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Most and Least Profitable Business Types

  1. Tracking 2010 Profit Margins in 97 Industries
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    Tracking 2010 Profit Margins in 97 Industries

    Which industries were hardest-hit in 2010? Which fared the best? According to financial software company Sageworks' analysis of net profit margins and sales of tens of thousands of private companies in 97 industries, ranging from construction to health care, the answers aren't surprising: Commercial contractors and building materials suppliers were among the biggest losers while law firms and medical clinics beat pre-recession levels. What is perhaps surprising, though, were a few of the biggest gainers: day-care centers and funeral homes. Will Boland, acting chief administrative officer at Sageworks, says parents needing to take an additional job to make ends meet likely led to the increase at day cares. He adds that they, like funeral homes, have yet to hire more workers post-recession. Flip through this slide show for snapshots of the 10 industries with the lowest profit margins in 2010 and the 10 industries with the highest margins.

    Note: We used Sageworks private company data for profit margins and sales; we used 2007 Census data (the most recent available) for the total number of firms and people employed in each industry.
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  2. Nonresidential Building Construction
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    Nonresidential Building Construction

    Net profit margin rank: 97
    Net profit margin: 0.78%
    Change in 2009-2010 sales: –15.54%
    Number of firms: 45,105
    Employment: 766,961

    The industry—which includes industrial, commercial, and institutional building construction trades—had a 4.84 percent profit margin in 2006. It dropped below 1 percent last year.
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  3. Highway, Street, and Bridge Construction
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    Highway, Street, and Bridge Construction

    Net profit margin rank: 96
    Net profit margin: 0.83%
    Change in 2009-2010 sales: –2.31%
    Number of firms: 10,953
    Employment: 323,289

    The change in sales for the sector was above 10 percent from 2005 to 2006. It dropped into negative territory during the recession.
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  4. Utility System Construction
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    Utility System Construction

    Net profit margin rank: 95
    Net profit margin: 0.88%
    Change in 2009-2010 sales: –14.51%
    Number of firms: 20,421
    Employment: 524,840

    Contractors and construction companies that install water and sewer lines, oil and gas pipelines, and power and communication lines have seen their payroll-to-sales ratio (payroll expense as a percentage of sales) rise from about 10 percent to 15 percent since 2006.
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  5. Building Material and Supplies Dealers
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    Building Material and Supplies Dealers

    Net profit margin rank: 94
    Net profit margin: 1.25%
    Change in 2009-2010 sales: –5.74%
    Number of firms: 45,392
    Employment: 1,202,392

    Sales have been dropping since 2007 for the sector, which includes paint and wallpaper stores, hardware stores, home centers, and other building materials suppliers.
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  6. Foundation, Structure, and Building Exterior Contractors
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    Foundation, Structure, and Building Exterior Contractors

    Net profit margin rank: 93
    Net profit margin: 1.35%
    Change in 2009-2010 sales: –17.17%
    Number of firms: 115,010
    Employment: 1,103,222

    The industry, which includes framers, roofers, and masons, continued to suffer in 2010, with sales dropping by more than 17 percent from a year earlier.
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  7. Lumber and Other Construction Materials Merchant Wholesalers
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    Lumber and Other Construction Materials Merchant Wholesalers

    Net profit margin rank: 92
    Net profit margin: 1.74%
    Change in 2009-2010 sales: –9.20%
    Number of firms: 12,895
    Employment: 264,252

    Lumber and construction materials sales rose slightly in 2010 after dropping since 2007.
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  8. Household and Institutional Furniture and Kitchen Cabinet Manufacturing
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    Household and Institutional Furniture and Kitchen Cabinet Manufacturing

    Net profit margin rank: 91
    Net profit margin: 1.82%
    Change in 2009-2010 sales: –9.61%
    Number of firms: 16,184
    Employment: 333,974

    Net profit margin for the industry, which includes cabinet makers and furniture upholsterers, was in negative territory last year. It nudged upward in 2010.
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  9. Printing and Related Support Activities
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    Printing and Related Support Activities

    Net profit margin rank: 90
    Net profit margin: 1.96%
    Change in 2009-2010 sales: –0.55%
    Number of firms: 3,239
    Employment: 35,493

    Profit margins were below 5 percent in 2006 for the prepress services, device manufacturers, and various types of printers that form this shrinking industry.
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  10. Cement and Concrete Product Manufacturing
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    Cement and Concrete Product Manufacturing

    Net profit margin rank: 89
    Net profit margin: 2.03%
    Change in 2009-2010 sales: –16.25%
    Number of firms: 5,093
    Employment: 221,488

