Under-the-Radar Hot Industries For Small Business Profits

TheStreet.com

NEW YORK (TheStreet) -- It's often the least sexy, lack of brand-recognition businesses that present the best growth opportunity. Or in other words, today's entrepreneur looking for a new business venture or career shift might want to pass on the Dunkin' Donuts' franchise license and learn how to administer antibiotics to sheep and pigs, or use a microscope to test an R&D-phase consumer product for toxins.

Veterinarian health care, ambulance services and laboratory-based product testing are industries ripe for profitable returns.

The barriers to entry are high, but that shouldn't deter aspiring entrepreneurs.

"These are growing industries with favorable operating conditions that present opportunities. If entrepreneurs can overcome the high barriers to entry there is significant growth and profitable opportunity to offer specialized services in these industries," says Doug Kelly, an industry analyst at IBISWorld in a recent report on the growth opportunities.

Here is a brief rundown of opportunities in these select industries.

1. Veterinary services

Continued growth in pet ownership and consumers' increasing willingness to pay for pet services, including health care, means strong growth prospects for the veterinary services industry.

Vet service providers have been able to increase their prices by gauging strong consumer demand. More importantly, a majority of these services are paid for out-of-pocket as opposed to the hassle of dealing with insurance companies. Those who can offer specialized services will have a leg up against competitors.

"Despite high barriers to entry, the top four industry players only account for an estimated 8.3% of industry revenue, which presents industry operators with opportunities to gain market share through acquisitions and transitioning toward group animal-care practices that can offer enhanced services and achieve economies of scale," the report says.

The vet services industry also includes another growing area: laboratory and diagnostic testing for licensed veterinary practitioners.

To be sure, start-up costs are high. In order to operate profitably labs rely on long-term fixed contracts, meaning securing contractual relationships with different vet practitioners in the area. The labs also need highly trained staff and state-of-the-art medical equipment, Kelly says.

Major players in the vet services space include Idexx Laboratories IDXX and VCA Antech WOOF , and smaller firm Abaxis ABAX .

The problem for vet health services is the limited number of certification programs in the U.S. (which seen in another light could limit the threat of new market entrants, IBISWorld says). The second problem is the high cost to obtain certification.

Still, if you can get past likely having a big student loan bill, the biggest opportunity for animal-friendly entrepreneurs is the labor shortage in veterinarians that specialize in livestock health, particularly in rural and agricultural areas.

"America's shortage of food supply veterinarians has become a crisis, and it's expected to get worse. This shortage leaves some agricultural areas of the country without a local veterinarian to treat local livestock populations, which puts America's food safety in danger. Studies have shown that the current shortage of food supply veterinarians will grow by two to four percent every year, according to the American Veterinary Medical Association's website.

2. Ambulance services

The ambulance services industry includes private and municipal operators that provide patients ground or air transportation and medical care, the IBISWorld report says. IBISWorld expects industry revenue to rise at an average annual rate of 5.8% to $17.8 billion by 2017.

For entrepreneurs, there is big opportunity as a result of the cutback in state and local government funding. As municipalities struggle, curtailing emergency services is an unfortunate reality, presenting small private ambulance companies significant opportunity to partner with local firefighters and other emergency providers and, more specifically, franchising opportunities, Kelly notes. Health care reform will also create opportunity for the industry as increased Medicare reimbursements increase consumers' abilities to pay for services.

Another reason for the growing need of private ambulance services: developments of stroke and heart-failure treatments have helped to lengthen the time between incident and treatment, which allows for transportation to the hospital, the report says.

Once again though, barriers to entry can be high in the form of licensing and registration requirements for emergency care. But entry into the market for non-emergency medical transportation services is easier and less costly (even though Medicare is unlikely to cover non-medical services, Kelly cautions). There is a huge opportunity in the growing private market for non-emergency transportation services due to an aging population and as senior citizens live longer, Kelly says.

Players in the ambulance services industry include Greenwood Village, Colo.-based Emergency Medical Services and Air Methods AIRM and Scottsdale, Ariz.-based Rural/Metro, which has a smaller share of the market. The four largest players in the sector only account for 24.3% of industry revenue, according to IBISWorld data.

3. Laboratory-based product testing services

Laboratory testing services includes companies that perform physical, chemical and other analytical testing for commercial purposes in the product manufacturing, medical device, as well as for the government.

The lab testing industry is growing from the increased government regulation on consumer goods, particularly the environmental impact, as well as in the private sector, where a rise in research and development expenditures (despite the recession) has lead to increased product testing.

As in the other under-the-radar growing industries, profit relies on building relationships and establishing long-term fixed contracts. A good way for small players to break into the industry is to confine their services to a niche market -- health and medical devices, telecommunication, mobile devices, automotive parts, electronics, energy pipelines, or solar panels, just to name a few items.

IBISWorld expects industry revenue to rise at an average annual rate of 7.4% to $22.5 billion by 2017.

A high level of specialization limits the threat of new market entrants, but also has allowed companies to increase profitability quicker and stronger than the overall industry, Kelly says.

Notable U.S. players include Underwriters Laboratories and National Technical Systems NTSC , a smaller player in the field. The four largest players in the sector only account for 15.3% of industry revenue, according to IBISWorld data.

-- Written by Laurie Kulikowski in New York.

To contact Laurie Kulikowski, send an email to: Laurie.Kulikowski@thestreet.com.

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