Growing with Small Business

While the economy in general is doing so-so, there are industries that are sweet spots for growth right now.  Many of these are perfect start up opportunities for a small business looking to expand or a new entrepreneur getting started.   That said, there are also business areas in free fall now that you’d do best to avoid, and despite the global village created by the Internet, location apparently matters now too.

Roughly half of all new business start ups fail within 5 years.  On the “don’t-go-there” list are the following industries:

1.  Men’s suits, coats and trousers top the list.  As best I can tell the only folks who still have to wear these things work in investment banking or law firms.  Not big areas for growth right now.
2. Photofinishing or a one hour photo shop.  Revenues in the industry have dropped 70% over the past ten years, and there’s no sign of a reversal or bottom in sight.
3. Same is true for video, DVD and game rentals.  Even with Blockbuster gone, the market continues to shrink.
4. This is the only one of the list to surprise me – small appliance repair is a losing proposition now.  It’s currently cheaper to replace small appliances than to fix them.  In a case where that isn’t true, the manufacturer now often insists that they do the repair.

On the flip side consider elder care and wellness as areas of opportunity.  Demographics of an aging population that on one side needs care and on the other side is trying to stay healthy drive growth here.  Other big areas growing and poised for more growth are warehousing and transportation logistics.  As more retail sales shift online, businesses in these areas are capturing what is being lost from bricks and mortar.

According to the folks who publish the Business Journals, where you have a business can be a success indicator.  Austin wins the top spot on this index for all the US.  It is worth noting though that Pittsburgh takes the prize for the northeast, and ranks 7th nationwide for best places to start a business. 

Think Globally Innovate Locally

I'm prompted to share my takeaways from a Pittsburgh Tech Meet Up event I attended earlier this week.  Dennis Yablonsky, CEO of the Allegheny Conference spoke about entrepreneurial opportunities and challenges in the Pittsburgh region.  As expected he had encouraging things to say about building a local business in the areas of health care, tech and education.  The unexpected twist for me was his tip that advanced manufacturing techniques and energy related businesses are the areas where local entrepreneurs get the friendliest hearing from investors.

Despite Pittsburgh’s collection of prestigious educational institutions,  there’s  a general belief that the kinetic dialogue  young companies need to be on the cutting edge is less available in Pittsburgh than say New York, Boston or Silicon Valley.  I can see the point, but net net I’m not convinced.  If that’s really true I have to wonder how the borderless techie world remains so dependent on chance meetings at Starbucks.  Still, if perception is reality, location is a real road block (thought not a dead end) for tech start ups here.

When it comes to Energy, Yablonsky says the view is different.  He indicated it’s not just Marcellus Shale hysteria, but perhaps the local history of energy business success that makes the difference.   The Conference is such a believer in this idea that they participate in a group formed to promote energy related business development.  The idea is this Energy Alliance can assist in encouraging innovation and linking businesses that can participate in the supply chain for energy.

In addition to his strategic direction for start-ups Yablonsky gave some lessons learned from his experience as a successful entrepreneur.   His “5 commandments for aspiring new business owners” include:

1.  Focus – Do what you do best.  Don’t try to grab every opportunity you see. 
2. Hire people you like and trust.  No one is competent enough to overcome the lack of these key ingredients.
3. Be clear about expectations with your employees.  Reward the good with specific feedback as well as money.  When there’s a problem, detail what needs to happen to fix it.
4. Honesty and integrity are your most important assets.  The cost of a damaged reputation is never worth it.
5. Ask yourself these questions:
   1. What problem does my business solve?
   2. Who needs that solution?
   3. Why will they pay for it?

So between bites of pizza I promised myself I would bone-up on energy and research related tax credits and look forward to preparing solar battery powered financial statements for VC review.