10 & 1/2 Thriving Trends of 2010

03-Oct-2010

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We read the reports. Sifted the data. Nagged insiders until they gave up the goods. Now, here’s the result:

1. Economic Turmoil

It’s not the $700 billion bank bailout. And no, it’s not the $787 billion American Recovery and Reinvestment Act of 2009. The real economic stimulus is … wait for it … the recession. That’s right, the Great Recession. This upside-down economy is creating entrepreneurial opportunities aplenty, so long as you can deal with a situation about as stable as a lava flow.

Results from Challenger, Gray & Christmas’ job market index revealed that 8.7 percent of job seekers gained employment by starting their own businesses in second quarter 2009–way, way up from the record low of 2.7 percent during the last quarter of 2008.

Even in finance, confidence and risk tolerance are on the rise. IbisWorld, an industry market research firm, expects that after a great purge, loan brokerage services will see 40 percent growth in 2010.

Sunwest Bank, a community bank that caters to entrepreneurs, upped its total assets by more than $150 million during the worst of the financial crisis–and that was before acquiring two failing banks in July and September. “We were picking up good clients left and right,” says CEO Glenn Gray. “Business owners are still seeing opportunity.”

Delve further into the numbers. It appears startup rates remain steady through recessions. “Ten, 15 years from now, there will be a slew of companies that we’ll point to and say they started in the recession,” Kauffman Foundation senior analyst Dane Stangler says. “You don’t see them yet, but you can be sure they’re out there.” In fact, more than half of today’s Fortune 500 companies were founded during a recession or bear market.

Austrian economist Joseph Schumpeter once described entrepreneurial innovation as a “perennial gale of creative destruction,” forcing existing companies to adapt or fail. “Economic progress in capitalist society,” he declared, “means turmoil.”

Well then, we must be on the right track. –Jennifer Wang

2. Green Power
Thanks to government incentives and changing public sentiment, clean energy is the most popular kid on the green movement block. The stimulus plan poured billions into renewable energy, automakers are all but predicting electric gridlock within the next few years, and everyone who’s anyone in the electric power industry is investing in the “smart grid.”

If the money being thrown around is any indication, that’s just the tip of the slowly melting iceberg. Cleantech Group, an industry research firm, reports venture capital investment in clean technology–including solar, biofuels, batteries and the smart grid–overtook IT and biotech for the biggest piece of the VC pie. The sector swiped 27 percent of all investment dollars in the third quarter–that’s $1.6 billion.

“The venture dollars,” says managing director Dallas Kachan, “show where innovation is happening and where investors are placing their bets.” The promise of a new economic growth engine is helping to lure lawmakers too. “They’re realizing that these are challenges that require us to reinvent almost every way we interface with the planet,” Kachan says.

And that is one massive market opportunity. –J.W.

3. The Senior Market
Bladders have never been bigger or badder. Same with vision care, cosmeceuticals and pretty much every other business associated with aging. You name it–catered tea parties, tech assistance, medical waste disposal, senior dating sites–you can profit from it. So forget how unsexy it sounds, because businesses aimed at retiring boomers are, well, booming.

According to the U.S. Bureau of Labor Statistics, the aging-services industry, composed of home healthcare, elderly and disabled services and community care facilities for the elderly, make up three of the top 10 industries with the fastest employment growth.

The Chronicle of Higher Education even named gerontology one of the “hottest” academic fields of the future. For instance, this fall, the University of Southern California debuted a new master’s degree in aging-services management to meet the growing interest in the field.

“The opportunity is there,” says Athan Bezaitis, director of communications at USC’s Davis School of Gerontology. “Many students in our programs are entrepreneurs noticing the trends in the ‘silver’ industries. They’ll spot the trends and create the businesses that fulfill a need–and create more jobs in the process.”

Plus, you can’t beat the job security. There are more than 37 million seniors today, and in 20 years, they’ll comprise nearly 20 percent of the U.S. population. They’ll also have cash to burn, with calculated spending power exceeding $1 trillion.

Case in point: Peter Ross, CEO of the home-care franchise Senior Helpers, says his company has grown significantly despite the languishing economy. Year-over-year revenue is projected to more than double from a respectable $28 million in 2008, and more than 60 new units will have opened up by year’s end. “There are a few reasons we’re successful, but the first is because we picked a good demographic,” Ross says. “We’re on the front end of something that’s getting bigger and bigger.”

And slower, and saggier, and leakier, for years to come. –J.W.

