2008 Hot List

Years on the list: 8 out of 21
Tech Consulting
If the thought of building out a network or setting up e-mail services gets you excited, then we've got an opportunity for you. According to recent reports by AMI-Partners, about one-quarter of small and midsize businesses are increasing their spending on outsourced IT. "There is room for startups that are focused and have a really clear value proposition for customers," says Laurie McCabe, vice president for SMB insights and business solutions at AMI-Partners. "Whether it is consulting or software support or network management, there's definitely a need."

Larry Velez, 33, founder of managed solutions provider Sinu in New York City, knows firsthand what it's like to cater to growing businesses and nonprofits. Velez takes what he calls a "holistic" approach: Instead of obsessing over what hardware it sells or hourly support rates, Sinu charges a flat rate per person and focuses on the needs of the workers in an organization and what can be done to keep the tech running smoothly. With 2007 sales expected at up to $5 million, Sinu has outgrown its office space twice in the past year. Looking ahead to the next year, Velez says, "We're going to really see the mainstreaming of this approach to outsourced IT." Entrepreneurs seeking to get into tech consulting can look forward to an upward swing. --A.C.K.

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Web Apps
What dotcom bubble? Today's web application companies are lean, mean services and advertising revenue-generating machines. Entrepreneurs are starting businesses armed with little more than a big idea and a credit card. But when it comes to really making a mark on the web, it takes business smarts, a flexible development approach and some intelligent marketing. "What we see now is a huge increase and adoption of web apps that are equivalents of business or consumer apps that you used to install on your PC or Macintosh," says Jeff Clavier, managing partner of SoftTech VC. This category can include typical office applications and widgets that work with social networks, as well as accounting and CRM-style web offerings.

The social media and networking space may seem crowded, but there's still room for startups to make their mark. Clavier suggests social media entrepreneurs ask "how [they] can deliver value to a very specific demographic that has some passion or need and do it in a clever way that will have some element of viral distribution." Clavier also sees a lot of opportunities to get involved in web infrastructure and online gaming applications: "There is a lot of potential value that has yet to be unlocked. The web is now a valuable commerce and distribution platform where it's cheaper to build and easier to make money. It's worth a shot."  --A.C.K.

Still Hot
These hot businesses are bigger than ever. Here's what makes them fresh.

Upscale cupcakes: What started in Los Angeles and New York City is making its way inland. Look for exotic or superindulgent flavors like passion fruit and cappuccino.

Online gaming: One in three adult internet users is a gamer, and many of them are female. Blood, guts and guns are out; smart, fun puzzles are in.

Home automation: This $3.8 billion industry is getting attention with greener systems that control lights and sprinklers. Integrated electronics and entertainment packages connect with plasmas and flat screens in each room.

Home party sales: In an industry that's shown steady growth for 20 years, customers still want personalized shopping experiences. Personal-care and home/family-care products are the most popular, but there are plenty of other options, too.

Pets: Healthy, organic and environmentally friendly products are hot, as are diets for overweight companions. And don't overlook baby boomers with pets.

Sarbanes-Oxley compliance: An aging work force means a shortage of experienced accountants who can help companies comply. Expect hiring frenzies for seasoned staffers. --J.P.

Apparel
Years on the list: 2 out of 21
Specialty Lingerie
Every woman wants to feel sexy and beautiful, and specialty lingerie helps them do just that. From plus-size to maternity to lingerie for women over age 40, "There's a golden opportunity in all of these areas," says Rosalie Regni, assistant professor of merchandising at Virginia Commonwealth University. In fact, this $10.5 billion industry grew an impressive 10 percent last year, according to the NPD Group.

Victoria Roberts, 47, founded Zovo Lingerie to cater to the underserved 35- to 60-year-old market with her upscale line of beautiful, well-made pieces. "It's going back to basics, but doing it in a way that's styled a little more hip and has a younger-at-heart baby boomer in mind," she says. In addition to a brick-and-mortar store in the Seattle area, she also sells her line, which includes underpinnings, loungewear and sleepwear, online at zovolingerie.com and at retailers like Nordstrom, pushing sales to $1 million annually since launching in 2005.

While upscale is a great niche, Regni also notes opportunities in more affordable lingerie. It's a competitive market, she warns, but entrepreneurs can carve their place in lingerie with a fresh take. She says, "Retail stores, more than ever, are looking for differentiation--they're looking for the new, the innovative." --N.L.T.

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Sunglasses
Cool sunglasses are today's ultimate must-have accessory. This sizzling market grew 9.1 percent in unit sales from 2005 to 2006, for total retail sales of more than $2 billion, according to the Sunglass Association of America. High-end designer sunglasses are driving the trend, notes Tibor Gross, president of the SAA: "People are paying a lot more attention to sunglasses. They're a status symbol and a fashion accessory."

From upscale brand names to more affordable lines, various entry points into the market are open to entrepreneurs. Veteran sunglasses entrepreneurs Jack Martinez, 42, and Dan Flecky, 51, made their mark with Black Flys, an Irvine, California, company founded in 1991 that projects $10 million in sales for 2007. Their signature shades cater to a rock 'n' roll, youth and sports clientele. Black Flys has even added Fly Girls, a line for women, and plans to branch out with a new prescription line next year. "Sunglasses are a crazy deal--there are so many brands now," says Martinez. But don't let a competitive market deter you: Success means finding your own style and brand, he says. --N.L.T.

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Handbags
Holding a hot handbag is in. Handbag sales rose 18 percent to $6.1 billion between 2004 and 2006, according to market research firm Mintel. But don't market solely to grown women: "Companies are targeting younger girls, [as] they tend to bring their consumer habits into adulthood," says Kat Fay, a senior analyst at Mintel. "If you get them when they're younger and they develop a taste for slightly higher-end purses, they're not likely to reverse the trend and start buying cheaply made bags after that." Handbags priced between $150 and $200 are an affordable luxury for many women and even young girls, who are also driving the market.

