#BusinessProfitability #IndustryAnalysis #BusinessStrategy
Hey fellow entrepreneurs! 👋 Let’s talk about something crucial that often gets overlooked: the importance of profit margins in different industries. Not all businesses are created equal, and some industries are just tougher to make money in than others.
Here are some thoughts I’ve been pondering recently:
– Starting a business in a highly competitive industry with low margins can lead to an uphill battle for profitability 📉
– High margin businesses provide more room for error and allow for better financial stability 💰
– It’s essential to do thorough research and analysis before diving into a new business venture to assess the potential profitability
So, what do you think? Have you considered profit margins when deciding on your business strategy? What industries do you think are the most challenging in terms of making a profit? Let’s share our insights and experiences to help each other succeed! 🚀
I disagree, profit margin alone doesn’t determine if a business is “good” or not. Low profit industries tend to be more stable, and society (North American especially) is a little too used to the Pax Americana. The bad times come eventually.
Farms have very low margins, but people will always need food. Worst case scenario, you can at least feed yourself.
An Uber clone or niche Saas looks sexy with their limited overhead, but one economic downturn or politically unstable event later and your main demographic (urbanites with money to spend) is no longer reliable.
In short: there’s a reason the businesses that have lasted *hundreds of years* are family owned and in low margin industries. They can take hell and keep going, since they address an ever present need.
Agree. It also depends in which country you live in/work for. I’ve been a structural engineer for 5 years, did a relationship coaching business for 2-3 years, run now a Photobooth business for the last 1-2 years, and work on mobile apps for the last 1 year. Some will require more responsibility for less money, and there will be some which requre less responsibility for more money (still have to do the SMART work). Not to mention the importance of being free and being able to do the job from wherever you want.
“If you start a business where there is lots of competition AND the margins are low”
I think those two things don’t always come together. There are industries where there is a lot of competition BECAUSE the margins are high, e.g. Tech. And there are industries where margins are low because of competition, e.g. food retail and restaurants. Competition can be high because of low entry barriers and a popular field, e.g. restaurants or video editing gigs on Fiverr.
Examples of good vs bad margins?
Naval Ravikant’s ideas address this. I’ve really enjoyed his perspectives. Free online: https://navalmanack.com
Could you please give examples of bad industries and good industries