10 Most Profitable Cash-Only Businesses To Avoid Taxes

Published on April 5, 2021 at 11:18 am by Usman Kabir in Lists, News

In this article we will take a look at the 10 most profitable cash-only businesses to avoid taxes.

Technological advancement and convenience have forced cash to give way to electronic transactions as the preferred choice for payments around the world. The rapid growth of this digital economy was accelerated by the onset and wide adoption of the smartphone over the past decade. During the course of the last twelve months, the COVID-19 pandemic has proved to be decidedly transformational for the payments industry. These trends have led to many lofty claims about cash becoming obsolete in a digital world.

However, analysts and commentators often overlook the fact that paper money and coins are still the most popular way of paying for things in many countries around the world. Even as technologists trumpet the benefits of cashless societies, questions about identity and inclusion continue to hold back the wider acceptance of electronic payments. According to a report by the European Central Bank, household cash payments edge other payment methods in the continent, where many countries already have well established online financial services.

Across the world, this is partly a cultural issue. For example, in India, even after the government withdrew certain bank notes and pushed digital payments, the results have been far from satisfactory. Indeed, in many developing and poor nations, the transition to cashless societies comes at the added cost of hidden transaction fees and increased government scrutiny. For small entities seeking to avoid burdensome taxes, cash is still king. Here is a list of cash-only businesses fighting a cashless world by offering great profits and tax avoidance. Let’s start our list of the 10 most profitable cash-only businesses to avoid taxes.

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Most Profitable Cash-Only Businesses To Avoid Taxes

10. Nail Salons

Nail Salons are a multi-billion dollar industry where most customers utilizing the services still prefer to pay in cash. According to Statista, a German firm specializing in market and consumer data, the market size of beauty salons, including hair, nail and skincare, was more than $57 billion in the US in 2020 despite the coronavirus pandemic. In a report, Nails Magazine claimed that traditional methods continued to outperform electronic means as the preferred engagement method of clients in most nail salons across the US.

One success story of the salon business is Ulta Beauty (NASDAQ: ULTA). The company has a market cap of more than $19 billion and the shares of the company are surging as the COVID-19 vaccine rollout boosts investor confidence. Ulta Beauty operates many stores in the US and sells cosmetic products, fragrances, and salon services. Well-established and mature companies usually have a market cap of more than $10 billion, and for a business dealing primarily in cash, this translates to handsome profits and lower taxes.

9. Vending Machines

Most of the vending machine business is still cash-only, although the trend may be changing. Valuates Reports, a leading market research firm, has projected that the global vending machine market size will reach close to $8 billion by the middle of this decade. The hectic lifestyle of the modern man is seen as the driving factor behind this growth, as demand for on-the-go snacks and drinks grow exponentially across the world. Vending machines selling items other than food are also fast becoming popular.

Crane Merchandising Systems, a subsidiary of Crane Company (NYSE: CR) is one of the top manufacturers of vending machines globally. The shares of the parent firm have soared after a difficult 2020 and analysts predict the stock will rise further. The business has a market cap of more than $5 billion and more than 11,000 employees. It mostly produces specialized industry equipment. The firm has a fluid handling segment, a payment merchandising segment, and an electronics segment. As far as cash-only businesses go, it is hard to go wrong with Crane Co.

8. Errand Services

Providing services such as grocery shopping and food delivery are increasingly profitable businesses. Indeed, these services often offer a solution to businesses who are struggling to carry out these tasks. In terms of cash flow, these services rake in a lot of money. According to G4S Global, a multinational security services company, more than 70% of e-commerce transactions in Asia are paid with cash. The firm claims that businesses that go cashless risk losing customers. In England, a milk delivery firm has come under fire over online-only plans.

A quick glance at the finances of American technology firm Uber can attest to the profitability of errand services. Uber (NASDAQ: UBER) has a market cap of more than $100 billion and rising stock value. Although Uber primarily operates a ride-hailing business, it also owns a food delivery service by the name of Uber Eats. Over the past year, as ride-hailing profits have plummeted, the food delivery business has witnessed a more than 135% increase in value. In developing economies, where these services are cash-loaded, there is a lot of profit in the trade.

