The 5 Least Profitable Small Business Industries To Invest In

When starting a small business, it’s tempting to start out in the industry you’re most interested in. Perhaps you always wanted to own a jewelry store as a child, or you have an obsessive fascination with taxidermy.

Regardless of this, your interests may not necessarily translate to big returns for your small business. In some cases, they might actually lead to your financial demise.

Year in and year out, the small business industries drawing in the least profit remain the same. It’s a good idea to know which ideas to relegate to your imagination.

Oil and Gas Extraction

In a Looney Tunes episode, Bugs Bunny runs afoul of Yosemite Sam for living on his oil-rich land. Yosemite Sam, who is driven around everyday in a long limousine to leisurely check on his oil fields, is a wealthy, self-made man, thanks to him banking on his oil dream.

This isn’t the case in real life.

The oil and gas industry is incredibly difficult to get started in. The business requires an astronomical investment in terms of equipment, licensing and hiring of highly skilled labor. There’s also insurance and finding reliable buyers. And of course, this all depends on whether you even find any oil.

Oil prices are also notoriously unstable, with prices fluctuating in response to the environment and global politics. Even if you’re able to extract oil at a time when prices are favorable, you’ll still have to fend off competition from global behemoths like Shell and BP.

Groceries and Related Goods

General stores are an important part of American history. In isolated settlements, they were the only source of valuable goods for families. In the 20th century, there were mom-and-pop shops which were located at the end of the block and sold miscellaneous goods like stationery and candy.

There’s no longer a place for the independent grocery store in the 21st century. Instead, we have Amazon, Walmart and Whole Foods. Of course, this isn’t to say that grocery stores simply can’t succeed in today’s society. It’s just much harder for them to do so given the immense competition from major businesses who have a greater advantage over stock and pricing, plus the high overhead costs they have to pay.

Beverage Manufacturing

Pepsi and Coca-Cola seem to rule the world. Everywhere you go, you’re accosted by a colorful ad commanding you to indulge in one of the sugary, fizzy drinks from one of the two companies.

It’s easy to think that the whole world drinks fizzy beverages.

In some ways, you’d be right. Fast food chains invite customers to choose a large drink with their meal, often with free refills. In theaters, people often choose a drink to go with their popcorn. So there must be a market for beverage manufacturing. Right?

Refer to the first line: Pepsi and Coca-Cola seem to rule the world.

The market share owned by these companies is enormous. And it’s growing by the minute. These longtime beverage manufacturers enjoy a monopoly that small business owners will simply never have. It makes sense. They’ve had over a hundred years to gain this market share.

In addition to this, a growing spotlight on the health effects of junk food means these beverages are currently being avoided in favor of healthier drinks. Considering the high costs that go into production and the uphill battle you face competing against the larger companies, you’re better off working on another business idea.

Furniture Stores

It’s true that furniture is expensive. People think nothing of paying a few thousand dollars for a couch because it comes in a color that matches their walls. So it’s easy to think that this is an especially profitable industry. You’d be wrong.

Furniture is hard to sell because once people buy it, they rarely replace it for the next couple of years, or even decades in some cases. Unless you have a spontaneous combustion button implanted in the beds, chairs and tables, your furniture will move at a much slower rate than other merchandise. Couple this with the fact that furniture stores build up their reputation on the sturdiness of their items and you have a catch-22.

Furniture stores are also expensive because of overhead costs. You need a lot of space to display your items, some of which can remain unsold for months. Unless you can use the space for other purposes, you’ll need a lot of funds to cover overhead costs.

Assisted Living and Elderly Healthcare Facilities

It’s true that America’s baby boomers are getting older. This means that more adults are heading into assisted living facilities which might make this look like a great business idea. However, it’s difficult to make a profit on retirement homes and elderly healthcare because of the overhead costs that go into maintaining the buildings.

Healthcare facilities, in particular, are beset with the costs of paying for medical staff, and dealing with uneven insurance policies from patients, some of whom might not be able to pay for all their treatment.

Starting such a business is definitely a good deed but it’s recommended you know the risk that comes with it.

If you want recommendations on small business ideas, there are several other industries that provide more returns for small business owners.

Once you start your small business, you’ll need a reliable payment processor to give you the freedom you need to expand your business. Bank wire transfers often cost an arm and a leg to send. In addition to this, they are often slow and unreliable as a single missing detail can result in your losing your money.

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