Tomorrow’s start-up opportunities

Shifting consumer habits will play a major role in identifying the leading start-up opportunities of next year, research prepared for StartupSmart reveals.

A report by IBISWorld shows that trends are pointing budding entrepreneurs towards areas such as house construction and fast food retailing in 2011, although new businesses based upon computer maintenance and image processing are set to struggle.

The research, which draws together factors such as industry growth and levels of competition and regulation, reveals that accounting services is set to be the top start-up opportunity in 2011.

Increased financial regulation stemming from the economic downturn is expected to provide openings for new players in the sector, according to IBISWorld.

“Although the top end of the industry is dominated by large multinational accounting firms, there are thousands of small businesses dealing with BAS statements and personal tax issues,” says Robert Bryant, IBISWorld GM, Australia.

“The $14.35 billion industry is relatively recession proof with annual business accounts and tax returns needing to be lodged regardless of economic conditions. New SME’s entering this industry need to be aware that the key to success is strong client relationships.”

Other leading start-ups

Housing construction, which comes in at number two on the list, is also tied to favourable economic conditions, although the appearance of landscaping services, plumbing and fast food outlets in the rest of the top five points to long-term changes in consumer habits.

IBISWorld says that Australia’s “obsession” with lifestyle TV programs will help push demand for landscaping start-ups, predicting that there will be more than 500 new entrants to the market in the next two years.

The public’s fascination with home improvements and a surge in housing construction will also boost the plumbing industry, with 550 start-ups anticipated by 2012.

Take away food retailing, which is number five on the list, will provide opportunities for entrepreneurs keen to move away from the traditional model of hamburgers, pizza and fish and chips.

The rise in popularity for healthy alternatives such as sushi, coupled with more time-poor Australians, will inspire more than 1,000 fast food start-ups in the next two years, according to IBISWorld. What’s more, it’s expected that many will be cost-conscious independent businesses, rather than being linked to multinational franchises.

Not so hot for 2011

On the other end of the scale, if you are thinking about starting up a service station, IT business or plant nursery, 2011 could prove to be a difficult year.

IBISWorld singled out service stations as the least favourable start-up of next year, citing slim margins, high competition and regulation and poor market conditions. At least 200 service station business owners are set to depart the industry over the next two years.

“A service station typically earns no more than four cents of revenue for each litre of petrol sold,” says Bryant.

“Revenue is extremely sensitive to shifts in retail fuel prices, given the fine margins of petroleum retailers. This makes for a tough trading environment and more and more of the smaller operators are choosing to exit the market rather than try and compete with the major players.”

A 10.4% fall in revenue in the computer maintenance sector over the next five years sees it take the number two position, with IBISWorld pointing to the expediency of replacing faulty computers, rather than repair them.

Similarly, start-ups in the household equipment repair space are also set to struggle, with consumers increasingly prepared to buy new, lower priced goods rather than have malfunctioning items fixed.

Image processing firms, placed at number four, are also at the mercy of shifting consumer attitudes, with Bryant saying: “Operators in this industry have been struggling for several years due to the digital revolution. Digital images are far less likely to be printed by consumers for multiple reasons.”

“Alternative means of displaying images, for example via Facebook or Flickr, or on increasingly common digital frames, means that there is another factor mitigating the need to keep physical prints of images.”

Plant nurseries, at number five, may be another victim of changing circumstances. IBISWorld pointed to increased competition from the likes of Bunnings and Woolworths, smaller domestic garden sizes and water shortages for the expected decline.

“Some nurseries have begun to market themselves as more than a provider of nursery goods. For example, some also have small cafes, or sell other goods such as gift wares, garden accessories and outdoor furniture,” says Bryant.

“Diversification of product is a clear indication of a shift in industry lifecycle, as enterprises seek to maintain revenues and margins as more traditional lines become less profitable.”

Top five start-up opportunities in 2011

1. Accounting Services

2. House Construction

3. Landscaping Services

4. Plumbing Services

5. Take-Away Food Retailing

Bottom five start-up opportunities for 2011

1. Automotive Fuel Retailing

2. Computer Maintenance Services

3. Household Equipment Repair Services

4. Image Processing and Printing Services

5. Plant Nurseries