In one of their investor letters, RiverPark Advisors, LLC highlighted a few stocks and Uber Technologies Inc (NYSE:UBER) is one of them. Here is what the fund said:

“UBER was also a strong contributor, as shares rallied following the approval of California’s Proposition 22 by voters, allowing the company’s California-based drivers to remain independent contractors (rather than become more expensive employees). We believe this news is not just about the 10%-15% of Uber’s revenue tied to California, but the influence this will have on other states reassessing driver pay. UBER also reported strong third quarter results with Delivery Gross Bookings growing 135% year-over-year which nearly fully offset a reduction in Mobility Gross Bookings, which were down 50% year over year. Total Gross Bookings for the quarter were down only 10% year over year as compared with down 35% last quarter.

Despite the COVID disruption, UBER remains the undisputed global leader in ride sharing (44% of the Company’s third quarter revenue), with greater than 50% share in every major region in which it operates. The company is also a leader in food delivery (46% of revenue), where it is number one or two in the more than 25 countries in which it operates. We view UBER as more than just ride sharing and food delivery, but also as a global mobility platform with the ability to sell to its more than 100 million users (by comparison, Amazon Prime has 130+ million members) and penetrate new markets of on-demand services, such as grocery delivery, truck brokerage and worker staffing for shift work. At its current $96 billion market capitalization, UBER trades at only 6x next year’s revenue from its two core businesses. Additionally, the company has substantial, seemingly unrecognized, value in its several nascent development businesses and another $12 billion in equity stakes in synergistic businesses around the world.”

7. Laundromats

The laundry industry has posted steady growth down the years as more and more people move to cities and opt for coin laundromats as their destination of choice to wash their clothes. There are no signs that this growth is going to slow down. In fact, as apartment housing becomes the new norm, the laundromat industry is expected to expand. According to Martin Laundry, there are more than 35,000 laundromats in the US alone. These outfits, on average, generate close to $300,000 in cash every year and the industry has a 95% success rate on investment.

Although no one company dominates the laundry market, there are several smaller ones turning steady profits. For example, the former Mac-Gray Corp (NASDAQ: TUC) was the largest supplier of coin-operated laundry services in North America. The company was founded in 1927. In 2013, the CSC Service Group acquired the firm for $524 million. The share prices for the laundromat remained steady over the last few years. In addition to providing services to apartment buildings, the firm also operated in hotels, universities and colleges.

6. Auto Services

Providing car repair and car wash services is a very cash-rich business. By virtue of their model, these setups have to be cash-only because the services they offer require a steady flow of paper money. People across the world own cars to commute, run errands and even take trips outside of the city. It is estimated that an average American spends $800 on vehicle repairs annually, not taking into account regular services like car washes. Paying for these repairs is easiest with cash because interest costs are not incurred.

Amerco (NASDAQ: UHAL) is an auto company primarily operating in the leasing and rental business. It also operates auto repair shops. The firm has a revenue of close to $4 billion and a net income of almost $500 million. The sales growth of the firm has been an impressive 6% and stock prices have been rising along with the numbers. American business publication Forbes reports that the firm is expected to grow for years to come. This cannot be said for most cash-rich businesses in the modern era and makes the firm extra special on the list.

Third Avenue Management in their Q3 2020 investor letter said that they sold some shares of AMERCO (NASDAQ: UHAL) and used the earnings in acquiring a new investment position. Here is what Third Avenue Management has to say about AMERCO in their investor letter:

“During the period, the Fund reduced its exposure to the common stock of AMERCO.– The proceeds from this reduction was primarily used to fund a new investment position.”

