The top 5 industries to get into if you want to launch a small business in Australia

Every entrepreneur wants to hit the ground running when launching a startup.

IBISWorld’s business information analysts have identified the top industries in which Australian small and medium-sized enterprises thrive. The sectors are defined by companies with annual revenue of between $750,000 and $25 million, with fewer than 50 staff.

“What we have seen is that these industries are all forecast to grow, and SMEs thrive in these industries because they have low market share concentrations, as there less competition from larger players,” IBISWorld analyst Spencer Little told Business Insider.

“What we have seen is that service-based industries have proven to be particularly fruitful for SMEs as wages are the dominant expense, and the cost of additional employees, in terms of profit margins, does not decline as employee numbers increase.”

Here are the top 5 ranking industries, in no particular order.

1.Dental Services: A $9.4 billion industry with 12,397 businesses.

Growth over the past five years has been underpinned by out-of-pocket payments from individuals as well as the growing private health insurance industry, where patients are willing to visit the dentist more regularly and undergo more expensive procedures.

Revenue is forecast to rise by a compound annual rate of 2.1% to $9.4 billion.

A growing and ageing population, and rising disposable incomes, are expected to continue this trend as people work to care for their teeth as they get older. This could see industry revenue rise by a compound annual rate of 2.5% over the five years through 2019-20, to reach $10.7 billion.

2. Restaurants: A $11.7 billion industry with 8550 businesses.

Changing social trends have fueled a recovery over the past five years, following the GFC.

Busier lifestyles and a growing demand for quality dining experiences has fed growth, projected to reach 3.6% over the five years to 2014-15 to a total of $11.7 billion.

Australia’s developing food culture, influenced by popular TV cooking shows and an increased focus on health, is expected to create more opportunities, with consumers willing pay a premium price thanks to rising discretionary incomes.

Takeaway food, pubs and cafes, pose a significant competition to revenue growth, so restaurateurs need to be quick to respond to changes in customer demand in order to sustain profit.

Industry revenue rise by an annualised 2.3% over the five years through 2019-20, to total $13.1 billion.

3. Wine Production: A $5.8 billion industry with 1852 businesses.

Despite being one of the top performing industries, wine production in Australia has experienced difficult trading conditions over the past five years due to volatile export economies and a rising Aussie dollar.

The domestic market has struggled with an oversupply of grapes, which pushed prices down. However, the increased popularity of cider has helped to offset falling demand and small wineries have added it to their product range.

A major concern for wine producers is the increasing dominance of Woolworths and Wesfarmers in downstream liquor retailing. The aggressive pursuit of market share – which now stands at 60% between the pair – gives the retailing giants significant bargaining power over wine producers.

Despite this, conditions are expected to ease with the anticipated fall in the dollar, which will improve export competitiveness, and see a rebound in industry revenue over the five years through 2019-20 to $6.4 billion.

4. Special Medical Services: A $16.9 billion industry with 13,231 businesses.

Over the past five years the industry has experienced strong growth due to increased government assistance and Australia’s ageing population.

The government heavily subsidises all qualified specialists through Medicare and provides safety nets to prevent too great a burden on patients. This, combined with the growing population, which has a heightened susceptibility to chronic diseases, means people are more willing to pay out of pocket for technology improvements, such as robotic surgery.

This has seen revenue grow by a compound annual 6.0% over the five years through 2014-15 and as the trend continues it’s expected to grow to $20.8 billion through 2019-20.

Currently the only threat is potential declining government assistance in the Medicare safety net as outlined in the 2014-15 Federal Budget.

5. Road Freight Transport: A $51.7 billion industry with 42,942 businesses.

Road freight transport dominates the Australian non-bulk freight market, with its competitive advantages in price, speed, convenience and reliability in comparison to rail, water and air alternatives.

Demand for road freight transport services is a lead indicator for changes in economic growth. According to IBISWorld businesses hold less stock prior to an economic downturn, and for a period afterwards, which reduces demand for the transport of goods.

Rising fuel prices, skills shortages and vehicle size restrictions could challenge expansion over the next five years, slowing the revenue growth rate to 2.5% between 2019-20.

Despite this total freight movements and demand for road freight are expected to increase steadily due to a growing economy.

NOW WATCH: Ideas videos

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.