Best Industries for Starting a Business, 2011
Hot start-ups in the coming year will likely be thinking outside of Silicon Valley. It's not that technology and software are on their ways out; rather, a softly stabilizing economy has heightened consumer confidence and opened up growth in areas such as brick-and-mortar retail, boutique consulting firms, and education companies, industry data from three private research firms show.
Analyzing and comparing data from firms Sageworks, IBISWorld, and AnythingResearch.com on employment, profit growth, anticipated industry growth and a host of other factors, Inc.com has pinpointed 17 industries that are not only growing, but are also ripe for new companies. That's due to factors favorable to start-ups, such as low-to-moderate industry competition and saturation, employment growth, and attainable average company size. You can see the complete methodology for information on the research firms consulted for data compiled to create this list, as well as other sources consulted.
After years of growing unemployment, Americans are not only going back to school—trade schools and language schools both made the list—but also looking for, and finding, work. Employment and recruiting agencies show promising growth. The housing bubble burst, and people stalled on major purchases, but today, both real estate appraisal and automobile retailing are picking back up. But in a post-banking crisis world, consumers are giving great care to their savings, as illuminated by the fast rate of growth predicted for financial planning services.
Some of the industries missing from this year's list also serve as strong economic indicators: consider repossession services (this past year down 8 percent, according to AnythingResearch.com), as well as self-storage, and foreclosure services, which both grew last year, but neither of which can expect significant industry growth in the near future. Goodbye, recession. But others that did make the list illuminate both growing consumer confidence and a reluctance to return to spending habits of the pre-slump decade.
Take, for instance, two surprise newcombers on our list: the beauty industry and clothing accessory stores. According to AnythingResearch.com, the cosmetology and barber schools (that educate salon-entrepreneur-hopefuls) grew at 29 percent last year, and nail salons grew at 9 percent. Inc.com's reporting shows an industry with a low barrier to entry for salons and barber shops. Pair that with a recent resurgence in barbershop nostalgia—and with a return to beauty-service spending by consumers—and it's a perfect storm for rapid growth in the salon and beauty industry. Bring on the beauty start-ups. Not so disconnected from the growth in personal pampering is clothing accessory stores, which show a 9 percent year-over-year growth rate, according to AnythingResearch.com. That's due to the allure of affordable luxury for shoppers.
Economic indicators, to be sure. Two additional industries on Inc.com's list show even families are spending more freely. They're moving past the staycation, but appear more eager to choose the nearby great outdoors over more elaborate—and expensive—travel plans. That's as evidenced by the growth in industries such as historical site management and tourism (which grew at a rate of 16 percent), and recreational good rental (10 percent).
Education companies continue to be poised in a strong and growing field. Whereas testing and tutorial companies made the list last year, this year language education is primed for strong growth, as experts attribute it to an increasingly diverse U.S. population and a highly globalized business atmosphere.
Technical and trade schools are particularly strong (with a 15 percent increase in sales), as the unemployed or underemployed seek additional skills, even as employment numbers slowly improve. Similar forces—including the increased ability of companies to hire—that seem to be driving anticipated growth in employment and recruiting agencies, which are predicted to grow 5.5 percent annually. Also tied to job growth in general, experts say, is coming growth in boutique consulting firms, and, particularly, in services provided by financial planners and public relations agencies or sole-practitioner companies.
Gary McCormick, chair of the board of directors of the Public Relations Society of America, says the industry's recent stagnancy was due to other companies that use public relations firms or independent contractors cutting back on advertising, marketing, and publicity-related expenses. Upcoming growth is due to social media's necessitating growth in marketing and public relations budgets, he says.
A strong industry that makes the list for the second year in a row, environmental consulting, is a broad field with a moderate barrier to entry, but super-strong growth. As energy use, environmentalism, and saving money are all front-and-center issues for both businesses and families, the industry is expected to grow an astounding 16 percent each year through 2016.
"We had a little bit of a lull with the economic conditions that we experienced with the recession," says Jeff Kishel, senior vice president of Stantec, an engineering and design firm. "Demand for certain services dropped off for a while, but demand is picking up and we believe it represents a growth opportunity for us both short-term and long-term."
But can you break in?
"There are lots of different ways to be successful," Kishel says. "This is a broad multi-disciplinary field that goes from the beginning of a project's life cycle to the end: planning and regulations, production and operation, and finally, cleaning up the mess."
And consumer-facing goods are going green as well. As grocery shoppers become hungrier for organic foods, even the snack aisle is thriving by picking up that labeling. And parents are not just treating their kids to organic snacks, but also to eco-friendly toys and clothing.
Or, you can swing the other way, and take advantage of Detroit's resurgence. For the first time in years, growth is predicted in many of the manufacturing industries that support the auto industry. Car sales are recovering—and could face a big boost due to a simple fact: people are sick of driving their beaters. "Thorugh the downturn, we saw severe declines as consumers were just putting off large purchase decisions as they hunkered down to weather the storm." said Will Boland, a senior analyst at research firm Sageworks. "Even though 2010 wasn't a great year economically, but there was large pent-up demand in the auto market due to consumers riding out their old vehicles."
How big's the demand? Boland himself is starting a business helping drivers sell their used cars.
Ready to start something? Check out the entire 2011 list of Best Industries to Start a Business.
—Additional reporting by Gabrielle Blue, Tim Donnelly, and Drew Gannon.
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.