Connect with us

Business Ideas

15 Least Profitable Small Businesses in the U.S.

Published

on

Whether you’re looking to turn your passion into a profession or you were simply born with that innate, unshakeable spirit of an entrepreneur, there’s one thing that all aspiring business owners have in common. To make your big dream a long-term, sustainable reality, you have to figure out how to earn more revenue than you spend on business expenses.

Unfortunately, with market trends, consumer preferences, and other variables, there are always going to be certain industries and business ideas, that at one time or another, are less likely to become profitable. Therefore, before you invest all your time, energy, and savings into starting a business, we recommend checking out this list of 15 least profitable small businesses, so that you can put yourself on the track to success from the get-go.

Least profitable small business industries

Deciding on the perfect idea for your new business can be a detailed and lengthy process. This being said, the last thing you want to do is choose a business idea, invest in planning, and start financing—only to come to realize that it’s going to take a huge investment to make your business profitable. Unfortunately, there are certain industries and business types that are simply less likely to be profitable than others—and usually, these are the business ideas that require high overhead costs to get started or already have saturated markets that are difficult to get into.

Conversely, some of the most profitable businesses are going to be the ones within industries that you can launch with little to no overhead (especially if you’re a first-time business owner) and fulfill a current market need or trend. So, with this kind mind, let’s break down 15 of the least profitable small businesses so that you have an idea of industries you should probably avoid as you search for the best business idea for you.

1. Oil and gas extraction

The first two items within our list of the least profitable small businesses are part of the manufacturing industry. Unfortunately, considering the overhead costs and moving parts associated with manufacturing, this is not going to be a very profitable industry for most entrepreneurs.

This being said, despite the almost urban legend around “striking oil” you might be surprised to learn that oil and gas extraction is regularly cited as one of the least profitable industries for small business owners—if not the least, period. This stems mainly from the variability that comes with investing in this kind of business, with a market that can go from plentiful to desolate in a day’s time. Plus, lowering prices for crude oil and gas since 2014 doesn’t help in this field’s profitability.

2. Medical equipment and supplies manufacturing

If you’ve ever read the fine print on your hospital bill after a surgery, illness, or injury, you’ve probably noticed the sky-high prices. With the high costs of everything from crutches to braces, you may quickly find yourself thinking that manufacturing medical equipment and supplies would be one of the best small business ideas.

Unfortunately, this is not the case. In reality, the majority of that profit goes straight to the hospitals and insurance companies—not the wholesalers, who are left with an average pretax profit of less than 5% (according to a 2016 report by Sageworks, now Abrigo). With such a low profit, plus all of the potential processes and equipment required to get started, you can easily why a medical equipment and supplies business makes our list of the least profitable small businesses.

3. Home healthcare services

Next, although there are plenty of service-based business ideas that can be very profitable, there are also those that fall on the other end of the spectrum.

For example, although there’s a huge need for home care for the elderly, there are also many barriers that prevent home healthcare services from becoming profitable businesses. The main issues that these businesses face are the hard-line price limitations negotiated through Medicare and major insurance companies.

At the same time, the emotional toll and relatively low pay associated with providing this kind of care results in high turnover and a shortage of workers in the home healthcare industry, which could make managing your home healthcare business a stressful and profitless endeavor.

4. Real estate services

Requiring a relatively low barrier to entry in terms of both capital and required training, businesses involved with providing real estate services—including not only real estate agents but also appraisers, title companies, loan brokers, and more—might appear to be a lucrative and worthwhile opportunity for aspiring small business owners.

However, you’ll also want to keep in mind these serious downsides before launching a business in real estate services. First, competition within the industry is fierce, with a small number of top realtors in each market controlling the vast majority of who does business with whom. Additionally, since revenue is almost exclusively commission-based—with particularly small percentages going to loan brokers, appraisers, and similar professionals—it can be difficult to build up the number of clients required to keep your business afloat.

To pursue a business offering real estate services such as property management, appraisals, inspections, title, or loan management, you must build key relationships from the start with successful and well-connected real estate agents, as these are the individuals most commonly making referrals between your business and your target customers.

Therefore, considering the time, effort, and honestly, luck, that can be involved with this industry, getting started in real estate services is going to be one of the least profitable small businesses.

