The Best Industries for Starting a Business in 2009
CandyiPhone AppsHealth-Care TechnologyBeer, Wine, and Liquor WholesaleSoftware as a ServiceHome Health CareYoga Products and ServicesTechnical and Trade SchoolsFast-Casual DiningGreen ConstructionNiche ConsultingEducation TechnologyTemporary Staffing FirmsGovernment ServicesAccounting ServicesRepair ServicesSelf ImprovementEnergy
How sweet it is. Even in a recession, candy has been a luxury that many people can still afford. "Chocolate is a comfort food," says Dan Johnson, owner of Choco-Logo in Buffalo, New York, which has seen retail sales rise 30 percent since last year. The confectionery industry, as a whole, grew 3.7 percent during the 52-week period ending April 19, according to the National Confectioners Association, which is pretty good considering so many industries are flat or declining. Historically, experts say, candy is one of the most recession-resistant industries and many of today’s classic brands, including Snickers, Tootsie Pops, and 3 Musketeers, all launched during the darkest days of the Great Depression, between 1930 and 1932.
Apple launched its App Store last summer, creating a whole new burgeoning industry in the process. Sales of apps in the first month topped $30 million, leading Steve Jobs to predict that the marketplace would be worth $1 billion some day. To date, companies have produced more than 30,000 applications, ranging from games such as Tap Tap Revenge to apartment-hunting help to tools for finding out the name of a song; in all, Apple has processed more than a billion downloads. To capitalize on the trend, venture-capital firms such as Kleiner Perkins have begun investing in app producers; the venerable Sand Hill Road firm has earmarked $100 million for the market.
The challenge of streamlining patient care through digitized medical records, e-prescription programs, and online hospital communication, is just now gaining momentum, giving younger companies a chance to make inroads. The federal stimulus bill pledged $19 billion to the development of a health-information tracking system. Based on that level of funding, employment in the field is expected to grow by 18 percent between now and 2016, according to data from the Bureau of Labor Statistics. One up-and-comer: Phreesia, a New York City business that makes electronic patient check-in tablets for doctors offices, recently closed $11.5 million in Series C funding, and has secured $25 million in funding to date.
Even as consumers cut back on their consumption of premium alcoholic beverages, sales of booze at lower price points have risen significantly over the last year. As a result, beer, wine, and liquor wholesaler profits have grown 18 percent and sales have grown 5 percent over the past year, according to Sageworks. And the Distilled Spirits Council estimates exports of U.S. distilled spirits grew by 8 percent last year, to $1.1 billion, led by robust demand for American whiskeys.
Although software spending is expected to increase just 5 percent through 2013, the software-as-a-service niche is forecast to expand by nearly 20 percent annually over the same period, as companies continue to see the benefits of on-demand, flexible applications, according to Gartner, a market-research firm. The industry is expected to produce $8 billion in sales by the end of this year and $16 billion by the end of 2013. The office suites categories will lead the pack this year, increasing 376 percent to $512 million.
Perhaps the sector likely to benefit the most from the aging baby boomer generation is the home health-care industry. An increasingly popular alternative to nursing homes, home health-care services tend to offer patients lower costs while affording them the dignity of being able to remain in their homes. Industry employment is expected to increase 4.5 percent annually through 2016, the third-highest rate of growth recorded by any industry, according to the Bureau of Labor Statistics. The industry has spawned dozens of promising niches, including companies that specialize in cognitive-fitness computer programs, which help exercise the mind. Total revenue for companies in the cognitive-fitness market topped $265 million in revenue in 2008, up from $100 million in 2005, according to the market research firm SharpBrains. Total sales are expected to hit $2 billion by 2015, the firm estimates.
Amid a recession, are we getting more in tune with our inner spirit? Perhaps. Americans spent $5.7 billion on yoga products, equipment, and clothing in 2008--87 percent more than they did in 2004, according to a study from Yoga Journal. Nearly 14 million Americans say a doctor or therapist has recommended yoga to them. And as the industry continues to expand, there is ample room for new products. One promising opportunity: creating appealing men's yoga apparel.
With unemployment numbers up to 8.9 percent, it's no surprise that technical and trade schools are experiencing a surge in business. Revenue at these for-profit schools rose an average of nearly 8 percent over the 12-month period ending in May, according to Sageworks, a financial analysis company. While thousands of Americans are trying to set themselves apart from other job applicants, others are switching careers as the realization hits that their former industries may have permanently contracted.
This year might be the worst ever for the food-service industry as a whole, but the emerging fast-casual segment -- which falls between fast food and full-serve restaurants -- continues to shine. Sales for the top 100 fast-casual restaurant chains grew by nearly 11 percent in 2008, to $16.7 billion, according to Technomic, a Chicago-based restaurant industry research and consulting firm. Panera Bread led the segment with $2.6 billion in sales in 2008, representing 16 percent growth, while Chipotle Mexican Grill totaled $1.3 billion in revenue, good for a nearly 21 percent growth. For those without the capital to start a restaurant, food industry watchers are seeing a growing trend in food trucks, with those that offer one type of food -- tacos, waffles, and even Korean barbecue -- all the rage on the streets of major cities.
