From the May 2007 issue of Startups

Question: I've heard that medical billing is a growing area for entrepreneurs. Do you think it's still hot?

Answer: Although an estimated 6 out of 10 medical offices have switched to software that enables them to handle billing internally, medical billing is still outsourced and thus can be a rewarding home business. But it won't work everywhere. Many doctors want to keep their billing in-house or at a nearby billing service. So one way to predict whether you should start a medical billing business is to determine how many doctors and existing billing services are nearby.

Merlin Coslick, founder of the Electronic Medical Billing Network of America, explains how to gauge the market: "A 10-square-mile area with 1,000 doctors will support two to three medical billing services." He advises counting the companies listed under "Billing" and "Insurance Claim Services" in your local Yellow Pages and dividing the number by four. Only 1 in 4 of these will be competitors. The others will be closed down or have all the clients they can handle.

If you find there are fewer than three potential competitors, proceed to the next step: contacting doctors' offices directly. Keep in mind that you'll need to convince them of the advantages of outsourcing their billing.

Doctors are not your only potential clients, though; any health provider who uses third-party billing and is open to contracting their billing is a potential client. This includes chiropractors, commercial ambulance services, dentists, massage therapists, nurse practitioners, occupational and physical therapists, optometrists and psychologists, among others. The number of doctors in an area is still a key indicator, though, for predicting whether you'll find this homebased business viable.

Authors and career coaches Paul and Sarah Edwards are co-authors of Home-Based Business for Dummies. Send them your questions at www.middleclassadvocacyinstitute.com or in care of Entrepreneur.