In the dynamic world of entrepreneurship, identifying the most profitable businesses is a crucial step for any aspiring entrepreneur crafting a solid business plan. This search not only shapes the trajectory of individual financial success but also influences the broader spectrum of economic growth and job creation. The quest for high-profit margins drives innovation and efficiency, propelling various sectors from commercial banking to tech startups. With sectors as diverse as the pharmaceutical industry, IT support, and real estate investment trusts experiencing significant growth, understanding where the highest returns can be found is more important than ever for those looking to invest time, skill, and capital into the market.
This article delves into the sectors that stand out in the American landscape for their profitability, ranging from investment banking and securities dealing to the burgeoning fields of software publishing and online courses. It will highlight key areas such as financial services, including credit intermediation and portfolio management, and consider the growing impact of digital ventures such as mobile apps and graphic design on entrepreneurship. Additionally, it explores traditional sectors with consistent returns like trusts and estates, as well as emerging trends in service-based businesses like personal trainers and vacation rentals. By providing a roadmap through the most lucrative fields, this piece aims to guide entrepreneurs and investors in making informed decisions that align with their business aspirations and financial goals.
Investment Banking and Securities Dealing
Investment banking and securities dealing is a lucrative sector within the financial services industry, playing a crucial role in facilitating capital raising, mergers and acquisitions, and strategic advisory services for corporations, governments, and other institutions.
Investment Banking and Securities Dealing Overview
Investment banks enable large corporations, governments, and firms to raise capital quickly, manage risks, and execute strategic transactions, strengthening their market positions. 1 These institutions connect private and institutional investors with businesses in need of capital, facilitating complex financial transactions. 1 In addition to managing investments, investment banks offer strategic advisory services, including corporate restructuring, strategic planning, mergers and acquisitions guidance, and similar services. 1 Their role in financing new investments, enabling private equity funds, enhancing risk management, and facilitating corporate finance governance is essential for the functioning of modern markets. 1
Investment Banking and Securities Dealing Profit Margins
As of June 2020, the trailing twelve months' net profit margin for retail or commercial banks was approximately 13.9%, a sharp decrease from June 2019 when it was 27.6%. 2 For comparison, the net profit margins in June 2018 and June 2017 were 23.8% and 24.3%, respectively. 2 The International Monetary Fund (IMF) attributed the 2020 decline to challenges posed by the COVID-19 pandemic and predicted that globally, the banking sector will continue to post declining profits through 2025 due to ongoing tightening of financial conditions. 2 This could also be attributed, in part, to rising competition from fintech startups taking market share in various banking segments. 2
It's important to note that profit margins can vary significantly within the financial services industry, ranging from 5.1% to 40.5% across different subsectors. 3 The average profit margin for the industry may be around 14.71%. 3
Top Investment Banking and Securities Dealing Companies
According to rankings, some of the most prestigious and top investment banking firms in the United States include:
- Goldman Sachs & Co. 4
- Morgan Stanley 4
- J.P. Morgan 4
- Centerview Partners 4
- Evercore 4
- Lazard 4
- PJT Partners 4
- Moelis & Company 4
- Bank of America Corp. 4
These firms are known for their expertise in various areas, such as mergers and acquisitions, initial public offerings, and strategic advisory services. They have played significant roles in some of the largest and most notable deals on Wall Street. 1
Credit Intermediation Activities
Credit intermediation activities refer to the process of channeling funds from savers to borrowers, facilitating the efficient allocation of capital, and enabling economic growth. 5 A financial intermediary is an entity that acts as the middleman between two parties in a financial transaction, such as a commercial bank, investment bank, mutual fund, or pension fund. 6
Credit Intermediation Activities Explained
