Click to Print

1997s Hottest Businesses

December 1, 1996
URL: http://www.entrepreneur.com/article/13632

The world seems to be spinning faster than ever. What's "in" this morning is "out" this afternoon. In such an accelerated environment, a business's ability to stay on top of trends is key. Knowing what's happening in your industry and what's likely to happen tomorrow, what consumers want and what they need--these things make or break your business. To help you keep on top of the latest changes, we're offering our selections for the top 11 businesses for 1997.

Some pretty large forces are at work in shaping these business concepts. The aging of the baby boomers (and their parents) is giving rise to an interest in assisted living facilities for older adults and physical therapy to keep people in peak condition. Ongoing corporate downsizing means specialized staffing services and professional employee organizations continue to thrive; newly hot this year are business training companies that help people learn new skills.

The Internet, of course, offers a world of opportunities, as do computer training and consulting. And an increasing interest in "do-it-yourself" projects has spawned such successful concepts as brew-it-yourself custom breweries and paint-your-own-pottery stores.

Our look at next year's hottest businesses will help you target your goals and keep your business on track for success. Check it out--then get to work putting this information to use.

Educational Toy Stores

Back in the days when the words "educational" and "toy store" never shared the same sentence, opening a retail toy outlet was a formula. A toy store was a toy store was a toy store. These days, however, toy stores that feature learning-based playthings are all the rage.

Why is this market so hot right now? "Today's more educated parents are much more involved in their children's lives," says Katie Malone-Cordell, co-owner of Skokie, Illinois-based Brainstorms Inc. In addition, they often have less faith that the school system will supply all the education a child needs.

Despite the presence of monolithic chains such as Noodle Kidoodle and Zany Brainy, experts agree there's still room in this industry for savvy entrepreneurs. It's not child's play, however: "You need capital, competence and luck to make it," says Howard Davidowitz, chairman of Davidowitz & Associates Inc. in New York City, a national retail consulting firm.

So how can you ensure success? For one thing, choose a plum location, far from the upscale urban areas that large chains favor. But the key, says Sue Edelman, editor of Big Blue Box, a publication that reports on the children's market, is setting yourself apart from the pack: "Be sure you have something unique to offer."

Paint-Your-Own-Pottery Stores

Once again, entrepreneurs have broken the mold--this time by starting a slew of paint-your-own-pottery stores. Different from traditional ceramic studios, these contemporary studios are located in bustling retail locations and boast a hip, coffeehouse-like atmosphere. Here, the future Picassos of the world are given all the necessary materials to create their own works of art on functional, prefabricated pottery pieces such as platters or mugs.

With an estimated 200 retail outlets and counting, paint-your-own-pottery stores are painting the town from coast to coast. More than just shelves stuffed with pottery though, many stores also offer live music, cappuccino--even wine and cheese. And smart entrepreneurs bring in extra business by renting out their stores for baby and wedding showers, bachelorette parties and holiday celebrations. "When we throw parties, many referrals are generated," says Leslie Tall, co-owner of Paint 'n Plates in Irvine, California, "and in this business, word-of-mouth is absolutely imperative."

You can't just throw yourself into this business, however. Before opening their store, Tall and co-owner Terri Laine Klingner spent a year reading ceramics magazines, visiting warehouses and frequenting studios to research prices and themes. Barbara Tobias, editor of Popular Ceramics magazine, warns that thorough knowledge of safety regulations and the mechanics of ceramics are musts: "It could really turn people off if they have problems, don't like how their pieces turn out, or if you can't answer their questions properly."

Web Site Design

In light of the Internet's promise to place a company's products, advertising and marketing materials in front of millions of customers, it seems every business on the planet either has a Web site or wants one. That's why opportunities for firms that create graphics and content for Web pages are simply outta site.

"Businesses are continuing to learn how to use the Web," says Don Heath, president of The Internet Society, which seeks global cooperation and coordination for the Internet. "That means good Web site design companies that can provide excellent graphics and content are going to be important."

Market research firm O'Reilly & Associates estimates 40 percent of large companies and 25 percent of medium-sized and small businesses have either developed or plan to develop Web sites. Revenues are also coming from companies with poorly designed Web sites that need to be revamped. And because Web site design firms aren't limited by geography, the world market is in their grasp.

