The unemployment numbers are bleak, but a few entrepreneurs are beating the odds—and beefing up their staffs.
Even as companies nationwide are in the midst of layoffs, Ed Marflak, founder and CEO of Schoolwires, is worrying about choosing the right 50 or 60 employees to add to his workforce—a 60 percent increase over last year.
Marflak is in the enviable position of expanding as everyone else is retrenching; he's taking advantage of the opportunity, sorting through résumés of competitors' employees and cherry-picking his sector's best talent. His 100-person Pennsylvania-based company, which designs content-management systems for school districts, is in a high-growth pattern and ranked No. 328 on last year's Inc. 500. Marflak's biggest concern is choosing the right salespeople, developers, customer service reps, and managers to build the company into a major force in education.
"We just feel really blessed, and we're mindful of the fact that when you have turbulence, you have to be careful, but being in a growth mode at a time like this can be a very good thing," he says.
And what a time it is: the unemployment rate hit 8.1 percent in February, and the widespread losses have left many job seekers wondering where to turn. The industries with the most job creation activity—education, healthcare, government contracting—aren't necessarily traditional small business havens. But Marflak is one of a number of entrepreneurs who've found a niche and edged their way in.
Local school boards are the ultimate authority in formal education, but the private sector can be a catalyst for the adoption of new technologies and improving efficiency in schools. "School districts' core competency is educating kids, not innovation," Marflak explains. "Private companies can come in and cross-pollinate and take best practices from other sectors."
Because regulations differ from state to state, as new advances hit the educational market, it's common to see an initial burst of small-business activity, followed by a period of consolidation—which Schoolwires hopes to ride as it expands nationally.
Driven by the new Obama administration's focus on education—and the efficiency schools gain from using technology to connect parents, teachers, and students—Schoolwires is positioned for growth regardless of the economic climate. More than a thousand school districts have adopted the company's platform, representing four million users. But Marflak isn't stopping there. His audacious goal: to see 20 percent of districts nationwide using Schoolwires by 2012.
"As much of a challenge as the economic environment is, we're mostly worried about the brighter prospect of managing our ramp-up effectively," he says.
C2 Education, an Atlanta-based tutoring service and No. 982 on the Inc. 5000, is also expanding. They've seen an increase in student enrollment, as competition for financial-aid packages at top-tier, state, and smaller private schools has escalated.
"We do a lot of test prep and that continues to be an area that's in great demand, despite the downturn," says CEO David Kim. "A lot of parents are realizing that a small investment for test prep or tutoring for AP or IB tests can pay off with huge dividends."
Between an increase in students and plans for adding new locations, C2 Education will be hiring both tutors and program directors this year. Kim sees the current market as an opportunity to acquire great new talent. More recent college grads are looking for jobs, including many who might, in previous years, have gravitated towards banking or something similarly lucrative. He's also seeing more applications from experienced people, both for potential franchisees and for senior management positions.
"It's like a baseball team," he says. "You can always upgrade on the talent you have, and now we can get it at a great price, which allows us to keep costs low for our parents."
Because healthcare, like education, provides an essential service, some businesses in the sector will continue to add employees despite the fact that large state and federal facilities may face cuts during the downturn.
Case in point, the industry faces a severe nursing shortage and is constantly hiring in an attempt to close the gap. The Bureau of Labor Statistics predicts the profession will add 587,000 jobs through 2016, in addition to hundreds of thousands of positions that will open as older nurses retire. Overall, the employment of registered nurses is expected to grow by 23 percent through 2016, higher than the national average, driven by both medical advances that make more health problems treatable and by the nation's aging population.
The lack of manpower is creating a crisis of care, according to Mark Baiada, CEO of Bayada Nurses, which offers home health care services, placing nurses with elderly and rehabilitating patients who often need high-tech, specialized care. Because of the company's emphasis on high standards of care, its intensive hiring process requires interviews, written tests, skills labs, and preceptors for their first assignments. But those nurses with the right qualifications have their pick of jobs: Baiada estimates the average nurse can find a job within a week. His company's 140 offices currently employ 12,000 registered nurses, licensed nurse practitioners, and home health aides, with another 427 positions open right now.
"There's no trouble for a nurse to get a job," Baiada says.
And while the industry has its big players, the market is so fragmented and competitive that it's not easy for a large company to emerge. It's a struggle for anyone to break in, explains Baiada, who operated his first office for five years without expanding to new locations. But when he felt comfortable with his staff, he began sending trusted employees to open new branches, doubling the size of the business annually.
In addition to creating jobs in their own industry, healthcare businesses often provide opportunities to the most successful sector of IT—niche companies. "Think of healthcare like an orange—it has many slices," explains Paresh K. Shah, president of Mindleaf Technologies, No. 291 on the Inc. 500, which provides medical administration and IT support services largely to government-run hospitals. Shah expects their 2008 revenue will be up from 2007 by more than $1 million, and he expects continued steady demand as Mindleaf expands to serve new facilities and explores private-sector opportunities. The company has 96 employees but is growing, with three new people starting next week, three additional openings, and five expected openings.
Because hospitals have to comply with new federal regulations such as HIPAA v. 5010, which deals with patient privacy, and ICD-10, a new system of disease classification, Shah predicts his slice of the orange—administrative IT—will continue to add jobs. He also expects growth in the clinical sector, as companies capitalize on the stimulus-funded push for electronic medical records.
"There are government incentives, compliance with regulations is required, and everyone wants to improve quality of care," says Shah.
As the government pumps money into healthcare improvements, Shah expects to see an increase in competition. "In this economy, you'll see every Tom, Dick, and Harry entering the health care field, but in the end, it's about what value you bring and what expertise you have," he says.
Helping implement federal regulations is just one way small businesses can profit and expand by taking advantage of government actions. Drawing on a steady stream of federal projects, Phil Jaurigue has built his company, Sabre Systems, from a two-man team with one contract to a 600-employee organization that develops software and provides infrastructure support for the departments of Defense, Commerce, and Justice. Jaurigue expects their growth to continue, and he intends to add between 50 and 70 jobs annually for the next several years.
"The challenge for us is positioning ourselves against our competition and really articulating our value proposition as being the best for the government," he says. He hasn't faced any trouble working as a small business at the federal level. In fact, Jaurigue is quick to point out the government encourages the participation of small businesses, setting yearly participation goals and giving large business incentives and even requirements for subcontracting out to small businesses.
"The challenge in our business is navigating the federal procurement process if you aren't familiar with it, but there are agencies, like the SBA, that are available to help businesses understand," he says.
Now that the election is over and new administration has settled down to policy-making, he expects to see more work. "There was a sense even before the election there would be a shift toward more spending in civilian agencies, in places like healthcare and IT," he says. As part of high-tech upgrades to the Commerce Department's data collection, Sabre will probably be heavily involved in the 2010 Census.
Priorities in defense spending will likely shift, but he expects the same amount of money will be available in small-business contracts. But the draw-down of troops in Iraq will push dollars toward modernization projects like upgrades in the military's IT capabilities and experiments with unmanned aerial vehicles, for example.
Education, healthcare, government contracting, and niche IT services are only a handful of sectors that are still expanding and adding jobs to boot. The entrepreneurs who run these types of companies find themselves in the strange position of pursuing employees at a time when so many businesses are shedding staff.