Financial intermediaries offer several benefits to consumers, including safety, liquidity, and economies of scale involved in banking and asset management. 6 They move funds from parties with excess capital to parties needing funds, creating efficient markets and lowering the cost of conducting business. 6 Banks connect borrowers and lenders by providing capital from other financial institutions and the Federal Reserve. 6
Through financial intermediaries, savers can pool their funds, enabling them to make large investments, which benefits the entity in which they are investing. 6 These intermediaries also reduce costs by expertly evaluating the credit profile of potential borrowers, maintaining records and profiles cost-effectively, and reducing the number of financial transactions an individual investor would otherwise have to make. 6
Credit Intermediation Activities Profitability
The profitability of credit intermediation activities depends on factors such as the interest rate spread between deposits and loans, the cost of funding, and the quality of the loan portfolio. 5 According to industry projections, the revenue of the "credit intermediation and related activities" industry in the U.S. is expected to reach approximately $1,390.9 billion by 2024. 7
Leading Credit Intermediation Firms
Leading credit intermediation firms include commercial banks, savings and loan associations, and credit unions, which accept deposits and make loans to individuals and businesses. 5 The market size for the "Savings Institutions & Other Depository Credit Intermediation" industry in the U.S. is projected to grow over the next five years. 8
Securities and Commodity Exchanges
Securities and Commodity Exchanges Basics
Stock exchanges are marketplaces where U.S. financial securities, commodities, derivatives, and other financial instruments are traded. 9 Companies that operate publicly through shareholders or successful startups wishing to launch an initial public offering (IPO) must go through a stock exchange. By being listed, companies become closely watched and scrutinized entities, as all their financials are open for potential investors to analyze. 9
The two major U.S. financial securities markets are the New York Stock Exchange (NYSE) and Nasdaq. 9 The NYSE, founded in 1790, is a stock exchange based in New York. 9 In April 2007, the NYSE merged with the European stock exchange Euronext to form NYSE Euronext. 9 NYSE Euronext also owns NYSE Arca (formerly the Pacific Exchange). 9 To be listed on the NYSE, a company must have 400 shareholders and 1.1 million shares outstanding. 9 The Nasdaq, created by the National Association of Securities Dealers (NASD) in 1971, is the largest electronic screen-based market and is popular due to its computerized system. 9
Commodity markets have existed since early human history, serving as physical backbones for exchanging raw materials. 10 Alongside these traditional markets, there is a parallel world of financial commodity markets where traders enter into trade agreements on future prices of goods through contracts like forwards, futures, and options. 10 Without these markets, farmers couldn't ensure they get the prices they need for their harvest to plant seeds the following year. 10
A commodities exchange is a legal entity that determines and enforces rules and procedures for trading standardized commodity contracts and related investment products. 11 It also refers to the physical center where trading takes place. 11 Two of the best-known commodity exchanges in the U.S. are the Chicago Mercantile Exchange (CME) Group and the New York Mercantile Exchange (NYMEX). 11
Securities and Commodity Exchanges Profit Potential
Although commodities markets experienced significant uncertainty, commodity trading generated more than $100 billion EBIT in 2023, translating to over $150 billion in gross margin. 12 Despite decreased volatility in commodity prices from 2022 to 2023, commodity markets remain tight, and changes in demand and supply have become harder to predict. 12 Supply chain disruptions have also constrained global trade activity. 12
The trading value pool for power and gas increased in 2023, with volatility in power and gas in Europe remaining above average. 12 The LNG market continued to grow in 2023 and remained crucial for maintaining energy security in Europe. 12 In the agricultural market, robust demand for food and animal feed, global supply disruptions, and increasing production costs impacted profitability. 12 Metals and mining experienced a decrease in trading profitability in 2023 due to elevated energy prices increasing mining and processing costs. 12
Major Securities and Commodity Exchanges in the U.S.
