In this article, we look at the 20 most profitable small businesses to start in 2023. You can skip our detailed analysis on what small businesses with high net margins you can venture into this year by heading over to our article, 5 Most Profitable Small Businesses to Start in 2023.
Small businesses are typically privately owned ventures that employ few people and generate lower revenues compared to larger organizations. While there is no one fixed definition of what constitutes a small business, various countries and bodies have established their own sets of criteria to define the elements of a small business. According to the US Census Bureau, a small business is an entity having between 100 to 1,500 employees, with the firm’s revenue ranging from $1-40 million. On the other hand, in the European Union, firms having less than 50 employees and an annual turnover of no more than $10.8 million are regarded as small businesses.
While understandably large corporations get a lot of attention, small businesses are one of the main drivers of the American economy. Figures shared by the Small Business Association (SBA) in 2019 said that small businesses accounted for 44% of all economic activity in the US. Moreover, 99.9% of all businesses in the US were made up of small businesses having 500 or fewer employees, while small businesses account for 99.7% of all businesses in the US with paid employees. It is also important to note that most large businesses started as small, before they came up with an innovative product or service that propelled them into growing big.
While we will be sharing lucrative small business ideas ahead, it is imperative that you brand your business well, and doing so has never been easier. Several businesses are maintaining a presence on social media to promote their offerings. Meta Platforms, Inc. (NASDAQ:META)’s apps such as Facebook and Instagram give business owners a great opportunity to target relevant audiences through advertisements. You will be asked by Meta Platforms, Inc. (NASDAQ:META) for your geographic as well as demographic audience target before placing the ad, so that your promotional campaigns reach the right people you are targeting.
Digital/Social media marketing is far more effective than traditional marketing for exactly these reasons. The AI-based algorithms ensure that the audience you reach is more likely to buy your product/service. Meta Platforms, Inc. (NASDAQ:META) is not only enhancing the AI capability of their advertisement arsenal, the company is also making it more convenient for businesses that do not have a digital presence on facebook, as many businesses simply register on Whatsapp and do not go beyond that. As of 2020, 50 million businesses have a Whatsapp presence.
Below is an excerpt from Mark Zuckerberg in Meta Platforms, Inc. (NASDAQ:META)’s Q2 2023 Earnings Call about how their AI driven products are aiding businesses wanting to advertise and how businesses on whatsapp are being brought into the larger Meta's facebook and instagram-based advertisement ecosystem.
Beyond Reels, AI is driving results across our monetization tools, through our automated ads products, which we call Meta Advantage. Almost all our advertisers are using at least one of our AI driven products. We’ve also deployed Meta Lattice, a new model architecture that learns to predict an ads performance across a variety of datasets and optimization goals. And we introduced AI Sandbox, a testing playground for generative AI powered tools like automatic text variation, background generation and image outcropping. Business messaging is another key piece of our monetization strategy and we recently announced that the 200 million users of our WhatsApp Business app will now be able to create Click-to-WhatsApp ads for Facebook and Instagram without needing a Facebook account.
Another essential component of your business’ branding is creative assets, such as email headers, website landing page graphics, digital signages, and brochures, among others. Tools such as Adobe Photoshop and Adobe Illustrator, both owned by Adobe Inc. (NASDAQ:ADBE), can help do that for you. The company recently released Firefly, its AI generative model, that aids designers in generating ideas, and manipulating images more quickly than it was previously possible.
Firefly has received acclaim from users and Adobe investors alike. Harding Loevner Global Equity Strategy made the following comment about Adobe Inc. (NASDAQ:ADBE) in its Q2 2023 investor letter:
Although the market initially feared that Adobe Inc. (NASDAQ:ADBE) would lose out to Al image-generating programs Dall-E, Midjourney, and Stable Diffusion, the design-software giant has since released its own generative Al model called Firefly. One feature of Firefly is that it can help designers generate ideas and create and manipulate images more quickly in Photoshop or Illustrator that can then be processed by other Adobe products for further development, fostering a seamless workflow. There’s more work involved when trying to manipulate images created by outside tools. Also, because Firefly is trained on Adobe’s vast inventory of stock images and other licensed content, it can generate professional-quality, commercially viable results, further setting it apart from generic models that are often trained on copyrighted content that isn’t properly licensed. These are just two examples of how Al enhances the Adobe suite, which should allow the company to raise subscription prices and upsell users.
Lastly, a critical factor to weigh in is whether you should start your business online or have physical presence. While several businesses today are operating remotely and selling their products on their own websites or e-commerce platforms such as Shopify Inc. (NYSE:SHOP) and Amazon.com, Inc. (NASDAQ:AMZN), many others prefer the brick and mortar concept to ensure they have a physical setting of an office. Both have their own pros-and-cons, and you have to see what suits your business model the most. You might be required to have an office to offer accounting services and a clinic for pet services, but online may work if you offer professional services like tutoring, language translation, or affiliate marketing.
Let’s now head over to the list of the most profitable small businesses to start in 2023.
