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13 Hot Businesses for 2005

From high-tech clothes to wine, eBay drop-off stores to tech security, the business ideas on our 2005 hot list run the gamut. But they have one thing in common: They're sizzling hot and just waiting for you to bring them to life.
November 12, 2004
URL: http://www.entrepreneur.com/article/73778

eBay Drop-Off Stores

One business realm continues to flourish despite Americans' concerns over the sluggish economy--the seemingly indomitable kingdom of eBay. The auction marketplace juggernaut has more than 95 million registered users worldwide who traded nearly $24 billion worth of goods in 2003. Whether you pride yourself on being a Titanium PowerSeller or have never even thought about selling on eBay, there's serious money to be made, and a crop of eBay drop-off businesses are popping up to help with the process.

EBay drop-off stores bridge the gap between the online bazaar and people who want to sell their goods without the hassle. Owners serve as middlemen who handle an item's sale--from photography and description to financial transaction--netting a percentage for the service. Though eBay set up a Trading Assistant Program in 2002, which allows eBay users to help others sell their items, it has otherwise kept its distance in this arena and has welcomed enterprising individuals as intermediaries. "We're definitely seeing a trend of these retail storefronts opening up," says Hani Durzy of eBay. If you don't want to build a drop-off store from the ground up, consider one of the many franchises getting in on the auction action, like iSold It or QuikDrop .

"It was a huge opportunity with a recession-proof model in terms of coupling the consignment world with businesses, nonprofits and retail space," says John Hawk, 39, who started Bidadoo Inc . with his brother Howard; both brothers have B2B backgrounds. Bidadoo, with two store locations in Bellevue and Seattle, Washington, incorporates fund raising into the mix by allowing sellers to donate an item's proceeds to a nonprofit. Launched in January 2004, Bidadoo projects sales will top $1 million this year and expects fivefold growth by 2005.

What's really surprising is that many existing eBay sellers, even PowerSellers, use Bidadoo. "We thought they'd be our competitors, but it turns out they're some of our best customers," reveals Howard, 41.

Marsha Collier, author of eBay for Dummies , suggests first trying the Trading Assistant Program for a free taste of this business. Says Collier, "Why not get on-the-job training before you put out any money?"-April Y. Pennington

Kids Plus-Size Clothing

Obesity is no longer just a weighty issue for adults--children now make up an increasing percentage of the growing number of overweight Americans. According to 1999-2002 survey data from the National Center for Health Statistics, 16 percent of children and teens aged 6 to 19 were overweight--triple what the proportion was in 1980--with another 15 percent at risk of becoming overweight. That means there's a growing need for clothing that not only fits right, but also boasts the same style and attitude of its average-size counterpart.

Ruth "Penny" Smith knows all too well the anguish and frustration plus-size kids and parents feel when clothes shopping: Her own son often came home empty-handed and disappointed. Smith, 44, had been sewing some of his clothing and realized she could help others by designing large-size boys and girls clothing. Teaming up with her former district manager from a formalwear store, Patti Herioux, the two started Hey Mom, "It Fits!" in Bolingbrook, Illinois, and have received an enormous response worldwide from their e-tail website.

Market research firm The NPD Group reports the kids plus-size apparel industry has grown to about $3 billion a year--about 12 percent of the overall children's clothing market. Though large companies like Dickies, Old Navy and others have joined the fray, entrepreneurs who move quickly into this arena can stand out.

"Big names like J.C. Penney and Sears are going to larger sizes, but from what we've seen, their large sizes are not even close to where they need to be," observes Herioux, 24. "And that's the market we look to cover." Serving up to 44-inch waistlines since 2003, Hey Mom, "It Fits!" is expanding its line to keep up with requests for larger sizes. The company expects sales to reach $150,000 this year.

