This industry is very volatile & dependent on market fluctuations. In last few years, this industry has also evolved & modernized. Gone are the days of those lavish offices. Broker offices have been cut down in size thus making this business a profitable model.
   
7. Other health practitioners- This industry includes orthopedics, pharmacist, psychiatrists’ opticians & many more such general health practitioners. Nurse practitioners are one such important that is expected to grow tremendously. As per The American Association of Medical colleges, US will face a shortage of 90000 physicians by 2020. This is considered a boon for this industry.
   
8. Management of Companies & enterprises- Another professionally manages companies or enterprises holed the tenth place in Sageworks’ industry ranking.

Whenever an industry starts to prosper, outsiders try to make their way to tap it in one or the other manner & benefit from its growth. At the same time, every growing business industry would need people both for backward & forward integration; backward integration is to accumulate the raw material, suppliers & forward integration like distributors, packaging, etc.

Question is how to identify the growing industry? Sageworks has done an analysis on this subject & evaluated various private companies. These have been evaluated based on the dramatically higher growth rate in last 12 months.

In words of Sageworks analyst Mike Lubansky, ‘In this analysis it has been found that a few industries like computer system design are consistent performers whereas industries such as real-estate are more cyclical’. Since 2010, industries linked to computer systems design like programming, system integration etc., have shown a growth of 2 digit percentile.

Another industry identified as the fastest growing by Sageworks is the employment services industry. A higher number of employers are hiring temporary or contract based employees to hedge against slow down. This category also includes executive placement firms.

Third in the list are the real estate brokers & agents. Although, this industry is quite volatile & is easily affected by economic conditions, it still proves to be a profitable business industry.

Overall this insight into the most profitable business industries is valuable information for any Entrepreneur who is wishing to start up a business. Having knowledge in what industry is on the rise or what industry will provide the most profit can aid in the decision of what type of business you wish to start up.

Good Luck!