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The 11 Hottest Industries For Start-Ups

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Food, booze, and cost-saving firms top IBISWorld list of industries with low barriers to entry and high growth potential.

When UCLA classmates Misa Chien and Jennifer Green noticed a gaping hole in the Los Angeles lunch menu in 2009, they knew it was a void they could fill. And with a conveniently low startup cost of just $25,000 their Vietnamese banh mi food truck was an investment that would bring them quick profit. By 2010 two Nom Nom trucks brought in revenues of over $300,000 and 2011 was a banner year, topping a million in sales.

Making it not just a delicious idea, but a brilliant one, a sentiment confirmed by a recent special report from IBISWorld that details the hottest industries for new start-ups. Not surprisingly, food trucks and street vendors make this year’s list, which ranked industries for aspiring entrepreneurs looking to launch their first business. The market research firm cited Kauffman statistics indicating entrepreneurial activity in 2010 and 2011 was at an all-time high, a trend it predicts will continue over the next five years, forecasting the number of businesses with one or more employees to increase at an average annual rate of 1.6% over the next five years to total eight million by 2016.

“This isn’t a list based strictly on profit growth,” says IBIS' Brian Bueno, the author of the report, which he says explains why much-hyped sectors like clean energy and bio-tech didn’t make the cut while something called “relaxation beverages” did. “Instead, we looked for industries that are growing and require low capital to start up to pinpoint areas that would be easy for a new entrepreneur to get started.”

From the rankings, three key trends emerge. One, corporations are outsource-happy, looking to smaller firms for consulting work, to provide human resource services, and to weigh in on the health and wellness of its employees. Two, an increase in pop-culture attention to food and drink (think two dedicated “foodie” channels on cable and countless restaurant competition programs) has turned us into a population of chefs and critics, resulting in an opening in the market for street vendors, specialty supermarkets and boutique beverages. Lastly, continued enthusiasm for social networking keeps online business booming—IBIS notes that e-commerce sites, digital publishing and gaming will all continue to grow, especially when they tie niche content and offerings with social networking tools.

Four out of eleven sectors identified on Bueno’s IBIS list tap into the U.S. food obsession: wineries, ethnic super markets, street vendors and relaxation beverages come out on top. Are we turning into a nation of gourmets? Yes and no, says Bueno. “I think it’s partly pop culture, but it’s also about consumers looking to purchase foods and products that satisfy a certain niche need, whether that’s for dietary purposes or just in search of some small luxury. It used to be that these things were hard to find, or prohibitively costly, but not anymore.”

Ethnic stores, for example, may provide the gluten-free alternatives to conventional grocery store options for some while others make them a destination to satisfy a craving for traditional, authentic ingredients. Food trucks highlight variety and choice for cubicle-dwellers, and while it’s not a new trend—food trucks have gained in popularity in coastal metropolises since the early 2000s, IBIS predicts Middle America will see an explosion as well—Bueno says it’s in keeping with the consumer trend towards seeking out something “special” at an affordable price. “There’s been a real movement towards inexpensive luxury goods,” he says, and that trend can be found both in gourmet lunchtime treats, specialty drinks and the low-cost American vintages being produced by upstart wineries.

At the other end of the spectrum but in keeping with the “affordable” consumer pattern, four other industries on the list offer cost-saving measures to big businesses. “This is a generalized trend for businesses to cut costs and increase margins wherever they can,” says Bueno. “The high tech sector is growing rapidly, for example, and any service that can provide insight to technology is going to be an asset, especially on a contracted basis.” As a result, consultancies are hot, but so are companies that build online survey software, which IBIS predicts will grow as companies move away from traditional market research to understand consumer behavior.

But it’s not just intellectual capital that businesses are looking to farm out. According to the report, human resource duties—filing, record-keeping and benefits management—are often outsourced to allow companies to cut costs and focus on their core business. Opportunities for small businesses to fill those needs are ripe, Bueno says. Similarly, practitioners of corporate wellness programs—health fairs, for example, where blood pressure and health risks are measured, or flu shots administered—are in a unique position for growth as corporations look to save on healthcare costs for its employees. A healthier employee, is, after all, a cheaper, more reliable employee, notes Bueno.

As the author of the report, Bueno, a member of the Millennial generation, sees the list as a tool for the millions of young people hoping to become their own boss. And for good reason: A recent Kauffman poll shows that Gen-Y may be poised to be the most entrepreneurial bunch the world has seen: “Fifty-four percent of the nation’s Millennials either want to start a business or already have started one.”