…then your CPA firm may be below average.
Sageworks, a Raleigh, N.C.-based business analytics software provider, reports in Forbes that CPA firms may just be the most profitable business an entrepreneur can choose.
T
he offices of CPAs tops a list of 20 other industries, with an average pretax margin of 17.1%. Wired communication carriers (transmission-line operators and the like), with a 10.1% margin, rank 20th.
“Industries which provide need-to-have solutions rather than nice-to-have solutions tend to do better,” says Sageworks founder Brian Hamilton.
The data are drawn from financial statements on nearly 300,000 companies, most with under $10 million in annual revenue, and bucketed by five- and six-digit North American Industry Classification System codes. The figures were gathered between 2000 and 2009, to capture an entire business cycle. To be considered, each category included at least 100 companies.
Two big perks with professional services: consistent demand (no matter what the economy is doing, people will still catch fevers and want to avoid paying taxes) and relatively low overhead. Little surprise that traditional industries–like manufacturing and retail, which are hard to scale–didn’t make the cut. The top of that heap, including medical-equipment makers and wineries, clock 6% pretax margins; jewelry stores, 4.4%.
(PS: Looking for a profitable new niche or specialty? Consider the other most profitable businesses.)
THE RANKINGS
1. Offices of Certified Public Accountants
Average Pretax Margin: 17.1%
The most profitable niche of the bunch enjoys a nice mix of pricing power (everybody needs accountants, no matter how the economy is doing), low overhead and marketing scale, thanks to plenty of repeat clients.
2. Offices of Chiropractors
Average Pretax Margin: 16%
3. Other Accounting Services
(Various accounting, bookkeeping, billing and tax preparation services in any form, handled not necessarily by a Certified Public Accountant)
Average Pretax Margin: 15.5%
4. Offices of Dentists
Average Pretax Margin: 15.4%
5. Tax Preparation Services
Average Pretax Margin: 15.1%
6. Sales Financing
Average Pretax Margin: 15.1%
7. Freestanding Ambulatory Surgical and Emergency Centers
Average Pretax Margin: 14.8%
8. Lessors of Mini-Warehouses and Self-Storage Units
Average Pretax Margin: 12.3%
9. Offices of Optometrists
Average Pretax Margin: 12.2%
10. Lessors of Nonresidential Buildings (Except Mini-Warehouses)
Average Pretax Margin: 11.6%
11. Insurance Agencies and Brokerages
Average Pretax Margin: 11.3%
12. Offices of Physicians (except Mental Health Specialists)
Average Pretax Margin: 11.2%
13. Consumer Lending
Average Pretax Margin: 11.1%
14. Offices of Physical, Occupational and Speech Therapists, and Audiologists
Average Pretax Margin: 11%
15. Investment Advice
Average Pretax Margin: 11%
16. Veterinary Services
Average Pretax Margin: 10.5%
17. Diagnostic Imaging Centers
Average Pretax Margin: 10.5%
18. Offices of General or Family Practitioners
Average Pretax Margin: 10.4%
19. Support Activities for Oil and Gas Operations
Average Pretax Margin: 10.3%
20. Wired Telecommunication Carriers
Average Pretax Margin: 10.1%
