Key takeaways
- 1By profit margin, the most profitable small businesses are knowledge and licensed services: psychiatry (55.1%), therapy and counseling (50.9%), management consulting (50.2%), building inspection and surveying (50.1%), physicians (46.1%) and law (43.8%). None of them carries inventory or a storefront.
- 2By what the owner actually keeps, dentists lead at $86,566 average net profit per return, then physicians ($70,959), psychiatrists ($62,785) and lawyers ($59,807). Most of the "high margin" businesses on the internet lists pay their owner $20,000 to $40,000 a year on average.
- 3The businesses first-time owners open most often sit at the bottom: restaurants and bars average a 3.4% margin and $3,995 of profit, clothing stores lose money on average and only 38% report any profit at all. The average across all 31 million filers is an 18.3% margin and $12,119 of profit, and only 69% made a profit.
In this article
Search "most profitable small businesses" and you get the same twenty ideas on every page, ranked by nobody, with margins that trace back to a blog quoting another blog. There is a better source. Every sole proprietor in the United States files a Schedule C with their tax return, and the IRS publishes the totals by industry: how many people filed, what they took in, what they spent and what was left. That is 31.1 million businesses for tax year 2023, the latest year published. We divided profit by receipts to get a margin for each industry, profit by filers to get the owner's average take, and counted how many filers made any money at all. The ranking that comes out looks nothing like the listicles.
The short answer
The most profitable small businesses in America, by margin, are services that sell a person's knowledge or license and carry no inventory, no storefront and almost no staff.
| # | Business | Profit margin | Avg net profit per return | Share with a profit | Returns filed |
|---|---|---|---|---|---|
| 1 | Psychiatrists (physicians, mental health) | 55.1% | $62,785 | 86% | 56,136 |
| 2 | Therapists and counselors | 50.9% | $29,827 | 79% | 328,355 |
| 3 | Management and technical consulting | 50.2% | $30,371 | 67% | 1,109,907 |
| 4 | Drafting, building inspection, surveying | 50.1% | $25,270 | 85% | 53,024 |
| 5 | Physicians | 46.1% | $70,959 | 80% | 181,294 |
| 6 | Legal services | 43.8% | $59,807 | 77% | 316,370 |
| 7 | Engineering services | 41.8% | $38,300 | 70% | 94,550 |
| 8 | Bookkeeping and tax preparation (non-CPA) | 39.3% | $13,797 | 76% | 333,080 |
| 9 | IT and software services | 37.0% | $19,550 | 70% | 318,183 |
| 10 | Scientific research and development services | 36.8% | $10,915 | 75% | 64,361 |
| 11 | Child care and social assistance | 36.7% | $11,707 | 82% | 803,710 |
| 12 | Insurance agencies | 36.1% | $38,199 | 71% | 313,543 |
Two things stand out. First, the top of the list is dominated by people who are their own product: a psychiatrist, a counselor, a consultant, an inspector. A 50% margin means half of every dollar a client pays ends up with the owner, because the main cost of the business, the owner's own time, is not a deduction on Schedule C. Second, most of these businesses are small in dollar terms. The average consulting practice billed $60,444 and kept $30,371. The margin is high, but the pay is not.
The ranking most people actually want: what the owner keeps
A margin tells you how efficient a business is. It does not tell you whether you can live on it. Sorting the same table by average net profit per return gives a different list, and it rewards businesses that handle real money.
| # | Business | Avg net profit per return | Avg receipts | Profit margin | Share with a profit |
|---|---|---|---|---|---|
| 1 | Dentists | $86,566 | $319,670 | 27.1% | 75% |
| 2 | Physicians | $70,959 | $153,857 | 46.1% | 80% |
| 3 | Psychiatrists (physicians, mental health) | $62,785 | $113,976 | 55.1% | 86% |
| 4 | Legal services | $59,807 | $136,644 | 43.8% | 77% |
| 5 | Investment advice | $54,877 | $362,197 | 15.2% | 66% |
| 6 | Engineering services | $38,300 | $91,678 | 41.8% | 70% |
| 7 | Insurance agencies | $38,199 | $105,697 | 36.1% | 71% |
| 8 | Management and technical consulting | $30,371 | $60,444 | 50.2% | 67% |
| 9 | Therapists and counselors | $29,827 | $58,579 | 50.9% | 79% |
| 10 | Drafting, building inspection, surveying | $25,270 | $50,412 | 50.1% | 85% |
A dental practice runs on a 27% margin, half the psychiatrist's, and still pays its owner the most of any small business in the country, because it bills three times as much. That is the pattern all the way down: the businesses that pay best combine a good margin with enough volume to matter, and five of the top seven need a professional license that takes years to earn.
Among businesses anyone can open, insurance agencies are the standout. An agency averages $105,697 in commissions, keeps 36% of it, and seven in ten report a profit. The product is renewal commissions, which is why agencies sell for high multiples and why the owners rarely leave.
