30 Mar

Which Small Businesses Have Money to Spend?

As the economy recovers, and pent up demand for goods and services starts taking off, you’re going to want to know which small businesses have money to spend.

Obvious targets are the small businesses with the highest profits. Those businesses typically have the highest free cash flows, too. In other words, they have money to spend.

According to Sageworks Inc., here are the 20 industries with the highest EBITDA (earnings before interest, taxes, depreciation and amortization) in the past 12 months, for the period starting 2/16/2008 and ending 2/16/2009. (EBITDA is a proxy for cash flow from operations.)

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Small business with highest EBITDA, 2/16/2008 to 2/16/2009

Small business with highest EBITDA, 2/16/2008 to 2/16/2009

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And which businesses have the least spending cushion after the long recession?  Here are the 20 industries with the lowest EBITDA:

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Small business with lowest EBITDA, 2/16/2008 to 2/16/2009

Small business with lowest EBITDA, 2/16/2008 to 2/16/2009

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  1. Susan Kishner said on March 30th, 2009 at 3:12 am

    A friend of mine just emailed me one of your articles from a while back. I read that one a few more. Really enjoy your blog. Thanks

    Reply
  2. Amanda said on March 30th, 2009 at 10:18 am

    Interesting stats. I’m shocked that grocery stores are amongst the lowest. With food being a necessity, these numbers must be the result of families severely cutting back. Somehow I just thought that grocery cutbacks weren’t quite that severe.

    Reply
  3. Anita Campbell said on March 30th, 2009 at 1:19 pm

    Thanks Susan!

    Amanda, I think the low numbers for grocery stores simply reflect that there are narrowly thin profit margins traditionally in grocery stores. I’ve always heard that they have a lot of inventory waste (expired produce and bakery goods, etc.) and high operating costs with high utilities, and so forth. So it may not necessarily be that consumers have cut back, just that grocery stores don’t have a lot of cushion in their operating budgets, in general.

    – Anita

    Reply
  4. Arthur Bland said on March 31st, 2009 at 4:40 am

    Wow. Real Estates again. What do you think Anita? Does a real estate business a good choice to start your business based on the data you presented above?

    Reply
  5. Rose Anderson said on April 1st, 2009 at 2:19 am

    IMHO Arthur, I think they really are. Consider also the other fact that these assets never depreciate, do they? And yes they are, if and only if, you have the capital.

    Reply
  6. Martin Lindeskog said on April 1st, 2009 at 9:53 pm

    I think that hard assets, like real estate could be an interesting market in the future.

    Reply
  7. Rose Anderson said on April 14th, 2009 at 3:12 am

    Yes Martin. It is always interesting. Imagine how good these assets are because their value never depreciate.

    Reply
  8. John Schneeberg said on May 11th, 2009 at 9:02 am

    Curious how these stats may differ by US geographic region (if any)

    Reply
  9. Jennifer Rai said on May 19th, 2009 at 3:47 pm

    Great info, thank you for sharing. Second time I have been routed to your blog when looking up topics. Nice work!

    Reply
  10. Martin Lindeskog said on June 1st, 2009 at 5:46 am

    Anita,

    Have you seen any changes in the trends since last time they checked? It is soon “half time” and more data has been collected. Any industry that is sticking out? Do you see improvements in some industries?

    Reply
  11. Henri Schauffler said on April 23rd, 2010 at 10:46 am

    Very interesting info, Anita. It still holds true, however, that all small businesses have the same fundamental issues – owners are not running their businesses like a true entrepreneur from the strategic level.

    Those selling to small businesses can keep this constant need into account as they seek to fill needs.

    Great new site, BTW!

    Reply
  12. mentoring programs said on January 20th, 2011 at 9:44 am

    This means that the business has a good cash flow and very liquid to spend the expenses for the business. A good business has less liabilities. Thanks!

    Reply
  13. Kirill Storch said on February 16th, 2011 at 1:59 am

    Very cool, thanks for giving us something to set our sights on. Question: We are attempting to market to small businesses by creating custom branding concepts for them via a conversion app. The app is housed here:

    http://mindflashad.com/branding-concept-quiz-design/

    The idea is to give people branding ideas before pitching them. Do you feel this is a good approach? We would like a professional’s take on this tactic of converting via app as opposed to form.

    Reply
  14. Jeffrey Gross said on April 7th, 2011 at 2:10 am

    @Anita Campbell: True Anita, Grocery has certainly fewer margins, which can only be increased if the buying is in bulk.

    Reply
  15. Marshall Hatfield said on October 11th, 2011 at 9:27 pm

    I’m surprised to not see software companies on the top 20 . . .

    But otherwise all seems to be expected by my read.

    Strangely enough, my marketing services company mostly services small businesses in the top 10 market verticals almost exclusively. This was by nature more than by design – which goes to show that for those of us who are B2B service providers – this list is also probably commonly indicative of our own clients’ industries.

    Reply
  16. ShyEntrepreneur said on February 10th, 2012 at 2:12 pm

    With small businesses the funny thing is the companies with the higher margins generally have the lower volumes. What does that mean? It means that they may be bringing in more per sale but their overall liquid funds may not be that great. The art here is finding the companies that maintain both a high margin while accommodating larger volumes. If anyone figures out how to find this sweet spot let us know :-)

    TJ Mollahan
    ShyEntrepreneur.com

    Reply
  17. Suzi Holand said on July 6th, 2013 at 9:15 am

    Real state guyz are big and its obvious that this people will have the highest money.But “offices of dentist” ? i m shocked

    Reply

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