Which business sector is the most profitable? Learn about the most profitable business sectors in the world.
Which Business Sector is the Most Profitable: Running your own business can be difficult, but it also presents opportunities that you wouldn’t have had otherwise, such as providing jobs to other people and increasing the demand for your services or products.
Which Business Sector is the Most Profitable?
If you’re thinking about starting your own business, it can be helpful to know which business sectors are the most profitable, which will allow you to make an informed decision about where you want to invest your time and money in creating something new. Here are the top 10 most profitable business sectors by revenue
1) Arts, Entertainment, and Recreation
$554 billion. The arts, entertainment, and recreation sector include $4 billion in cinema box office sales and $12 billion for licensing deals with theme parks. The film industry is known for high-budget productions which can cost as much as hundreds of millions of dollars to produce, so it’s no surprise that a good number of successful films earn back more than they initially cost to make.
Just looking at 2015’s biggest box office hits we see six movies (Kingsman: The Secret Service, Spectre, Jurassic World, Avengers: Age of Ultron, Minions, and Inside Out) which grossed more than $100 million each in U.S. theaters alone—and those are just from domestic ticket sales; these numbers don’t even include international ticket sales!
2) Accommodation and Food Services
The accommodation and food services sector encompasses hotels, restaurants, and other providers of food services. Workers in these industries earn a median annual salary of $26,600. The industry has seen strong job growth in recent years. Employment for workers in accommodation and food services grew by 6 percent from 2014 to 2015—over three times as fast as total U.S. employment growth during that time period (1.8 percent).
The fastest-growing occupations within this sector include bartenders; waiters and waitresses; home health aides; cooks; and dishwashers. The Bureau of Labor Statistics predicts that employment opportunities will grow at an average rate over 10 years, with jobs available particularly in large cities.
3) Construction
The construction industry in America employs more than 7 million people and contractors, electricians, plumbers, and other building professionals typically make between $40,000 and $90,000 a year. With little competition for projects in many places, contractors can charge higher rates for services.
The industry is also highly dependent on government-funded infrastructure spending at all levels of government—meaning that without tax increases or debt relief from federal and state governments, employment will continue to decline. States like California might lead you to believe that construction in a recession is profitable due to tax rebates on new homes but it’s important to remember that these rebates are often temporary.
4) Manufacturing
Every business will require raw materials at some point, and manufacturing businesses are where those raw materials come from. These businesses may specialize in processing a single type of material or a range of different ones. Manufacturing businesses can be quite profitable and have long-term growth potential.
The value of their products will likely remain stable or even rise in future years. However, there are some major risks involved with starting a manufacturing business. If you’re planning to start one, it’s important to know how much capital you’ll need to invest and how much time it will take for your venture to become profitable.
5) Information
You can make a lot of money on Wall Street. Investment bankers made an average of $362,950 in 2012. That’s pretty nice. But they aren’t nearly as rich as hedge fund managers who took home $1 billion (on average). Hedge fund owners had a rough 2013, but there’s still plenty of cash to be made. As these numbers suggest, investing and money management is one of America’s most lucrative professions.
If you want to get into it, you’ll need some education—but it will be worth it. The best investment-related degrees are MBAs and Master of Finance programs from top business schools like Harvard or Stanford. MBAs are more generalist than finance degrees, so if you think you might want to go into consulting or work for a non-financial firm later on, then maybe consider getting your MBA first.
If not, then perhaps consider a Master of Finance program that focuses specifically on investment management. Whichever path you choose, expect to pay anywhere from $50k-$100k per year for your degree—but also keep in mind that many people with finance degrees earn even more than that once they enter their field! Best of luck!
6) Retail Trade
The retail trade industry includes companies that sell goods through bricks-and-mortar stores, such as retailers, department stores, and wholesalers. This sector includes a number of subsectors, including furniture & home furnishings; food & beverage; general merchandise; clothing & accessories; and electronics & appliances. This sector accounts for more than one in every five dollars spent in the U.S., with consumer spending totaling nearly $5 trillion annually.