5. Amusement and recreation services

If you’ve always been naturally gifted at rolling out the welcome mat to show out of town visitors or house guests a good time, it’s natural to think that opening a business in the hospitality industry would be right for you. Unfortunately, when it comes to travel, leisure, and caring for others, there are some business ideas that fall into the category of “least profitable businesses to start.”

First, although many people see recreational services as an easy way to make money—a place where people can spend their extra money on services that improve their quality of life and free time—it’s actually more difficult than you would think to make these service-based businesses profitable.

Ultimately, the fixed costs of operation, stiff competition, and the high impact of economic ups and downs, make amusement and recreation services one of the least profitable industries. Although you may find success in a small community that’s lacking these services, for the time being, it’s important to remember that if your customers face a shortage of cash, your services may be the first thing they cut to save money.

6. Traveling accommodations

For anyone with big dreams of moving or retiring to an exciting or scenic destination, the idea of opening a picture-perfect inn, bed and breakfast, or small hotel might sound like an ideal small business venture.

In reality, though, travel accommodations businesses rarely match up with the carefree, cozy vibe that owners picture at the start. In fact, they are one of the least profitable small businesses. Hotel professionals are faced with high fixed costs along with stiff competition from low-priced chain hotels and sites like Airbnb, forcing many to sacrifice profits with bare-minimum pricing to maintain occupancy rates.

These factors and more leave independent inns and hotels with average pretax profits at a hollow 0.26%. Therefore, if you’re interested in this type of service business, you might instead consider becoming an Airbnb host.

7. Retirement and assisted living facilities

As the baby boomer generation moves into older age, demand for retirement, assisted living, and hospice facilities to care for and support this large aging population continues to rise.

Unfortunately, although gearing a business toward the care of our older citizens might be a noble choice, as we mentioned above with regard to home healthcare, this is one of the least profitable industries for small business owners. High overhead, a shortage of nurses, real estate costs and pricing controls put in place by Medicare and Medicaid leave most healthcare elderly facility businesses with a net profit margin of just 3.3%.

Therefore, you decide to start a small business in this industry, consider whether the business venture you’re planning for will be profitable enough to support your livelihood.

8. Furniture stores

When you imagine small business ownership, there’s almost nothing as truly quintessential as the classic Main Street business storefront. Yet sadly, no other industry has been harder hit by the rise of the global online economy than independent, brick-and-mortar retail businesses.

In particular, you might find that despite the popularity of HGTV and interior decorating, opening a furniture store is actually one of the least profitable small businesses. Why is this such a hard retail business to get started and make successful?

Furniture stores typically have incredibly high overhead, which pairs poorly with a notoriously low markup rate from wholesale to retail. Combine this with shipping costs, production delays, and the growing influence of online retailers like Wayfair, and you’ll quickly understand how the average furniture retailer winds up with pre-tax profits of only 3.3%.

9. Car dealers

With the reliance many people around the country have on their cars, you would think getting into the car-selling business would mean easily accessible profit. However, like many of the business ideas on our list, selling cars involves much more than the sale process.

As a car dealer, you’ll need to source and transport cars—whether new or used—maintain them, store them, market them, and have representatives to sell them and work with customers. Considering all of these different components, starting a car-selling business, let alone a dealership, is going to require a significant amount of startup costs that most new entrepreneurs don’t have access to.

Plus, with the push for green transportation, especially in major cities and surrounding areas, it’s not surprising that car dealers have a low net profit margin of 3.2%

10. Lawn service and garden supplies stores

Although lawns and gardens are always going to be something that homeowners need to maintain, millennials are changing the home buying industry, which certainly could be a contributing factor to why these stores are on our list of the least profitable small businesses.

Millennials are renting longer and buying later, thereby eliminating the need for a “starter home,” which would require the most maintenance and therefore, drive the most business to these types of stores. Plus, not only is there not a high demand for this kind of retail shop, but as we’ve discussed with many of these ideas, overhead costs are high and maintaining the store means dealing with moving parts between employees, wholesale distributors, customers, and more.

11. Specialty retailers

For every passion and personality under the sun, there’s potential for a different type of specialty retail store—fashion boutiques, paper goods shops, hobby shops, and more.

Sadly, though, there’s a reason you’ve seen so many of your town’s Main Street retailers come and go over the years. High overhead costs along with impossible-to-beat pricing competition against big box stores and online retailers make local specialty retail shops one of the least profitable small businesses.