4. Discount Retail
Everyone’s eating lower on the food chain these days. Consumer spending is down more than 30 percent from this time last year, to an average of $57 a day, according to a Gallup poll. And even those who can still afford to spend are beset by “luxury shame,” which means high-end retailers are out, and discount shopping is in. Wal-Mart’s earnings increased more than 5 percent this year, while Neiman Marcus reported a 14.8 percent drop in sales. And the dollar store? Long the domain of low-income shoppers and random cheapskates, dollar stores are doing brisk business with the middle class. Family Dollar saw record net income in 2009. It jumped 25 percent, to $291.3 million.

Another hand-me-down from the weak economy: Resale shops. In 2009, secondhand shops increased revenue by $223.3 million, according to IbisWorld. The National Association of Resale Professionals reports that secondhand stores had an average 31 percent increase in business this year. Uptown Cheapskate–a fledgling fashion-centric resale exchange franchise–opened two locations this year, with four more on the way.

“There is a strong orientation towards value, which is likely to be with us for quite a while,” says Josh Lerner, a professor at Harvard Business School. “Now is not the time to start a luxury dog-wash service. But identifying opportunities where you can come in at a dramatically lower price can have very good returns.” –Kara Ohngren

5. Local Business

Demand is exploding for locally grown and made products–which means more support for mom-and-pop stores. The dividend: For every $100 spent at a locally owned business, $68 comes back to the community. Only $43 recirculates from national chain stores.

The “buy local” ethos has its roots in the farmers markets movement: There are almost 5,000 farmers markets across the country, the result of more than 5 percent annual growth for the past five years, according to the Department of Agriculture. Nearly 60 percent of consumers say they try to shop at a farmers market. Wal-Mart and Safeway recently added “Locally Grown” sections to their produce departments, and the USDA launched a “Know Your Farmer, Know Your Food” marketing campaign.

Programs that promote community shopping, like Buy Local Orlando, are also popping up all over the country. About 40,000 Orlando shoppers have participated since May. “We like to appear that we’re not just consuming for the sake of consuming,” says Don Boudreaux, an economics professor at George Mason University. “It makes us feel good to show that we’re socially conscious.” –K.O.

6. Education
Huge numbers of people are going back to school–ducking the bad economy, retraining for new jobs, even reinventing themselves completely. Total enrollment at universities and colleges is close to 12 million and climbing, says IbisWorld senior analyst Toon van Beeck, most likely because of unemployment. Or, as van Beeck puts it: “They’re up-skilling.” Certainly, 2010 will be a good year for higher learning institutions: Revenue is expected to grow 4.9 percent, to $421 billion. Enrollment at less expensive junior colleges, trade schools and online universities is also on the rise, particularly since student loan financing is still in short supply.

Neumont University, a computer science school near Salt Lake City, Utah, with accelerated degree programs, entices students with postgraduate employment rates of 85 percent to 95 percent within the first 60 days, even during the recession. “Some students have launched a company while in school and made it their career,” university President Edward Levine says. “We’ll be offering a new degree in Digital Entrepreneurship in 2010, and there should be a high proportion of adult learners in the first group of students.”

The Kauffman Foundation’s Monica Doss points to a shift in course offerings–groups like hers are actively seeking people displaced from jobs and, in partnership with cities and other public service organizations, offering free training in new fields. For instance, there are several efforts to get struggling auto suppliers to enter the clean energy field, because they already have the equipment and expertise.

“In this recession, there’s been a real change in workforce training,” Doss says. “Back in 2001, entrepreneurship training wasn’t available for people who were displaced.”

Doss is director of Kauffman’s LaunchPad program, a boot-camp version of its popular 10-week early-stage entrepreneurship training course called FastTrac. “We’ve condensed it to just three weeks and targeted some of the hardest-hit areas, like New York City, Detroit and Charlotte,” she says. “The response was good. People are very serious about this. They know the recession has produced fundamental changes.”

Moral of the story: These days, nobody’s too cool for school. Not even entrepreneurs. –J.W.

7.  Parental Outsourcing

Taking care of the kids, scrubbing the toilets, checking in on Mom, helping with homework, coaching Little League–more people than ever are paying professionals to do their domestic chores. The trend even has a name: Parental outsourcing.

It’s something of a surprise, since recessions tend to affect the middle class more dramatically than the wealthy, and some services that seem like luxuries are still thriving. But the numbers tell the story. For example, revenue for tutoring, test prep and driving schools is expected to increase $100 million, to more than $7 billion in 2010. Sports coaching expects a 4 percent increase next year.

