From the January 2003 issue of Startups

It's crossed your mind at least once, how wonderful it would be to start your own business. You might have heard about someone else's compelling story or read a news clip highlighting an entrepreneur's success. Or perhaps you play the lottery and dream of a day when you won't have to answer to someone else. Well, this is your chance. We're bringing you the fourth annual "Million-Dollar Ideas," a look at the hottest business ideas that have more than just buzz factor--there's actual promise, backed by experts, statistics and industry trends pointing toward your pot of gold.

Take a moment to check out these possibilities, and hopefully you'll be inspired to get up and do something about it. After all, taking the first step to see where your potential can lead you means you might not have to count on lucky numbers to make you a winner.

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Auto Aftermarket

At $1.5 billion and growing strong, the auto aftermarket industry--like the hot rods it caters to--is appropriately showing no signs of slowing. Aside from the obvious performance benefits of adding aftermarket accessories, "a lot of people do it for the looks," says Reginald Loterina, 31, founder and CEO of Island Motorsports Inc. Loterina, who started his Buena Park, California, company in 1995, says his sales have been growing about 25 percent a year--selling everything from lighting and exhaust kits to carbon fiber-based products such as spoilers and hoods--and he expects 2003 sales to hit $2 million.

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Start your engine with these Web sites:

So what are the real winners in this market? "Right now, vehicle lighting is the hottest thing going," says Jack Panzarella, 32, founder of Wayne, New Jersey-based Street Glow Inc. Panzarella's products (some of which were featured in The Fast and the Furious as well as the sequel)--neon undercar kits, glowing foot pedals, LED shift knobs, LED exhaust tips and more--have fueled Street Glow's success, with sales exceeding $100 million in 2002. More than just lighting up cars, this industry is lighting up profits--big-time.

--Steve Cooper
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Bed & Breakfasts

B&Bs aren't just attracting younger guests--younger entrepreneurs are looking into the allure of innkeeping, and with good reason: A survey from BedandBreakfast.com shows an overall occupancy increase of nearly 8 percent for the B&B industry since 9/11. Bobbi Zane, editor/publisher of aspiring B&B innkeepers newsletter Yellow Brick Road who also moderates a discussion for the Professional Association of Innkeepers International, has noticed a trend of many thirtysomethings looking into innkeeping. "They have seen enough of corporate life," says Zane. Add to that the sway from frilly to more modern inns, and the new generation of innkeepers is thriving.

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With a quarter of inns run by owners under 40, Jim and Julie Degenfelder are in good company. They started Eaglenest Bed & Breakfast in Julian, California, eight years ago at 33 and 23, respectively. With 2003 projected sales of $125,000, the Degenfelders equip their rooms with amenities many older innkeepers try to avoid. "Some [innkeepers] fight the whole TV/VCR thing," Julie remarks. "However, to keep up with the evolution of travelers, it's important to make them comfortable." A stocked pantry filled with beverages and snacks is open to guests, and the Internet can be accessed through the phone line in each room.

PAII executive director Jerry Phillips echoes Zane's observation and also sees doors opening wider for minorities. Phillips adds, "We already have a lot of single ownerships, particularly single women." --April Pennington

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eBay Aftermarket

Want an idea of the opportunities for companies selling eBay-related products and services? PayPal co-founders Peter Thiel and Max Levchin launched their online payment service in October 1999. It quickly became the standard way for users to consummate their eBay transactions. In July 2002, eBay purchased PayPal for $1.5 billion. "PayPal is the 500-pound gorilla of the eBay aftermarket phenomenon," says Adam Cohen, author of The Perfect Store: Inside eBay.

Online payment is far from the only opportunity available in the eBay aftermarket. Start-ups have blossomed offering everything from shipping supplies for sellers to sniping software that slips in last-second bids on behalf of bargain-hungry buyers. With 46 million users and 7 million items for sale on eBay at any time, there's room for almost any conceivable product or service supporting electronic auctions.

AuctionWatch.com Inc. sells software that automates the process of placing items for sale on eBay. The San Bruno, California, venture has almost 100,000 users and is profitable, says Rodrigo Sales, co-founder and CEO. AuctionWatch is the largest of several firms that provide similar products and services to eBay merchants, but Sales, 28, says getting to where he's at wasn't easy.