"The advantage for entrepreneurs is creating a very creative, specific brand identity," says Jeff Klinefelter, senior research analyst for investment firm Piper Jaffray & Co. , based in Minneapolis. Offering hip attire like denim jackets and carpenter jeans, Hey Mom shouldn't have a hard time keeping up with trends--especially now that Smith's son Cedric, 13, has moved from being the company's clothes model to one of its designers.-A.Y.P.

Search Engine Optimization

Being a rock star on stage in front of thousands of screaming fans will get the hairs on your arms to stand up. Garry Grant, 46, who used to play with the likes of Bon Jovi and Bruce Springsteen, says he got that same feeling the day he learned his company was ranked No. 1 on Google. The CEO and president of Search Engine Optimization Inc. , Grant says top ranking has equaled huge revenue gains: He expects company sales to reach $6 million in 2004, up from $1.9 million in 2003. Not bad for the multitalented computer science graduate, who went from being a rock star to an internet entrepreneur.

Eighty-four percent of Americans online use search engines, according to the Pew Internet & American Life Project, which researches the impact of the internet, and ComScore Networks Inc., a provider of marketing information and consulting services. That means getting a high ranking can make or break a business. "You could spend a million bucks on a website, [but] if it's not visible, it's worth nothing," says Grant. Businesses that want top rank turn to search engine optimizers, which provide the "technology, methodology and science of increasing your website's visibility," according to Grant.

Larry Chase, publisher of Web Digest for Marketers and SearchEngineForMarketers.com , says search engine optimization (SEO) isn't for the faint of heart. "This is a very fast-changing marketplace," says Chase. "It's not the kind of field where you learn it once and forget about it." Chase recommends constant reading of industry news to keep up; Grant goes a step further and checks for patents filed by search engine companies to stay ahead of the competition.

Good niche areas for entrepreneurs include pay per click, copywriting and local searches, says Chase, who forecasts personalized searching will be the next big search innovation. For example, tech geeks searching the word Apple will get results for Apple Computer, not the kind of apple you sink your teeth into. In this niche, opportunities exist for entrepreneurs in developing the technology that acquires such user preferences or profiles, as well as in optimizing websites for personalized searches.

Of course, we can't talk about SEO without mentioning the elephant in the room: Google. Chase and Grant agree that Google gets the most SEO attention. However, Chase adds, "You can't please all of the search engines all of the time--you have to figure out that middle ground." Like Grant, if you figure that out, you, too, can be a headlining act.-Steve Cooper

Performance Apparel

Today's clothing needs to offer more than just a fashion statement--it needs to offer value and practicality. That's the thinking behind the growing industry of performance apparel.

Performance apparel is clothing with a purpose, like shirts that offer UV protection or sunglasses with an embedded MP3 player for active people who love the outdoors. You may have been donning performance threads for a couple of years without even realizing it--think wrinkle-free pants and stain-resistant shirts. Apparel that's really pushing the envelope includes clothes that clean themselves; suits that monitor the body and deliver drugs like insulin when necessary; raincoats that receive real-time weather forecasts, notifying the wearer of the outdoor conditions; pants that repel insects; washable suits; and anti-microbial underwear.

Bill McNally, co-founder of Noble Fiber Technologies in Clarks Summit, Pennsylvania, has created X-Static, a silver-woven textile fiber that's easily incorporated into any textile material and enables the material to kill odor and bacteria while enhancing existing sweat-wicking systems. McNally, who has a biomedical background, recognized the benefits of X-Static for the medical community and also saw applications for use in the military and consumer markets.

"To maximize the performance of a given product, you need to be able to deliver multiple benefits--and that's what we do," says McNally, 43, whose company has seen exponential growth each year since it was founded in 1996.

David Schmida, executive director of the International Association of Clothing Designers & Executives , predicts that by 2010, some 40 percent of all garments sold will have some performance apparel element to them. "Where I see the entrepreneur coming in is in nontraditional uses of fabrics or technologies in apparel," says Schmida. For example, Schmida says entrepreneurs might develop a new fabric for the military but find a use for it in golfwear. Schmida adds that fitness and leisure-time clothing are the hottest segment of the performance apparel market today.

