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BUYING A SMALL BUSINESS

How We Created This Year’s List

The criteria and ranking method behind the 2011 Best Industries to Start and Grow a Business.

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Best Industries 2011 Data: Sources include Sageworks Inc., AnythingResearch.com, and IBISWorld

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Setting out to identify the most promising industries for starting a business in the coming year, a team of Inc.com reporters and freelancers scoped out data from three private research companies and researched independently (which included all sorts of standard reporting procedures, including but not limited to: phoning reality-show agents, interviewing used-car-salesmen wannabees, and getting a haircut at at the country's best barbershop).

The data we compiled, compared, and contrasted came from Sageworks Inc., which does past and current financial analysis of privately held companies, AnythingResearch.com, which provides industry market research analysis, reports, and publications, and IBISWorld, which provides detailed past industry growth percentages, revenue forecasts for the next five years, employment growth, profit margin averages, and industry competition ratings.

Sageworks this year in addition to sales percent change, provided also net profit margins for the growing industries it pinpointed, yielding a new wealth of analysis. The industries it targeted were (somewhat surprisingly) manufacturing-heavy, including motor vehicle parts manufacturing (with a 2010 profit margin of nearly 5 percent) and metal and mineral (more than 15 percent sales growth in 2010), as well as the industries they support, such as automobile dealers, which made our final list, after seeing a more than 16 percent growth in sales last year. These of course aren't industries particularly conducive to starting a small company, but we took the growth rates and sales figures into account when compiling our list.

AnythingResearch.com this year gave Inc.com a list of 10 fastest-growing industries it had identified that could be hospitable to small businesses. Again, we found surprises. No. 1? Cosmetology and barber schools, with a remarkable 29 percent year-over-year growth rate last year. Other surprises, both with start-up friendly average company sizes of less than $1 million, were historical sites and recreational goods rental.

From there, we looked at detailed reports from IBISWorld, which creates industry market research analysis, reports, and publications. For our purposes, IBISWorld's future projections of industry revenue growth, employment, and number of establishments was extremely influential. It expects extreme growth in environmental consulting, industries that support future real-estate growth (such as building inspection, architectural services, and—the one that made our list—real-estate appraisal). Other growing industries IBISWorld points to include employment and recruiting agencies, financial planning, and online dating services.

We also took into account employment figures and projections from the Bureau of Labor Statistics, individual industry sources, and trade publications. Our reporters hit the phones, and talked with sources from inside these industries as well. Some of the best economic indicators, we found, can come from people actually trying to make it in these industries. See our features on the barbershop boom, language-teaching in a Web 2.0 world, and a start-up dating site for those perspectives.

Ready to start something? Check out the entire 2011 list of Best Industries to Start a Business.

Last updated: Apr 11, 2011

CHRISTINE LAGORIO-CHAFKIN | Staff Writer | Senior Writer

Christine Lagorio-Chafkin is a writer, editor, and reporter whose work has appeared in The New York Times, The Washington Post, The San Francisco Chronicle, The Village Voice, and The Believer, among other publications. She is a senior writer at Inc.




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