But while the Internet offers a huge audience, Web site entrepreneurs must market intensely to get their attention, says Heath. Another key? Learn more than just the technical aspect of the business. MacDonnell Ulsch, senior vice president of O'Reilly & Associates' Online Research Division, advises, "A Web site developer also has to be a management consultant so he or she can develop a site that reflects the mission, goals, culture and personality of the organization--not the Web site developer."

Computer Training/Consulting

A vast work force in need of up-to-date computer skills, companies adopting new technologies to do more with fewer employees, and a seemingly endless supply of new and updated software programs--put it all together, and it's no wonder computer training and consulting companies have a full plate.

Still, industry insiders say it's the Internet that's spurring much of the growth in these two fields, with corporate and consumer training on using the Internet leading this growth area. Opportunities for consultants to establish and manage Web sites and corporate Intranets are also ripe, says Sharon Marsh Roberts, vice president of the Independent Computer Consultants Association.

According to Framingham, Massachusetts-based International Data Corp. (IDC), a technology research firm, revenues in the worldwide technology training and education market are expected to exceed $27 billion in 2000. Likewise, IDC predicts the information technology consulting industry will reach $18.5 billion by 2000.

The challenge for computer consultants and trainers is competition. A strong commitment to marketing, adequate capitalization, extensive networking and systems to handle irregular cash flow cycles are all key to a computer consultant's survival, says Roberts.

Another important aspect is offering diverse training methods. "It's important to keep up with the trends in technology education to provide quicker, more efficient service," insists Deborah J. Clifford, co-owner of Bloomfield, Connecticut-based HBM Technology Group, an information and business technology solutions company, that offers classroom instruction, on-site training, a multimedia learning lab and CD-ROMs.

With no end in sight to the new and updated products that hit store shelves each year, computer training and consulting businesses appear poised for rapid growth.

Specialized Staffing

Staffing services have been booming for nearly a decade. In recent years, providing employees who have specialized skills--such as legal or accounting expertise--has emerged as an especially hot market segment, as companies find that hiring people with high-level skills on a temporary basis is much less expensive than keeping them on staff.

The latest trends in this field? Supplying long-term and temporary-to-permanent employees continues to be hot. Currently, says Bruce Steinberg of the National Association of Temporary and Staffing Services (NATSS), employees with technical and information technology backgrounds are on the most-wanted list. Also hot is the professional segment, which includes workers with legal, accounting and management backgrounds.

Despite the demand for workers, there are significant challenges in this industry: Finding adequate capitalization and qualified workers can be difficult, says Steinberg. You must also be cautious when expanding; it's essential to keep a tight rein on receivables while continuing to heavily promote your business.

"We do a tremendous amount of marketing," says Barry Cohen, co-owner of New York City-based Response Staffing Services, a staffing company specializing in providing permanent and temporary professional-level employees. "You're always looking for new business, so you've got to keep your name out there."

Despite the challenges, the industry outlook is good: According to NATSS, the overall industry receipts jumped an impressive 10.8 percent to reach $20.8 billion in the first half of this year as compared with the $18.8 billion earned in the first six months of 1995.

Physical Therapy

With Americans taking a more active approach to their health, physical therapy businesses are changing to address their health-care needs. Once found exclusively in hospitals and used solely for stroke or accident rehabilitation, it's more common now to find physical therapists operating out of fitness centers, schools, large companies and free-standing locations and offering a wide variety of services.

According to Peter A. Towne, president of the private- practice sector of the American Physical Therapy Association, private-practice therapists are thriving. "The entrepreneurial aspect of physical therapy is bigger than it used to be," says Towne. "Often, private practitioners enter joint ventures with hospitals to cover outpatient services."

Of course, you don't have to be a physical therapist to profit from this market. If you've got the business skills but not the medical know-how, consider hiring experienced therapists to handle the hands-on work while you tackle marketing, management and the rest.

Why the growing need for physical therapy? "The population is living longer," says C. Shelby Durham, who opened Rehab Options Inc., a certified rehabilitation agency in Bala Cynwyd, Pennsylvania, in 1992. But physical therapy isn't just for older people, Durham is quick to point out; people with disabilities and sports injuries, among others, also benefit. "There's a tremendous need for our types of services."