Mary Frances Shaffer's embellished handbags, priced from $180 to $300, give women the chance to shine like stars Jennifer Aniston and Eva Longoria--both fans of Mary Frances Accessories in Lafayette, California. Her line of whimsical, beaded handbags is sold in boutiques nationwide, pushing annual sales past $9 million. Women love to express themselves with their handbags, says Shaffer, 48 (photo, page 93). "We're at a time right now where women really like to play." --N.L.T.

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Specialty Shoes
What's the fastest-growing segment of the apparel industry? Footwear--comfortable, stylish footwear, that is. "Comfort and fashion are no longer mutually exclusive," says Diane Stone, COO of WSA Global Holdings LLC, a marketing company for the foot-wear and accessories industry. Although the footwear market in general is huge--it's projected to grow to $194.3 billion globally by 2010--entrepreneurs are standing out with specialty shoes for diabetics, obese consumers with foot problems, or simply people who are on their feet a lot and seek comfort.

Joe Croft, 37, Jeffrey Fitzhugh, 45, and Mike Ray, 36, have stepped into success with Jeffrey Fitzhugh, an upscale line of ergonomically contoured men's shoes launched this January. Fitzhugh describes their branding strategy as "laid-back luxury," an approach that's paying off. The Newport Beach, California, business sells its shoes at high-end retailers like Fred Segal and projects 2007 sales of $1.5 million.

Manufacturing a specialty shoe is also a challenge, notes Jennifer Lovitt Riggs, 36, founder of Nota Bene in Whitefish Bay, Wisconsin. She spent a full year testing factories and prototyping her line of comfortable yet chic shoes for women. "Then I started researching production options and whether the shoes could be made while still making the price accessible," she says. "It looked promising." Fulfilling that promise, the footwear retails at high-end boutiques nationwide. Sales are in the healthy six figures and growing, she adds, as happy customers flock back for multiple pairs. --N.L.T.

Miscellaneous
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Household Management for the Rich
Last summer, The Wall Street Journal reporter Robert Frank launched both a book on the ultrawealthy and a brouhaha after announcing there is a butler shortage. We, however, would like to announce a prime market for smart entrepreneurs.

According to the American Housing Survey, in 2005, 3.95 million U.S. homes were 4,000 square feet or larger, up from 3.4 million in 2003. The Federal Reserve Board reported in 2004 that more than 530,000 U.S. households were worth more than $10 million; 1.4 million were worth $5 million. (All stats reflect the last year available.) The American Affluence Research Center recently found that 29 percent of surveyed individuals with an average net worth of $3.1 million owned a second home.

Managing such estates is a full-time job, creating a variety of opportunities for entrepreneurs: upscale concierges, household and estate management services, cleaning services, and household help training and placement services. Carol S. Scudere, owner of Professional Domestic Services & Institute, advises those interested to seek training and experience to understand what the wealthy require. "You have to realize that caring for the home of somebody who can afford to buy anything they want without even thinking--they're not someone who does on-the-job training," says Scudere. "They want the true professional who can be a benefit to them up and running." --L.T.

Years on the list: 16 out of 21
Executive Recruiting
Executive recruitment is a perennial favorite of ours--and for good reason. While some niches within the industry wax and wane in popularity, the need for high-level, talented employees never ceases.

"Executive leadership is dynamic and changing," explains Glenn Manko, 40, partner at BSG Partners, a Haverford, Pennsylvania, executive recruiting firm founded by Brad Costello, 33. Says Manko, "Very few companies stay with the same team of leaders for long periods of time due to changing business demands, family relocations, the enticement of leaving [the] corporate [world] to seek entrepreneurial ventures and, quite frankly, individual performance not [being] consistent." The company, started in 2005, expects $2.5 million in sales this year.

Hope Wilson, vice president of professional services at Snelling Professional Services, sees several areas of niche growth in the future. Biopharm will boom as boomers require more medication; the medical field in general also needs more physicians and nurses. Executive-level administrators and finance and accounting positions continue to be hot. Wilson also sees a potential market for military personnel departing Iraq.

But what about that pesky competition from online job sites? Both Manko and Wilson say fuhgedaboudit. "Online job boards provide no additional value to the hiring process," says Manko. "Sourcing candidates is the easy part of executive recruiting; assessing and selecting is where the executive search firm truly adds value." --L.T.

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Crafts and Handmade Goods
Making stuff is big news. The exploding craft market--now $30 billion per year, according to the Craft & Hobby Association--is not just turning consumers into creators; it's inspiring a new breed of entrepreneur.

Crafters sell their wares at online sites like Etsy.com, indie craft fairs or by building their own businesses. Tracy Lolita Yancey, 42, started out painting whimsical martini glasses at her kitchen table. The demand for her work grew beyond her ability to fill orders from home, so she licensed the work out to a design studio. Designs By Lolita now sells 2 million glasses annually and projects sales of $35 million this year, but Yancey still designs all new items herself.

Reaching a limit to how much you can create by hand is a big danger with crafting. Some crafters choose to make a living rather than make millions, but others branch out by hiring employees, using manufacturing firms, opening a store, teaching, or creating craft supplies and kits.

There are 65,000 sellers currently on Etsy, and the site has facilitated more than $20 million in sales since 2005--showing quite a market for handmade goods. Retailers, take note: While craft supplies like jewelry kits, knitting supplies and scrapbooking materials are popular sellers, so are the end results of those crafts.  --L.T.

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