The 10 Worst Industries for Starting a Business
Looking for a business idea in a fast-growing sector? If so, you should steer clear of the industries below.
Sageworks has identified the industries that have experienced the slowest sales growth during the 12-month period ending October 23, 2015. At the top of the list is the Land Subdivision industry, comprised of companies dedicated to servicing land and subdividing real property into lots. Businesses in this sector have seen revenue contract 1.7 percent year over year. The bright side is, it's the only private company industry in the U.S. seeing negative revenue growth over the past year.
When an industry experiences contracting sales, a combination of internal and external factors are likely responsible, says Sageworks analyst Libby Bierman. Business owners witnessing a sales slowdown should take a close look at revenue models to determine problem areas, like underperforming locations or product lines.
In addition to land subdivision, retail is heavily represented on the slowest growing list. Retail industries included on this list were Jewelry and Luggage Stores, Sporting Goods and Musical Instrument Stores, Gasoline Stations, and Grocery Stores. Each of these four sub-sectors is growing revenues at an annual rate of less than 2 percent, compared to the average annual sales growth of 9.5 percent among all private companies.
One possible explanation for this slower rate of retail growth, of course, is the shift towards e-commerce and online retailers. Privately held brick-and-mortar retail companies are facing more competitive pressure than ever from online retail, as well as big box retailers.
"Even Amazon.com is becoming a common grocery store for some consumers," Bierman says.
The list also includes several industries within healthcare, such as Outpatient Care Centers and Medical and Diagnostic Laboratories. Inclusion on the list is far from a death sentence, however, as sales growth only tells part of the story, Bierman says. Without the context of other data, like net profit margin and previous periods' sales percent change, the most recent sales figures can be slightly misleading.
Legal Services is one industry where slow sales growth does not tell the full story, Bierman says. The growth may be slow but it is also consistent, and companies in this sector are much more profitable than the average private company.
Check out the table below for the full list of the slowest-growing sectors in the U.S.