Hot Trends to Explore


You don't have to be under 18 to appreciate the fact that children's businesses are exploding. From educational products and services to tech gear and accessories just for kids, the markets are virtually wide open.

According to the Bureau of Labor Statistics, there were 35.4 million families with children under age 18 in 2004. Of these, more than 90 percent had at least one parent employed, and more than 70 percent of mothers were working moms. That's as strong an indicator as any that there's a huge need for products and services that make kids' lives educational, safe and enjoyable--and help ease the burden on parents.

And don't forget, those kids are going to grow up. Today's 18-year-olds will be 23 by 2011, and that's the makings of another baby boom-or as we like to think of it, the makings of an even greater need for children's products and services. In fact, we're pretty sure you're not getting any younger reading this. The time is now-and the opportunities are plenty.

Kids' Party/Activity Centers
Edutainment centers are just what they sound like: places where kids can take a class, play a sport or have a party--on someone else's turf. What parent wouldn't love it?

Today's savvy parents aren't looking for just a playground, however. Vicki Gersten was looking for quality educational programs for her sons, Jonah, 3, and Gabriel, 2. When Jonah was born, she took him "to every child enrichment class under the sun," says Gersten, founder of Jonah's Treehouse , a children's play and movement center in Washington, DC. When Gabriel was born, though, she "became a bit more discerning about which programs were top-notch and why."

So Gersten, 36, designed the kind of classes she knew she'd want for her own children, integrating movement, music, fantasy and developmentally appropriate curriculum. Jonah's Treehouse, which opened for business in September, is on track to hit $250,000 in gross revenue for 2006--and Gersten plans to open six more centers in the DC area over the next three years.

"Edutainment centers are both nourishing and fun for children," says Randy White, CEO of White Hutchinson Leisure & Learning Group Inc. in Kansas City, Missouri. White predicts the greatest growth with programs for children 8 and younger, and with centers targeting at-home moms with preschoolers.

Startup isn't cheap--"$100,000 and counting" for Gersten, who has thus far self-financed the venture. But all the dollars and cents are in the right place, it seems. After all, Jonah has a birthday coming up in February. Says Gersten, "Guess where he wants to hold his party?"

Child Care
These days, a baby-sitter just won't do. "Parents have seen the research," says Mark R. Ginsberg, executive director of the National Association for the Education of Young Children in Washington, DC. "They know that the early years are the learning years, and they're looking for programs that support all aspects of their children's development." Consider these figures from the Census Bureau: Nursery school enrollment increased from half a million 3- and 4-year-olds in 1964 to about 5 million in 2003. And more working parents means a greater need for quality child care.

So what are parents looking for? Enrichment activities are a big hit--such as on-site music, dance, sports and crafts. Parents also like the idea of giving their kids an early advantage via second-language and computer instruction. In many cases, these activities are taught by teachers or companies that partner with preschools and come in a few times a week for on-site instruction.

At Carpe Diem Private Preschool LLC in Richardson, Texas, founder Ashley Murphree offers much of what today's parents want--low child-teacher ratios, Spanish and music teachers, a computer lab--"everything you would expect" from a quality program, says Murphree, 32, who started Carpe Diem in 2001 with $2 million in loans. She opened a second location in Frisco, Texas, in August and expects combined sales of $2.5 million for 2005-up from $1.5 million last year.

Most important, says Murphree, is investing in a safe and comfortable facility, a professional staff and a great curriculum. At Carpe Diem, all the teachers hold degrees, are experienced and are given generous benefits--which makes for not only a high retention rate, but also happy children. "Our kids love to come to school," says Murphree. "They're not just doing work sheets."

Teaching Toys
The thing about educational toys is you can't let on that they're educational. Just let kids think they're playing. And in fact, if the toy is made right, that's exactly what they're doing--and learning, too. "You don't necessarily have to be playing with a true 'educational toy' to get educated," says Mark Carson, co-founder with his wife, Karen, of Fat Brain Toys, an online retailer, distributor and developer of educational toys. Since starting in 2001, the Carsons have zeroed in on a hot market that's only getting hotter: Teaching toys like the ones sold on the Fat Brain site are a big hit among parents.