Some of the major securities and commodity exchanges in the U.S. include:
- New York Stock Exchange (NYSE) 9
- Nasdaq 9
- Boston Stock Exchange (BSE) 9
- Cboe Options Exchange (Cboe) 9
- Chicago Board of Trade (CBOT) 9
- Chicago Mercantile Exchange (CME) 9
- Chicago Stock Exchange (CHX) 9
- International Securities Exchange (ISE) 9
- Miami Stock Exchange (MS4X) 9
- National Stock Exchange (NSX) 9
- Philadelphia Stock Exchange (PHLX) 9
- New York Mercantile Exchange (NYMEX) 11
The CME Group is the world's leading and most diverse derivatives marketplace, while NYMEX is one part of the CME Group. 11 The Intercontinental Exchange (ICE) is the most well-known commodity exchange in Europe, similar to CME and NYMEX as an electronic commodity exchange with no physical trading floor. 11 The London Metal Exchange (LME) is the only physical commodity trading exchange left in Europe and is the world center for trading industrial metals. 11
Portfolio Management
The US portfolio management systems market is on the cusp of rapid expansion, buoyed by a surge in businesses and the ongoing digital transformation. 13 With increased investments spanning various sectors, the US market is witnessing a notable uptick in adopting portfolio management systems, driven by their cost-effectiveness. 13 Concurrently, the North American project portfolio management market is poised for a significant upswing, propelled by the integration of cutting-edge technologies. 13
Portfolio Management Industry Overview
Notably, sectors such as healthcare, manufacturing, banking, financial services, and construction in the US are increasingly turning to project portfolio management services. 13 This strategic shift aims to streamline operations and rein in costs, fostering a conducive environment for the growth of the market. 13
AI is revolutionizing asset management, empowering managers to make swift, well-informed investment decisions. 13 As a result, AI is emerging as a pivotal force propelling growth in the asset management sector. 13 This growth hinges on several factors, such as the rapid adoption of AI in asset management, the growing importance of asset tracking, a heightened focus on management standards, and the expanding IT infrastructure. 13 In the current year, the North American AI in the Asset Management market commanded a revenue share of over 30%, highlighting the region's embrace of cutting-edge technology. 13 Notably, the projected surge in AI-related spending within the US asset management sector signals a significant shift toward digitization. 13
The market size, measured by revenue, of the Portfolio Management & Investment Advice industry was $554.2 billion in 2023. 14 The market size of the Portfolio Management & Investment Advice industry increased 17.3% in 2023. 14 The market size of the Portfolio Management & Investment Advice industry in the US has grown 7.3% per year on average between 2018 and 2023. 14
Portfolio Management Profitability Factors
The primary negative factor affecting this industry is high competition, while the primary positive factor is a growing life cycle stage. 14
Portfolio management means different things to different people, but generally, it is a way of balancing risks and rewards. 15 The most elemental measurement of a portfolio's performance is the return on investment or ROI. By knowing what each dollar invested is likely to yield, individuals can more effectively formulate a logical money-management strategy. 15
ROI = (Gains - Cost) ÷ Cost 15
Typically, the higher the potential ROI, the higher the risk, and vice-versa. 15 Therefore, controlling risk is one of the primary functions of sound portfolio management. 15
An increase in profitability from project portfolio management comes because of improved resource management, capacity planning, better strategy execution, and increased productivity leading to higher-quality deliverables. 16
Top Portfolio Management Companies
Some of the top portfolio management companies in the US include Vanguard, BlackRock, Broadridge, State Street, Goldman Sachs, T. Rowe Price, SS&C Advent, American Century, Waddell & Reed, Bessemer Trust, Eurizon Capital, Franklin Templeton, Commerce Trust, Delaware Funds by Macquarie, Elliott Management, and Thornburg Investment Management. 17
The following is a list of the top 20 asset managers in the world (as of 2023), ranked by total assets under management (AUM): 18
- BlackRock | United States | 9,090
- Vanguard Group | United States | 7,600
- UBS | Switzerland | 5,710
- Fidelity Investments | United States | 4,240
- State Street Global Advisors | United States | 3,600
- Morgan Stanley | United States | 3,131
- JPMorgan Chase | United States | 3,006
- Goldman Sachs | United States | 2,672
- Crédit Agricole | France | 2,660
- Allianz | Germany | 2,364
Trusts and Estates
Trusts and Estates Industry Explained
The Trusts and Estates industry comprises trusts, estates, and agency accounts managed on behalf of beneficiaries under the terms of a trust agreement, will, or agency agreement. 19 Industry revenue is defined as the income generated by the assets in the entity, which may be in the form of interest, dividends, and other investment income. 19 This income may be held by the entity or distributed to beneficiaries.
