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6 Startup Friendly Industries

These businesses are booming despite the gloomy economy.
July 15, 2009
URL: http://www.entrepreneur.com/article/202636

The headlines and market reports were foreboding.

But Rami Weiss saw opportunity despite the gloomy economy. Weiss says he enjoyed low startup costs and quick profitability two years ago when launching Boomerater, a networking site where baby boomers can exchange advice on topics ranging from retirement savings to outings for grandkids.

Elderly services and e-commerce are among several industries ripe for startups, according to a new IBISWorld report comparing growth forecasts, competition levels, entry barriers and required startup capital for more than 700 industries.

Some, such as landscaping and elderly services, find opportunity in serving an aging population. Others, such as fashion design and community food services, find opportunity in the grim economy itself.

Toon van Beeck, senior analyst with IBISWorld, an industry research firm, says while all nine industries named in the report have great growth potential, the single best opportunity for any given entrepreneur depends on individual goals and finances.

"We didn't rank these in any particular order, because it really depends on the direction the person starting the business is looking to take it in, and how much capital they have to outlay," van Beeck says. Below are a few examples of IBISWorld's startup-friendly industries.

Entrepreneurs providing landscaping services can start small and dream big, with startup costs as low as $1,000 and ample franchise opportunities, van Beeck says. Brian Kurtz spent roughly $10,000 for a trailer and other small equipment when he founded Solidago Landscapes in Church Hill, Md., in 2007, relying on a used truck and other gear to keep costs low. The business was cash-flow positive within a year, but Kurtz says being conservative about equipment purchases came with its own costs.

"I would occasionally have to tell people I couldn't do the job because I didn't have the necessary equipment," Kurtz says.

IBISWorld echoes this catch-22, warning that "in order to stay competitive, investments--such as in earth-moving equipment--will likely be required, invariably driving up the cost to enter the industry." It also notes an aging population will continue to drive industry growth.

Kurtz chalks up his success to his flexibility in pricing and services and a clientele of individual homeowners rather than "new residential complexes with 300 or 400 major installs."

Designers catering to budget-minded consumers will likely find success in fashion design services, a field that requires as little as $5,000 for startup costs, according to IBISWorld.

The founders of Loden Dager have found the market extremely receptive to their "functional, well-tailored menswear," says Paul Marlow, who launched the business with three partners in 2006. Marlow says much of the company's $250,000 in startup costs stemmed from immediate demand from retailers.

"The response was so positive that costs increased, but sales did, too," Marlow says. "I wish we would have known the sheer amounts of access to capital we would need just to make the business run smoothly."

Marlow says costs stemmed from the need to work on three seasons of merchandise at a time, and in assuring retailers on Loden Dager could deliver. "You've got to be able to produce the three seasons comfortably," Marlow says. "Once you start to run late, stores start questioning your entire production." van Beeck says designers should rely on "witty self-marketing" rather than advertisement. Marlow agrees, saying Loden Dager uses "strong and simple branding" to market itself.

Entrepreneurs in community food services will find a market hungry for affordable meals, with startup costs of only $500 to $1,000 and "excellent growth prospects" through 2011, according to IBISWorld. Kristin Gross Richmond says the growth of Revolution Foods, which she co-founded in 2006, illustrates that demand. Revolution Foods now employs 125 people, delivers 20,000 fresh, healthy meals per day to public schools in San Francisco and Los Angeles, and is expanding to other cities.

Richmond says since Revolution depends on "high quality, all-natural, fresh ingredients" for locally prepared meals, the launch required nearly $1 million for facilities, staff and supplies.

But Richmond says the "tremendous need and tremendous demand for affordable, healthy food across the board," made the initial costs worth it, both personally and financially.

e-Commerce and online auctions, along with other web-based businesses, represent "the way of future," says van Beeck, who anticipates growth in the industry through 2015 and startup costs as low as $12,000.

Deal-seekers increasingly shop online to find the cheapest merchandise, and secure payment systems like PayPal have improved consumer confidence, according to IBISWorld.

Weiss, co-founder of Boomerater, says he paid $50,000 in startup costs, and says the website turned a profit within months. He says instant feedback from users kept the company nimble as it evolved.

Eric Frank says Flat World, an online textbook publishing company he co-founded in 2007, keeps costs low in part by relying on other internet resources for formerly high-cost items, like textbook art.

"Now, you can go to Flickr and find a ton of high-resolution, openly licensed images," Frank says. "Things like that truly keep costs low, and allow you to do a lot more with a lot less." van Beeck says websites with enhanced functionality and features cost more to set up, and says costs for maintaining databases can be "hefty."

Entrepreneurs can launch a tutoring company or other education service for as little as $4,000, relying on only rented space and basic equipment to get started, according to IBISWorld. Increased acceptance of tutoring and exam-preparation services has helped advance the industry, according to IBISWorld.

In 2006 William Fowler co-founded Brain Balance Centers, which works with children with developmental learning disorders, spending roughly $100,000 to develop a business plan and fine-tune the center's unique curriculum. He says his partner, Dr. Robert Melillo, was already working with children when they launched, which provided "immediate cash flow."

Fowler says connections within the education world and a cadre of "extremely well-trained employees" have helped the company build a total of 10 Brain Balance Centers throughout the United States.

Businesses in the elderly and disabled services industry can carry hefty startup costs, ranging from $200,000 to more than $1 million to invest in nursing staff and medical equipment, according to IBISWorld. But growth and demand will continue to rise as more baby boomers retire. Alex Saldarriaga, who founded Home Health Advocates in 2003, says companies like his, which provides in-home support services to seniors, offer a great opportunity for profit with low startup costs. He paid roughly $25,000 to launch the business in 2003, and turned a profit within six months.

Saldarriaga says while it's a rewarding business for those with a passion for elder care, entrepreneurs who don't have that passion should look elsewhere. "It's like having a parent to take care of, except you have 52 parents to take care of," Saldarriaga says.

Medical and personal care isn't the only way to capitalize on the needs of an aging population. Weiss says Boomerater has benefited from advertisers eager to reach lucrative boomer consumers, and says there are plenty of opportunities for age-specific services marketed as being "fun, uplifting and inspirational" for a population that sees itself as active and energetic.