McNally can attest to that: His product was used by 61 countries during the Athens Olympics; Johnson & Johnson and NASA are also on his client roster. One success secret is pretty simple, he says: "Value is a recession-proof asset."-S.C.

Functional Food

Water isn't just water anymore--it can now be fortified with vitamins and minerals to enhance your health. And the same goes for nutrition bars, shakes, snacks, cookies--you name it, and companies are adding nutrients like calcium and soy protein to enhance it. Such "functional foods" experienced an average of 9 percent growth year-over-year, accounting for $22.8 billion in U.S. sales in 2003, growing from$13.7 billion in 1997, according to the Nutrition Business Journal .

Promising benefits that range from defeating dehydration to alleviating joint pain, functional foods are marketed to play up their health and wellness benefits. It was, in fact, a search for something to relieve his mother's menopause discomfort that led Dr. Aaron Tabor to create his company, Revival Soy . Founding the company in 1998 while he was in medical school, Tabor wanted to create a line of shakes, bars, snacks and such that would harness the positive health effects of soy but taste good, too. Tabor patented the process he'd found for isolating the most beneficial elements of soy and, adding them to his products, began putting the Revival Soy products through clinical trials. To date, the company has 20 such trials completed or underway, offering evidence of the products' health benefits. "I've been able to touch hundreds of thousands of people now, [compared to] if I'd just gone into clinical practice," says Tabor, 34. Selling direct to consumers via a toll-free number and the internet, Kernersville, North Carolina-based Revival Soy has annual sales of more than $20 million.

Patrick Rea, research director with Nutrition Business Journal, notes that nutrition bars remain one of the most popular functional food items, while drinks and snack foods also show a strong market presence. Still, he notes that it's a challenge to get noticed among all the competition--especially because you'll want to get your product on the shelf beside those from huge companies. To get started, check out Functional Foods & Nutraceuticals magazine , not only to find out what's going on in the market, but also to see the listing of functional food technologies and innovations to possibly license and put into food products.-Nichole L. Torres

Financial Planning

Now entering their retirement years, 77 million baby boomers are finding themselves forced to deal with financial planning and asset management if they want to live comfortably well into retirement. From the wealth boomers are expected to inherit in the next few years to management of the money they've earned in long careers, there's a need for good financial planning. Still, according to a 2003 survey by financial services company ING, 62 percent of baby boomers spend one hour or less on retirement planning activities per month, while 32 percent say they don't spend any time on it at all.

And therein lies a huge market--or plethora of markets. "Even within the baby boomer demographic, find a niche--a target group," advises Michael Kitces, director of financial planning for Pinnacle Advisory Group Inc. , a wealth management company based in Columbia, Maryland. There's opportunity, he notes, for financial planners to target boomers within a specific asset level, for example, or even boomers getting ready to retire from a specific profession or industry.

Bruce Fenton started wealth managment and private banking firm Atlantic Financial Inc. , now based in Boston, in 1994. He targets boomers as his main clients and warns that they are a particularly demanding group. "Boomers tend to be savvy consumers," says Fenton, 32. He has built his business to more than $1 million in annual sales by meeting those demands as well as being highly communicative with his clientele.

While the boomer market is highly competitive, forward-thinking entrepreneurs can also target Gen X and Gen Y consumers. Jonathan Guyton, principal with Cornerstone Wealth Advisors Inc . in Minneapolis, notes that financial planners can get into the business today by managing the assets of slightly younger consumers--who often don't have the same large net worth as boomers--and build a long-term trust with those clients over the years. But whatever niche you ultimately choose, Guyton sees a trend of more service-oriented vs. product-oriented financial planners--those who are paid a fee to provide ongoing advice on all relevant financial matters.-N.L.T.