The location of will and trust grantors is based on their tax filing status and is influenced by the age and wealth of a state's population. 19 States with large numbers of people aged 65 and older typically utilize industry products more.
Financial institutions compete based on fees and investment reputation provided to fiduciary services to trusts. 19 This competition will increase as growth in the upper middle class and high-net-worth individuals increases demand for the industry's services.
Trusts and Estates Profit Margins
The market size, measured by revenue, of the Trusts & Estates industry was $260.1 billion in 2023. 20 The market size of the Trusts & Estates industry increased by 17.8% in 2023. 20 Between 2018 and 2023, the market size of the Trusts & Estates industry in the US has grown at an average annual rate of 5.7%. 20
The primary negative factor affecting this industry is low barriers to entry, while the primary positive factor is a growing life cycle stage. 20
Profit has grown due to rising asset values. 19 Additionally, smaller charitable donations, distributions, and taxes have put upward pressure on profit. 19
The Real Estate Investment Trusts (REITs) industry, closely related to the Trusts and Estates domain, provides insights into the profitability of the sector. The following table presents key profitability ratios for the REITs industry as of Q1 2024: 21
| Profitability Ratio | Value |
|---|---|
| Gross Margin | 75.34% |
| Gross Margin Annual (TTM) | 75.8% |
| EBITDA Margin | 58.94% |
| EBITDA Margin Annual (TTM) | 54.18% |
| Operating Margin | 28.8% |
| Operating Margin Annual (TTM) | 29.24% |
| Pre-Tax Margin | 18.16% |
| Pre-Tax Margin Annual (TTM) | 13.94% |
| Net Margin | 17.38% |
| Net Margin Annual (TTM) | 13.73% |
Leading Trusts and Estates Firms
Trust and estate attorneys play a crucial role in assisting clients with the efficient and effective transfer of assets to spouses, younger-generation family members, other intended beneficiaries, and charities. 22 Their services involve preparing trust agreements, wills, powers of attorney, medical directives, and closely held business structures, including partnerships, limited liability companies, and corporations. 22
When beginning the planning process, attorneys consider the client's objectives, family relationships, charitable inclinations, and the relationship of federal and state estate tax, gift tax, and generation-skipping transfer tax laws to these objectives. 22 They work with clients and other advisers to design an appropriate plan, prepare necessary documents, and assist with implementation. 22
Trust and estate attorneys also handle estate administration, conferring with the decedent's family on various issues, such as preparing probate documents, valuing estate assets, making insurance claims, preparing tax returns, monitoring asset investment, and arranging for the distribution of the estate's net assets. 22
In the trust administration area, attorneys advise and consult with corporate and individual trustees concerning the discharge of the trust's terms and consult with beneficiaries on trust administration matters, including preparing trust accounts. 22
Trust and estate attorneys assist clients in all phases of probate and trust litigation, such as construing or reforming the terms of a will or trust, prosecuting or defending will contest actions or surcharge actions against trustees. 22
The goal of a trust and estate attorney is to assist clients in achieving their personal goals while obtaining significant tax savings through proper planning. 22 Attorneys in this practice spend a significant amount of time dealing with federal estate, gift, and generation-skipping tax issues involved in transfer planning. 22
Software Publishing
Software publishing is a segment of the computer software industry that is focused on the development and publishing of software products. 23 The software publishing industry is a highly profitable industry, with many companies generating significant revenues and profits from their software products. 23
Software Publishing Industry Overview
The market size, measured by revenue, of the Software Publishing industry was $528.5 billion in 2023. 24 The market size of the Software Publishing industry declined by 1.1% in 2023. 24 However, the market size of the Software Publishing industry in the US has grown at an average annual rate of 7.5% between 2018 and 2023. 24
The primary negative factors affecting this industry are high competition and medium barriers to entry. 24 The market share concentration for the Software Publishing industry in the US is moderate, which means the top four companies generate a significant portion of industry revenue. 25
Software Publishing Profitability
