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Fertile Ground for Startups: 10 Sectors of the $207 Billion Cyber-Security Industry Poised to Take Off

Fertile Ground for Startups: 10 Sectors of the $207 Billion Cyber-Security Industry Poised to Take Off

If you are hunting for startup business ideas, you might want to consider sectors of the $207 billion cyber-security industry that are expected to show impressive revenue growth over the next five years.

If the revenue generated in the cyber-security industry were the economy of a country, it would be the 46th-largest economy in the world, just above Algeria and below Portugal, according to a report released this week from Los Angeles-based industry research firm, IBISWorld. And it’s growing. For entrepreneurs seeking a foothold to launch a business, that can spell opportunity.

With the increasing adoption of cloud computing, mobile devices and web-based applications, hackers have more opportunities than ever to infiltrate the network systems of businesses. At the same time, as more sensitive data is moved online, cyber-security is becoming a high-stakes game. In the coming five years, the cyber-security industry is expected to expand by 7.7 percent annually, reaching $285.9 billion in revenue by 2018, according to David Yang, the analyst who wrote the IBIS World report. Here is a list of the top 10 sectors in the industry ranked by the percentage their revenue is expected to grow over the next five years.

1. Online payment processing software developers
Projected annual revenue growth through 2018: 17.2 percent
Revenue expected in 2013: $15.3 billion
Profit margin expected in 2013: 19.9 percent
In addition to online credit-card processing, this sector includes services where consumers link their credit card information to a payment system like PayPal or Google Wallet. Also, it includes emerging technology where your mobile device connects to an in-store payment processor from a distance without any physical contact. Because of minimal labor costs associated with maintaining the software, the 20 percent profit margin is expected to increase.

2. Virtual data rooms
Projected annual revenue growth through 2018: 14.2 percent
Revenue expected in 2013: $728 million
Profit margin expected in 2013: 7.5 percent
Virtual data rooms are locations in the cloud where businesses can securely store and access information about private negotiations, including mergers and acquisitions, real-estate transactions, intellectual property rights and initial public offerings. Of particular note to entrepreneurs, virtual data rooms are an especially attractive sector for investors, according to IBISWorld.

3. Online insurance brokers
Projected annual revenue growth through 2018: 12.9 percent
Revenue expected in 2013: $19.2 billion
Profit margin expected in 2013: 11 percent
These brokers make a commission from insurance companies when they sell insurance to consumers online. Because these transactions involve highly sensitive personal information, including social security numbers and home addresses, IBISWorld predicts the industry will need to adopt comprehensive practices in the coming five years.

4. IT security consulting
Projected annual revenue growth through 2018: 6.8 percent
Revenue expected in 2013: $5.3 billion
Profit margin expected in 2013: 7.5 percent
One of the greatest security risks to businesses is the employees who work there and have access to sensitive data. IT security consultants work with businesses to put in place monitoring systems for email and network usage. Demand for this expertise is expected to grow in coming years.

5. Operating systems and productivity software publishing
Projected annual revenue growth through 2018: 6.7 percent
Revenue expected in 2013: $38.6 billion
Profit margin expected in 2013: 34.4 percent
As businesses move their operations to the cloud, the servers they run off of will need to be protected. If there is a recurrence of operating systems vulnerabilities, as there has been with Google’s operating system for the Android phones recently, investors may become hesitant to enter this sector, the report says.

6. Identity theft protection services
Projected annual revenue growth through 2018: 4.9 percent
Revenue expected in 2013: $3.8 billion
Profit margin expected in 2013: 8 percent
These services use software and analytics to identify suspicious credit-card activity and use of personal-identification data. Going forward, these companies will need to get even more granular in their tracking of what consumers spend and where they are accessing data online so they can not only identify fraudulent activity, but stop it before it happens.

7. Financial data service providers
Projected annual revenue growth through 2018: 4.7 percent
Revenue expected in 2013: $6.3 billion
Profit margin expected in 2013: 19.6 percent
Web portals that give customers a snapshot of their stock portfolios or fixed income balance sheets are predicted to grow in popularity in coming years as consumers demand more services available at their fingertips. Intrinsic to the success of these conveniences, however, is protecting the information provided by consumers. If there is a pattern of security breaches, this industry would suffer, and revenue growth would not meet projections, IBISWorld warns.