Have a handmade product you want to sell? Or are you still eager to curate your own collection of wholesale distributed goods? Opt for an ecommerce business model instead. It might not be the same as flipping the open sign on your own brick-and-mortar storefront, but when it comes to profitability, you’ll be much better off.

12. Grocery stores

Who doesn’t love a good meal? Joining friends around the table to enjoy a meal is a favorite pastime for many of us. This being said, however, when it comes to the food and beverage industry, you’ll find that some of the least profitable small business ideas fall under this umbrella.

For example, if you’d love to be the local grocer in your small town, it’s going to be very difficult to turn a profit with this small town business idea. Like many other specialized companies within the retail industry, there are low entry barriers, which leads to more and more competition, which leads to an average pretax profit of only 2.5%.

Plus, because grocery stores operate with perishable items that have to be carefully handled, maintaining profitability for an independent grocer can be especially tough.

13. Bakeries

If you have a passion for making bread, cakes, pastries, and all sorts of treats, opening your own bakery probably sounds like a dream small business.

Unfortunately, high overhead costs and food regulations along with tough competition from retail food stores and larger scale franchise operations make it close to impossible to sustain a freestanding independent bakery.

Therefore, instead of opting for a brick and mortar bakery, consider a food truck setup or focusing on bespoke baked goods for weddings and other special occasions. Either of these options will let you minimize overhead while meeting your customers where they are.

14. Beverage manufacturing

At first glance, knowing the high demand for palatable beverages, you might be tempted to start your own distillery, winery, or soft-drink manufacturing business—but unfortunately, even these ideas make our list of the least profitable small businesses.

With a high demand for beverages then, why is this industry so unprofitable? As you’ll see just based on the different types of “cola” available in the grocery store, there is no shortage of competitors in the beverage manufacturing industry, and smaller companies struggle to compete with the larger companies that can supply these drinks quickly and easily. This leaves the average pretax profit for small businesses in the beverage manufacturing industry at a very low 0.8%.

15. Beer, wine and liquor stores

In the United States, we have vastly different laws from state to state as it relates to liquor licenses, alcohol consumption, and distribution. And, while the demand may be tempting for a person who wants to start a profitable business, the regulations placed on alcohol retailers can put a lot of pressure on your small business. Plus, competing against other companies can be hard, since some have near-monopolies in their field. All of this leads to a less than desirable average pretax profit of just 3.4%.

Therefore, if you’re tempted to jump into this industry with your liquor store, your best choice is to find a specific, niche product type to specialize in and bring customers with those tastes directly to you.

This article originally appeared on JustBusiness, a subsidiary of NerdWallet.

Advertisement

This post was originally published on this site

Continue Reading

Business Ideas

How to Kick-Start Your Online Clothing Resale Gig

Published

on

With the recent rise of resale apps like Depop and Poshmark, the idea of selling old clothes online is becoming more fashionable. Many people have turned clothing resale into a lucrative side gig or even a full-time job, gaining thousands of followers and making dozens of sales per week.

The secondhand-clothing market is projected to more than triple by 2030, according to a 2021 study by reselling platform Mercari and research firm GlobalData, as more fashion enthusiasts clean out their closets and search thrift stores to find valuable pieces to resell.

But whether you have a collection of band T-shirts or office attire, finding success on these platforms takes time and effort. Before diving into your closet, there are a few things to know.

You set your prices

Unlike consignment and resale shops, you can price items yourself on an online platform. Before listing a piece of clothing, look it up on multiple platforms to find out what it’s currently selling for. Depending on age, condition and brand, prices can vary widely.

You can also take advantage of direct messaging to negotiate with buyers and use features on apps like Depop and Poshmark that let you accept offers and create multi-item discounts.

“Sales can be sporadic,” says Andres Castillo of Los Angeles, who sells rare designer pieces through Depop, eBay and Instagram under the name Debonair Vintage. With rare or high-value items, it may take a while to find the right buyer, especially if you’re looking to break even or make a profit.

There’s a big time commitment

“I treat [reselling clothes] like my job,” says Eve Perez, a full-time student in Lebanon, Pennsylvania, who sells under the name Fitsfinesse and was featured in Teen Vogue in 2021 for her Depop success. She responds to messages daily, on top of taking product photos, sewing custom pieces, and packaging and shipping orders.

