Why a ranked list is the wrong starting point
Top-industry lists ignore your capital, location and skills. A business that works in one market can fail in another.
A hot industry attracts competitors. A boring one may pay better because few people want to do the work. What matters is the match between the market, your abilities and the money you can put in.
Start by asking three questions. What problem can you solve better than the alternatives? Who already pays to have it solved? Can you reach them at a cost that leaves profit?
Five factors to score every idea
Compare ideas on startup cost, margin, demand stability, competition and fit with your experience.
Give each idea a score from 1 to 5 on these points:
- Startup cost. Equipment, licenses, inventory, deposits.
- Gross margin. What is left after the direct cost of delivering the product or service.
- Demand stability. Does it sell in slow economies and in every season?
- Competition. How many alternatives do customers have, and how do they differ?
- Your fit. Do you know the work, or can you learn it fast?
Add up the scores, then test the top two against real customers before spending much.
Industries with steady demand
Businesses that serve needs people cannot postpone, such as repair, health, home upkeep and food, tend to hold up in slower periods.
Consider categories where customers pay because something is broken or required: auto repair, home services, healthcare support, professional services and food. Our guide to recession-resistant businesses explores this in depth.
Steady demand is not the same as easy money. Many of these trades need licenses, insurance and skilled labor. Check your state's rules before you commit.
Low-cost versus capital-heavy starts
Service and consulting businesses can start with little money. Restaurants, trucking and manufacturing need far more capital up front.
A solo consultant may need a laptop and a few hundred dollars in setup. A restaurant needs equipment, build-out, inventory and months of runway. Neither is better in the abstract. Low-cost businesses grow slower unless you add staff or tools. Capital-heavy ones carry more risk but can have more room to scale.
See business startup costs and the most profitable businesses for ways to estimate your own number.
Test the idea before you commit
Sell to a few real customers first. Their willingness to pay tells you more than any research report.
Before you sign a lease or buy equipment, take small steps:
- Talk to ten potential customers and ask what they pay now.
- Pre-sell or run a small pilot.
- Calculate break-even: fixed costs divided by margin per sale.
- Draft a 12-month cash forecast.
If the numbers only work with best-case assumptions, change the plan, not the assumptions.
A simple example of scoring two ideas
Scoring forces tradeoffs into the open. Two ideas that sound equally good often look very different on paper.
Illustrative example: you compare a mobile cleaning service and a small online store. The cleaning service scores 5 on startup cost because a van and supplies are cheap, 3 on margin and 4 on demand stability. The store scores 3 on startup cost because of inventory, 4 on margin and 2 on demand stability because of trends.
The totals are close, so the tiebreaker is fit. If you have cleaning experience and local contacts, that service wins. If you have a product you already know sells, the store may. The goal is not a perfect score. It is to see the weak spot in each plan, so you can test it cheaply before you spend real money.
Funding a startup versus an established business
Most funders want a track record. ROI Funder works with businesses that have 6+ months of operating history and $20,000+ in monthly revenue.
Brand-new businesses usually rely on savings, family, grants or personal financing. ROI Funder does not place startup loans for businesses under 6 months old. Once you have revenue, products like working capital or equipment financing may help you grow, with 500+ FICO considered.
For options at the earliest stage, read bootstrapping a small business startup.
Frequently asked questions
What business is easiest to start?
Service businesses with low equipment needs, such as consulting, cleaning or bookkeeping, usually cost the least to start. Ease also depends on your skills and local rules.
Which industries have the highest margins?
It varies by business model. Professional services and software often have higher gross margins than retail or food, but they depend on skill and sales effort.
How much money do I need to start a business?
It ranges from a few hundred dollars to hundreds of thousands. Build a startup budget and a 12-month cash forecast to find your number.
Can I get funding for a business under 6 months old?
ROI Funder requires 6+ months in business. For newer businesses, look at savings, grants, bootstrapping and personal options.