8. Online mortgage brokers
Projected annual revenue growth through 2018: 4.1 percent
Revenue expected in 2013: $10.1 billion
Profit margin expected in 2013: 4.2 percent
As with online insurance brokers, web-based mortgage brokers also require a significant amount of private data from customers. The industry is expected to need revamped and improved cyber-security protocols.

9. Database, storage and backup software publishing
Projected annual revenue growth through 2018: 3.4 percent
Revenue expected in 2013: $25.6 billion
Profit margin expected in 2013: 21.9 percent
Businesses are expected to continue to demand more data storage and in turn, they will need more sophisticated software to protect that data, particularly for cloud and mobile applications. One risk for entrepreneurs looking into this sector is that due to a lack of industry-wide standards for cyber-security practices, demand for software may fluctuate before it stabilizes, spooking investors, the report says.

10. Data processing and hosting service
Projected annual revenue growth through 2018: 2.1 percent
Revenue expected in 2013: $82.2 billion
Profit margin expected in 2013: 12 percent
Data processing services take information that businesses give them, analyze it, and turn it into analytic reports. Hosting companies support web application software for businesses. This sector is already more than twice as large as any other on the list because it is so fundamental to the evolution of business services moving to the cloud.

Karen Mills to Leave the SBA

Karen Mills to Leave the SBA

Karen Mills, the head of the Small Business Administration, has told President Obama that she will be leaving her position.

Who will replace Mills remains unknown. The White House is making no personnel announcements today, according to an email from White House spokesperson Inouye Shin. Mills said in a letter to staff that she will stay on until the White House has named a replacement.

Mills served as the 23rd head of the government agency that is charged with representing small business interests in Washington. She was sworn into her position in April 2009.

In a nod to the important role small business plays in the economic recovery, Obama elevated the Administrator to a Cabinet-level position in January of 2012. The announcement was made as part of a larger proposal from the White House to merge the agency with five others in a bid to make government more efficient. The president would need Congress to sign off on his broader plan to streamline agencies, and since the announcement in January 2012, there has been no further action on the proposal.

Mills came into the SBA as the recession had choked off pipelines of credit to the nation’s small businesses. During her time at the SBA, she worked to implement various stimulus measures to improve access to capital. In its 2011 fiscal year, which ends Sept. 30, the SBA supported more than $30 billion in lending to more than 60,000 small businesses throughout the U.S.

On Capitol Hill, Battle Over Small-Business Loans Grows Fierce

On Capitol Hill, Battle Over Small-Business Loans Grows Fierce

The nation’s small businesses have struggled to get anybody to loan them money since the Great Recession started. Meanwhile, banks and credit unions have been fighting over who deserves the right to make small business loans to them. And as the JOBS Act works its way through Congress, that battle has grown fiercer.

Credit unions are not-for-profit, cooperatively owned institutions that provide financial services to their members. Currently, credit unions are legally mandated to lend out no more than 12.25 percent of their total asset size to businesses. For nearly a decade, there has been legislation bouncing around Capitol Hill that would increase the authority of credit unions to be able to lend out 27.5 percent of their total assets to businesses.

Senator Mark Udall (D., Colo.), the lead sponsor of the current iteration of the legislation, called the Small Business Lending Enhancement Act, introduced his bill to be considered for inclusion in the Senate’s version of the JOBS Act that the House passed last week, which will come to its first vote as early as Tuesday. The bipartisan bill is co-sponsored by Republican Senators Susan Collins (Maine), Rand Paul (Ky.) and Olympia Snowe (Maine).

Senate Majority Leader Harry Reid (D., Nev.) said today that he would not add the bill to the Senate’s version of the JOBS Act. But he did pledge to bring the bill to the Senate for a standalone vote, though it’s unclear when. “During this economic meltdown that we’ve had, around the country, in Nevada, the credit unions have been a lifeblood for small businesses and individuals,” said Reid today. “I think we’ve waited long enough.”

If passed, small business owners would have access to more capital. “Raising the cap could substantially benefit smaller business owners and in turn the economy at large,” wrote Brian Martin of the Progressive Policy Institute, a Washington D.C. think tank, in a paper on helping ease the small-business credit crunch, at the end of last year.

Udall says increasing the amount that credit unions can lend to small businesses would help a segment of the market that is currently being overlooked. “I’m talking about the smallest of small local businesses. These are the men and women who need $50,000, $100,000, or maybe even $200,000 to move from their garage to a retail store front, to renovate their sales floor or to upgrade their equipment and expand,” said Udall on the floor of the Senate yesterday. “They are often too small to be worth the banks’ time or they just don’t fit the lending guidelines of the banks’ corporate headquarters.”