The businesses that lose money most often
The bottom of the table is where first-time owners cluster, because the businesses that look easy to understand are the ones with the thinnest margins.
| Business | Profit margin | Avg net profit per return | Share with a profit | Returns filed |
|---|---|---|---|---|
| Animal production and pet breeding | −25.3% | −$8,896 | 38% | 70,455 |
| Hotels, motels and B&Bs | −11.6% | −$12,666 | 44% | 53,829 |
| Landlords and self-storage (on Schedule C) | −5.1% | −$3,148 | 39% | 80,579 |
| Clothing stores | −2.8% | −$1,347 | 38% | 259,978 |
| Food manufacturing (small producers) | −1.2% | −$1,589 | 52% | 74,154 |
| Health and personal care stores | 0.9% | $349 | 43% | 257,296 |
| General merchandise stores | 3.4% | $1,736 | 50% | 281,379 |
| Restaurants and bars | 3.4% | $3,995 | 58% | 653,372 |
| Car and parts dealers | 3.6% | $12,563 | 65% | 132,371 |
| Grocery and food stores | 4.3% | $5,890 | 60% | 267,490 |
| Sporting goods, hobby and book stores | 5.2% | $3,485 | 52% | 119,544 |
| Oil change, lube and car washes | 5.5% | $4,348 | 59% | 122,366 |
Retail as a whole, 2.3 million filers, ran a 4.1% margin and only 52% of stores reported a profit. Restaurants and bars did a little better on the share that made money (58%), but the average restaurant kept $3,995 on $118,182 of sales. Even restricted to the restaurants that were profitable, the average profit was $21,282, less than a full-time minimum-wage job in several states. The reasons are structural: these businesses buy inventory before they sell it, pay rent on a space customers must walk into, and pay staff by the hour whether or not anyone comes in. A consultant has none of those three costs.
The clothing-store line is the one to read twice. Filings rose 16.8% in a year, the industry as a whole lost money, and only 38 in 100 owners reported a profit. Thousands of people are opening boutiques, online and off, into a business that pays most of them nothing.
The businesses people actually open
Most Neur reports are not for psychiatrists. They are for trades, food, personal services and small shops. Here is how those look in the same data, with one extra column: the average profit of only the filers who made money, which is the fairer picture of what a working business in the category earns.
| Business | Returns filed | Profit margin | Avg net profit, all filers | Avg net profit, profitable filers only | Share with a profit | Net profit change 2022 to 2023 |
|---|---|---|---|---|---|---|
| Specialty trade contractors (electric, plumbing, HVAC, roofing, painting) | 2,521,516 | 15.7% | $16,054 | $24,276 | 79% | +2.6% |
| General contractors and home builders | 795,086 | 13.2% | $18,909 | $28,504 | 81% | +6.8% |
| Personal services (salons, barbers, pet grooming, laundry) | 2,957,905 | 24.4% | $7,923 | $16,758 | 71% | +1.6% |
| Child care and social assistance | 803,710 | 36.7% | $11,707 | $17,022 | 82% | −1.6% |
| Trucking | 837,211 | 10.1% | $13,823 | $26,636 | 75% | −12.2% |
| Auto mechanical repair | 261,730 | 7.5% | $6,329 | $19,608 | 67% | −22.3% |
| Home health care | 478,730 | 12.7% | $3,714 | $15,479 | 65% | −23.2% |
| Real estate agents, brokers, property managers | 1,046,471 | 35.0% | $22,139 | $42,483 | 63% | −23.0% |
| Insurance agencies | 313,543 | 36.1% | $38,199 | $57,710 | 71% | +7.8% |
| Bookkeeping and tax preparation (non-CPA) | 333,080 | 39.3% | $13,797 | $21,679 | 76% | −12.0% |
| IT and software services | 318,183 | 37.0% | $19,550 | $33,969 | 70% | −6.8% |
| Advertising and marketing services | 179,434 | 27.4% | $20,800 | $39,045 | 67% | +13.6% |
| Design services (interior, graphic, industrial) | 306,934 | 30.3% | $14,140 | $28,369 | 64% | +15.8% |
| Restaurants and bars | 653,372 | 3.4% | $3,995 | $21,282 | 58% | −15.6% |
| Grocery and food stores | 267,490 | 4.3% | $5,890 | $19,938 | 60% | −0.2% |
| Clothing stores | 259,978 | −2.8% | −$1,347 | $18,845 | 38% | −168.3% |
| Delivery drivers and couriers | 1,434,245 | 9.0% | $1,199 | $5,301 | 71% | −39.3% |
| Rideshare, taxi and limo | 1,302,820 | 6.3% | $2,141 | $11,202 | 69% | −51.9% |
The trades are the quiet winners of this table. Specialty contractors are the largest group of real businesses in the country, 2.5 million filers, and 79% of them made money. Their margin is ordinary at 15.7%, but the share that is profitable is higher than in consulting (67%) or real estate (63%), because a plumber's customers call when something is broken, not when the economy feels good. General contractors are the same: 81% profitable, the highest of any large category outside health care.