Over the past 20 years, industry revenue more than tripled, untouched by the Great Recession and boosted by the pandemic. 26 Microsoft Word and Excel have enabled executives and schoolchildren to command words and numbers easily. The industry has been richly rewarded for these world-changing applications, with revenue climbing at a CAGR of 6.9% to $160.4 billion in 2023, with profit reaching 15.8% and revenue rising 2.1% in 2023 alone. 26
The major companies writing operating systems (think Microsoft, Apple, Google) have become some of the world's largest, primarily due to their omnipresence in the devices people use almost hourly across much of the world. 26 Operating system giants have demonstrated that the downstream benefits to alternate software revenue more than make for the high sticker price for an OS. 26
Top Software Publishing Companies
Some of the top software publishing companies include Microsoft, Adobe, Oracle, and SAP. 23 Technology companies have always been lenient when offering employees remote work packages, and very few require in-person attendance to this day. 26 Having synergistic benefits between software is also a feature desired by time-strapped business clients. 26
Complimentary services have become the core revenue generator for operating system developers. Apple+, Microsoft 365 and Google One each bring in revenue outstripping the cost of operating system development and are connected to each company's operating system with synergistic features. 26
However, regulators have begun restricting the largest operating system and productivity software developers, citing anticompetitive practices, disregard for the environment, and personal privacy violations. The European Union and California have taken the lead on this movement, though the Biden administration's word on the subject will carry the most weight for Microsoft, Apple, and Google. 26
Conclusion
Throughout this exploration, we've traversed a broad spectrum of the most profitable enterprises in the U.S., from the fiercely competitive arenas of investment banking, portfolio management, and software publishing to the enduring solidity of trusts and estates. Each sector reflects unique catalysts and pressures, where innovation, technological advances, and strategic management practices play critical roles in driving profitability and shaping market dynamics. By offering an overview of various profitable industries, this article aims to serve as a comprehensive guide for entrepreneurs and investors looking to navigate the complexities of the American economic landscape, seeking opportunities that align with their business models and financial objectives.
The insights provided underscore the significance of adaptation and forward-thinking in sustaining success across diverse economic sectors. As we consider the future of these industries, it becomes clear that continued exploration, coupled with a keen awareness of emerging trends, will be vital for those aiming to capitalize on new opportunities. Moreover, the evolving nature of global markets and the increasing emphasis on digital transformation suggest that flexibility and innovation will remain indispensable to achieving and sustaining profitability. Thus, whether one's interest lies in the high-stakes world of finance or the rapidly evolving domain of software publishing, the key takeaway is the paramount importance of strategic planning and adaptability in the pursuit of economic prosperity.
FAQs
What are some of the most profitable businesses in the United States as of 2023? In 2023, the most profitable businesses in the United States include professional services and real estate, non-manufacturing goods production, finance and insurance, business support and consumer services, retail, healthcare and education, leisure and hospitality, and manufacturing.
Which types of businesses yield the highest return on investment? Businesses that typically offer the highest return on investment include content development agencies, organic soap and candle making, cybercafes, travel and tourism agencies, digital marketing companies, event management companies, cleaning businesses, and cloud kitchens.
What are the quickest and most profitable businesses to start? Some of the fastest and most profitable businesses to initiate are food trucks and food stands, accounting and bookkeeping services, kids' activities, landscaping services, IT services, electronics repair, auto repair, and vacation rentals.
Which industries are expected to grow rapidly in 2024? The industries anticipated to experience rapid growth in 2024 include e-commerce, online education, healthcare and fitness, home improvement, pet care, travel and tourism, financial technology (Fintech), and cybersecurity.
