Original Article: 10 Most Profitable Businesses in 2021 – Insider Monkey
In this article, we will take a look at the 10 most profitable US companies in 2021.
With the pandemic of 2020 wreaking havoc on businesses and even entire industries in a matter of days, it is altogether too soon to predict the success, or lack thereof, of businesses and industries in 2021. However, given current circumstances and the business environment, the following businesses have been identified as the most profitable in the United States for the year 2021. The analysis has been conducted on the basis of the business environment in the US, the prevalence of periodic COVID-19 outbreaks, and the long-term prospects of the businesses.
With this context and industry outlook in mind, let’s start our list of the 10 most profitable US companies in 2021.
Photo by Kelly Sikkema on Unsplash
10. Tutoring Business
The majority of schools and colleges in the United States are offering online classes instead of allowing students to attend classes on campus due to the prevalence of the COVID-19. The tutoring business is especially profitable during the COVID-19 pandemic as students do not understand their lessons sufficiently via remote learning. Startups such as TeacherPod were solely designed to meet the students’ rising demand for tutors. Moreover, tutoring companies based in the United States such as Chegg and Club Z! Inc., have been thriving.
Tutoring businesses in the United States may specialize in one, or more, of the following:
- Natural Sciences
- Foreign Languages
- Mathematics
- History
- English
- College Essay preparation
- Entrance Tests preparation
- Management Sciences
As these tutoring services would undoubtedly be offered exclusively using video software, the startup costs for such business would be low. Moreover, the operating costs of the business would be low, as most aspects of the business would be service-oriented instead of product-oriented and fixed costs would most likely be limited to the cost of internet data and any software that the business would use. Tutoring services would be profitable both on small and large scales. The tutoring business may even consist of one or two people entirely, making the margins extremely high. As many students required tutors even before the COVID-19 outbreak, the tutoring business would flourish even after the pandemic has passed. Depending on the level of education of the tutors, the revenue earned by each tutor could be up to $56 per hour. It is hence no wonder that the size of the online tutoring industry in the US for the year 2021 is $1.3 billion with a growth of 10.2% since 2016.
9. Fitness Business
Even though gyms and all kinds of indoor fitness centers had been closed due to the impact of the COVID-19, the fitness industry has managed to flourish. The annual revenue of the industry is $27.6 billion in the United States, notwithstanding the boost in the business due to the COVID-19 restrictions. One of the most noteworthy names in the fitness industry includes Nike (NYSE: NKE), which reported a 3% increase in revenue to $10.4 billion in 2021. Moreover, the stock price of Nike increased by 57.76% in the past 12 months. Furthermore, Peloton (NASDAQ: PTON) is another fitness business that is becoming increasingly profitable. The revenue of Peloton surged 128% in 2021 to $1.06 billion from $466.3 million in 2020. The company’s share similarly increased by 319.56% in the past year.
Bloomberg revealed in their study that 54% of gym subscribers had either frozen or cancelled their memberships due to the risk of contracting the virus in gyms and fitness studios. Instead, virtual workouts were perceived by the public as the perfect alternative to in-studio workouts. The fitness booking platform Mindbody reported a 30% increase in subscribers in the beginning of 2021. Moreover, around half of the subscribers were for yoga, signifying that emotional, spiritual, and mental fitness had become as significant to the subscribers as physical fitness.
Due to the coronavirus and the consequent social distancing, virtual fitness classes have become popular as 46% of virtual subscribers of Mindbody intended to continue with their virtual fitness classes even after the pandemic was over. However, fitness companies such as Gold’s Gym, Planet Fitness Inc. (NYSE: PLNT) and 24-hour Fitness which did not adapt to the changing business environment during the COVID-19 lockdown suffered heavy losses. Specifically, Gold’s Gym was forced to permanently close 50% of its locations while 24-hour Fitness closed down 30% of its locations according to EisnerAmper.
The delivery business has been growing ever since the first restaurant in the United States offered to transport their goods to customers’ homes. As the demand for such services grew, so did the supply, with more and more restaurants and businesses offering to deliver goods to their customers. Since the 2020 pandemic, the delivery business has grown massively, as people strongly prefer to stay safe indoors while all their purchased items, from groceries to medicines, are delivered to them securely. Even after the pandemic is over, the convenience of receiving ordered goods at home will not be any less desired by the US population. While food delivery services alone generated a revenue of $26.5 billion by the end of 2020, the demand for goods delivery is expected to surge even higher in the near future.