20. Online Tutoring
Net Margin: 7.70%
Online tutoring is one of the most profitable small businesses to start. It is a rapidly growing industry, which is projected to grow at a CAGR of 14.9% over the next seven years to reach a size of $23.73 billion by 2030 according to Grand View Research. It is a lucrative opportunity where you can earn between $20-50 per hour. Delivering these lectures online can also help save fixed and overhead costs associated with renting a physical place. You can easily create a group on Meta Platforms, Inc. (NASDAQ:META)’s Facebook and begin tutoring your students against a fee.
19. Retail - Building Supply
Net Margin: 8.67%
The demand for building supplies continues to remain strong despite the contraction in the industry due to inflation. By venturing into this business, you can cater to the needs of a variety of customers, builders, and contractors.
18. Food Business
Net Margin: 9.28%
The restaurant food industry was among the hardest hit by the coronavirus pandemic. However, it is on the path of recovery and offers great potential for those willing to start a small business. While it may be difficult to compete with large restaurant chains, you can still expect to derive a decent net margin out of your business. Home-based food businesses have also emerged over the last few years, and have an annual median revenue of $50,000.
17. Home Improvement
Net Margin: 9.65%
The home improvement industry had an estimated size of $762 billion globally in 2020, and is expected to cross the $1 trillion mark by 2027. Selling home décor products or services can be one of the most profitable small businesses to start in 2023 due to the sheer demand among people to improve their living standards.
16. E-commerce
Net Margin: 10%
E-commerce is one of the most lucrative small businesses to start, due to its high net margin, flexible working hours, and low overhead costs. According to Shopify Inc. (NYSE:SHOP), the global e-commerce market is estimated to have a size of $6.3 trillion in 2023, and by 2024, it is projected that 21.2% of all global retail sales will take place online. Shopify Inc. (NYSE:SHOP) is one the largest players in the e-commerce industry, with a global market share of 11%.
15. Preloved Items
Net Margin: 11.15%
Preloved items are products that were loved by a user before being put up for sale. It is one of the most profitable small businesses to start in 2023 with the potential to earn you up to $100,000 a year. Once in this business, you can source unwanted items people want to sell and then help them in doing so.
14. Translation Services
Net Margin: 11.54%
Translators in the US earn between $65,000 per year on average. You might not even be required to have a physical space in the form of an office to sell translation services. This is a business you can start from home, build a portfolio, and attract clients. Moreover, you can also hire other translators online and expand your business. If interested, take a look at the 25 Most Difficult Languages to Learn.
13. Consultation Services
Net Margin: 12%
Consultation services is one of the most profitable small businesses to start. This is one of the fastest growing industries and by 2026, the global management consultation services market is projected to be worth $1.6 trillion. Having a consultancy firm can be a profitable business, and platforms such as Facebook and Instagram can help it grow further.
12. Real Estate
Net Margin: 12.67%
Real estate is one the largest industries in the world. It was valued at $3.69 trillion in 2022, and is projected to grow at a CAGR of 5.2% till 2030. You can venture into property management or real estate brokerage, and reap rewards of this highly lucrative industry.
11. Social Media Management
Net Margin: 13.34%
We discussed at the start of this article the significance of social media management for any business. You can also start a business that offers these services and cash your social media expertise by using tools such as Buffer, Sprout Social, or Hootsuite. The median income for a social media manager in the US is over $70,000.
10. Affiliate Marketing
Net Margin: 16%
Affiliate marketing involves publishers or content creators earning commissions by promoting products or services of the advertiser. This is a trendy and emerging field of marketing that already has more than seven million professional affiliate marketers worldwide. Globally, the affiliate marketing industry is forecasted to be worth more than $15 billion by 2024.
Meta Platforms, Inc. (NASDAQ:META)’s Instagram has its own affiliate program offering commissions to influencers.
9. Retail Distribution
Net Margin: 16.50%
It is one of the most profitable small businesses to start in 2023, having an average net margin of 16.5%. Businesses in this industry act as intermediaries by purchasing products in bulk from manufacturers and then selling them to retailers at a mark-up.
8. Content Writing Services
Net Margin: 16.62%
There is growing demand for content writers in the market. It is a multi-million dollar industry, where you can expect to make anywhere between $20-$400 per blog. You can look for clients on platforms such as Upwork, LinkedIn, and even Facebook.
7. Information Technology
Net Margin: 16.62%
Business ideas in information technology (IT) can include software development, data analytics, as well as digital marketing. This is an industry that offers high financial rewards. Having a small IT business can also prove beneficial in the sense that smaller teams can be more agile and quick in decision making as compared to larger ones. This is useful considering that trends and customer needs in the IT industry evolve faster than in other industries.
6. Website Designing
Net Margin: 18.90%
The web design services industry in the US is estimated to be worth $56 billion, according to IBIS World. The industry has grown 3.5% between 2021 and 2022, and is one of the most profitable markets for small business with an average net margin of 18.90%.
