Whether you are looking to start a career, a new company, or diversify your existing business, consider the overall trend in an industry before entering it. Look to enter industries that are growing today and in the near future because your chances of success are higher in a growing industry than in an shrinking one. Of course this is intuitive, but I often speak to entrepreneurs who are raising funds and building businesses in struggling industries like print and online magazines. In this post I’ll discuss starting a company in an existing industry rather than launching a disruptive or completely new industry.
Getting Started Is Easier in a New, Growing Industry
The world of online development offers many mini-industries for entrepreneurs to capitalize on. In online development, one company can specialize in a language like Ruby on Rails, while another can specialize in a platform like Facebook or Salesforce.com, while yet another can specialize in a hardware platform like i-Pads. Each specialization is a mini industry, and each mini industry is complete with conferences, blogs, experts and heroes. For these reasons, I’ll use online development to illustrate the importance of the industry.
Imagine starting a company specializing in Android application development. Most of your competitors will (at the time of writing this post) have few, if any, portfolio projects, so you look just as good as the big guys. Getting clients is easy since there’s an acknowledged shortage of great Android app developers. And raising capital for the business is easier too, because investors are keen to plow money into growing markets.
Compare that to starting a new online news website with a pay-per-click ad model. In this case, you’re probably doomed. Your content, however novel, will be scraped and re-broadcasted on countless sites and blogs just seconds after it’s posted. Knowing this, few investors will want to talk to you. You won’t have the money to hire journalists and get great content. You’ll get content from hobbyists instead of journalists. Even the most curated content with smart, snarky opinions will have to partner with bigger companies to survive.levitra medicine
Management is Easier in a Growing Industry
Managers can afford to make mistakes, waste money and upset clients in a growing industry because the failures of management are obscured by growing demand. Eventually bad management will catch up to bring a company down, but a bad company in a good industry has more time to mend its ways.
Hiring is easier in a growing industry. Since a new and growing industry will have few experts, managers can just hire smart people (of which there’s no shortage) and rely on in-house and on-the-job training.
Employees in Growing Industries Have It Better
Since there’s often a shortage of experienced workers in a growing industry, each year on the job is measured in dog-years… seven to one. It’s not uncommon for a developer with just one year of experience at one company to leverage that into a much higher paying job with a competitor. Recruiters hound employees in growing markets, so even average employees are overwhelmed with job prospects.
Timing matters for new companies in new, growing industries because the first stage of business is always an “Early Struggle” (Predictable Success, McKeown, Les), where management races to establish market viability before running out of cash. If your industry is nascent, you need a lot of cash to survive the waiting period.
Timing also matters when deciding to exit a market. The key here is to leave at the top if your industry is prone to market bubbles. My wife and I always try to leave a party when just we’re having the most fun – that’s the secret to a great night – and the same might be true for people working in over-heated industries. Your job prospects are best when leaving a successful venture at its peak. Don’t wait until the industry disappears, because then you’ll be looking for a job with everyone else in your industry.
Some Growth Industries to Consider