What are the top 10 most profitable businesses in India?
Before we jump into the top 10 profitable businesses, we need to know which industries are evergreen. First, we learn which sectors can always thrive despite constraints.
These industries thrive on human needs. And it is because of this that these sectors will never die. These sectors are the model for profit. Many people have made huge profits in them, regardless of the market. Simply by using technology as an accelerator, they have amassed wealth in these sectors.
You can start a business in any of these industries. You can either start from scratch like most or buy a profitable franchise like smart. But to know which franchise is profitable, we need to know what makes a business profitable. We also need to recognize the type, model and scalability of the business.
To begin with, there are 2 types of business model to understand.
Asset-heavy business and Asset-light business model.
I am writing a book on top 10 franchise businesses with assets in India.
These are highly profitable businesses in India. For this I had to do some intensive research. I had to analyze the depth of both business models. And study the companies that do them. For asset-light I set 100 parameters and did some interviews. I worked with the research team on comparison, analysis, deduction and conclusion. Here is my brief analysis:
A business model with lots of assets
In this model, companies own a large percentage of their long-term assets. They use them to generate income. Businesses with large amounts of assets are often heavily regulated. This means that they own the entire production process from raw materials to finished products.
It requires a large capital outlay to begin with. This means you will need deep enough in your pocket to get started and succeed.
1) Monopoly conditions occur. The reason is the high entry barrier and the limited number of players. You compete to keep your skin in the game during the early years and earn a lot later.
2) Greater control over the product
3) Very high margin
4) Extremely high entry barriers
1) Inflexible. Therefore, it is not suitable for industries that change rapidly. Tech is the first example that comes to mind.
2) Low return on assets. Despite higher gross margins, it is still difficult to recoup the massive upfront costs required to acquire the assets.
3) Monthly recurring costs. Infrastructure and maintenance must be covered every month, as well as numerous fixed costs.
4) The payback period is very long. Sometimes 1-8 years. Because of the large negative initial cash-flow in your ROI calculations, it may take years to break even.
5) If a project, plant or new venture fails, you will suffer a significant loss. Since much of the start-up capital is borrowed or financed by third parties, you may find yourself in serious debt.
6) High returns but high risk.
I also mentioned examples of franchises with a lot of assets in my book. Here we will see Subway, Zara and other profitable businesses follow this model. We will see how they will profit from it and what will be their disadvantages.
As we know, asset-heavy, as its name suggests, is cost-intensive but very profitable. It needs huge capital and infrastructure with additional monthly expenses for healthy profits.
Subway was founded in 1965 and falls into three evergreen sectors – Food. This American fast food chain has over 41,000 franchises worldwide. To buy a franchise from the world’s largest food chain, you will need at least an investment of 1-2 cr. Also be prepared to pay monthly expenses of approx. 10-15 million.
Clothing is also a human need and Inditex is taking the lead as the world’s largest fashion retailer with Zara and seven other brands under its wing. With a brand value of $13 billion, Zara is undoubtedly Inditex’s proud brand. It is also in the top 10 leading fashion brands in the world. Zara produces 840 million garments a year and has around 6,500 stores in 88 countries.
The number is constantly changing, as Inditex is known to open more than one store per day, or about 500 stores per year.
There are certain things you should know before becoming a Zara franchisee.
First, the franchise fee. Due to the global presence, the price of the franchise fee varies by location. But the average is around 1Cr.
Second, other significant fees. Equipment, furniture and accessories would amount to 35 million. Employee wages, rent, and miscellaneous also contribute to monthly expenses.
Asset light business model
Companies are more active by owning fewer capital assets compared to their operating assets. By reducing the number of capital assets such as land, buildings, plants, machinery, automobiles, and computers, companies can gain a significant advantage. Capital assets could potentially encumber the company. However, investments in technology and talent allow entities to scale faster.
Therefore, the dominant business model is asset-light.
Technology is changing the game in the asset business. New technologies are now a major factor in the transformation of industries.
1) You are not the owner of the product / asset. You don’t need to buy anything to sell.
2) Your fixed costs are lower. Because you don’t own any infrastructure, assets or maintenance fees.
3) High margin
1) Huge technological costs
2) Huge customer acquisition costs
3) Quality human resources
Now let’s see which companies use asset models and how they align with profit.
Airbnb has changed the hotel industry. Since its inception in 2008, the company has experienced phenomenal growth. It now has more rooms than InterContinental Hotels or Hilton Worldwide. At the time of writing, Airbnb accounts for 19.5% of New York’s hotel room supply. It operates in 192 countries, where it represents 5.4% of room supply (up from 3.6% in 2015).
The founders of Airbnb recognized that the technology platform allowed them to create an entirely new business model. They realized that this would challenge the traditional economics of the hotel industry. Unlike traditional hotel chains, Airbnb does not own or maintain the property. Instead, it allows customers to rent any living space (from a sofa to a villa), all online. It connects people looking for accommodation with people who want to share a room or building.
In my book, I mentioned a company that offers franchises with assets.
They collect a lot of money for their partners. I did a thorough research.
I also had a personal interview with the agency. All parameters were also double-checked.
They are a very successful company with equally profitable franchises. A detailed case study of the company is in the book, but here too I would like to mention one of the top 10 franchises with the best asset. Their remarkable growth with the help of as