While the financial news of 2023 has had its ups and downs, the economy has remained resilient while inflation slows. One positive factor for the economy is that there are many businesses that were stable and even grew. Here’s a rundown of the industries that grew in 2023 and what you can learn from their successes to grow your business.
What’s the difference between growing and declining industries?
The line between growing and declining industries is rooted in assets and debt, with influence from inflation. Businesses that purchased big and/or long-term income-generating assets in prior years performed fine in 2023, but those that made these investments recently (in 2022 or 2023) felt the impacts of high interest rates.
Businesses that were light on assets thrived this year, especially those in industries that could raise their pricing to match the rate of inflation.
With that in mind, here’s a look at the fastest-growing industries this year.
Leisure and hospitality see renewed investments
Personal services, leisure, and hospitality led the way as wages, hiring, and overall revenues grew in 2023. Personal services have lower input costs than other industries, and a lower cost of goods sold gives them a higher gross profit margin. With that, inflation hasn’t affected these industries as severely as others.
Consumers are also spending more money of their income on services than ever before. This is a trend that began as pandemic-related restrictions loosened and has only continued in the past year.
Some of the sub-industries here that experienced the most growth included:
- Event companies
- Mental health counseling and general counseling
- Sports and fitness businesses
- Travel and tourism
- Theater and performing arts
Star performers in leisure and hospitality
There were two segments within leisure and hospitality that had outstanding performances: counseling practices and fitness businesses. With the public’s increased investments in health and increases in insurance payouts for mental health providers, counseling and fitness were well positioned for success.
The job market also gave mental and physical wellness businesses a boost this year. As more employers invest in these services to attract and keep high-quality talent, demand has increased and benefitted the industry.
Restaurants were driven by new openings
The restaurant industry has seen a significant change in the last several years, from COVID-related pivots, to “new normal” adaptations, and even the tough decision to close doors. In 2023, the industry saw mixed results but positive signs for the future.
According to Yelp’s State of the Industry report, there was increased consumer interest in restaurants nationwide. In particular, consumer habits have shown more interest in pricier restaurant experiences, while more affordable options experienced a decrease.
While some restaurants and food service businesses were hit hard by rising wages and the cost of goods, the sector grew due to a very strong rate of openings throughout the year. In particular, kiosks, market stalls, and pop-ups were abundant in 2023. This is in line with the trend that businesses choosing “asset-light” models performed better this year.
Healthcare stayed resilient with employment increases
Despite adverse economic forces in 2023, the healthcare industry remained resilient and even grew. These gains were led by home healthcare services, medical billing services, and medical staffing, with employment increasing sharply this year.
The healthcare industry is projected to continue growing as the U.S. population ages and needs more medical care, and secondly the usage of healthcare services online is causing the sector to grow.
Professional services see gains
In line with the asset-light model of personal services, professional services also experienced significant growth in 2023 with a more than 7% increase in total employment growth projected between 2021 and 2031 according to the Bureau of Labor Statistics.
Looking into why this sector is growing, the story is a bit more complex. While the clients of consultants, brokers, and advisors are all working with tight budgets, they actually need these services more than ever and demand is increasing. For example, nearly all businesses have a need for labor law compliance services, especially in recent years with new laws, regulations, and temporary safety requirements related to the pandemic.
Additionally, professional services have benefitted from increased government spending. From the federal level (supported by the inflation and infrastructure acts passed in the past few years), down to the local level, there are substantially more government contracting opportunities for small businesses. Those that are certified as minority- and/or women-owned businesses (MWBE) can take advantage of these opportunities as many government agencies are required to award a certain percentage of their contracts to MWBEs.
Online retail sales keep moving upward
While in-store retail has continued to have lower-than-average sales in line with the trend of recent years, online retail states posted a modest increase through 2023.
The reason is twofold: First, consumers are continuing to move their purchasing activity from in-store to online. Second, online merchants were able to pass along increased costs to customers through raising prices.
There are benefits to each channel for retail sales, and savvy business owners found ways to leverage one to benefit the other. For example, if you offer an option to purchase items online and pick them up in-store, your customers will get the convenience of online shopping without the shipping costs and may make additional purchases while there. Per the National Retail Federation, 70% of U.S. consumers prefer this purchase method for its convenience.
How can business owners adjust to the current market?
Some of the business models that performed well in 2023 require years of planning and investment, but others can be integrated into your operations right away. Whether you’re in wholesale, retail, manufacturing, or another industry, you can integrate a service or consulting model into your business relatively quickly.
To take advantage of the increase in personal services, consider adding an experiential element to their offerings. For example, retailers and manufacturers can offer classes and visits to production sites as additional income streams.
Here are some other tactics to keep your business in line with the fastest-growing industries:
Asset-light profits today, big-ticket investments tomorrow
One strategy that financially-savvy small business owners are using is promoting offerings that require low or no investment in assets today (such as consulting, personal services, and online sales). This allows you to retain your profits from these well-performing business models. Then, when interest rates decline, you can use your retained profits alongside high-quality long-term debt to make large capital investments in your business.
Make smart choices when taking on business debt
When interest rates are high, it’s important to preserve your cash flow. You’ve likely seen and read news stories about the effects of high inflation and high interest rates on long-term loans, but right now may be a good time for you to secure a short-term working capital loan like a line of credit.
When you use a short-term loan effectively, you can cover important short-term expenses related to scaling your “asset-light” business models (such as hiring and launching new services). You won’t rack up significant interest expenses if you make your payments as agreed because the debt is designed just for short-term use.
As always, you want to match the term of your debt with the term of what you’re financing. Short-term assets should use short-term debt, while long-term assets require longer repayment terms.
Pursuit has worked with many businesses in the fastest-growing industries
While there are many lessons and strategies to learn from the fastest-growing industries this year, Pursuit can help your business grow no matter what industry you’re in. We’ve worked with thousands of businesses when they need financing to reach higher, transform, and grow. With more than 15 different business loan programs for nearly any business need, our team of expert lenders is ready to get you the funding you need. Contact us today to learn more about what’s possible.