Concierge Physician Services

As doctors become frustrated with paperwork, red tape and stifling patient loads, some are taking matters into their own hands and starting a new kind of doctor's office, often with the help of a dedicated businessperson. "Concierge physician services" is a term that covers patient-financed health care. This has many variations, but most often, the patient pays a yearly or monthly fee for services like premium access, more personalized visits, even house calls.

Dr. John Blanchard, 34, is a founder and managing partner of Premier Private Physicians in Clarkston, Michigan, as well as president of the American Society of Concierge Physicians. "We were unhappy with the service we were able to provide and the quality of health care we were able to deliver to patients in the traditional health-care setting," he says. In a regular practice situation, doctors have 3,000 to 4,000 patients; with his 3-year-old business, each has about 600. "It restores the integrity of the physician-patient relationship," says Blanchard.

Because these companies don't bill insurance, they can have a smaller ancillary staff and lower overheard costs. Experts say family practice and internal medicine physicians are typically the ones who shift to a concierge model.

Katherine Harmer, 33, is founder and president of Higher Care in Denver. She came from a technology industry background and was propelled into starting a concierge physicians business due to the loss of her father and a desire to do something that really mattered. "You really have to do your research, and you have to have good attorneys," she says of starting this business. She handles all the year-old practice's business matters, while physician James Benoist handles the patients. Higher Care is about to earn a profit, and Harmer expects they will have a full patient load by the end of their second year.-Amanda C. Kooser

Hispanic Marketing

The Hispanic market is sizzling--Hispanic purchasing power is expected to hit $1.2 trillion in 2010. "This has become a highly desirable market for mainstream Americans," says Elena del Valle, president of the Hispanic Marketing & Communication Association.

But over the past three years, leading U.S. advertisers budgeted an average of just 2.4 percent of their resources to target Hispanic consumers, according to the Association of Hispanic Advertising Agencies. The time is ripe to help these companies decipher the vast Hispanic market and target their marketing dollars to reach this prized demographic.

One possible niche is teaching companies how to communicate in Hispanic-oriented media and how to be sensitive to this market when mass marketing. Advertisers are seeking specific, up-to-date information on the Hispanic market--even down to the size and purchasing habits of Hispanics in a certain ZIP code. Becoming an expert on the types of segmentation is key--for example, you must know how the Los Angeles Hispanic population differs from that of Miami or New York City.

Tony Moreno founded Huellas.com , a provider of multimedia and marketing services for the Hispanic market, in Pembroke Pines, Florida, in 1998. "Hispanics are very proud of their culture and generally like to be catered to in their own language and according to their cultural heritage," says Moreno, 38. He's built his international company into a six-figure business by coordinating and producing events such as a pageant and fashion show in Florida aimed at the Hispanic market.

"It's hard to find an industry today that shouldn't have a Hispanic marketing strategy," says Luis Garcia, president and founder of Garcia 360� , a Hispanic advertising firm in San Antonio, Texas. Use that to your advantage when marketing your services: Show companies examples of other businesses whose sales have grown after targeting the Hispanic market. Just about any industry is worth a look--food retailing, clothing, financial services, travel, manufacturing. Simply determine which industries and companies are a good match for your skills.-N.L.T.

Technology Security Consulting

Raise your hand if you have security concerns when it comes to your hardware, software and network. With spam, spim, security breaches, software patches, viruses, worms and hackers to worry about, many businesses are turning to technology security consultants for help. While some will use their regular IT vendors, there's an increasing demand for specialized consultants who are up-to-date and knowledgeable about all aspects of technology security.

Mike Ryder, founder and president of Franklin, New Jersey-based Safelink Networks LLC , found his focus in IT consulting. Ryder, 33, serves the needs of small businesses and schools, with the main task of securing their networks and internet connections. Self-funded Safelink isn't yet a year old, but Ryder has built a comfortable client base, and his sales have been doubling every month. He attributes some of his success to his ability to explain technical issues in a nontechnical way. "My background wasn't technical. I'm more like a regular person than a tech geek," says Ryder, whose history degree went on the shelf in 1993 when he joined the data communication equipment business where his brother worked. Ryder has also found a smart way to keep his costs down. Rather than stocking up on employees, he uses a loose federation of trusted independent contractors to fill out his service offerings.

