What California Industries Are Performing Well Heading into 2020?
With every new year come predictions of trends for the coming year, and what is next. With events like the Consumer Electronics Show each January, we get a glimpse of what the latest and greatest tech is, and when it will be coming to our homes and our lives. At the same time, we also often miss the next emerging industries, and the tried and true ones that continue to be steady and a great investment for many entrepreneurs. The better question might be what California industries are performing well heading into 2020?
If you’re looking to sell your business in 2020 and it falls in one of these business categories, you can assure your buyer that your industry is safe and growing. If you are loaning to buy a business this year, here are some of the top-performing California Industries.
The Business Services Industry
If you provide services to businesses or homes such as landscaping, pest control, and janitorial services, there are a number of interesting developments in the state of California that will affect your business this year. While many larger companies move business services in house to reduce costs, other smaller companies are better suited to outsource these activities, and busy homeowners and even HOA’s outsource this type of work. Temporary or leased employees (employee services) make up a large part of this market.
While larger business services companies can win contracts with national companies, the answer to a successful business services company is to specialize in certain services, a geographic area, or serving a target industry or market.
There are challenges like seasonal cashflow and employee turnover in periods of low unemployment, but overall the outlook for the business services is positive, but they can be overcome, and you can share that knowledge with buyers.
The Construction Industry
The outlook for the construction industry in California is still good overall as development continues in many areas. The growth in the construction industry was 3.9% as of October of 2019 according to the Bureau of labor statistics.
The largest barrier to entry in this field in California is that you must be licensed as a contractor, and you’ll often need local permits and licenses as well in order to operate in particular cities or counties or to perform certain kinds of construction work.
As a seller, this means it is more difficult to find a qualified buyer, preferably one who has all the licenses already in place, or who you know can get them in a timely manner. As a buyer, this means that you must be prepared to become licensed in California or preferably already be licensed by the California State Contractors Licensing Board before initiating a purchase.
All in all, the outlook for the construction industry, including home remodeling and other services like HVAC installation, plumbing contractors, electricians, and more is positive and will likely continue to be in the current economy.
The Healthcare Industry
Wherever there are people, there is a need for healthcare. Like the business services industry, the way to compete with large hospitals and conglomerates is specialization. Specialties like cardiology, pediatrics, and even urgent care in certain areas are growing as cities expand and populations age.
The biggest barrier to entry into the healthcare industry is licensing. You must be a physician to own most practices, and doctors who move to California from other states must seek certification by the California State Medical Board.
As a seller, this means you must look for a buyer who is already licensed or who is aware of the specific California requirements. There are many options where you continue to work with the buyer for a period of time after the business sells, and this can give them time to adjust to the unique regulations required by the state.
Healthcare job growth rates are strong at 3.3%, and in some areas even stronger, meaning this is still a growing industry with many business opportunities.
The Manufacturing Industry
Growth in the manufacturing industry has slowed for a number of reasons, including the uncertainty of the current trade wars and the political climate. But there are some bright spots that create great opportunities.
- Specialization: Like other industries, specialization is the answer for many manufacturing companies. Medical robotics and other specialties are doing well, along with others powered by AI.
- Domestic Operations: Manufacturing domestically means that there is less chance prices will be impacted as strongly by possible tariffs. This, of course, is also affected by supply chain issues, but those can be overcome.
- Proximity: Being in California puts innovative manufacturers close to Silicon Valley and some of the greatest tech startups around. This proximity offers them (and your company) advantages.
The primary barriers to entry into the manufacturing industry are financial ones: the cost of equipment and other factors mean businesses are more expensive. However, automation and other factors also continue to reduce labor costs and increase efficiency, resulting in greater profit potential. That makes this industry very attractive to qualified buyers.
The Wholesale Distribution Industry
The wholesale industry is fairly stable, with growth of only 0.2% according to the Bureau of Labor Statistics. However, the outlook is good long term. While large companies like Amazon have huge distribution networks of their own, with the growth of the eCommerce industry in many areas, the need for wholesale distribution centers will likely continue to grow in California and beyond.
Again, like many other industries, the key is specialization and location. The more a wholesale distribution business focuses on an industry or a particular location, particularly where there is a distribution vacuum, the more likely it is to be successful.
While these five industries show great potential, they also face challenges. It’s an exciting time to be in business in California. If you are selling your California business in any of these industries, contact Rogerson Business Services today. We would love to be your Certified Business Broker, and help you find the right buyer for your business at the right time.
If you are looking to buy one of these types of businesses in California, check out our listings of businesses for sale.