According to the Credit Union National Association (CUNA), the leading trade organization, increasing the cap would allow credit unions to lend an additional $13 billion to small businesses in the first year and spur the creation of 140,000 new jobs.

“We will gladly be happy to have our legislation attached to any moving vehicle that can be signed into law,” says John Magill, the executive vice president of CUNA.

Meanwhile, the banking community is doing everything it can to prevent the bill from becoming law. The American Bankers Association (ABA) and the Independent Community Bankers of America sent a joint letter to members of the Senate last week saying that they “stand united in vigorously opposing movement of this controversial bill in any form, either independently or as an amendment to any legislative package, including the ‘JOBS’ bill.”

The banking industry says that to allow credit unions, which are tax exempt and have a unique regulatory set of guidelines, to increase their lending to small businesses gives them an unfair tax and regulatory advantage. If a credit union wants to substantively move into the consumer lending market, then it should have to become a mutual savings bank, says Keith Leggett, vice president and senior economist for ABA. A mutual savings bank has no stockholders and is instead owned by its members. Mutual savings banks, unlike credit unions, do pay taxes.

“If you want to be a credit union and keep your tax exemption, then you need to remain focused on serving consumers,” said Leggett. But credit unions “don’t want to pay taxes, they would rather have their cake and eat it too.”

Banks also argue that by allowing credit unions to make more loans to small businesses that would otherwise be made by tax-paying banks increases the federal deficit. The especially tricky part of the bill for Congressional delegates is that it pits them against two groups of constituents that they want to support — community banks and credit unions.

A CUNA conference will bring 4,000 credit union and small-business supporters to Washington, D.C. next week to visit with members of Congress. Passing the bill to increase the cap on small-business lending at credit unions is top of the legislative agenda, says Ryan Donovan, the senior vice president of legislative affairs for CUNA. “This isn’t over by a long shot.”

$2 Billion Cut from Fed Loan Program Affecting Small Business

$2 Billion Cut from Fed Loan Program Affecting Small Business

A federal program that had the potential to extend $4 billion in credit to small-business and community-development lenders has been reduced by half. The program’s fate underscores how difficult it can be for the government to get much-needed capital to entrepreneurs.

The CDFI Bond Guarantee program, signed into law through 2010’s Small Business Jobs Act, is still waiting for a round of Congressional approvals. Because the program is only budgeted for $1 billion a year through 2014, the delays have shaved $2 billion in funds from the program.

The government office managing the program confirmed today that it doesn’t expect to issue credit until 2013 because of a “legislative requirement” typical of a new law of this sort. The CDFI Fund, a branch of the Treasury Department, said it is moving as “efficiently and responsibly” as it can. Especially in an election year, there is intense political pressure to safeguard taxpayer dollars and not add to the growing deficit.

CDFIs, or Community Development Financial Institutions, are nonbank lenders that work in underserved communities and provide financing to small businesses that are turned down by traditional banks.

How ‘Working Spouse’ Rules Can Save a Company Money — And Headaches

How ‘Working Spouse’ Rules Can Save a Company Money — And Headaches

A robust benefits package, with options that include spouses and other family members, can be an important tool in recruiting and retaining the best employees. But without clear policies that spell out your company’s guidelines with regard to working spouses, divorce and other issues, your business could end up incurring needless expenses or damage employee relationships, says Matthew McDermott, an employee benefits consultant with Landmark Group of Brighton, a Rochester, N.Y., insurance agency and benefits consulting firm.

One of the key areas where employers can save money is by creating working spouse “carve-outs,” says Jeffrey Kraut, an independent certified public accountant from Commack, N.Y. In other words, the company sets a policy that if a working spouse has the option of health insurance through his or her employer, he or she must take advantage of that plan rather than choose his or her spouse’s plan.

“At one company where I worked, we actually sent notices to all employees saying that if the spouse could provide proof that he or she was covered under another policy, we would give them a check each year the spouse was covered elsewhere for $1,000,” Kraut says. Since coverage of a spouse could cost several thousand dollars a year beyond the employee’s contribution, that hefty sum made financial sense, he says.

Companies also need to have clear policies for adding and removing spouses and other dependents from policies, McDermott says, especially in emotionally charged situations like divorce. McDermott says he’s seen situations in which an angry spouse wants an estranged husband or wife removed from a policy immediately. Those extreme reactions are not wise and could leave the business open to liability, especially if there is a legal provision that the spouse maintain coverage until a certain point, such as when the divorce is finalized.