Communicating clearly with first-time buyers is essential: “If you don’t build that relationship, then you won’t get sales and returning customers,” she adds.

Although you have control over the prices, reselling online takes much more time and energy than selling to consignment stores. According to Depop, sellers who list consistently — around 15 items per week — sell more over time.

“It takes a lot of time and dedication,” says Castillo. Top-notch sellers have to learn to take eye-catching photos, understand shipping rates, negotiate over text, and research brands and trends to make the most of their inventory.

Overhead costs add up

Yes, you can set your prices — but there are a few overhead costs to factor in. Online resale platforms charge commission fees, plus additional fees for shipping through the platform or accepting payments through a processor like PayPal. Depop takes 10% of every sale and eBay takes 15%; Poshmark takes $2.95 for items under $15 and 20% for items over $15. PayPal, which integrates with Depop, Poshmark and eBay, charges another 3.49% plus 49 cents per transaction for payment processing.

On top of that, you’ll need to pay for packaging, label printing and possibly storing inventory including bins, hangers and shelves. Top sellers also recommend adding a personal touch in shipments, like free stickers, small accessories or a thank-you note. When all those costs add up, you may find that only higher-value items are worth listing.

You can cut costs by reusing shipping mailers and boxes, and printing labels at your local FedEx or UPS store instead of purchasing a label printer. Or, reduce shipping costs for buyers by bundling several items into a single shipment, which can motivate buyers to purchase more from your shop.

The social aspect is a priority

The most successful online resellers have one thing in common: a strong personal brand. Finding your niche and building a loyal following is essential to long-term success on a resale platform.

“It’s like Instagram, but for selling,” says Perez, who focuses on curating a consistent aesthetic and marketing her shop on social media platforms like TikTok.

Castillo grew his business by catering to a very specific market: vintage designer collectors, specifically for Moschino and Chanel. He sells across several platforms, using his Instagram to rent pieces out to stylists for photo shoots and red-carpet events. Though he targets a fairly small community, his narrow focus helps him reach his ideal buyers.

Other top sellers on resale platforms can be seen taking a similar approach, with shop themes ranging from band T-shirts to vintage gowns. “Lean into your personal taste,” says Castillo. Even if you don’t have a curated collection to sell, personalized packaging or a unique photo background can help your items stand out.

Both Perez and Castillo emphasize the importance of cross-linking social media platforms to reach as many potential customers as possible. Creating a dedicated Instagram Business account and following other online sellers and designers can help drive buyers to your shop. Check popular pages for trendy hashtags and add those to your posts. Making the time to promote on social media can help transform your closet into some serious income.

Advertisement

This post was originally published on this site

Continue Reading

Business Ideas

Turning Your Hobby into a Business? Here is What You Need to Know

Published

on

Do you dream of one day quitting your job and following your passion in life? You can do it! Many successful entrepreneurs turned their hobbies into profitable businesses.

Do you have a hobby? Doing the things you love keeps you engaged with life, gives your mind a focus, and helps you enhance your concentration. Investing time in your hobby also provides you with a great way to relax, unwind, and relieve daily stress.

photo credit: Giulia Bertelli / Unsplash

You shouldn’t be ashamed of your hobby even if your friends and family don’t share it. Only because they find interest in something else doesn’t mean that no one in the world shares the same interests that you do. In fact, millions of people engage in the same hobby as you do daily.

So if you thought that no one shared your enthusiasm for this activity until now, think again. Whatever activity you can imagine, millions of other people on the planet are doing it as you read this article.

If you’re one of the individuals who wonder how they can transform their hobby into a successful venture, this article provides information on how to start a business based on the things you love.

Do a Self-assessment

Do you know what it takes to turn your hobby into a lucrative business? Do you have the required stamina and energy to take the necessary steps and transform it into a venture? Yes, it would be nice to spend your days doing what you love and making money, but make sure you don’t ruin your hobby by transforming it into a business. You started pursuing it to blow off some steam, but you could take its charm away if you add a lot of pressure on it to deliver money.

Research to understand what starting a business in this sector implies and make sure there’s a paying public before you bet the farm on it. Running a successful company requires plenty of work and responsibility, two things that could take the fun out of your hobby.

