SMALL BUSINESS-DOMINATED INDUSTRIES



The United States supports many industries that are dominated by or heavily populated with small firms. The majority of these are in service industries, a fact that reflects the growing dominance of the service sector in the overall American economy. According to the U.S. Small Business Administration, the fastest-growing small business-oriented industries in the country in the mid-1990s were as follows:

  1. Employment Agencies
  2. Real Estate
  3. Automotive Dealers and Service Stations
  4. Building Materials and Garden Supplies
  5. Automotive Services, Except Repair
  6. Millwork, Veneer, and Plywood Manufacturing
  7. Paint, Paper Hanging, and Decorating
  8. Meat Markets and Freezer Provisioners
  9. Retail Stores
  10. Agricultural Services

These industries are expected to see continued growth over the coming years, as increasing numbers of small businesses enter the marketplace. But many analysts, citing studies conducted by the SBA's Small Business Advocate office, believe that some other industries friendly to small business are poised for even greater growth. Indeed, statistics compiled by the SBA, the Department of Labor, the Bureau of Labor Statistics, and Monthly Labor Review indicated that high rates of growth can also be expected in such business areas as residential care, collection agencies, child day care services, travel arrangement services, equipment rental companies, accounting and bookkeeping services, public relations, and family services.

SELECTED HIGH-GROWTH INDUSTRIES FOR SMALL BUSINESS

RESIDENTIAL CARE Residential care encompasses a variety of facilities, including those devoted to caring for emotionally disturbed adolescents and mentally retarded individuals, but government data indicates that the area in which residential care will see its greatest growth is in the realm of elder care. Analysts expect growth in assisted-living facilities—which range from domiciliary care homes and personal care homes to adult congregate living facilities—to serve as the engine that drives this industry forward over the next number of years, as the American population ages and workers explore various elder care options. "These facilities," wrote Jenny McCune in Journal of Business Strategy, "are a bridge between traditional nursing homes, which offer round-the-clock, skilled medical care in an institutional setting, and independent retirement housing, in which residents receive no outside help. In assisted living, the elderly live as independently as possible—usually in suites or cottages—but also have access to meal and laundry facilities and get assistance with daily chores such as bathing and dressing." Business consultants and current participants in the industry warn, however, that while demand for these services will continue to grow in the coming years, entrance into this business area is costly.

CHILD CARE The child care services industry has enjoyed steady growth for a number of years, due to population increases and the growing presence of women in the business world. And as McCune noted, the popularity of child care facilities in recent years has also been driven by the increased professionalism of the industry, as evidenced by the development of accreditation standards. The sheer demand for child care services is expected to insure the continued health of many businesses engaged in this area for years to come, but entrepreneurs should be aware of the hazards that lurk here as well. Business experts note that concerns about child welfare have sparked increased calls for regulation of the industry by OSHA and other government agencies, and that participants face a host of competitors. "A for-profit center may be competing with non-profit centers sponsored by religious organizations, the local Head Start program, family members who baby-sit for little or no cost, caregivers who work in the home, and even after-hours programs run by local elementary schools." Finally, professional day care centers have to grapple with liability issues, encroaching involvement of larger firms, and historically high levels of turnover both among clients and employees.

COLLECTION AGENCIES The surge in credit availability in American households has sparked a corresponding increase in demand for businesses willing to pursue collections for clients. As one industry participant told Journal of Business Strategy, establishing a business in this area is attractive to some entrepreneurs "because the cost of entry is low—someone can start out with a phone and a personal computer in a spare bedroom—and clients generally accept smaller vendors." Another business owner in the industry observed that effective collection agencies will particularly benefit from increasing demands from clients such as credit card companies; doctors, lawyers, and other professionals; and health care firms. Moreover, many observers believe that privatization initiatives by local, state, and federal government agencies will provide collection agencies with additional business.

TRAVEL AGENCIES Travel and tourism is a huge business area both in the United States and around the world, and independent travel agencies have benefited accordingly. Both business and recreational travel continue to rise in all geographic regions of America, but the hectic pace of modern life has made many of these travelers look to agencies to take care of the specifics of their journeys, from itinerary planning to plane reservations. McCune noted that travel agents do face some challenges today, including slimmer profit margins (because of competitive fares, etc.) and what amounts to a mandate to provide top-level service (since travelers can either go to competitors or make travel arrangements themselves). But she added that travel agencies that are able to improve productivity through available technology can dramatically increase their prospects for success, and noted that "becoming a specialist in a particular type of travel also gives agencies an edge. [In the mid-1990s], cruises, adventure travel, and eco-tours are what's hot. In addition to being in demand by consumers, such packaged tours also offer better margins. Of course, the key to succeeding in the long run is an ability to uncover the next trendy market in travel. That requires a study of demographics—like the aging of the population and the rise of dual-income families—to identify up-and-coming niches."

FURTHER READING:

Bregger, John. "Measuring Self-Employment in the United States." Monthly Labor Review. January-February 1996.

Goff, Lisa. "They're In the Money." Crain's New York Business. September 23, 1996.

McCune, Jenny. "The Face of Tomorrow." Journal of Business Strategy. May-June 1995.

Porter, Michael E. Competitive Strategy: Techniques for Analyzing Industries and Competitors. Free Press, 1998.

"Top 10 Small-Business-Dominated Industries." Journal of Accountancy. January 1995.



User Contributions:

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Jonathan Phillips
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Oct 28, 2006 @ 10:22 pm
An increasing number of small businesses are emerging with retail and service focus with a primary presence on the internet. The long tail of marketing has spawned a whole industry of SOHOs and WAHMs who sell everything from awnings to children's parties. The effect on standard brick and mortar businesses, while not severe, is noticeable. The ranks of small business owners is increasing as much as 30% a year solely on internet-based businesses. While many of these are part time endeavors, many too are full time occupations, entrepreneurs looking for a new way to market both themselves and thier products. Without doubt, this is going to have a strong effect on the composition of small businesses over the next few decades.

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