Have an independent streak? If you’re an American, chances are you do.
The U.S. consistently leads developed countries around the world in the rate of entrepreneurship, and 25 million people were in the process of starting or running a new business in 2013, according to the latest Global Entrepreneurship Monitor survey. Every day, there are hundreds of people looking to hang out their own shingles, and there are even more who would like to.
If you are one of the many itching to dip your toe into entrepreneurship, the biggest question is likely: Where do I start?
Sageworks, a financial information company, has identified a few industries that entrepreneurs may want to consider when thinking about potential business ideas. Looking at private-company financial statements ended in the last 12 months, Sageworks isolated the fastest growing service industries in the United States. Each of these industries has experienced stable net profit margins in recent years and all but one showed profitability in the last 12 months that was above the average for all privately held companies, based on Sageworks’ financial statement analysis.
For various reasons, each of these service industries might be worth exploring as starting points for business ideas, said Sageworks analyst Kevin Abbas. Many jobs in these industries require specific skill sets, educational degrees or licenses before you can open up shop, making some industries better options for some people, he noted. On the other hand, the availability of information on the Internet and through various educational outlets means there’s more access to knowledge and training to help you learn enough to explore opportunities.
“Another interesting way to use the data to explore new business ideas is to identify some of the pain points or unmet needs for these industries that are growing and determine where you could provide support to them in some capacity, even if you are not directly in that industry,” he said. For example, if you want to start a marketing business, you could tailor your offerings to appeal to one of the growing industries.
Computer services (NAICS 5415) is frequently on Sageworks’ list of fastest-growing industries, and it is growing at an annual rate of about 15 percent, based on financial statements ended in the last 12 months. “As companies become more technologically advanced, data integrity and protection become a huge priority. This creates a high demand for computer service companies to ensure proper protocols are in place and to protect against lost data or security breaches,” Abbas said.
The need for architectural services (NAICS 5413), seems to go hand-in-hand with improved construction trends and the better economy in general, he said. This industry has experienced nearly 14 percent growth recently.
Employment firms (NAICS 5613) (a category that includes temporary help placement agencies, benefits administration companies and executive placement firms) have likely benefited from employers hiring both temporary or contract workers as a hedge against uncertainty, and from companies boosting permanent hires as the economy has improved, according to Abbas. Sales growth for that category has been about 13 percent, but margins are below average for private companies.
Consulting firms (NAICS 5416) is a broad category that can include consulting related to management, logistics, marketing, regulatory changes, technology or any number of other aspects of business, and sales for that industry have increased about 11 percent. “The landscape is changing in so many ways for businesses – with health care, technology, environmental issues, etc. – that experts who can help companies comply with new regulations or navigate the changing environment may have a lot of opportunity,” Abbas said.
Companies performing accounting services (NAICS 5412), including audits, payroll and tax preparation, seem to have consistent demand and once you have the appropriate education and/or license, the up-front costs of starting your own business aren’t as intensive as for some other industries, Abbas said. This industry also perennially posts some of the strongest profit margins among private companies, too. “It’s highly specialized, which is why they can demand a higher profit margin,” he said. “And once you’re up and running with an accounting business, there aren’t a ton of costs besides salaries to maintain the business – it comes down to how much work you and your staff can handle.”
Mary Ellen Biery is a Research Specialist at Sageworks, a financial information company, which collects and analyzes data on the performance of privately held companies and provides accounting and audit solutions.