According to IT and telecom research firm IDC, Ryder is working in a strong area. Small and midsize businesses are a fast-growing market for IT services, especially in the areas of network and security consulting. "During the next five years, the share of services spending by small and midsize companies will grow from 22 percent to 28 percent of the market in the U.S.," says Rebecca Segal, vice president of Worldwide Services at IDC, based in Framingham, Massachusetts.

Ryder's advice for prospective tech security entrepreneurs: Invest some time in human networking, and build solid relationships with customers and colleagues. "What's important for me is for this company to focus on taking care of a core group of customers," he says. Entrepreneurs with the technical know-how and desire to keep up on the latest in security can do well serving this market.-A.C.K.

Peer Support Groups

The lyric goes "Everybody needs somebody sometime"--and it couldn't be truer if you consider the proliferation of peer-to-peer business support groups. Popping up all around the country, these groups bring together like-minded individuals to discuss current business challenges or help take businesses or careers to the next level. Groups exist for business owners, female executives, young businesspeople and people in specific business areas, such as marketing. They can be for-profit or nonprofit endeavors, independently run or a franchise. But one thing's certain: You'll need a clear vision to create a successful peer-to-peer support group.

Find your niche, and provide valuable services and guidance for that group. Ted Sun, an executive coach and organizational designer with Columbus, Ohio, business coaching firm Executive Balance , has facilitated and advised such peer support groups. He recommends that entrepreneurs hoping to start a for-profit group come in with a ton of research, expert speakers, hot topics, great facilitators and members-only benefits. "You can charge a bit more for that," he says. Membership can range from a few hundred dollars to a few thousand dollars, usually paid annually or quarterly.

Key to the success of peer support groups is a hands-on approach--groups need a strong facilitator who is knowledgeable about group dynamics and a limited number of members so everyone gets the attention they need. Ray Silverstein, founder of the President's Resource Organization (PRO), a peer advisory board franchisor, caps group memberships at about 13 and assigns people to groups based on their companies' number of employees.

Author and marketing consultant Marcia Yudkin, 49, focuses on providing value to members with her online mentoring and support group, Marketing for More . Yudkin provides members-only weekly articles, a monthly teleclass with an expert guest, an online forum for questions and discussion, and even a conference call each week to discuss in real time each entrepreneur's marketing needs. "People have been very excited about the opportunity to get feedback when they need it," says Yudkin, who started the Goshen, Massachusetts-based company in September 2003. Through monthly membership fees, Yudkin has built her sales comfortably into the six figures.-N.L.T.

Wine Businesses

It's the nectar of the gods--and the nectar of Americans, too, apparently. The number of Americans who drank wine at least once a week increased from 19.2 million in 2000 to 25.4 million in 2003, according to the Wine Market Council. And it seems that American consumers have also developed a serious affection for all things wine-related.

While starting a winery is one way to get into the wine business, you'll wait at least seven years before producing your first bottle. Creating a business peripheral to wineries could provide a quicker path to success. From wine educators and wine game inventors to wine accessory manufacturers and builders wh0 design wine cellars, entrepreneurs are entering this market from all sides.

With a background in the restaurant industry, focusing on wine, Kyl Cabbage got into the peripheral side of the wine business by opening The Wine Experience in Des Moines, Iowa, in 1995. Cabbage wanted to create an environment that would draw everyone from knowledgeable wine enthusiasts to newbies. "We had to dispel the thought that wine is only for the rich," says Cabbage, 44. The Wine Experience provides a forum for wine tasting and wine education, while offering a selection of over 2,800 labels for sale-the company even coordinates wine-tasting trips to Napa Valley. With two locations in the Des Moines area, The Wine Experience is slated to gross $3 million this year.