Fat Brain has found its niche quietly and inexpensively with nonmainstream European specialty toys, games and gifts, and with "legacy toys"--things like Lincoln Logs, which require planning and decision making on the part of the kids using them. "Our only startup expenses were the products themselves," says Mark, 37, who expects sales of $2.8 million in 2005 for the Elkhorn, Nebraska, company. "We bought $600 worth of product, and it grew exponentially from there."

What's hot in this market won't necessarily have dozens of electronic bells and whistles (though there's a place for electronic toys that offer, say, math or phonics instruction). A simple Geomag building set, for instance, has just two components, yet "a 3-year-old can intuitively build three-dimensional structures [with it]," says Mark.

Another option, albeit more expensive: Create a product from scratch that's clearly educational, and put it in a package that sells in an instant. If you go this route, industry veteran Susan Rives recommends immersing yourself in your specialty market--through trade shows, product research, a well-thought-out business plan and prototypes--and preparing to spend over half a million dollars during startup.

"Come up with mock-up packaging," says Rives, co-founder with husband Bill of Seattle-based Scientific Explorer, a creator of science products that expects $5 million in sales for 2005. "[Make] prototypes, and take them to a regional show to get reactions."

Education & Tutoring Products & Services
Tutoring is a $4 billion market that's expected to grow up to 15 percent over the next few years, according to educational market research and consulting firm Eduventures. And with the No Child Left Behind Act on everyone's minds--from parents to school district officials--it's no wonder.

Among other things, the act requires public schools that aren't meeting performance standards to provide tutoring services to students. What's more, "parents are really aware of how demanding it is out there," says Francie Alexander, senior vice president and chief academic officer at children's publisher and media company Scholastic Inc. in New York City. "You can't start [preparing children] too early," she says--even if it's in preschool. Products and services designed to help students, teachers and school districts meet the requirements of NCLB are hotter than ever, including everything from tutoring centers to software and homework websites.

SchoolNet Inc. CEO Jonathan Harber is bringing in more than $16 million annually and expects 100 percent growth this year from providing K-12 educational institutions with software that tracks and monitors students' educational progress. According to Harber, who started New York City-based SchoolNet Inc. in 2001 out of a spare bedroom for less than $1,000, it's that kind of technology-based individualized attention that will be huge. "When I was a student, the 'one size fits all' approach was standard in education," says Harber, 41. "In the future . . . learning environments and experiences will be tailored to the needs . . . of each student."

Homework help is a hot area, too. Scholastic created Homework Hub, a website designed to help kids--and their busy parents--with things like book reports, math homework, test prep and study skills.

Cooking for Kids
In many homes, the mere suggestion of cooking is usually enough to get the little ones dragging a chair over to the counter, begging to help. Products like the Crafty Cooking Kits created by Jimmy and Andrea Zeilinger make the activity even more appealing. "Everything is included except one ingredient [that varies by kit]," says Andrea, 41, co-founder of Brand Castle LLC in Beachwood, Ohio.

"It's very rewarding to create a business where you're helping families spend time together," says Jimmy, 41, who started the company with Andrea in June 2004. The couple spent more than $1 million of their own and private investor money getting started. But all the preparation impressed Crayola, which decided to license its trademark to the Zeilingers. Now the kits are sold in select grocery stores and by mail order nationwide, and the couple expects 2006 sales of $10 million.

Cooking classes and camps are another great way to get kids into the chef's hat. Joanne Cogan, 48, and Anne Lawson, 47, launched Eurostoves Inc. , The Culinary Centre in 2004 and started offering classes for kids soon after. Now, half the Beverly, Massachusetts-based store's business is related to children and teens. "What is amazing is that children's activities were never part of the original business plan," says Cogan, who self-financed the venture with Lawson for $1.2 million. The company earned $100,000 in its first nine months of operation and is on track to earn $830,000 in 2005.

Keep in mind, you'll need lots of staff on hand to help--and it's not a tidy endeavor. Says Cogan, "Our kitchen is quite a sight after a teen baking class!"

Kids' Hair Salons
Walk into an average hair salon with an average toddler, and things can either go very right, or very wrong. So it's no surprise that parents--and kids--are grateful for places that make snipping fun.

