You’ve got to spend money to make money. But that doesn’t mean you have to risk all your life savings to get a small business off the ground.Here’s a roundup of small business ideas that could turn you a high profit with a small investment.
First things first, let’s define what we mean by the term ‘high profit.’ And the simple answer is: it depends.There are several factors that can influence whether your profit is ‘good’ or not. Here are just four of them.
It’s no secret that some industries are more profitable than others. We’ll dive into this in more detail later. For the time being, consider this.The alcohol industry had a gross profit margin of 46.25 percent in the third quarter of 2018. By contrast, the agricultural industry’s gross profit margin during the same period was 16.77 percent. Gross profit margin is the sum of your total sales minus production costs before tax, expressed as a percentage.
And here, you’re in for some good news. Smaller businesses typically have fewer expenses. And this may have a positive effect on their profit margin.Think about it. As a small business, you probably have only a handful of employees (if any). And you might work from home, which means there’s no office rent to pay. As a result, you get to keep a larger slice of your income.A large business, on the other hand, probably has a large payroll, a big office space and other overheads. Inevitably, this will eat into their profit margin.
The longer you’ve been in business, the greater your chances of having a higher profit margin.Again, this stands to reason. When you’re just starting out, you probably won’t have much income coming in. Meanwhile, you’ll have business bills to pay, such as the cost of advertising and insurance. But, over time, you’ll build your client base and, so, increase your income.
Let’s say your business’s profit margin is 12 percent. If you’re happy with where you are right now, this is a good profit margin. But what if you have dreams of world domination? Can a 12 percent margin absorb the cost of new equipment or other expenses you need for your business to grow?
Unfortunately, the Office of National Statistics doesn’t hold information about the average profit margin of small businesses in the UK. That said, it does hold information on the average profit margin of UK companies in general:
So what would this look like if we were to translate it into cold, hard numbers?Legal and General’s State of the Nation’s SMEs report splits the average small business profit in the UK into three categories:
Ah! That’s the million-pound question, isn’t it?Luckily, there are lots you can do. Here are a few ideas.
It sounds obvious. But the less you spend, the more of your money you get to keep. So, it’s worth having a look at your business expenses and trying to figure out ways to reduce them.Here are a few tips:
This is super important. You don’t want to charge too much, or your customers will go elsewhere. At the same time, you have to make sure you’re charging enough to make a reasonable profit.If you sell products, you could use this simple formula to set your prices: (labour costs + materials) x 2.Let’s say you make jewellery. It takes you about four hours to make a piece. You’d like to earn about £20 an hour. You also have to buy £40 worth of materials.You’d price the finished piece of jewellery as follows:
But what if you sell a service?You could work out your price using a similar formula to the one above. So, you’d work out the labour costs involved in providing the service, add in your overheads and add a markup.Alternatively, you could use value-based pricing:
It costs five times as much to get a new customer than to keep one you already have. So, while drumming up new business is important, don’t do it at the expense of your current customers.You can add even more value and boost your revenue into the bargain by upselling or cross-selling.Let’s say you have an electronics shop. A customer walks in to buy a new TV. You could add more value and boost your revenue by asking whether they’d also like to buy a DVD player.Even better, you could start stocking cables, batteries and other bits and bobs your customers might need to set up their new TV. Or offering a repair service should something go wrong.
In business, time is money. The more efficient your processes are, the more work you can get done. And the more money you’ll earn.Here are a few things you can do to boost your productivity:
So you’ve got an idea of what a ‘good’ profit margin should look like. And you’ve picked up some tips to help you make your business more profitable.But let’s get more specific. What’s a very profitable business to get into in the UK with a relatively small investment?Here’s a roundup of the top five:
Skilled carpenters, joiners, plumbers and blacksmiths are becoming increasingly rare. As a result, you can expect to charge a fair chunk of change for your services.According to a study, UK tradesmen make, on average, £10,000 a year more than University graduates, with plumbers and electricians earning more than architects or accountants. And bricklayers in London can earn as much as £90,000 a year.Yes, you read that right.
Don’t have what it takes to be a skilled tradesman? Being an accountant is still a good choice. More Brits are going self-employed than ever before, and someone has to do their taxes, right?These days, you can work as an accountant from anywhere. All you need is a laptop and an internet connection. And, if you’re really good, you can expect to hit upwards of six figures.Don’t fancy studying that long? Becoming a bookkeeper is easier. And it can still be lucrative.
Handy with computers?Have excellent organisational skills?Good communicator?An IT consulting business could be right up your street.Experienced IT consultants can expect to earn £550 or more. Per day. And, best of all, you can typically work from anywhere using just your laptop.
Love being around kids? Fancy making a living caring for them? You could start offering child-minding services from the comfort of your own home.To do this you’ll need to:
With house prices skyrocketing across the UK, more and more people are opting to renovate their current property instead. Problem is, many aren’t cut out for DIY. In one survey, 77 percent admitted to having made a blunder that blew their budget.The average Brit spends £3,000 hiring professionals to fix their DIY mistakes. So, if you’re handy around the house and enjoy it, this could be the perfect business opportunity. Best of all, you don’t need much initial investment: a set of quality tools, safety equipment and a van should do it.And there you have it, five profitable businesses you can start with little investment.So go on. Pick one, roll up your sleeves and let’s make some money.