Doordash (NYSE: DASH) is one of the most successful companies in the food delivery business. The company’s revenue grew by 241% in 2020, from $850 million to $2.9 billion. Doordash has 18 million active users in 2021, and controls 45 percent of the US food delivery market.
The competition is high in the delivery business, as there are quite a few businesses whose operations solely consist of collecting and deliveries goods, with not many factors differentiating between them. Many delivery companies have been introduced since the beginning of the pandemic and have been highly profitable since. Although the margins of the delivery service industry are low on average, some companies charge higher rates for shorter delivery times and for larger packages in addition to their standard charges.
7. Digital Marketing Business
The occurrence of technological advancements and the adoption of those advancements worldwide confirm that the digital age has arrived. With digital services such as e-commerce, e-learning, and e-banking becoming mainstream in the US, marketing is also becoming digitalized. In fact, the digital marketing business is all set to be one of the most profitable in the United States for the year 2021. With customers shifting increasingly from physical platforms and markets to digital markets, businesses need to make their presence known in their customers’ localities.
As hundreds of new startups emerge in the USA each year, there can never be too many digital marketing agencies that cater to the businesses. Moreover, new digital marketing companies would undoubtedly even give the emerging startups a better chance of their survival, making the digital marketing business a highly profitable one. With a market size of $17.2 billion, and a growth of 4.4% from 2020 to 2021, the digital marketing industry is booming. In the future, too, the industry’s prospects look promising, as it creates more jobs with a range of services. Digital marketing agencies may offer services such as web design, content creation, content writing, SEO, social media advertising, and social media management. With high margins, and ever-increasing demand, the digital marketing business is one of the most profitable in the US at present.
6. App Development Business
As coronavirus forced businesses to close their physical operations, companies raced to increase their digital footprint and capture millions of potential customers online that are spending several hours daily on their smartphones. Data from apps platform App Annie shows that over 33 billion new apps were downloaded just in the third quarter of 2020 and a whopping $28 billion was spent in apps, a 20% increase when compared to the same period last year. In order to be present in the virtual world of the internet, businesses turn to app developers to establish their digital presence. There exists a great need of businesses to build their customer apps that their customers can download, hence a great demand for app developers has emerged.
As app development does not require certification or any physical location, there is very less competition and therefore low barriers to entry for the app development business. Although, according to reports by IBIS World, there are currently 1,321 app publishing businesses operating in the United States, the competition does not discourage new app developers due to the low initial investment and sizable margins that the business can generate. The market size for the app development industry in the US is currently $31 billion, with an average growth of 7.5% annually, making it one of the most profitable businesses in the United States.
5. Accounting Business
Corporations as well as entrepreneurs alike utilize one or more of several accounting methods in order to run their daily operations as well as calculate taxes. However, many businesses and entrepreneurs do not hire in-house accountants. They instead outsource their accounting and finance departments to accounting firms or use freelance accountants and tax advisors. As accounting requires both vast knowledge and skill, as well as attention-to-detail, the accounting business has a great demand in the United States. As existing businesses grow, and new startups emerge, the demand for accounting services in the United States rises even higher.
The Big Four accounting firms — Deloitte, PricewaterhouseCoopers (PwC), Ernst & Young (EY), and KPMG — had a combined revenue of $157 billion in 2020. The forecasted revenue earned by accounting businesses in 2021 is $107.6 billion. The accounting business has highly competing companies as well as high barriers to entry in the form of both qualification and licenses to practice. Accounting firms must be well-known and reliable to be used by corporations, as audit and accounts must be accurate for all the stakeholders of the companies to be satisfied. Although the market size of accounting businesses has grown by a low average value of 0.1 % annually, the industry will continue to be one of the most profitable in the United States.
4. Legal Services Business
The legal industry is indispensable across many personal and professional sectors. Similar to accountants and accounting firms, lawyers, attorneys, and law firms are significant for both business and individuals. The range of services they offer, however, are much wider than that of accounting firms. Firms may deal with services such as constitutional law, corporate law, criminal law, family law, property and intellectual property law, employment and union law, and personal injury law. It is hence no secret that lawyers are some of the most sought-after people in the United States. Therefore, lawyers and law firms are employed by all kinds of individuals, corporations, and institutions in the United States.