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AuctionWatch originally offered shoppers a single site that brought together some of the hundreds of auction services that were then competing with one another. As eBay grew to dominate the space, other online auctions disappeared or became irrelevant. AuctionWatch faced a similar fate until it found a new focus selling software to eBay merchants. Today, it sells general e-commerce software to merchants selling direct from their own Web sites.

Want to succeed in the eBay aftermarket? Companies like AuctionWatch have been successful because they've managed to maintain their flexibility and have benefited from alertness to the changing needs of the still-maturing online auction business. "One of the big lessons of eBay is that it gives you access to millions of buyers," says Cohen. "They'll tell you what they need."

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Home Entertainment Installation

Do you have friends who dream of custom-built home theaters with surround sound, automatic lights and a big-screen digital TV? We thought so--according to the Custom Electronic Design and Installation Association (CEDIA), 86 percent of U.S. adults want home entertainment systems. And they're creating a tidal wave of demand for expert installers.

David Harwell and Greg Hill, founders of Audio Video Unplugged in Farmers Branch, Texas, are meeting that need. Offering custom-designed systems that start at about $20,000 and go well into the six figures, the pair expects sales to top $2 million this year. Business is so robust, in fact, that the partners work only on referrals and have had to turn customers away.

The government's recent mandate that all TVs larger than 13 inches be digital by July 1, 2007 is fueling industry growth. "That gave a big boost to the audio-video industry," says Hill, 30. "If you're going to digital, you have to have people who can help you implement the technology in your home."

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Magazines to be aware of: Audio Video Interiors, Home Theater magazine, Home Theater Builder magazine, The Perfect Vision and The Absolute Sound and Sound and Vision magazine.

More than just entertainment, this industry encompasses everything from security systems to home computer networking. Right now, most clientele is affluent, though as the technology becomes more affordable, it will trickle down to more modest-income consumers, creating huge market potential, predicts CEDIA president Jeff Hoover.

This business can be tough, though: Hoover notes there's a shortage of labor who can master the ever-changing technology. Harwell, 37, agrees. "We have very competent people," he says, "[but] it requires special individuals."

In addition to finding talented employees, a key to success is making sure to pitch potential customers on the ease-of-use angle. "Nobody buys a 'home network,'" says Hoover. "What they buy is the convenience that a home networking system provides."

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Instant Messaging

Internet use at U.S. companies rose 20 percent from October 2001 to July 2002, according to ComScore Media Metrix Inc., a New York City tracking firm. Meanwhile, instant messaging attracted 28 percent more business users, and MSN's IM service grew an even loftier 42 percent.

The IM explosion seems certain to create opportunities selling IM-related services and products. At the top of the list are fixes for IM's weaknesses. IM's big four--America Online, ICQ, MSN and Yahoo!--are consumer services, notes Max Kalehoff, senior manager at ComScore. Because IM messages aren't coded, virus-protected, tracked or logged, companies can't protect secrets, verify communications or block viruses. Some firms sell add-on software to log employees' IM messages. But many services employ stealth technology that is hard to detect without complex software.

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  • The Internet Engineering Task Force is backing the Extensible Messaging and Presence Protocol (EMPP), which is developing an open source standard for instant message. Read more here.
  • AOL is now selling an Enterprise version of their AIM software for businesses.

In-house IM systems with built-in security may be the most practical solution. Richard Bezjian, CEO and president of Boomerang Software Inc. in Belmont, Massachusetts, says financial and health companies with regulations requiring secure client-related communications have been quick to adopt his encrypted IM system. "I wouldn't say we're making money hand over fist," says Bezjian, 48. "But I think it's a matter of time."

We see similar stories in many security, marketing and other IM-based products and services. "Is there a gold mine there?" says Kalehoff. "I don't think anyone's figured it out yet. But [IM] is a communications tool that's not going away."

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Kiosks

"The cost of going into business is just really high, and kiosks offer the opportunity to get into business ownership at a relatively lower cost," notes Howard E. Van Auken, a management professor and academic director for the Pappajohn Center for Entrepreneurship at Iowa State University in Ames.

