The 10 Fastest-Growing Industries for Small Business

Past performance is no guarantee of future results, as the old business truism says. But you also may have heard that you can’t know where you’re going without knowing where you have been.

To get a sense of which industries small businesses are growing in, the analysts at Raleigh, N.C.-headquartered private-company financial-information company Sageworks ran some numbers for Entrepreneur.com. Here’s a look at the industries where U.S. companies with $10 million or less in annual sales have shown the highest and lowest percentage change from Jan. 1 to Dec 31, 2012. As a benchmark, the average growth rate across all U.S. small businesses in the time period was 8 percent, says Libby Bierman, an analyst at Sageworks.

Fastest-Growth Industries for U.S. Small Businesses in 2012

Residential building construction: 14.77 percent
Building custom software and servers for businesses: 14.29 percent
Machinery, equipment, and supplies merchant wholesalers: 13.75 percent
Management, scientific, and technical consulting services: 12.31 percent
Architectural, engineering, and related services: 11.40 percent
Foundation, structure, and building exterior contractors: 11.37 percent
Building finishing contractors who make additions, alterations, maintenance and repairs: 11.32 percent
General freight trucking: 10.41 percent
Services to buildings and dwellings, including pest exterminators, janitorial services, and landscaping: 10.11 percent
Other specialty trade contractors, including site preparation activities and other specialized trades: 10.04 percent

Slowest-Growth Industries for U.S. Small Businesses in 2012

Skilled nursing care facilities: -3.29 percent
Printing and related support activities: 1.86 percent
Automotive repair and maintenance: 2.81 percent
Offices of physicians: 3.00 percent
Highway, street, and bridge construction: 4.24 percent
Insurance agencies, brokerages, and other insurance-related activities: 4.32 percent
Lessors of real estate: 5.07 percent
Other miscellaneous manufacturing including jewelry and silverware, sporting and athletic goods, dolls, toys, and games, office supplies other than paper, and signs: 5.55 percent
Offices of health practitioners other than physicians and dentists, including chiropractors, optometrists, mental health practitioners, speech and occupational therapists: 5.98 percent
Other amusement and recreation services including bowling centers, golf courses, and recreational centers: 6.03 percent

The good news for entrepreneurs is that much of the fastest growth is in service businesses, which can be started without a lot of money to buy equipment and inventory, says Bierman. Software development, management consulting and architecture firms have been frontrunners have been for a few years now, says Bierman.

Not all of the businesses on the fastest-growing list are service based. In particular, the residential housing market has just started to recover, and that is supporting businesses related to the construction industry, including foundation and exterior construction and specialty contractors. A lot of construction projects were abandoned during the recession and so part of the bounce in construction is businesses and individuals picking back up old half-finished projects.

Business services and construction are looking strong in the coming years. “They provide services that are, maybe not critical, but very much needed by other businesses and people who are trying to even grow their homes,” Bierman says. “I don’t see these industries going anywhere. Maybe their growth rate won’t be as high as it has been, but I don’t think it will be a decline anytime soon.”

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The 10 Fastest-Growing Industries for Small Business
BY CATHERINE CLIFFORD | April 2, 2013| 9 Comments |

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Past performance is no guarantee of future results, as the old business truism says. But you also may have heard that you can’t know where you’re going without knowing where you have been.

To get a sense of which industries small businesses are growing in, the analysts at Raleigh, N.C.-headquartered private-company financial-information company Sageworks ran some numbers for Entrepreneur.com. Here’s a look at the industries where U.S. companies with $10 million or less in annual sales have shown the highest and lowest percentage change from Jan. 1 to Dec 31, 2012. As a benchmark, the average growth rate across all U.S. small businesses in the time period was 8 percent, says Libby Bierman, an analyst at Sageworks.

Fastest-Growth Industries for U.S. Small Businesses in 2012

Residential building construction: 14.77 percent
Building custom software and servers for businesses: 14.29 percent
Machinery, equipment, and supplies merchant wholesalers: 13.75 percent
Management, scientific, and technical consulting services: 12.31 percent
Architectural, engineering, and related services: 11.40 percent
Foundation, structure, and building exterior contractors: 11.37 percent
Building finishing contractors who make additions, alterations, maintenance and repairs: 11.32 percent
General freight trucking: 10.41 percent
Services to buildings and dwellings, including pest exterminators, janitorial services, and landscaping: 10.11 percent
Other specialty trade contractors, including site preparation activities and other specialized trades: 10.04 percent
Related: Hunting for Business Ideas? Consider Looking at These 8 Hot Industries

Slowest-Growth Industries for U.S. Small Businesses in 2012

Skilled nursing care facilities: -3.29 percent
Printing and related support activities: 1.86 percent
Automotive repair and maintenance: 2.81 percent
Offices of physicians: 3.00 percent
Highway, street, and bridge construction: 4.24 percent
Insurance agencies, brokerages, and other insurance-related activities: 4.32 percent
Lessors of real estate: 5.07 percent
Other miscellaneous manufacturing including jewelry and silverware, sporting and athletic goods, dolls, toys, and games, office supplies other than paper, and signs: 5.55 percent
Offices of health practitioners other than physicians and dentists, including chiropractors, optometrists, mental health practitioners, speech and occupational therapists: 5.98 percent
Other amusement and recreation services including bowling centers, golf courses, and recreational centers: 6.03 percent
Related: Franchise Forecast Continues Strong for 2013

The good news for entrepreneurs is that much of the fastest growth is in service businesses, which can be started without a lot of money to buy equipment and inventory, says Bierman. Software development, management consulting and architecture firms have been frontrunners have been for a few years now, says Bierman.

Not all of the businesses on the fastest-growing list are service based. In particular, the residential housing market has just started to recover, and that is supporting businesses related to the construction industry, including foundation and exterior construction and specialty contractors. A lot of construction projects were abandoned during the recession and so part of the bounce in construction is businesses and individuals picking back up old half-finished projects.

Business services and construction are looking strong in the coming years. “They provide services that are, maybe not critical, but very much needed by other businesses and people who are trying to even grow their homes,” Bierman says. “I don’t see these industries going anywhere. Maybe their growth rate won’t be as high as it has been, but I don’t think it will be a decline anytime soon.”

Related: Most New Business Ideas Hatching for 6 or More Months

A list of the fastest-growing industries for all businesses would include manufacturing, says Bierman, but most successful manufacturers have more than $10 million in annual revenue. “Manufacturing as a whole has been something that has pretty positive news lately,” she says. “If those manufacturers are having pull, the middlemen, or the wholesalers that are transacting those sales, will continue to see growth, too.”

During the depths of the recession, many industries were contracting. Now, almost all industries are growing, albeit some at more sluggish rates. The slower-growth companies are not seeing impressive growth rates because they are entrenched in technology that is becoming obsolete, such as printing. But some of those industries are seeing slower growth simply because they have relatively inelastic demand. For example, an economic recession does not change the fact that sick people need to go to the doctor. The growth rate for physician’s offices does not typically change drastically.

Overall, the home health-care industry has seen positive growth rates in revenue over the past year as consumers look for an alternative to moving into a nursing care facility, says Bierman. Skilled nursing care facilities come up on this list as a shrinking, but that’s partly because of the restrictions placed on the data. For this research, Sageworks included only those businesses with less than $10 million in annual revenue. The decline in skilled nursing care facilities may be an indication that smaller facilities are losing ground to their larger competitors or home health care alternatives, she says.

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