And about 10 percent of all U.S. households now hire cleaning help; 70 percent of those clients make twice-a-month appointments (up from a once-a-month majority five years ago).

From an entrepreneurial perspective, this is very good news: Many of these businesses are among the least expensive to start up. A tutoring business, for example, can cost as little as $4,000. –K.O.

8. Health and Wellness
Healthcare reform, aging baby boomers, more emphasis on preventive care–all of these things and more are fueling growth in health and wellness businesses. Healthcare and social assistance topped the industry growth charts this year, according to the U.S. Census Bureau, with second quarter revenue of $452.5 billion, up 3 percent from the previous quarter.

Home care was the No. 1 growing industry from 2004 to 2009, averaging yearly increases of more than 7 percent, according to IbisWorld. In-home care already employs a staggering 1.33 million people, and revenue is expected to grow beyond $72 billion by 2011.

And whatever form the government’s healthcare act finally takes, it is likely to boost the number of consumers for health services.

Preventive care continues to thrive too. In fact, people are more likely to go to the gym during a down economy, according to a recent survey by the International Health, Racquet and Sportsclub Association. Total health club industry revenue last year topped $19 billion, the association reports.

Boomer Fitness, based in San Carlos, Calif., is capitalizing on that generation’s obsession with staying healthy and youthful.

“Our generation isn’t about sitting around and getting old,” says founder Arleen Cauchi. “We’re about being active, enjoying life.” –K.O.

9. Texas
Weird as it may be, there’s an undeniable pull toward the secessionist state.

Pick any 2009 economic rankings list and the “Texaplex” cities–Houston, Dallas, Fort Worth, San Antonio and Austin–will have nabbed a spot or three. Austin and Dallas are counted among The Wall Street Journal’s top Youth Magnet cities, and Texas cities were half of the Brookings Institution’s list of top 10 strongest metro areas. Texas dominated 2009’s lists of best relocation destinations, home-building markets and job-creation cities. This very magazine also named Austin one of its own Best Cities for Small Businesses.

“Texas has fared this recession better than most other parts of the country,” says Brad Burke, managing director of Rice University’s Alliance for Technology and Entrepreneurship. “The state became much more diversified over the last decade. It’s investing [billions] in growth industries.

The cost of living is comparatively low and real estate is still inexpensive, even with the overall industry being depressed.”

Certainly, the state’s low-tax, pro-business climate helps. Texas is home to more Fortune 500 companies than any other, and accounted for an astonishing 59 percent of all new jobs created in the U.S. last year. Its current unemployment rate hovers below the nation’s average.

And let’s not forget how it nurtures entrepreneurship. Burke notes that applications to Rice’s graduate entrepreneurship program–ranked in the nation’s top five, of course–are way up.

Still need proof? Check out Gov. Rick Perry’s prolific “Texas Brags” web page.

Say what you will, disgruntled Californians, but one state still has a budget surplus, and its Lone Star is rising. –J.W.

10. Affordable Alcohol
We’re still drinking like fish–only now we’re doing it at home with cheaper booze.

The alcoholic beverage industry has been growing steadily for the past three years and is expected to reach a record $455 billion in 2009. But analysts say it is specifically the more affordable packaged adult bevvies that ring up big sales during a downturn.The story is more sober when the drinking is done in bars: 24 percent of wine drinkers say they are choosing less expensive bottles, according to Nielsen market research, while about one-third of beer, wine and spirits consumers are ordering fewer drinks.

“Consumers are clearly focused on value and in many cases, altering their shopping behavior in order to get the most for their money,” says Danny Brager, vice president of beverage/alcohol at Nielsen.

That means more drinking at home, buying bigger bottles at the market, sticking with less expensive domestic beer, wine and liquor and favoring tried-and-true brands. –K.O.

10 & ½. Pets
Nobel laureate Albert Schweitzer once said, “There are two means of refuge from the miseries of life: music and cats.”

Maybe he was onto something. The recession may have demolished the manufacturing and financial services sectors, but the pet industry? Totally fine. Owners may be skimping on themselves, but certainly not their four-legged, furry, feathered or finned friends.

Earlier this year, the American Pet Products Association revealed total pet spending in 2008 topped a whopping $43 billion. The forecast for 2009 is $45.4 billion.

To put that truly ginormous number in perspective, consider that the amount is more than the gross domestic product of all but 64 countries in the world.

Which, for us, makes it the least likely sector to be out of the ruff. –J.W.

Source: entrepreneur.com


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