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Why the Simplest Businesses Are Often the Most Profitable

Have you ever entertained dreams of being a small business owner? If so, what kind of business have you thought about starting? Maintaining a profitable business over many years is not easy. However, one of the keys to long-term profitability is simplicity. The simplest businesses are often the most profitable.

Nerd Wallet published a piece in early 2021 briefly discussing nearly two dozen of the most profitable businesses in the U.S. Their choices were not companies per se; they were types of businesses companies could be engaged in. More than half of the businesses on their list are relatively simple in nature.

1.  Simple Businesses Mean Simple Models

Every business owner has a model for running their business. The smartest among them develop a business model before they even start. Then they constantly modify and adjust that model to accommodate changing circumstances. When you are talking about a simple business, you’re also talking about a simple business model.

The most profitable business on the Nerd Wallet list is auto repair. Even though fixing cars requires highly skilled technicians with a significant amount of knowledge, the business itself is fairly simple. Customers bring in their cars and you fix them. That’s it.

Auto repair is governed by some amount of regulation, but it is minimal compared to other industries. You are also not looking at managing a long menu of services. Auto repair is pretty straightforward. A solid business model in the auto repair sector requires only minor modifications from year to year.

2.  Simple Businesses Are More Efficient

Another thing that is easy to see about simple businesses is that they tend to be more efficient. Take Seraphim Plastics, for example. They are a Tennessee company that buys commercial plastic waste in seven states and turn it into plastic regrind. They sell the regrind to manufacturers.

Because what they do is so simple in principle, they can do it very efficiently. Their business model calls for two main processes: collection and grinding. That’s it. They obtain plastic waste by picking it up from the customer. They transport it back to their plant and put it through a series of grinders and shredders. The resulting material is ready for sale immediately thereafter.

By contrast, the restaurant business is a lot less efficient. Restaurants have a lot more moving parts. They offer a menu consisting of dozens of choices. Cooking every item on the menu requires hundreds of ingredients. Ingredients have to be purchased and stored. Then there are health regulations, building codes, fire codes, etc. to keep up with. It is not easy to run a restaurant at maximum efficiency.

3.  Simple Businesses Are Easier to Manage

Overall, simple businesses are easier to manage than more complex enterprises. Offer fewer services and there is less to manage. Cater to a very targeted customer base and you need less complex marketing strategies. Limit the resources you need to conduct your business and there are fewer worries about acquisitions and improvements.

You know yourself that more complex scenarios require more intentional management. Simple scenarios require less management. A basic birthday party with just five guests is a lot easier to manage than a no holds barred celebration with a hundred. The same holds true for business.

Some businesses are complex by necessity. It is unavoidable. But others are more complex than they have to be only because their owners don’t realize the beauty of simplicity. That’s too bad. Often times, the simple businesses are the most profitable. How many business owners would do much better if they stepped back, re-evaluated, and simplified their operations?

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