Female Owner Of Start Up Coffee Shop Or Restaurant Turning Round Open Sign On Door. concept: Least Profitable Small Businesses
By: camino
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10 of the Least Profitable Small Businesses

You want to open your own business?

Congratulations!

When starting a small business, it’s crucial that you’re savvy enough so that your business idea doesn’t crash and burn. After all, if you’re going to invest money into a startup, you’ll need to make sure you get a good return on your investment. Otherwise, what’s the point of it, right?

One of the first things you should do before starting a business is making sure you choose the right industry. By knowing which businesses are the least profitable, you can cross-out the ideas that won’t help you make money.

Businesswoman Using Laptop At Desk In Busy Office. concept: Least profitable businesses

The Least Profitable Small Businesses

Here’s a list of the least profitable businesses. Of course, nothing is written in stone, but we recommend you try to steer away from these industries so that you start a profitable business.

1. Oil and Gas Extraction

Market volatility is the main reason small business owners stay away from this kind of business. Crude oil prices have dropped since 2014, and profits average, minus 7.6%. If your goal is to strike it rich, this isn’t the business for you.

2. Manufacturing beverages

Capital-intensive manufacturing equipment. Large warehouse space. Low-priced products. Sophisticated technology. An incredibly fierce competitive environment. These are the big reasons why it’ll be too tough to break ground in the beverage market. With these things working against you, you’ll be old and gray by the time you get your ROI in the black, and who needs to be profitable when you’re 91?

3. Assisted Living

Baby boomers face the possibility of needing eldercare. The need is real, but small business owners have high overhead costs, a shortage of skilled professionals, and must abide by Medicaid and Medicare pricing regulations.

4. Photographer

Costs for cameras, studio space, lenses, business insurance, and training are ongoing. Photographers need to have a steady stream of clients to break even.

5. Online Surveyor

Here’s another part-time business that might provide income for gourmet coffee but not much else. The advantages are that you can fill out surveys anywhere, and there’s no investment. If you have an hour commute each way on a train, you could earn money filling out surveys.

6. Wholesale business

Think twice if you’re planning to put up something like this. The profit margins here are low and thin. Those wholesale businesses that thrive have incredibly sophisticated and efficient working systems and procedures, rigid credit and collection control, and more importantly, they have huge volumes of sales over which they’re able to spread their overhead costs, which are a-plenty.

7. Retail business

When you’ve got the Walmarts and the Kmarts of this world (and other large discount department store chains either steadily increasing their market share or threatening smaller retailers in various kinds of categories), retailing gets to be tougher than ever before. Not only that – you will also have to contend with big names like Amazon and a host of other online retail shops. Retail business is simply too competitive, and making a decent profit is like pulling teeth. It hurts! Sure, you can compete with these giant retailers, but it’s hard. You will need a strong strategy that will give your business a proper motivation for shoppers to choose your store.

8. Lawn garden tools and supplies store

This is a niche market. We have seen above that it can actually be a very lucrative business in rich states with warmer climates like Florida and California. Still, in most of the other states, there’s no need for year-round access to lawn and garden supplies and equipment. Winters are bad, and your potential customers would most likely stop tending their lawns from about mid-October to about March. And, when the tough times come – what non-essentials do you think homeowners will cut? Outsourced lawn care. What you need is an all-year business that will provide you with good, steady revenue.

9. E-commerce

Putting up an e-commerce site sounds easy enough. Set up your website and wait for a surge of orders, right? Nope. It’s a lot harder than you think getting internet users to visit your site. It’s an uphill battle to have your website ranking on the first page of search engine results. Of course, there’s advertising you can buy to drive traffic to your site, but it’ll cost you plenty. And, when you do get people to visit your website, you’ve still got to worry about converting these into sales and revenues. If e-commerce is in your mind as a business venture, it won’t hurt to think again.

10. Inventor

You may have plenty of ideas for products, but you’ll need to convince someone to invest in your ideas if you don’t have money. It takes capital to create prototypes and secure patents. Only 5% of patents see the light of day commercially, with only 1% reaching five figures.

Portrait of Worker at Factory. concept: Least profitable businesses

Dare to Reach for Success

Now that you know which industries are better to avoid, you’re one step closer to fulfilling your dream of starting your own small business.

But what steps come next?

Next, you should decide which type of business you should open. And what better way than to research what are the most profitable businesses?

Food trucks: one of the most profitable small businesses

The Most Profitable Businesses

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