5. Food Trucks

Food Trucks are also a cash-rich business. As the cost of operating a restaurant climbs, food trucks offer small business owners the opportunity to serve customers at an affordable rate. In some urban landscapes, where population density is high, food trucks are now competing with traditional street vendors for lucrative business spots. An undated Mobile Cuisine poll indicates that more than 72% of these food trucks operate on a cash-only policy. Business News Daily also claims that most customers are used to paying food trucks with cash.

One of the most popular of these food truck franchises is Captain D’s Seafood. The brand operates more than 500 eateries in 21 states across America. In late 2017, a private equity firm acquired the franchise for an undisclosed amount. The equity firm has a track record of investing in growing middle-income businesses. Captain D’s has been ranked the top seafood restaurant chain in the QSR 50, an annual ranking of limited service restaurant companies based on their sales records in the United States. 4. Flea Markets

Flea markets can be a great source of income if executed in the right manner. The National Flea Market Association in the United States estimates that more than 1,100 flea markets in the country generate $30 billion in sales each year. More than 150 million customers visit these markets annually, where business is conducted mostly in cash-only. The association has said it stands against attempts to legislate the markets. The US government recognizes the impact of flea markets and their sales are included in the GDP calculated each year.

Usually, for the 2.25 million vendors who operate in flea markets, a booth fee is charged by the local authority in charge of the market. These fees depend on the size and location of the booth. Some markets provide staff for booths, so that the owners are not required to man the booth themselves. However, some markets do require the presence of the owner at the booth for a set period each year in order to maintain business integrity. 3. Transport Services

One of the reasons that the transport business in most countries is still cash-dominated is that local transport fares are usually very low. Since many people in urban centers use inter-city transport, these routes tend to be busy and cash-heavy, as people prefer to pay these small amounts in cash in order to avoid hidden fees or hassles with electronic devices. In developing countries, this is especially true, where the transport in some of the most populated cities in the world is dominated by a cash-only market where mass transit systems are missing.

Expeditors International for Washington (NASDAQ: EXPD) is a freight and logistics firm that is operating transportation services in the US. The stock of the company has seen a steady rise since the vaccine rollout at the beginning of the year. The company is valued at more than $18 billion and future growth forecast is also positive. Other big players in the industry include Matson (NASDAQ: MATX) and Echo Global Logistics (NASDAQ: ECHO). Both these companies are also upbeat about the future as the pandemic fears recede.

2. Home Care Services

Home care services are a multibillion dollar industry in the US. By the end of the decade, this number is expected to grow and hit $31 billion. Even as home grows smarter, there are some jobs that still require old-school approaches to business. For example, house painting. There is little investment required for house painting jobs. Apart from the cost of paints and labor, there is little else that house painters require, except maybe brushes and ladders. This is perhaps one reason why the home care services market, house painting in particular, is cash-heavy.

Other home care jobs like landscaping, interior design, plumbing and carpentry require skilled labor as well. These jobs are cash-dominated like house painting. Another reason this industry is growing is that the cost of home care products has been steadily rising. Nippon Paint Holdings (NASDAQ: NPCPF) is one such firm. However, it has seen its stock price fluctuate over the past few years, mostly due to the pandemic. In 2019, it acquired the Dulux Group for more than $300 billion. The firm is based in Tokyo and has thousands of employees. 1. Christmas Tree Lots

Christmas only comes around once a year. Just before the end of the year, Christmas tree lots spring up in several places all over the world. Most people want to celebrate the festival with their loved ones in the presence of an authentic Christmas tree and are willing to pay for it. The National Christmas Tree Association in the United States estimates that more than 20 million trees are sold during the holidays every year. These sales rake in more than $1 billion in revenue for the people selling the trees. This business is also cash-heavy.

The association also claims that there are more than 15,000 farms dedicated to producing these trees every year. More than 150,000 people are employed at these establishments and more than 350,000 acres are utilized for the purpose. The average growing time of this tree is at least seven years, making this a business that would only return investments over a long period of time. Since this is a once-in-a-year purchase, many tree lot owners operate on a cash-only basis, though this is changing as fewer people chose to carry cash around the holiday season for a variety of reasons.

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