Remember the dotcom bubble? You know, that wacky window in the late '90s when profitless technology companies scored billion-dollar valuations like bouquets on Valentine's Day. This isn’t 1999, but the tech sector is getting frothy. Hot targets of late: Facebook, Groupon, 3Par, Huffington Post, among others. This time, at least, the beneficiaries are generating some profits–and profits are ultimately the basis for what any company is worth to investors in the long run.
To bring things more down to earth, we decided to assess the profit-making ability of small businesses in a variety of more traditional industries.
With the help of Sageworks, a Raleigh, N.C.-based accounting consultancy and private-company data provider, Forbes assembled a list of the 20 most profitable types of businesses, on a pretax basis. At No. 1: offices of Certified Public Accountants, with an average pretax margin of 16.5%. Offices of physicians (except mental health specialists), which clock an average 10.4% margin, brought up the rear.
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 Jan 1, 2003 and Jan 1, 2011, to capture an entire business cycle. To be considered, each category included at least 100 companies. (Banks were excluded from the analysis, as their accounting methods are not comparable to other industries'.)
Here is a list of the 20 most-profitable industries and their average pretax margins:
1. Offices of Certified Public Accountants
Average Pretax Margin, 2003-2010: 16.5%
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: 15.3%
