September 2, 2014

What are the Most Profitable Small Businesses in a Recession?

So what are the most profitable small businesses during a recession?

According to research firm Sageworks, it’s dentists, accountants, lawyers, doctors, and some other service businesses.  And of course, dentists, accountants, lawyers, doctors, etc. tend to be small businesses.

Their profit margins range from 11.5% to nearly 17% net profit.

Here’s the chart showing the top ten and their respective profit margins, along with the government industry code:

most profitable small businesses during 2008 recession

This data is of privately held businesses that report data through their accounting firms, using a data analysis tool provided by Sageworks.

If you recall, about a month ago I reported data from Sageworks about the retail industries that were suffering.

It’s good to see that certain service businesses continued to do well.  But why did they do well, while retail and others industries have not?  Part of it is that they provide necessary services.  Even during a downturn, you still go to the doctor or the dentist.  Businesses still need accountants and lawyers.

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Anita Campbell - CEO


Anita Campbell Anita Campbell is the Founder and Publisher of Small Business Trends and has been following trends in small businesses since 2003. She is the owner of BizSugar, a social media site for small businesses, and also serves as CEO of TweakYourBiz.com.

40 Reactions

  1. How many mobile and virtual workers are dabbling in or making the switch to virtual software apps (presentations, document collaboration and others)?

  2. Those are definitely not a surprise to me. No matter how bad things get, we can’t do without our doctors or accountants. I am a little surprised though that dentists came first.

  3. Amanda, good point about dentists. It shows that dental problems are among the most ‘unbearable.’ :)

    Just as the ‘essentials’ continue to get business, the other side of the story (stuff that you need only in good times) take the brunt of the slow down. Luxuries and Recruiting firms are examples.

    Chaitanya
    http://www.p2w2.com/blog

  4. Thanks for this post Anita – I always like to know what’s doing well and why. This also makes me think that other businesses should be asking themselves in what ways then need to re-structure their offering to meet the requirements of the environment we are in. For example – restaurants may want to re-structure menu’s, specials and prices – because people still WANT to eat out and do – but choose differently. This is a great opportunity to launch offerings that better meet your customers’ new requirements and behaviors.

  5. Overall, I’m not surprised by the findings but I am somewhat surprised to see that Physicians are not amongst the top 3. As stated, everyone needs health services regardless of the economy. But according to these findings, I guess they need accounting and legal services even more :-)

  6. Hi Anita
    It is too bad the learning curve is so high for many of these businesses… ;-)

    At the risk of offending some of my dear friends who are physicians, I will say that I believe the answer to why dentists top the list is because they are somehow better marketers and better at customer service. I’m not trying to be funny here, but I have noticed a big, big difference between my dentist’s office and offering and my physician’s.

    Physicians have yet to realize, as a broad generality, and I’ve seen some data to back this up, that they are in the customer care business (okay, substitute patient, if you must). There are studies that show legal action goes down simply when a physician is caring and listens and doesn’t just treat the symptom, but the person. This extends to how they run their offices and how their staff treat “customers”.

  7. These are businesses that would do relatively well throughout all cycles. Wonder what data would show in good years? Do you access to reports few years back Anita?

  8. I have read time and time again that freelancing is a great opportunity during the recession. I tend to agree because this is my background. How does everybody else feel?

  9. Interesting data…I would venture to guess thatthe majority of legal services include personal injury and employment-related claims.

  10. The best business to start in a recession is a network marketing business by far. In many cases the start capital is small relative to most franchises. Do your research and find a company that is credible, honest and have integrity.

  11. that is very true. When economic times are bad, people get very scared and fear often causes health related issues. Alcohol sales also supposedly are booming in a bad economy so what about bartenders?

  12. Norbert,

    I agree that the networking marketing business is growing during bad times. As you said about dentists, you still need to stay fresh, clean and eat nutritional supplements. I am involved as an independent consultant for a company that is doing research, development, and producing products within the health & beauty sector. This company is based in Germany and was founded in the 80′s. They have increased their revenue and profit every year.

    I definitively think that home based business and direct selling will become more popular as time goes by. People are looking out for new opportunities during difficult times and see that you could get a small extra income after some time and later on you could have the possibility to receive a steady residual income in the long run.

    You are right that you should “do your research and find a company that is credible, honest and have integrity.”

  13. Looks like it’s dentist, accounting & lawyer cartoons for me!

  14. Exactly Anita. That made these services still living and doing well despite of what’s happening in the economy because the services they provide are necessary. Unlike other industries for example, fashion industries, people or mostly women can still live without those in order to save money in this tight condition of the economy.

  15. Dentists, Accountants and Lawyers have much more control over their fees than Physicians. Although Dental Insurance is out there, its not nearly as powerful an influence over the industry and not nearly as many patients have insurance as do Health Insurance. The insurance business is holding back the business of being a Physician.

  16. Sure, the list is good but if you are not in any of those fields then the worst thing you can do is force yourself into it.

