Small businesses employ millions of professionals across dozens of industries. Every year, new companies open their doors and provide jobs to help drive their local economies. However, not all small business ideas are right for every moment.
In 2023, you’ll need to be prepared to adapt to shifting customer expectations, global conditions and economic realities. If you’re thinking about starting a business this year, here’s what you need to know about the current small business landscape and the opportunities available.
- What’s considered a “small” business?
- How many small businesses are there in the United States and Canada as of 2022?
- How can I start a small business?
- What is a good business to start in 2023? (Featuring 20 small business ideas)
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What’s considered a “small” business?
The SBA defines a small business as any company that either employs fewer than 500 employees or falls beneath a specific annual receipts cap.
Most small businesses in the U.S. are much smaller—the average small business employs 1 to 19 people.
How many small businesses are there in the United States and Canada as of 2022?
As of 2022, there are about 33.2 million small businesses operating in the United States and more that 1.28 million in Canada, which is a whopping 99.9% and 98.1% respectively of the total number of businesses in each country.
Small business owners employ 61.7 million people which make up almost half of the workforce in the US and 10.3 million in Canada, two-thirds of the workforce.
How can I start a small business?
So you’re ready to make being your own boss your full time job? Here’s what you need to do.
- Research your small business idea. Articles like this are a good start. Also make sure to research wider economic conditions and outlook and the general health and makeup of businesses in your area.
- Start planning your business. Download a business plan and start filling it out. Be as detailed as possible, and if you run into anything you don’t know the answer to, take the time to research it thoroughly. The more concrete your business plan, the stronger foundation you have to start your small business.
- Secure funding. Using your business plan, start approaching sources of funding, like banks and investors.
- Make sure the legal parts are covered. What certificates do you need? What permits? What laws should you be aware of? Start putting these in motion.
- Secure a location. If you’re opening a small business with a brick and mortar presence, you’ll need a location. You should have scouted some while making your business plan, so now that you have your funding, sign a lease.
- Get your business management software. If you’re opening up a retail store or charging for services, you’ll need a point of sale system. If you have employees, you’ll need payroll management. No matter what type of business you’re starting, you’ll need accounting software.
- Acquire inventory. Find wholesalers for small businesses from which to source your products and start contacting them. Expos and online supplier directors are great places to start.
- Build a team. If you’re just starting out, you may be able to run your business by on your own. But as things progress, you’ll nee to bring in in part-time or full-time employees. Make sure you research average wages in your area.
- Build your website. Having an online presence is crucial, even if you’re not planning to sell anything over ecommerce. Build a site and open your social accounts.
Want more advice? Check out our in-depth article to starting a small business here.
What small business idea is most profitable?
There isn’t one answer to this question. The most profitable business idea changes depending on the economic environment you’re in.
In an economic boom, profitable small businesses include luxury goods, travel and real estate.
In a recession, important services, essentials and repair and resale retail are more likely to be profitable.
No matter what, for a business to be profitable, the return needs to be higher than the investment. That doesn’t always mean a low investment is guaranteed to pay off—some of the most lucrative businesses require high initial capital.
However, businesses that require a high initial investment are always a higher risk. If you’re opening your first small business, a low investment business idea is probably going to be safer.
What businesses make a lot of money?
A business in a high-growth industry with low startup costs, less competition and a good long-term outlook is most likely to be profitable. Examples are financial services, personal services (like personal training or pet care), pet and baby supplies and well-positioned retail stores.
No matter the industry, profitable businesses are well run, in demand and with a cost of goods sold (or COGS) that doesn’t completely overpower revenue. A business without a lot of competition can fail, and a business with a ton of competition can out-compete the others.
If you want your business to make money, you need data.
Before you start your business, you need data about the economic climate, the demographics of where you want your business to be based, the outlook and tactics of competitors and the cost of supplies, technology and labor.
Once your business is open, you need your own data. For example, if you open a retail store, you can use tools like Lightspeed’s built-in reports and Advanced Reporting to monitor your sales, trends and margins. With that data in hand, you can make decisions about profitability instead of relying on anecdotes and educated guesses.
Without data, your small business might run into expensive potholes you never saw coming, and you might make decisions that aren’t in your best interest.
Which business is most profitable in future?
If you want your business to be profitable in the future, you need to be sure you’re innovating.
Again, this is where data is important. The way things have always been done isn’t always the best way. If you’re setting and measuring goals and key performance indicators, you can innovate and stay on top of what your customers need and how they’re evolving.
Let’s take financial services, for example. Everyone needs financial services, so it’s likely to still be a profitable industry in the future. But as more and more digital natives—people born after the internet took over our daily lives—grow up, how they interact with financial services will change. Is your financial services company equipped to serve clients online? If you want the best chance to be profitable in the future, it should be.
Be careful about fads and trends—they won’t always set you up for future profitability if you don’t address them properly.
Take the retail industry for an example. As concern for the environment grows, fewer shoppers want plastic in their goods. Right now, Vegan leather is a huge trend and is growing, which means it may be a good bet in this moment, but a lot of vegan leather is actually plastic. To ride the vegan leather wave now and into the future, it’d be best to carry vegan leather made from sources other than plastic. That way, you’re catering to current demand and future-proofing against growing consumer concerns at the same time.
Which business is most profitable for beginners?
If you’re a first time business owner, you’ll want:
- Reasonable startup costs. Every business has some startup cost, but there’s a difference between funding a small operation and funding a huge, specialized business. Keep in mind that startup costs should be reasonable, but not always as low as possible–forgoing a physical location might make it harder to get off the ground, and opting for pen-and-paper instead of a cloud point of sale system will just add extra work.
- Manageable overhead costs. Once a business is established, you’ll need the operating costs to be reasonable.
- Maximized inventory, if applicable. This doesn’t mean a lot of inventory. It means being smart about it—everything you order should be done with a strategy to sell it within six months (give or take depending on industry).
Examples of businesses that fit the bill are cleaning companies, online stores and/or dropshipping and pet services like grooming or walking.