Personal services look better on margin (24.4%) than on pay ($7,923), because the category is enormous and full of part-time operators: 3 million filers, many of them booth renters and side businesses. A profitable salon or grooming business averaged $16,758. The spread between the two columns is the clearest sign in the data that the category is easy to enter and hard to scale.
The two gig lines at the bottom are not businesses in the sense this article means, but 2.7 million people filed them, and the numbers explain a lot of the "I started an LLC and made nothing" posts. A delivery driver's average profit was $1,199 for the year, and it fell 39% from 2022.
What the averages hide
Four cautions before you plan around any of these numbers.
These are sole proprietors, not every business. Schedule C filers include everyone from a surgeon's practice to a weekend Etsy seller. The average filer billed $66,285 for the year. Corporations and partnerships, which include most restaurants with more than one location and most businesses with a loan, are reported separately by the IRS and are not in this table. The ranking is a good guide to what one owner earns from one business; it is not a guide to what a chain earns.
The owner's labor is not a cost. Net profit on Schedule C is what is left after rent, supplies, wages to employees and so on, but before the owner pays themselves. A 50% margin and $30,000 of profit means the owner worked for $30,000. Compare it with the salary the same person could earn, not with the margin of a public company.
Profit fell in 2023. Across all industries, net income dropped 8.1% from 2022 while the number of filers rose 0.5%. Real estate agents (−23%), trucking (−12%), restaurants (−16%) and rideshare (−52%) took the biggest hits. Tax year 2023 was a year of higher interest rates and slower home sales, and the table reflects it. The 2024 figures arrive in spring 2027.
Only 69% of filers made money at all. Among those who did, the average profit was $24,790, twice the all-filer average of $12,119. When you read a margin for your industry, look at the "share with a profit" column next to it. A business type where 85% of owners make money (building inspection) is a different bet from one where 38% do (clothing stores), even if a single successful boutique earns more than a single inspector.
How to use this before you open
Use the table to understand the shape of the business you are considering, not to pick one. The industries at the top are profitable because the owner sells expertise with no inventory and no storefront; if you are opening a storefront, you will not get their margin no matter how well you run it, and you should plan against the line for your own category.
Then do the one thing the national average cannot: price your own corner. The margin for restaurants is 3.4% nationally, but it is not 3.4% at your address. It is the result of your rent, your wage bill, the number of competitors a customer can see from your door and the income of the households within a ten-minute drive. A Neur report builds that estimate for a specific business at a specific address from the same government sources, counts the competitors, and scores the plan against your budget, which is a question this table cannot answer. If you want to see how we think about the four numbers behind any profit estimate, the business profitability guide walks through them.
Quick answers
- What is the most profitable small business?
- By profit margin in the IRS data for tax year 2023, psychiatric practices (55.1%), therapists and counselors (50.9%) and management consulting (50.2%). By average profit per owner, dentists ($86,566), physicians ($70,959) and lawyers ($59,807). Among businesses that do not need a professional license, insurance agencies (36.1% margin, $38,199 average profit) and bookkeeping and tax preparation (39.3%) rank highest.
- What small businesses have the lowest profit margins?
- Retail and hospitality. In the IRS tables, clothing stores (−2.8%), health and personal care stores (0.9%), general merchandise stores (3.4%), restaurants and bars (3.4%) and grocery stores (4.3%) have the thinnest margins of any common business, and fewer than six in ten of them reported a profit at all. Hotels, motels and B&Bs run by individuals lost money on average.
- Where does this profit data come from?
- The IRS Statistics of Income division publishes totals from every Schedule C filed with individual tax returns, grouped by industry: number of returns, business receipts, deductions and net income. Neur divided net income by receipts (margin) and by the number of returns (average profit) for each industry. The latest year published is tax year 2023, released in March 2026.
Sources and method
Internal Revenue Service, Statistics of Income Division, "Nonfarm Sole Proprietorship Statistics," Table 1: Business Receipts, Selected Deductions, Payroll, and Net Income, by Industrial Sector, tax years 2023 and 2022 (published March 2026; downloaded October 22, 2026). All figures are estimates based on samples of Schedule C returns. Profit margin is net income less deficit divided by business receipts; average net profit is net income less deficit divided by the number of returns; "share with a profit" is the number of returns with net income divided by all returns in the industry; the year-over-year change compares net income less deficit for 2023 with 2022. Industry names are shortened from the IRS sector labels. Industries with fewer than 50,000 returns and the "religious, civic and similar organizations" line are excluded from the ranked tables.
Researched and drafted with AI assistance from the public data above, then reviewed by Neur before publishing. Figures carry the date they were checked; the update date changes when a figure is corrected. How Neur Research works. Informational only; not business, legal or financial advice.
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