    You can start any business as along as their is passion and unique selling point.

  17. I think the best business in 2009 for someone to startup is a gold and diamond buying business. Why? You need no storefront, no inventory and can make 100% profit everytime you buy. The secret is how to get into the business.

  18. I am a bit tired of seeing people talk about how this and that business is good for you.

    Do yourself and everyone else a favor and go do what you are recommending. Stop planning, start doing something.

  19. I agree with Tom and this is exactly what I did. I am having a huge amount of success in my local market buying and selling gold and diamonds from the general public. I started as a hobby with $500 in order to buy used jewelry and I ended up making a business out of it to the tue of $100k a year. Any market is ripe and ready for the taking and it is an easy business to start.

  20. I have mistaken you Douglas, I thought you were just all talk.

    I am glad you are not just telling us but also doing it.
    I will be checking out your site.

  21. Hi TJ,

    “It is too bad the learning curve is so high for many of these businesses”

    So true. :)

    Most of these businesses would be difficult for anyone to just up and start. You need specialized training — in some cases many years of training.

    So this information is not necessarily helpful as a startup guide for an entrepreneur.

    Rather, it may be tremendously valuable to companies that sell to dentists, insurance agents and so on — to know that those industries are profitable. As Andertoons mentions, perhaps they become a favorable target market.

    More than anything, I am just trying to give an objective yet positive bit of news. It is hard to resist being dragged down by a constant barrage of negative news, before it becomes a self-fulfilling prophecy.

    – Anita

  22. Hi Anita,
    You are always spot on with getting us to look in the right place. Honestly, I had lost sight of these growing businesses as a source of potential revenue and opportunity, for myself or others, who might look at the data, the info is there for us to seize new markets. Thank you.

  23. Oh, and i do need to add a bit more on the dentists. Insurance or no insurance, it is a tough biz for a dentist. Does anyone ever say, “I sure do miss my dentist, i think i’ll go see him/her today…” No. So they have to be good at positioning their services and creating a pleasant, positive atmosphere. I guess my point was that the good ones work on maintaining your loyalty. Doctors, dentists, lawyers, retailers…

    Yes, you need a doctor or dentist, but it isn’t that hard to switch… So the successful ones need to read your blogs and stay sharp on the biz side, too.

  24. Anita,
    Thank you for another great Trends article!

    Please excuse me for the next 2 weeks, as I am trying to launch my newest venture:

    “Dentist In a Box”

    The Franchise King

  25. The margins in accounting/tax prep/bookkeeping, etc are likely to rise over the next few years as web services and data automation simplify the low-margin (i.e. manual) parts of their business.

  26. Not much of a surprise to me. Insurance would always make a big one. but I consider insurance companies mostly a scam. haha cheers,

  27. Fascinating findings. At last some good news!

  28. Very interesting findings.

    Another field that is growing exponentially is supplementary education services such as tutoring for children.

    High quality children tutoring is hard to find. Moreover, there is a need to serve not only affluent families but low-income communities as well.

    Tutoring can make a big difference in enabling children to learn “how to learn”, to gain self-confidence and the drive and motivation they need to achieve their academic objectives.

    That is a niche I hope to fill with my new venture.

    Thank you.

    Kind regards.

    Natalie Giron
    http://www.mrsgirontutoring.blogspot.com/

  29. Anyone questioning dentist surviving during a recession never had a bad toothache. The posters who commented on the insurance industry hit the nail on the head. So far my business is thriving. I hope it stays that way. I market well (internal and external). If you don’t have a good relationship with your dentist, it’s time for a new dentist. For those without a dentist -YUCK! Recession or not.

  30. The medical profession is invincible from the effects that recessions impose on the economy. Docs and dentists are always needed right?

  31. I’m surprised to hear that dentistry is the most profitable recession. I had heard conflicting reports to say that many people cutting out trips to the dentists now as they can’t afford it

  32. I agree with Survival Insight. Most people prefers going to public health services instead of private practice. It goes the same for physicians as for dentists.

  33. Figuring out data like this seems so complex and large a task, I’m not surprised the accountants were right up top on the margins (afterall, who would know the margins better than they!)

  34. This list seems questionable.

    Most businesses dont want to show a profit, because they have to pay taxes on profits.

    Since profit is based on what’s left after you pay yourself, maybe dentists have low self-esteem, and pay themselves the least. So they have a higher profit margin.

    You really need to know gross receipts. Anyone can overstate their overhead to lower their profit.

  35. It’s interesting and surprising that a lot of readers are astonished that dentists emerged at the number 1 spot over physicians. When you rethink the question it all makes sense. “What is the most profitable business?” Not what is the most frequented or necessary business. Not to go into detail but to put it all into perspective you have to take into consideration all the expenses physicians pay i.e., insurance, equipment, etc.

  36. I’m so glad dentists are among the top on the list. I’m in the process of starting up my own business and am hesitant to begin when the economy is so slow. But I guess this article shows otherwise.

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