The construction industry may be in a slump, but companies that specialize in green building are bucking the trend. The overall green building market is expected to more than double from $49 billion today to approximately $140 billion by 2013, according to a report from McGraw-Hill. A growing consumer awareness of the advantages of sustainable homes and buildings, along with the increased government focus on environmental initiatives, will only bring more opportunities in this arena. Businesses that position themselves as both eco-friendly and affordable stand to benefit even more.
In terms of overall job growth, the nation's fastest-growing industry is niche business consulting; it’s workforce is expected to increase by 5.9 percent through 2016. Corporate layoffs have spawned a wave of professionals who are trying to repurpose their skills in the consulting realm. While the competition is fierce in this space, the barriers to entry are low, and the industry as a whole is seeing a shift as clients drop big corporate consultancies in favor of smaller, more specialized firms. Particularly in demand right now: consultants who can help companies to save money, minimize financial losses, and do public relations damage control.
The education-technology industry has been gaining momentum for years and the $650 million allocated to it in the recently-passed federal stimulus bill should only accelerate the transformation inside U.S. schools and school districts. Companies such as Promethean USA, eInstruction, and Luidia have already capitalized on growing demand, carving out market share in the emergent interactive-whiteboard industry. Then there’s Schoolwires, a company in State College, Pennsylvania, that designs content management systems for school districts. The business plans to increase its workforce 60 percent this year. Don Knezek, CEO of the International Society for Technology in Education, says when it comes to technology in classrooms, the U.S. is still an "emerging market."
At a time when many companies are reducing their headcount, now might seem like a funny time to start a staffing firm. But some agencies, particularly those that specialize in filling part-time positions, are doing well. This sector -- the largest within employment services -- "should continue to generate the most new jobs in this industry," according to a government estimate. Those agencies that position themselves to take advantage of changes in the workforce by specializing in locating positions that offer flexible schedules, for example, are well-positioned to succeed.
In the past year, government services has been gaining steam as a top category among the fastest-growing private companies on the Inc. 500 | 5000 list. From 2007 to 2008, the total revenue for companies in this category nearly doubled, from $678 million to $1.2 billion, and the median four-year growth rate for companies on the 2008 list came in at nearly 1,300 percent. President Obama's $787 billion Economic Recovery Act certainly won't hinder that growth. According to the administration's Recovery.gov website, by 2012, two-thirds of the approximately $23 billion allocated to individual states will reflect investments in local infrastructure, creating opportunities for start-ups to bid on projects that involve transportation, broadband technologies, and clean water, among others.
It may not be considered a "sexy" industry, but small and independent firms that help companies manage cash flow by keeping on top of accounts receivables are increasingly in demand -- especially during a time when customers will do anything they can to avoid paying bills. Accounting work is a function that companies routinely outsource, especially when they are seeking to cut costs during a recession, which opens up opportunities for start-ups. Profit margins can be especially high for solo entrepreneurs or those who run their businesses from home. According to recent data from Sageworks, private accounting firms have seen a 20.9 percent growth in profit over the last 12 months.
Call it a sign of the times, but companies that provide repair services, ranging from the home-improvement sector to the auto industry, are seeing an uptick in revenue as more people opt to fix their existing possessions, rather than to buy new. Business is up 2.4 percent at auto repair shops and 4.6 for electricians and plumbers in the past year, according to statistics compiled by Sageworks. Other lucrative sectors include shoe repair shops, many of which have seen business more than double since the start of the recession, as well as personal electronics repair shops. The repair business is also hospitable for fledgling ventures: businesses can often be run from home and sustained on the founder’s knowhow and sweat equity.
If ever there were a time in which people are searching for self-improvement, it's now. Americans spend more than $11 billion each year on self-improvement products and services, including motivational-speaker seminars, networking and wealth-building instructional DVDs, and spiritual guidance books, according to Marketdata Enterprises, a Tampa-based research firm. Over the next three years, while many industries contract, self-help is expected to grow 6.2 percent annually.
The energy industry is full of start-up opportunities, so it's no surprise that it was the fastest-growing category among privately-held companies on the 2008 Inc. 500 | 5000 list -- with a median four-year growth rate of 287.5 percent among 79 companies on the list. These companies run the gamut from dealing in solar energy to alternative fuels. Due to growing consumer demand to save on energy costs, companies that install efficient lighting systems or cut down on heating costs by installing solar panels are well positioned for future growth. In addition, economic stimulus funds for energy projects nationwide amount to $43 billion, creating opportunities for entrepreneurs with a scientific background to break into areas such as biofuel and wind power. -- Jason Del Rey and Tamara Schweitzer