The market size in terms of revenue for legal services in the United States for the year 2021 is $319.7 billion, making it the most profitable business in the US. The growth rate for law firms annually has been 0.8% on average. Although lucrative, the legal services industry has extremely high barriers to entry, as attorneys must have an undergraduate degree, attend law school, and then pass the bar exam of one of the states. Moreover, attorneys usually specialize in a specific field of the law, hence law firms must hire different specialists to cater to different customers.
3. Healthcare Business
Since the COVID-19 pandemic in 2020, the healthcare business experienced a drastic boost. With the virus affecting people of all ages and conditions, the healthcare industry was caught off-guard even though its revenues surged highly. In the United States, healthcare is funded by the government to an extent; yet it accounts for 17.8% of the entire country’s revenue. In fact, the United States spends the most on health per person worldwide.
The healthcare business in the United States is growing significantly each year. Since 2017, it has expanded by 7.3% on average, a figure that would undoubtedly increase due to the emergence of the coronavirus. According to statistics by Policy Advice, the US healthcare industry is expected to increase to $808 billion by 2021, taking into account all the factors that impact it. Although the healthcare industry is a lucrative one, the barriers to entry are significant. To become a healthcare practitioner, an individual must complete a four-year undergraduate degree, a further four years of medical school, and from three to seven years in a residency program. In short, it takes between 10 to 14 years for an individual to become a licensed medical doctor in the United States. Moreover, the competition in the healthcare industry in the United States is intense, as 784,626 healthcare companies exist in the country.
2. Insurance Business
Due to accidents, natural disasters, financial loss, or events such as the COVID-19 pandemic, the insurance industry in the United States is booming in 2021. In 2019, the insurance industry’s net premiums were valued at an astounding total of $1.32 trillion. Insurance in the United States is sold in many forms for various purposes, such as life insurance, health insurance, property or casualty insurance, and fraternal insurance. Basically, insurance guarantees financial security for people in cases of any kind of loss, hence buying insurance is an integral component of financial planning. For the residents in the United States, insurance is important enough to be necessary in some cases, as 49 of the 50 states in the US require all vehicles that are being driven to have active insurance policies. Insurance policies hence remain in demand year-round in the USA.
The Allstate Corporation (NYSE: ALL), a well-known insurance company, reported profits of $5.58 billion, or $17.31 per share, in the fiscal year. The company’s revenue was reported as $43.44 billion. Another insurance company, The Travelers Companies, Inc. (NYSE:TRV) reported an increase of 53.4% of its stock price from $88 to $135 from 2019 to 2020. Similarly, its revenue witnessed a growth of 2.74% from $31,024 million to $31,874 million.
In the US, both the competition and the barriers to entry are high in the insurance industry. In 2019, 5,965 insurance companies were operative in the country. The insurance companies in the US generally offer policies to insure health, vehicles, homes, and travel. With health and wellness being at risk in 2021, the post-COVID world presents an even brighter future for the insurance business in the United States.
1. Software Business
As businesses begin offering their services online, they require online tools such as software to help them navigate, manage, develop, and deliver their products and services. Moreover, many large industries such as the financial industry, healthcare industry, and manufacturing industry need customized software due to the shift from analog systems of production to digital and mechanized systems. The software business deals with the development, publishing, and maintenance of either cloud-based software or licensed software. The growth trend of the software industry for the past 5 years since 2016 has increased significantly, from 5.32% growth between 2011 and 2015 to 7.8% growth between 2016 and 2021. This is because businesses and customers alike have invested in technology such as video games, computers, and software programs, which has had the effect of increasing the demand of software from businesses in recent years. Furthermore, we are seeing a rise of businesses that only operate internet-based solutions, which demand customized software to support their services.
VMware, Inc. (NYSE: VMW) is a software developing company in the US that boasts a revenue of $10.81 billion in fiscal year 2020, displaying an increase of 12% from the previous year. Moreover, its stock price soared 16.94% in the past year. Additionally, Oracle Corporation (NYSE: ORCL) is another profitable software company. The company’s revenue for the fiscal year 2020 was $39.1 billion, and its stock price rose 42.12% in the past 12 months.
The software industry boats high margins on its products, especially the software designed to suit a larger customer base. Inversely, custom-written software usually allows for narrower profit margins. Although the software industry is a fraction of the overall computer programming industry that takes place, the total market size of the software publishing industry in the United States in 2021 is forecasted to be $396.7 billion. The total profit generated from the software industry in 2021 is forecasted to be $115.8 billion. The software publishing industry is hence one of the most lucrative in the country.