Plant hobby as a business

Test The Idea

If you decide that you have what it takes to turn your passion into a business, the next step is to test the concept by starting a side hustle. When the profits reach a level that allows you to cover monthly bills and support yourself, you can quit your job and pursue this venture.

However, don’t leave your present job if your side gig doesn’t make enough cash flow to last you at least two years. Be ready for the shock you’ll get when you turn from getting a monthly salary to having to pay taxes yourself. To make sure that you won’t worry about housing, food, or monthly bills, save up at least two years of living expenses.

Research

Before investing time, money, and effort into starting a business, take a look at the market and see what your future competitors are doing. Research the niche online, on social media and among the public to see what customers expect from you and what other companies provide.

You can research the market on your own or hire a professional company to do it for you. It’s recommended to work with specialists because they know the aspects that require extra attention and can help you determine if starting a business in this niche is worth it.

Make a list of your biggest 10 competitors and analyse their activity to figure out what they do to position themselves as leaders in the industry. Check their website, evaluate its functionality, and have a look at their Google ranking. Remember that people start searching for a product or service online in the present digital world, and it’s crucial to rank high in search engines to reach your ideal customer.

After doing research, you’ll have a clear idea of what you’re dealing with in terms of competition.

Reading small business plan

Write a Business Plan

The business plan serves as a blueprint for your company, and you’ll definitely need it if you want to apply for a loan. However, don’t skip creating a business plan because it’s quite useful in starting your venture, even if you don’t seek funding. Research shows that the business people who make a detailed business plan are 16% more likely to develop a profitable business.

Here are some elements your business plan should include:

  • Financial plan
  • Executive summary
  • Business overview
  • Management team
  • List of services and products
  • Marketing and sales plans
  • Marketing strategies
  • Metrics and milestones

If you want to transform your hobby into a profitable business, you need to take it seriously and write a complete business plan.

Build a Brand

Branding is essential when trying to build an easy-to-recognise business. It would help if you had a unique business name and logo that match your company’s personality and values. Pick brand colours that resonate best with your target audience, and craft a message they resonate with.

You can use free online tools to create a logo and elements for your business cards and advertising materials. Canva is such a solution that provides access to a huge library of elements.

Digital aisles

Establish a Strong Web Presence

In the digital era, all businesses need an online presence to attract attention and reach their target audience, no matter their size or specific. You should create a website that allows you to present the benefits your clients get if they purchase your products and even create a shop page that allows them to buy online. However, establishing a solid web presence extends beyond creating a website. It also implies creating and maintaining the page, connecting it to social media profiles, and posting regularly on the blog.

Your purpose is to brand your company as an authority in the industry that also provides valuable pieces of advice beyond selling products.

Try to be consistent in how you present yourself to your public because you need to establish an image. Your web presence and brand are the main elements that impact your company’s identity and help loyal clients differentiate your products from your competitors.

This post was originally published on this site

Continue Reading

Business Ideas

Q&A With Dr Ryan Shelton on Starting Up a Natural Healthcare Business

Published

on

”Dr Ryan Shelton is the Medical Research Director For Zenith Labs. He believes that there is a way to help sick people with natural treatments complimenting the conventional pharmaceutical approach. He has created a regimen of natural treatments consisting of holistic and complementary medicine, and it’s all backed up by science-based research.

Dr Ryan Shelton had dreams about being a doctor from a young age. His love for helping people inspired him to study the human body and how its internal and external environments change it for the better or for the worse.

Dr Shelton’s path to becoming a doctor was anything but typical. His undergraduate education focused on biochemistry and genetics. After attending medical school for one year he withdrew to “think in slow motion” and received another degree in Philosophy. He left because he disagreed with the way doctors were being taught to practice medicine. Dr Shelton believed that the better way to treat his patients was to heal their whole bodies rather than just treating the symptoms.

After receiving his Philosophy degree, Dr Shelton understood how important it would be to be able to treat or prevent chronic diseases holistically. He returned to medical school, where he earned his Naturopathy Doctorate. Now, Dr Ryan Shelton gets to follow his passion by helping his patients achieve their best overall health through natural remedies.

