It’s every entrepreneur’s worst nightmare, venturing into a new industry, only to find that the market they’ve chosen to invest in isn’t lucrative enough.
Inside an investor’s mind
However, for savvy investors, looking at the profit margin of a company is a key characteristic that they’ll keep in mind as they search for a new business opportunity.
Some types of businesses have a high-profit margin, which is a clear indicator of profitability as well as efficiency, while others yield a smaller profit margin despite the annual revenue being quite high.
So as the new year approaches, why not start looking at your investment options for 2020?
We have compiled a shortlist below, which may give you some guidance.
1. Legal and accounting services
Legal services, accounting, bookkeeping, and payroll are types of services that are continually in high demand. And they appear to be quite lucrative, with even small firms in fields such as accounting raking in a £1.5m fee income per year.
Naturally, before you try your hand at managing someone’s salary, it is essential that you possess the specialised licensing and qualifications required.
If you want to focus on a niche market within this sector, options include providing defence services, business crime representation or others.
2. Consultancy services
Experts in selected business fields can offer consultancy services to clients in their particular sector, such as legal or financial. Establishing a consultancy firm can be profitable in cities that are known to be global business hubs, such as London and Singapore, where many foreign investors open businesses or holding companies.
3. Automotive rental
Companies in the automotive rental and leasing sectors service a wide range of clients, especially in locations that are frequented by tourists or cities that are known to be business hubs.
The company can focus on a single type of rental service, such as cars, or it may expand to other types of vehicles and equipment.
Currently, in the UK there are 4,808 automotive rental businesses, with a market size of 15 billion.
4. Real estate
It’s no secret that having a foot on the property ladder is a smart move for any hopeful business owner. The sector is worth some £1.662bn in the UK and accounts for 7% of the country’s GDP.
Why not open your own real estate agency? UK residential estate agents make an average salary of £41,392, which is a decent supplement to an investor’s existing salary or income.
The profit margin is only one of the manners in which investors and entrepreneurs tend to look at to measure the success of a business. It indicates the percentage of sales that have been turned into profits during a specific period and it varies according to the business sector.
Investors are encouraged to look at the profit margin as well as other characteristics when choosing a new business idea that is capable of yielding satisfactory profits.