    Profit margins dropped into negative territory in 2009 for makers of cement and bricks. They bounced back slightly in 2010.
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  11. Hardware and Plumbing and Heating Equipment and Supplies Merchant Wholesalers
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    Hardware and Plumbing and Heating Equipment and Supplies Merchant Wholesalers

    Net profit margin rank: 88
    Net profit margin: 2.06%
    Change in 2009-2010 sales: –0.71%
    Number of firms: 11,261
    Employment: 232,006

    Profit margins bounced back a bit in 2010 from the trough of 2009 for wholesale sellers of heating and air-conditioning equipment, refrigeration equipment, and similar supplies.
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  12. Accounting, Tax Preparation, Bookkeeping, and Payroll Services
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    Accounting, Tax Preparation, Bookkeeping, and Payroll Services

    Net profit margin rank: 1
    Net profit margin: 18.36%
    Change in 2009-2010 sales: 0.15%
    Number of firms: 108,428
    Employment: 1,357,368

    The payroll-to-sales ratio dropped from just above 30 percent in 2006 to 12 percent last year. The industry includes accountants and payroll services.

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  13. Offices of Dentists
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    Offices of Dentists

    Net profit margin rank: 2
    Net profit margin: 17.04%
    Change in 2009-2010 sales: 7.18%
    Number of firms: 120,676
    Employment: 824,770

    In a reliably profitable business, dentists were able to maintain double-digit profit margins throughout the recession.
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  14. Legal Services
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    Legal Services

    Net profit margin rank: 3
    Net profit margin: 16.75%
    Change in 2009-2010 sales: 3.79%
    Number of firms: 15,541
    Employment: 268,328

    The legal services industry—from notaries to settlement offices—was highly profitable during the recession and increased margins last year.
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  15. Offices of Other Health Practitioners
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    Offices of Other Health Practitioners

    Net profit margin rank: 4
    Net profit margin: 16.14%
    Change in 2009-2010 sales: 7.25%
    Number of firms: 113,010
    Employment: 614,171

    Chiropractors, optometrists, and mental health practitioners weathered the recession well, experiencing only a modest dip in sales during the recession. This industry doesn't include physicians.
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  16. Other Financial Investment Activities
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    Other Financial Investment Activities

    Net profit margin rank: 5
    Net profit margin: 16.11%
    Change in 2009-2010 sales: 0.33%
    Number of firms: 16,184
    Employment: 333,974

    This industry category excludes everything from bankers to securities traders to commodity contract dealers. Those within the sector, such as portfolio managers and investment advisers, dropped payrolls drastically in order to maintain historically high profit margins.
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  17. Offices of Physicians
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    Offices of Physicians

    Net profit margin rank: 6
    Net profit margin: 13.24%
    Change in 2009-2010 sales: 3.05%
    Number of firms: 191,961
    Employment: 2,169,682

    Physicians' profit margin hovered near 10 percent from 2006 to 2009. It jumped in 2010 as sales increased.
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  18. Outpatient Care Centers
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    Outpatient Care Centers

    Net profit margin rank: 7
    Net profit margin: 12.10%
    Change in 2009-2010 sales: 8.76%
    Number of firms: 14,444
    Employment: 695,863

    Payrolls dropped in 2008 and 2009 but picked up again last year as sales increased. The industry includes centers whose services range from family planning to kidney dialysis.
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  19. Death Care Services
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    Death Care Services

    Net profit margin rank: 8
    Net profit margin: 11.87%
    Change in 2009-2010 sales: 5.22%
    Number of firms: 15,839
    Employment: 136,928

    Funeral homes, cemeteries, and crematories saw a major bump in profit margin last year as sales bounced back from negative territory.
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  20. Other Professional, Scientific, and Technical Services
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    Other Professional, Scientific, and Technical Services

    Net profit margin rank: 9
    Net profit margin: 11.55%
    Change in 2009-2010 sales: 2.57%
    Number of firms: 64,704
    Employment: 599,993

    This broad-ranging umbrella industry includes commercial photography and portrait studios, translators and interpreters, and veterinarians.

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  21. Child Day-Care Services
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    Child Day-Care Services

    Net profit margin rank: 10
    Net profit margin: 10.43%
    Change in 2009-2010 sales: 3.31%
    Number of firms: 59,985
    Employment: 853,648

    The payroll-to-sales ratio was nearly 40 percent in 2006, before the recession, but dropped under 20 percent last year. That leanness boosted profit margins.
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