Assisted Living Facilities

Why are assisted living facilities so popular? Just ask Paul Klaassen, CEO of Fairfax, Virginia-based Sunrise Assisted Living, a chain of more than three dozen residential elder-care facilities. "Americans are dissatisfied with existing options," says Klaassen. "[The typical] nursing home is expensive, offers a low quality of life and has a hospital environment not designed for long-term stays."

Assisted living residences, on the other hand, offer residents a homelike environment, much like apartment living, that provides the help they need, whether with taking medication, bathing, dressing, eating or transportation. This relative independence is vital to today's aging population, says Karen Wayne, executive director of the Assisted Living Federation of America (ALFA).

Since emerging in the late '80s, the assisted living industry has experienced astonishing growth. In six short years, membership in ALFA has soared from zero to 2,600 members. "Consumers are demanding this type of long-term care," says Wayne. And with America getting even grayer as baby boomers head toward their golden years, Klaassen notes, "You have all the ingredients for explosive growth."

Professional Employer Organizations

A rash of small businesses are shrugging off the endless paperwork, unclear regulations and red tape involved in handling personnel functions and are leaving it to the pros--professional employer organizations (PEOs), that is. According to Bankers Trust Research, revenues and earnings for PEOs (formerly known as employee leasing companies) are growing at about 30 percent annually.

How do PEOs work? Unlike staffing services, PEOs form a co-employment relationship with a small business so both parties "own" the company's personnel. Then, PEOs handle all the personnel duties, including payroll, hiring and salary reviews. And because PEOs pool employees from multiple companies, they can offer lower rates on employee benefits such as health care and retirement packages.

One major change in the past year is a move toward PEOs targeting larger companies. Until now, most PEOs limited themselves to clients with fewer than 100 employees, says Milan P. Yager, executive vice president of the National Association of Professional Employer Organizations. But businesses with 200 or more employees are discovering PEOs can serve their personnel needs as well.

Because of the potential for lawsuits and the very small margins PEOs operate on, Yager cautions that successful entrepreneurs must be knowledgeable in benefits and payroll administration as well as taxes and employment law to understand all the rules and regulations.

Keeping clients satisfied is also a must. "Most of our business comes from referrals," says Fran Morrissey, president of Staff Management Inc. in Rockford, Illinois, "so providing quality service is what's really helped us grow through the years."

Healthy Mexican Restaurants

Remember all that hysteria about the high fat content and inherent evil of Mexican food? Well, now there's an alternative: So-called "healthy" Mexican restaurants (often dubbed "fresh Mex") are opening at breakneck speed around the country--indeed, around the world. Apparently, diners want to have their guacamole and stay healthy, too.

La Salsa. Chico's Tacos. ZuZu Handmade Mexican Food. Las Fajitas. Cool Peppers Mexican Grill. The list of "light" Mexican fast-food restaurants is growing by leaps and bounds. "A restaurant concept is only as good as the pleasure it brings the customers," says Edward Anderson, president of Chico's Tacos, a chain of fresh-Mex restaurants. "The key to our success is taste and presentation."

The numbers justify--and fuel--Anderson's enthusiasm. According to the latest Census Bureau figures, sales of Mexican food are higher than any other type of ethnic cuisine, ringing up annual sales of $11 billion.

Some experts believe the healthification of Mexican cuisine is simply a reflection of trends in the restaurant industry--and changes in people's eating habits in general. Americans seem to be craving healthier fare. And if their hankering for an enchilada happens to coincide with a craving for something light, well, that's what fresh Mex is all about.

Custom Brewery

Microbrewed beer is a hot commodity these days--that's not news. What is news is that now there's a way to get in on this market without the expense of opening a full-scale microbrewery.

Entrepreneurs and beer connoisseurs alike are raising their glasses to custom breweries, which allow customers to brew their own beer on the premises. What's the advantage? For customers, it's the fun of brewing it themselves, right down to creating product names and designing labels. For entrepreneurs, it's the benefit of opening in a smaller space with less expensive equipment than is needed for a traditional microbrewery.