Targeting baby boomers is a no-brainer in this industry, but wine consumption is also growing steadily among Millennials in their early 20s, says Vic Motto, chairman and CEO of Global Wine Partners , a global wine investment bank in St. Helena, California. He also notes that the market is starting to shift: An overabundance of grapes in the past few years had lowered the price of wine, but a smaller harvest in coming years will raise wine prices a bit in this cyclical industry. "It's a highly competitive industry," says Motto, but he notes there is still room for people to carve out a market niche.-N.L.T.

Staffing Services

While the economy continues on its twisting path, one business is booming. Demand for temporary and permanent staffing services has risen as we continue to head out of the post-dotcom-boom recession. Barry Cohen, co-founder and chief planning and development officer of The Response Companies , a staffing business, has seen the tide shift over the 15 years he's been in business. "Our hottest areas right now are our temp staffing business, our financial services group, our marketing group--and our newest startup area is legal," he says of the New York City-based business with $45 million in estimated sales for 2004.

The Sarbanes-Oxley Act--which forces companies to comply with strict accounting procedures--has been a major contributor to this industry's growth. Companies, particularly in financial and health-care fields, are turning to businesses like Cohen's to provide the personnel to help them comply. "There's a real increase in the need for qualified senior accounting and auditing professionals," says Glenn Walsh, vice president of interim staffing with The Response Companies. That demand is starting to cross into all business fields as the effects of Sarbanes-Oxley spread out.

Richard Wahlquist, president and CEO of the American Staffing Association , says the Bureau of Labor Statistics predicts a 54 percent increase in the employment services industry over the next 10 years. That includes almost all areas of staffing. "You could almost close your eyes and throw a dart at the wall, and you'd be hard-pressed to miss out," he says.

Even so, getting your business off the ground won't be cheap. "The startup costs are higher than they've ever been because of the insurance costs," says Cohen, 48.

Wahlquist suggests getting a solid grounding in employment and labor law before entering the field. It's also important to invest upfront in quality hardware and software. Staffing is a competitive market where new entrepreneurs are well-advised to find a specialty to focus on. "If they're looking to go into this business, they should go into it on the permanent side and pick a niche that is hot in their specific geographic area," says Cohen. Maintaining a temp service may be more difficult than a permanent one where you just place someone once. Plan well, and you can take advantage of one of the fastest-growing industries in the country.-A.C.K.

Niche Health and Fitness

Where do you go when your dog is stressed out? Or your whole family needs some exercise? Or you're looking for a gym that isn't a meat market? If you can answer any of these questions, you've already had a glimpse into the world of niche health and fitness businesses. This is a hot niche in a country full of people increasingly looking to alternative medicine. A report by research firm Mintel International Group Ltd. says, "The U.S. health and fitness club industry is on a revival trend, with new club brands, club openings and new memberships increasing--similar to the mid-1980s--after a decade of flat growth."

In this business, the more specific you can be, the better. Just look at Curves, the fitness franchise catering to women with 30-minute workouts. It's exploded to more than 8,000 locations worldwide. Clubs aimed at kids and families are also showing up. A recent report from market research company American Sports Data Inc. says that more than 39 million Americans belong to health clubs and that Pilates, yoga and tai chi are all growing areas. Simplifying workouts and providing comfortable surroundings are big trends in the fitness industry.

Fitness is just one part of a growing overall health industry. Besides yoga, health practices like acupuncture and massage are going mainstream. In this area, you can't get more niche than Kathleen Prasad. Founder of the Animal Reiki Source in San Rafael, California, Prasad, 35, applies the techniques of the Japanese energy-healing art to animals. "It's just on the cusp of being understood and accepted," says Prasad. "I'm a pioneer in a new field, so I can really do anything I want to do with it." So far, Prasad has worked with everything from elephants to horses and expects a 200 percent increase in business in 2005.-A.C.K.