It is as sunny as California’s climate, a business environment that attracts big corporations, long-established families, and upstart entrepreneurs alike. This state is home to millions of small businesses, which provide services to the most populous state in the country.
According to NerdWallet, there are several industries where businesses perform best in California. There are many opportunities for retail businesses as well as salons, spas, educational businesses, and e-commerce, which is thriving in California.
According to its study, NerdWallet examined 186 industries, categorized by the North American Industry Classification System. To identify the top 10 types of businesses to start in California, we measured workforce growth, payroll, revenue growth, and regulatory burden. Details can be found in the methodology section at the end of this article.
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The key takeaways
They’re not big. In terms of employee size, every top 10 industry on our list has fewer employees than Alaska’s median of 17.8 employees per company. The two industries with the fewest employees were real estate firms, which had 4.5 employees per firm, and personal care services, which had 5.4 employees per firm.
The number of employees per revenue is high. Labor costs have outpaced revenue growth in many of the top 10 industries. E-commerce companies, for instance, experienced revenue growth over three times the rate of new staff hired during that period.
Revenue and payroll are important factors in determining the success of a business. It can be difficult for businesses to drive high revenue while still keeping payroll expenses under control. Labor costs tend to be higher for companies with higher revenues. Top-ranked gas stations are the one exception, as they have been able to generate income using relative bargain-basement wages.
There’s no need to worry about them. There are some industries that offer workers some of the lowest safety risks. The Occupational Safety and Health Administration issued citations to all of our 10 industries at a rate well below the statewide median of 1.67 per 100 businesses per year, and eight on our list had citation penalties per citation below the statewide median of $1,247.2
California businesses: the best types
1. Gas stations
Gas stations are among the best businesses to start in the Golden State due to their strong car culture. A total of 8,000 gas stations operate in the state, employing 54,500 people. Between 2007 and 2012, when gas prices were at their highest, the gas station industry recorded revenue increases of nearly 25%. The industry’s low-profit margins are likely due to the commoditization of gasoline – meaning the prices are mostly the same – and increased competition among individual gas stations. An executive order recently issued by California sets a target of cutting greenhouse gas emissions by 40% below 1990 levels by 2030, forging the way for zero-emission and alternative-fuel vehicles. The California Energy Commission estimates that petroleum-based fuels provide 96% of the state’s transportation needs. In addition to this dependence, there is a deteriorating mass transit system, which places additional pressure on gas stations. California Energy Commission data shows that Los Angeles County is home to the highest amount of retail gas sales. In addition to Orange County, San Diego County, and Riverside County also had high sales. The state provides resources for gas station operators, as well as high regulation in terms of taxes and fees. Independent oil marketers in California are members of the California Independent Oil Marketers Association.
A retailer that sells merchandise using both print and electronic catalogs is typically known as an electronic retail company, or e-commerce. A brick-and-mortar store can be set up slower, more expensively, and more difficult than an online store. Approximately 5,000 companies with about 55,000 workers are involved in the industry in California. Despite being a rapidly growing industry, its revenue in 2012 was $52.66 billion – an average of $958,300 per employee. A 27% increase in the size of the workforce was observed between 2007 and 2012. By enhancing e-commerce companies’ reach with new platforms, apps, and software, Silicon Valley and the San Francisco Bay Area are driving the growth of the tech industry. ECommerce business owners have a great deal to gain from the California Retailers Association, a trade association that represents the entire retail industry.
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3. Supplementary educational businesses
Often privately owned, educational businesses include dance studios, driving instruction centers, and exam preparation centers. These businesses provide instruction in fine arts, athletics, languages, and tutoring. California is a state where supplemental education is in high demand after school, over the weekend, and during school breaks. These businesses employ 67,255 people in the state and number 6,150. Revenue in 2012 increased more than 30% over 2007, while the workforce increased more than 33%. As a result of No Child Left Behind, tutoring schools gained a lot of popularity. With the implementation of Common Core, as well as the ever-present fervor surrounding the SAT and ACT tests, that demand has not abated preparation. Some of the most successful supplemental educational businesses are based in California, including PresenceLearning, Ruby Makeup Academy, Ducerus, and ArborBridge Group.
4. Wholesale electronic trade
It is possible for companies involved in wholesale electronic markets to purchase or sell goods on behalf of others. Pajono Woodworks, a company in California that provides building materials to cities and the military, falls into this category. In addition to automotive companies, the California Automotive Wholesalers Association represents aftermarket firms as well. A company in the wholesale trade industry buys and sells large quantities of products to companies that resell those products to consumers. Wholesale electronic markets allow agents and brokers to trade remotely – an essential step for California’s retailers since they are not involved in handling goods. Statewide, there are four thousand and eight hundred wholesale electronic market firms, which employ more than 35,400 people. The top ten most lucrative industries in the world are all in the service industry, which earns $80.5 billion annually.