The initial capital outlay is smaller because there is no dining facility--you offer custom brewing and tasting only. That's one reason the number of custom breweries nationwide has grown from just eight in 1995 to more than 40 today.

"People are drinking less but drinking better," says Jeff Altvater, who opened Custom Brew Haus in St. Louis in 1994 after noticing a trend toward more personalized concoctions. "People really enjoy learning about beer and developing their own taste, trying to find a beer that is their style."

And for existing microbreweries, adding custom brewing to their operations is as natural a match as beer and pretzels--and a great way to pour on additional profits.

Job Training/Retraining

In a world where the skills you have determine how successful you are, it stands to reason that the more skills you have, the better your chances for success. That's why today's employees are clamoring for additional training to make themselves more well-rounded, increase their promotability or provide them with a backup plan in case they're laid off. No wonder businesses that train the general public and retrain the downsized-and-out are multiplying faster than you can say "You're fired."

"People are having to make changes more quickly than ever before," says Laura Berman Fortgang, owner of Verona, New Jersey-based InterCoach Business Development & Training. They don't want to wait until the ax has fallen before taking action, so they are reinventing themselves.

That trend has created a market of at least 1,500 individual job coaches nationwide and untold numbers of training businesses, according to Thomas J. Leonard, founder of Brandon, Florida-based Coach University, a training and development company.

Today's courses target everyone from newly divorced women seeking to re-enter the job market to people who want to learn word processing or executives hoping to become more promotion-worthy. And depending on the type of training you specialize in, you may be able to skip establishing an office altogether; some of your clients may prefer you to train on-site.

While laid-off or downsized employees (or those fearing such) are the hottest market right now, they aren't the only game in town. According to Leonard, tens of millions of self-employed and homebased individuals are also ripe for coaching or training. "People want to get ahead," he says. "They don't want to lose out."

Contact Sources

American Physical Therapy Association, (800) 999-2782;

Assisted Living Federation of America, 10300 Eaton Pl., #400, Fairfax, VA 22030, (703) 691-8100;

Bankers Trust Research, 130 Liberty St., 10th Fl., New York, NY 10006, (212) 250-2500;

Big Blue Box, 9 Galen St., Watertown, MA 02172, (617) 923-2583;

Brainstorms Inc., 8221 N. Kimball Ave., Skokie, IL 60076, (800) 621-7500;

Chico's Tacos, P.O. Box 890144, Temecula, CA 92589-0144, (800) 77-CHICO;

Coach University, 1971 W. Lumsden Rd., #331, Brandon, FL 33511, (800) 48-COACH;

Custom Brew Haus, 6701 Clayton, St. Louis, MO 63117, (888) 334-BREW;

HBM Technology Group, (860) 243-1000, dclifford@hbm.com;

Independent Computer Consultants Association, 11131 S. Towne Sq., Ste. F, St. Louis, MO 63123, (800) 774-4222;

InterCoach Business Development & Training, 45 Wayland Dr., Verona, NJ 07044, (201) 857-5068;

International Data Corp., 5 Speen St., Framingham, MA 01701, (508) 872-8200;

International Trade Administration, (800) USA-TRADE;

The Internet Society, 12020 Sunrise Valley Dr., #210, Reston, VA 20191-3429, http://www.isoc.org;

National Association of Professional Employer Organizations, (703) 836-0466, http://www.napeo.org/peo/;

National Association of Temporary and Staffing Services, (703) 549-6287, http://www.natss.com/staffing/;

O'Reilly & Associates, 101 Morris St., Sebastopol, CA 95472, (800) 998-9938, ext. 332;

Paint 'n Plates, 4213 Campus Dr., #166D, Irvine, CA 92612, (714) 509-6115;

Rehab Options Inc., 111 Presidential Blvd., #101, Bala Cynwyd, PA 19004, (800) 430-7342;

Response Staffing Services, 271 Madison Ave., New York, NY 10016, (212) 983-8870;

Staff Management Inc., 5919 Spring Creek Rd., Rockford, IL 61114, (815) 282-3900;

Sunrise Assisted Living, 9401 Lee Hwy., #300, Fairfax, VA 22031, (888) 4-DESTINY;

Take Good Care, 160 Rte. 22, Springfield, NJ 07081, (201) 912-0200.