With chronic disease being on the rise, Naturopaths like Dr Shelton want to do their best to try and stop it from spreading by treating patients holistically. He does this by turning their food into medicine first and using natural remedies to increase their overall health. His goal is to balance his patient’s systems, and he passionately believes that his ultimate goal is to help his patients achieve optimal health.

Dr. Ryan Shelton’s work with Zenith Labs has helped him attract patients interested in pursuing wellness rather than focusing solely on disease care. His successful medical practice complements this passion, as does the company he founded. Whether you’re looking to improve your overall wellness or just want an alternative to the traditional pharmacological regimen, Dr Ryan Shelton has a plan for how to help you.

Hello Dr. Shelton, can you briefly tell us who you are and what you do?

Currently, I’m the medical research director for Zenith Labs and a Naturopathic Doctor with a successful private practice. I am also the Wellness Director and on the admissions team for a behavioral therapeutic program.

For the last few years, I’ve been running an online supplement business where people outside of where I am can get the same kind of advice that I give to my in-person patients from anywhere in the world. I do my best to promote a concept of total wellness and natural health solutions.

I have developed several natural health regimens over the years based on my research. I’m working hard to teach people that everything else will follow if they improve their overall health.

Please describe your company in a few words

Yes, it is a company, but really what we’re trying to promote here is a culture. Sure, we could go online and sell supplements till the cows come home. Lots of people do that. This naturalistic approach has been my life’s work ever since I was in medical school. I initially left medical school because I felt that the traditional way medicine was practiced was to treat the symptoms rather than treat the whole person.

I’m working hard to use my company as a vehicle to teach my customers and patients that they can improve their total body health, which makes healing other symptoms easier.

What is your company’s biggest achievement in recent years?

The surge in online business, I would say, has been our best achievement in recent years. When we first moved into this space, I felt like the company wasn’t getting the attention it deserved. We did traditional promotions and bought advertising, but nothing was really getting us over that plateau.

Just when I thought I might have to just let it go, word of mouth started spreading, and it spread like crazy. Satisfied patients were telling other people about what they’d experienced by using these treatments, and those people turned out in droves to get these benefits for themselves.

In what direction do you see natural healthcare going?

The coolest thing I think I have seen recently is that natural medicine is becoming more and more mainstream all the time. For a long time, people who preferred natural remedies were seen as “uninformed” or “Weird.”

Nowadays, people are flocking to find out what natural remedies they can incorporate into their own life. We’ve all seen so many odd things come from big pharma over the past ten years, so is it any wonder people are looking for a way that they can take charge of their own health. It will become much more focused on environmental medicine, lifestyle medicine, and anti-aging medicine.

We will begin using natural treatments not in response to crises, but rather to promote a level of optimal health not yet seen in the general population.

Natural medicine
photo credit: PhotoMIX Company / Pexels

Which recent developments in your industry do you find exciting?

The way in which people seem to be flocking to natural medicine. It’s no longer on the fringes of people’s thoughts. I see people take a more open-minded approach to learn about things that natural healers from around the world have known for centuries.

The general attitude that people have, that they want to discover things for themselves rather than just taking the proscribed wisdom as gospel, is really exciting. I feel like I’m getting closer and closer to being able to reach more people than ever before.

Again, environmental medicine and anti-aging, natural agents specifically targeting your unique specific genes and DNA to promote optimal health. The days of degeneration and disease are hopefully going away soon.

What keeps you motivated?

My vision. It’s been front and center in my mind since I was a child. I watched so many of my older relatives that suffered from chronic conditions just wither away with the traditional medical approaches. I knew there had to be a better way, and I feel like I’ve found it.

What keeps me motivated is the drive to bring what I’ve found to as many people as possible, so maybe they won’t have to watch their loved ones suffer as I did.

What advice would you give someone starting out in the health field?

Hang in there. It’s the best advice I could give anyone. Medical school is tough, and it should be. Then you’ll have your residency and boards, which are brutal. Becoming a doctor is a privilege that we, as a society, only bestow on those who have proven themselves to be the best at what they do.

If being a medical professional is your dream, then hang in there, and fight for it tooth and nail until you’ve achieved your dream.

Thanks for your time, Dr Shelton!

This post was originally published on this site

Continue Reading

Trending

SmallBiz Newsletter

Join our newsletter for the latest information, news and products that are vital to running a successful SmallBiz.