5. Shoe stores
Californians love shoes. The state is home to Toms, Vans, and DC Shoes, among other successful footwear companies. There are stores in this category that sell footwear — sandals, boots, sneakers, pumps — and shoe care products as well. Approximately 25,400 people work for over 3,000 shoe stores in California. Shoe sales in California are huge — they’re $3.7 billion.
6. Beauty services
Numerous salons, barbershops, and manicurists are busy in California. Based on the state’s Barbering and Cosmetology Board, the number of licensed professionals in California’s cosmetology industry is the highest in the nation. A variety of services are provided by personal care service providers, such as hair salons, barbershops, estheticians, nail salons, spas, massage services, tattoo parlors, hair replacement and scalp treatments, saunas and bathhouses, and diet counselors. State businesses of this type number nearly 12,500, ranking it as the second-biggest industry in the top 10. An estimated 66,790 people work in the industry, which is worth $3.3 billion. Between 2007 and 2012, revenue grew 14%. State regulation, however, is extremely strict when it comes to personal care services. A detailed list of regulations is provided by California’s Board of Barbering and Cosmetology. Several industries within the tanning industry have their own regulations, including tattoo shops and tanning salons. In California, there are numerous associations representing businesses within this industry, including the California Massage Therapy Council, the Association of Professional Piercers, and the Professional Beauty Federation of California.
7. Real estate rentals
There is a high demand for California businesses that specialize in leasing properties. According to the state Department of Finance, the state will have 44,085,600 people by 2030, making it one of the most populous in the country. The demand for rental properties for housing, storage, and business purposes has increased since the housing bubble burst. It may make more financial sense to rent a home in areas such as San Jose, San Francisco, Ventura, Los Angeles, and Modesto than to buy one. Tax burdens in places like San Mateo, Santa Clara, and Marin contribute to the cost of short-term rentals being more affordable. Renters are owners of the real estate that is leased. Lessors in this industry may also include companies that rent real estate and sublet it to others. California has nearly 17,500 businesses associated with leasing of real estate – the highest number in an industry within the top 10. More than 79,000 people are employed in this $32.5 billion industry. In addition to residential properties, tenants can rent out mini-warehouses, self-storage units, mobile home parks, vacant lots, and offices. Real estate agent associations provide information, services, data, and insight into legal requirements and legislative issues to lenders. There isn’t only the California Association of Realtors, but you may also find most local associations, such as the California Desert Association of Realtors, the Central Valley Association of Realtors, and the Northern California Commercial Association of Realtors, depending on the location of the property.
8. Non-instructional educational support
Support services include all activities that contribute to the effectiveness of education systems, including educational counseling, testing services, student exchange programs, vocational counseling, and curriculum development. It is estimated that over 1,000 businesses of this type are located in California, including Total Education Solutions in South Pasadena and Inside Track in San Francisco. There has been an increase of almost 45% in educational support services from 2007 to 2012, with more than 13,500 employees – the highest growth rate among all top 10 industries. Over the past seven years, industry revenue has risen from $1.3 billion to nearly $1.5 billion, an increase of 71%. With the addition of new technology, curriculum changes, and state and federal mandates, schools require professional programs to train teachers, test students and develop curriculum.
9. Electronics and appliance stores
These businesses sell household appliances and electronics, such as refrigerators, stoves, televisions, and computers. Additionally, they might provide repair services and sell replacement parts. While the demand for certain household appliances and electronic devices is always high, innovations tend to further amplify that demand. Upon the release of the iPhone 6, people lined up outside Apple stores in anticipation of getting their hands on the device. 57,405 people are employed by 5,645 companies in California, creating a $14 billion industry. In California, Apple, MobileOne, and Outdoor Tech are among the most rapidly growing electronics and appliance retailers. Business owners in this industry can get information on government regulations, legislation, and more from the California Retailers Association.
10. Second Hand retail
There are many different types of thrift shops and consignment stores that sell secondhand items like antiques, used appliances, rare and used books, vinyl LPs, and used furniture. Neither used cars nor pawnshops are included in this category. The cost of running consignment stores is often lower than that of other secondhand retailers since they don’t have to purchase inventory. California has nearly 1,900 second-hand retailers who employ about 17,200 people. The industry generated revenues of $1.7 billion in 2012, up almost 32% from 2007. As a result of greater public awareness of recycling and demands for inexpensive merchandise, secondhand shops have flourished in the recent recession. Members of the Antiques Dealers Association of California are responsible for protecting the interests of second-hand business owners. NARTS, the Association of Resale Professionals, is the largest association for secondhand retailers on a national level.
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