If you're testing a product or your own entrepreneurial aptitude, kiosks can provide a simpler business alternative. Not only do they cost less than inline stores, but they also have substantially shorter leases, ranging from as little as one month to just a year, as opposed to inline leases, which can run up to 10 years. With this flexibility, entrepreneurs can test products and decide whether to make the move to an inline store or to take on more kiosks.

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See Specialty Retail Report for more help in getting your kiosk rolling.

When choosing products to sell at your kiosk, consider your audience and how they might react to your product. "Historically things that are demonstrated tend to do well because people are touchy-feely and like that interaction," explains Susie Grant, specialty leasing manager for the Galleria at South Bay in Redondo Beach, California.

And stay away from higher-end products. "Products [with] a higher price point may not be as easy a sell as those that are moderately priced, because the whole idea of malls having [kiosk] programs is to enhance their current tenant mix," says Grant. "It's not that the cart is going to bring the customer in; they just happen to pass by you and something catches their eye."

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Maternity Clothes

By now, maternity retailers have figured out that being pregnant in the 21st century is about both comfort and style. Big names like Old Navy and Gap have entered the growing maternity market, and all the industry is abuzz over Target and its agreement with Liz Lange Maternity to sell very affordable and fashionable maternity pieces. "Value is really important to everybody these days," says Peg Moline, editor in chief of Fit Pregnancy. While she predicts activewear to continue to be a hot maternity area for 2003, Moline also notes that maternity fashions will move toward a more dressed-up look--especially since about 75 percent of moms work during their pregnancies.

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Take a look at what's currently in the maternity market:

Dressing up moms is what enéa maternity founder Lea Disney, 32, has done with her San Diego company, founded in 1999. Disney, who did two and a half years of research before launching her start-up, sets herself apart from the competition by playing with different fabrics, bright colors and a cleaner line. "My styles emphasize the sexy curves on a pregnant woman," she says. Disney also promotes the value angle--her prices range from $42 to $98.

Disney, who currently sells via her Web site and in boutiques nationwide and in Puerto Rico, plans to take her line to her native Greece as well, thus growing her sales that are already into the six figures.

--Nichole L. Torres
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Niche Dating Service

The quest for love eternal: Technology only kicks it up a notch in the 21st century. "After college, the pool of available people dwindles--time to meet people diminishes," observes Los Angeles psychotherapist Suzanne M. Lopez. "Dating services eliminate a lot of riffraff, and during downtime, you can look for a potential partner." And for those who want a tailored approach, niche dating allows people to get downright persnickety.

Niche dating has surfaced notably with services targeting preferences from religion to hobbies and alternative lifestyles. Although there is no specific data available on niche dating, industry-wide dating service revenues topped $917 million in 2002 and is projected to skyrocket to a whopping $1.1 billion in 2003, according to a November 2002 report, "The U.S. Dating Services Industry," by market research and consulting firm Marketdata Enterprises Inc. Research director John LaRosa has seen the industry boom after 9/11, with singles flooding the market in search of a meaningful relationship.

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High-priced love meets its maker with services like the Millionaire's Club, where moneyed men seek attractive bachelorettes. Along with unlimited dates, the $10,000 to $20,000 annual membership (depending on whether it's a state or national search) buys the male suitors sessions with a dating coach, a relationship counselor and an image consultant. "The more successful the men, the pickier they are," asserts Patti Stanger, 41, owner and CEO of the Marina Del Rey, California, firm. "And they want the best." With projected 2003 sales of more than $1 million and licensing plans, Stanger and her idea are a match made in heaven.

--April Pennington
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Online Gaming

Enter a world that is enchanting, violent and full of nefarious creatures as well as heroes and warriors, and you've entered Norrath, a virtual country in the online game EverQuest--and the 77th richest country in the world, according to economics professor Edward Castronova at California State University, Fullerton.

According to the Interactive Digital Software Association, the number of users of online gaming sites is growing 12 to 15 percent per month, and some 111 million people will play online games by 2005. The opportunity for entrepreneurs, however, is more likely in advergaming-games created to help corporate clients attract users to their sites.

"An advergame has to feel like a game. If [consumers] think it's an advertisement, it won't fly," says Dan Ferguson, 35, a founding father of adver-gaming and co-founder of Dallas-based game developer Blockdot Inc.

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Visit our Associations you should know about:Ethical Online Gaming Association, Interactive Digital Software Association and Online Gaming Association.