At Karla Vandenberg's Boise, Idaho-based Monkey Dooz LLC , for instance, the haircut becomes secondary to everything else in the rain forest-themed hair salon, spa and party place: the monkeys dangling from the ceiling, the Hummer- and Mercedes-Benz-shaped chairs, and the myriad salon and spa services available to tots, tweens and teens alike. Offering everything from chocolate shampoos to personalized parties, Monkey Dooz has something for everyone.

And what about the ones footing the bill? "[Parents] get used to coming to Monkey Dooz and don't want to go anywhere else," says Vandenberg, 38, who opened her first location in Yakima, Washington, in 2001, and now has two others in the Northwest. With the addition of her new Boise location--launched in January for $110,000--she expects 2005 sales to reach $570,000, more than double last year's $230,000.

And while the National Cosmetology Association doesn't currently maintain data on children's hair salons, we think this market is hot--particularly places that include tweens and teens in the mix. After all, no matter what the age, kids like feeling good about themselves. "It's a self-esteem booster," says Vandenberg. "It makes [kids] feel special."

E-Tail for Kids
"Teens of all ages are more likely to report online shopping than they were in the past," says Amanda Lenhart, senior research specialist with the Pew Internet and American Life Project in Washington, DC, and co-author of the organization's recent "Teens and Technology" report. According to the report, 87 percent of Americans ages 12 to 17 used the net in 2004, up from 73 percent in 2000. Forty-three percent of them have purchased something online, and some 81 percent of wired teens play games online.

Things like concert tickets, ring tones and downloadable music will likely see the greatest growth over the coming years, according to Joseph Anthony, CEO of Vital Marketing , a New York City-based youth and multicultural marketing firm. It's these content- and entertainment-based products and services that are popular in the online space--because, simply put, kids still like to shop in real time. "They like the convenience of buying individual songs and personalizing their own phones," says Anthony. Hard-to-find items are likely to succeed, too--like video games and collectibles from Japan.

Above all, make sure your site isn't boring. Use good visuals targeting a young audience, teen-driven content, maybe even special contests and prizes.

And don't forget the parents: "It is important to remember that while teens have better access to credit or other repositories of digital cash," notes Lenhart, "many still have to ask a parent's permission and have them involved in an online purchase."

Tween Tech
From stripped-down keyboards and digital video cameras to two-way radios, cell phones, iPod cases and other aftermarket accessories, technology is no stranger to today's kids--and vice versa. According to the "2005 Tween Report" from Nickelodeon and Youth Intelligence, 9- to 14-year-olds are saving their allowances for more significant purchases-like technology--and spending an average of $27 on each shopping trip.

Not surprisingly, parents are looking for ways to maintain control, particularly when it comes to tweens. "Today's parents are constantly on the go to or from home, work, school and after-school activities," says Mark Weinzierl, 41, founder of Plano, Texas-based Enfora, which recently came out with TicTalk, a parent-controlled cell phone for tweens and teens. Enfora expects sales to reach $25 million this year. "TicTalk was designed as a result of parents requesting a safe and reliable way to stay connected with their children." Firefly Mobile Inc. offers a similarly downsized phone, and large toy companies like Hasbro and Mattel have recently come up with their own iterations as well.

But when it comes to tech, "you always have to be looking a generation ahead," says Joseph Anthony, CEO of youth and multicultural marketing firm Vital Marketing in New York City. Instant- and phone-text messaging are the new e-mail. Expect buddy icons or otherwise customized IM communications to be hot, along with IM tools that let kids post personal profiles, away messages and other customized communications.

You can expect tremendous growth among tweens, an as-yet-unsaturated market--but again, remember the parents. "Only 32 percent of younger teens have a cell phone, vs. 57 percent of older teens," says Amanda Lenhart of the Pew Internet and American Life Project. "Pure and simple, there is a lower level of market penetration with younger teens than older ones, so potentially larger opportunities exist. However, it is important to remember that issues of disposable income and parental control are greater in this age group than with older teens." --Karen E. Spaeder


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This article was originally published in the December 2005 print edition of Entrepreneur with the headline: The Hot List.

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