How Startups Can Get in and Stay Competitive in Scaling Industries Opportunities for small businesses to disrupt or even dominate markets don't come along every day. When technological and legal landscapes shift, however, enterprise companies tend to be slow to react.
By Rashan Dixon
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Disruptive entrepreneurs share two things in common: They beat their enterprise peers to the punch, and they find partners to help them do it.
Take Beyond Meat. Founded in 2009, the plant-based "meat" company is now valued at more than half-a-billion dollars. But Beyond Meat didn't do it alone: Grocery stores like Whole Foods and Kroger, restaurants like TGI Friday and Carl's Jr., and even sports venues like Yankee Stadium all carry the brand's meatless patties.
Beyond Meat's best move, however, might have been to get into the plant-based meat market right before its boom. In the 12 months preceding August 2018, faux meat sales grew by 23 percent -- outpacing not just general U.S. retail sales at 2 percent, but the wider market of plant-based foods at 17 percent.
Related: Beyond Meat's CEO Thinks Chicken Can Come From Plants
Plenty of other markets offer similar opportunities. But like Beyond Meat, startups looking to get in on the game need industry partners to help them do it. However, they must pick their partners wisely.
Which sectors are the ripest picks for small businesses? With a little help from their friends, they stand a serious chance in five very different industries.
1.) Shipping and freight.
Thanks in part to another industry on this list, e-commerce, the U.S. Department of Transportation and Federal Highway Administration predict that freight tons crossing the nation's transportation network will grow by 40 percent through the late 2030s. Over the same span, the value of that freight will nearly double.
With that said, freight transportation is a notoriously complex industry. Brokers can use fintech services like BAMFi to boost revenue while decreasing overhead. FreightCo, for instance, improved its labor efficiency by 260 percent, saving almost $90,000 per year in indirect labor costs. Meanwhile, carriers, some of them individual owner-operators, can use the tool to streamline cash flow and simplify invoicing.
Related: How Technology Is Infiltrating the Old-School Shipping Industry
2.) Staffing and recruiting.
In times of low unemployment, the staffing industry tends to swell. The current economic expansion is no exception: A staffing industry analysts report shows that both the total and temporary staffing markets grew 3 percent in 2018 and are expected to do so again this year by the same margin. Fast growth also means that the staffing market is highly competitive, however; to compete, small firms need access to industry-leading pools of talent and tools.
One example is Monster's suite of services, which helps staffing agencies find, engage and manage candidates. Focused on finding the right fit for both candidates and employers, Monster offers tools like SearchMonster, which provides a more complete candidate profile and SMS messaging, and Monster Studios, a video-based way to pitch companies and open positions. Its SearchMonster tool activates passive talent, a category that a 2018 Jobvite study found included 82 percent of U.S. workers.
3.) Construction.
Since the economic recovery hit full speed in 2011, construction expenditures have posted year after year of growth. In 2017, the most recent year for which the NAIOP has data, warehouse construction expenditures grew a whopping 55.7 percent from the year prior, while industrial construction spending posted a similarly impressive 52.5 percent. Although the study notes that labor shortages and interest rates could dampen growth, it predicts the industry's strength will continue for years to come.
High upfront costs, however, often keep smaller construction firms from gaining ground. Groups like EquipmentShare can ease that burden through short-term rentals of equipment, ranging from aerial lifts to backhoes to concrete saws. For those looking to buy their own equipment, EquipmentShare offers extended-term financing and cost-saving predictive maintenance software.
4.) Ecommerce.
The retail market just keeps migrating toward online sales. According to Forrester research, online purchases will account for 17 percent of U.S. retail sales by 2022, growing five times faster than projected brick-and-mortar sales. For better or worse, Amazon alone accounted for nearly half of total online sales in 2018.
Related: Why Amazon and Jeff Bezos Are So Successful at Disruption
Although entrepreneurs have little chance of unseating Amazon, they can certainly sell on its platform. To help small businesses on Amazon scale, Kabbage, an online lending platform that got its start in e-commerce, allows them to link Amazon sales data to their loan application. By doing so, applicants boost their chances of being approved via Kabbage's automated system for a line of credit up to $250,000. NDP Analytics research shows that, in part because of their additional data streams, alternative lending companies like Kabbage approve loans almost four times more often than big banks do for businesses valued at $1 million or less.
5. CBD
Following the 2018 Farm Bill's legalization of non-psychoactive cannabis products, the U.S. market for cannabidiol (or CBD, a cannabis compound that shows promise for managing conditions from epilepsy to anxiety) may grow by forty-fold between 2018 and 2022. Brightfield Group researchers point out that such a jump would make it the fastest-growing cannabis subsector.
With the industry now legal, entrepreneurs have a chance to get in on the ground floor. But because of remaining legal limitations, such as cross-state sales restrictions, small business owners don't need to invest in large-scale production equipment. To help them create smaller batches in a cost-efficient manner, niche equipment providers like Absolute Unit help entrepreneurs design, develop and finance small-scale production facilities. And because Absolute Unit sources the equipment directly from China, it keeps CBD companies' costs low by minimizing middlemen.
Opportunities for small businesses to disrupt or even dominate markets don't come along every day. When technological and legal landscapes shift, however, enterprise companies tend to be slow to react. With the right tech partner in tow, entrepreneurs can and should capitalize on the changing times.