One way start-ups can steer clear of that roadblock is to avoid pooling talent in a single area. "You're going to have a group that is very technology-savvy but not so creative," says Ferguson. "So they can make very solid games--with no sex appeal. It doesn't get people excited. Balance it out."

Ferguson says Blockdot's average advergame costs about $50,000. "You can even do a simple tic-tac-toe game [for about $10,000]," he says. With clients that include GM, M&M's and Volkswagen, Blockdot expects 2002 sales of $1.4 million. And there's room for growth. Forrester Research predicts advergaming will generate $1 billion by 2005. Overall, online gaming is expected to reach $5.6 billion by 2005, according to research firm Jupiter Media Metrix. Perhaps by then Norrath will be in the top 50.

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Online Learning

With the dotcom funding boom at its back a few years ago, e-learning seemed like easy pickings. Now, funding has dried up, and corporate training budgets have been slashed, says Trace Urdan, senior analyst of learning companies at ThinkEquity Partners Inc. His numbers show industry growth falling from 34 percent in 2001 to 7 percent in 2002. Does that mean a dour future for this once-bright market?

Not exactly. Online degree programs continue to grow, the government spends more on training in the 9/11 aftermath, and such corporations as GM are shifting their training budgets to e-learning, says Urdan. "If you've got the vision, this is an area that's going to be strong," he says.

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  • Training magazine recently folded in their sister publication, Online Learning. Find them online at www.trainingmag.com.
  • Online Learning 2003, an industry conference for e-learning, won't take place until September 2003, but you can download materials from their 2002 conference now.

The growth comes thanks to demand for professional development and vocational training, says Angela Lovett, founder of WorldWideLearn.com, a Calgary, Alberta-based e-learning directory. The future, she says, is bright.

But business training is where the market will lie early on. "It will take a few years for the mass consumer market to embrace it," Lovett says.

Beyond creating content, Urdan says, services will be a growth market. Help companies integrate training software or structure programs. Better yet, outsource it for them by running the software, finding talent and administering classes.

That's been the approach of Knowledge Anywhere, a Bellevue, Washington-based e-learning firm. CEO Charlie Gillette says providing a soup-to-nuts employee training solution makes his company attractive to corporate clients like AT&T and E&J Gallo Winery. The 30-employee company has been experiencing 50 percent year-over-year quarterly growth by producing educational content and delivering it via its software.

Skittish VCs are unlikely to fund an e-learning venture, so plan on self-financing--including customer funding, as Gillette did to bootstrap. "Go after a very specific vertical market," he advises. That doesn't make e-learning easy pickings. But there are still pickings to be had.

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Pet Products

What's too extravagant for a beloved family member? Apparently nothing, and pets reap the spoils. U.S. households will spend $30 billion on their pets in 2002, according to the American Pet Products Manufacturers Association Inc. (APPMA)--and not just on food bowls and the occasional chew toy. The upscale pet accessories market is where it's at, and entrepreneurs are cashing in with everything from high-end fashion to holistic foods.

Bobby Wise, 45, owner of San Francisco-based George, knows all about puppy love. Back in 1991, he and his partner couldn't find dog accessories that suited their tastes, so they decided to create their own line reflecting a clean modern aesthetic (think Banana Republic meets Petco) and found there was little competition. With three store locations and projected 2002 sales of $1.5 million, Wise has seen the market grow tremendously. To stay ahead of the pack, he's expanded his original line to include a full range of bedding, grooming products, clothing, treats and accessories for dogs, cats and their owners. "I think one of the keys is we've stayed faithful to our style," he says.

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  • Fancy Publications offers several magazines for pet lovers of all types: dog, cat, bird, horses and more. Visit them online at http://www.animalnetwork.com.
  • Visit the American Pet Products Manufacturers Association Inc. (APPMA) here.

So why are people spoiling their pets? "We live busy lives, and pets love us unconditionally," explains APPMA's Funda Alp. "They don't complain when we get home late or tell us about their problems. The relationship you share is unmatched." Alp says many people--empty-nesters, singles and couples without children--consider pets their "babies," creating a new breed of pampered pet. For these owners, money is no object in showing their affection. Looks like the pet business is nothing to bark at.

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