In 2014 alone, retail sales rose 3 percent to about $4.4 trillion—the largest annual increase since 2007. As consumers continue to spend money on big-ticket items like cars and homes, retailers will benefit from rising demand. According to IBISWorld estimates, revenue is expected to grow by an average of 2.8 percent per year over the next five years, reaching $5.1 trillion by 2019.
7) Transportation and Warehousing
Having grown 7.1% in 2012, transportation and warehousing rank as America’s most profitable sector, with an average margin of 10.5%. There are few industries that benefit from economies of scale as much as freight transport. Companies that move products across state lines or around oceans tend to enjoy high margins because they can leverage their volume by negotiating discounted rates with railroads and trucking companies, using a scale to get bulk pricing on fuel and other operating costs.
For example, Amazon has a new program called Fulfillment by Amazon (FBA) which allows merchants to ship goods directly to Amazon fulfillment centers. This service gives sellers access to Amazon’s vast customer base while relieving them of storage and shipping costs. This enables small businesses to focus on selling more goods rather than managing storage and shipping operations.
In addition, Amazon provides these merchants with competitive prices for these services through its marketplace. This means that for many small businesses, being able to reach millions of customers through Amazon’s platform will help them be more profitable than if they tried to reach those same customers without help from Amazon’s large-scale logistics network.
8) Finance and Insurance
The profit margin for finance and insurance is 23.5%, which means that for every $100 in sales, an average company in a given sector makes $23.50 after accounting for all expenses. Finance and insurance businesses typically focus on offering credit to consumers and businesses so they can purchase products or services. For example, a bank may offer loans to help people buy homes, pay for education, or finance other types of large purchases that they couldn’t otherwise afford.
The fees companies charge are calculated as a percentage of what customers borrow (the interest rate) or pay on their current account balance; i.e., how much they deposit or spend with them per month. This is why many financial institutions have high-profit margins: They’re making money from both ends—from lending money and from collecting interest on it. Insurance companies also make money by selling policies to protect against financial loss due to accidents, illness, or theft.
As another example, property-casualty insurers often sell policies that cover damage caused by storms, fires, and floods. Property-casualty insurers also collect premiums based on a customer’s risk profile—for instance, how likely they are to experience losses due to fire or theft.
And then pay out claims when those risks materialize into actual losses (i.e. if your house burns down). Because these companies don’t need to worry about financing costs like banks do, they tend to have higher profit margins than banks do.
9) Real Estate and Rental & Leasing
These industries have a number of benefits. For one, you can set your own schedule and work from anywhere in America, as long as you have an internet connection. Of course, there are some drawbacks to both sectors; for example, rental & leasing businesses don’t produce any physical product (and therefore can be challenging for people who thrive on that).
Likewise, real estate tends to be very competitive and saturated with plenty of local competition. But overall: these two business sectors make a lot of sense if you’re looking to make money outside of a traditional career. And they’re also relatively easy to get into—you could start by renting out a spare room or investing in commercial property. There are many different ways to enter each sector, but it’s important to do your research before jumping into either industry.
10) Professional, Scientific, & Technical Services
The U.S. Census Bureau defines professional, scientific, and technical services as business activities that involve applying specialized knowledge in such fields as accounting, engineering, health care, law, management consulting, and architecture to solve a problem or improve an existing situation. Professional services firms in law, for example, typically represent clients in legal matters by conducting investigations.
Or engaging in discovery efforts before presenting their findings to judges and juries during court hearings. In addition to providing services on behalf of individuals and businesses that need assistance with a given matter or case, professional service firms also may serve larger institutions—such as government agencies or corporations—by offering them training courses on how best to achieve their goals while abiding by regulatory guidelines. The U.S.
Also Read: What is the Fastest Growing Business?
Conclusion
In short, every sector has its ups and downs. The best thing to do is pick a business model that you’re interested in, and learn everything you can about it. Some industries seem more attractive than others but it’s important to remember that with hard work and dedication.
Any of them can be made profitable. Before you make your final decision on which one to go with though, make sure you keep these factors in mind.