“In this type of situation, I’ve seen companies prohibit action until the next open enrollment period or until there is some type of legal document that outlines everyone’s responsibilities regarding coverage,” he says.

Any policy or guideline must be in compliance with state and federal laws, McDermott says. Once the employer is sure that compliance requirements are met, Kraut says, the policies need to be put in writing and made available to all employees.

What Small Businesses Care About This Election Year

What Small Businesses Care About This Election Year

With just about six months left before the presidential election, healthcare and tax policy are small business owners two most pressing political issues, according to a nationwide survey released today.

About one in five small business owners (19 percent) feel that healthcare will hurt them more than any other political issue, according to a survey of 1,593 business owners conducted in early May by Manta, an online community dedicated to small business. Meanwhile,17 percent of small business owners say tax policy will impact them the most, followed closely by government regulation with 14 percent of respondents.

Small business owners’ focus on taxes has certainly not escaped politicians. Just last week, President Obama went to a small business near Washington where, among other things, he called on Congress to pass two tax cuts for small businesses. He touted a 10 percent income-tax credit for businesses that create new jobs or increase wages in 2012 and a tax break that would allow businesses to write-off 100 percent of selected expenses this year. The set of proposals Obama championed was outlined by Senate Democrats earlier this year.

The White House Administration pitted the President’s proposal for small business tax reform against the proposal made by House Republicans, which offers a 20 percent tax cut for all businesses with fewer than 500 employees for one single year. The same day that President Obama touted the Democratic tax proposals last week, House Majority Leader Eric Cantor (R., Va.) issued a statement criticizing President Obama’s efforts to help small business and calling his proposals a “Washington-knows-best approach.”

Meanwhile, nearly one in three business owners (31 percent) say they don’t even understand the current health care tax credit that was passed as part of the health care reform in 2010, according to a separate survey by Manta, conducted earlier this year. That tax break is available to businesses with fewer than the equivalent of 25 full-time workers, pay at least half their workers’ health-care premiums and pay an average annual wage of $50,000. The percentage of health-care premiums that a business can claim increases the smaller a business is and the fewer employees it has. Maxed out, the credit is 35 percent of what the business pays on premiums this year and next – and increases to 50 percent in 2014.

In February, the President proposed to expand the health-care tax credit to more businesses as part of his budget plan.

Readers, what is the most pressing issue you want to see addressed ahead of the presidential election? 

Olaplex’s New Hair Mask Gave Me Incredible Shine—And It’s 20% Off Right Now

Olaplex’s New Hair Mask Gave Me Incredible Shine—And It’s 20% Off Right Now

After two years without bleaching and a year of irregular trips to the salon, my hair is almost the longest it’s ever been. I’m thrilled with the length, but over-washing has left me with dry, damaged ends. I also pull my fine hair up into a tight ponytail on a daily basis, which has resulted in some minor breakage. And since cutting it all off isn’t an option, (I tried a bob once and cried for months), I decided to see if Olaplex’s new No.8 Bond Intense Moisture Mask could help repair my strands. Spoiler alert: It did, and it’s currently 20% off thanks to Sephora’s Spring Sale.

Not to be confused with the brand’s No.3 Hair Perfector, the ever-popular at-home treatment that strengthens hair by repairing broken disulfide bonds, the new No.8 Bond Intense Moisture Mask is specifically designed to add shine, moisture and body to damaged hair. It’s also Olaplex’s first-ever true hair mask.

I was first introduced to Olaplex years ago by a colorist, when my hair was literally breaking off due to excessive bleaching. The No.3 Hair Perfector, the No. 4 Bond Maintenance Shampoo and the No. 5 Bond Maintenance Conditioner were all instrumental in repairing my extremely damaged hair, and I’m constantly recommending the brand’s products to my friends and family.

Needless to say, I had very high hopes for the new mask. Especially once I learned about its ingredients. In addition to containing Olaplex’s patented Bis-Aminopropyl Diglycol Dimaleate in its formula, which is the key player in the brand’s signature bond-building technology, the Olaplex No. 8 Bond Intense Moisture Mask is infused with ingredients like hyaluronic acid, ceramides, avocado oil, sunflower seed oil and rosehip seed extract to help with shine and hydration.

Set Your Own Rules and ‘Live the Dream’: A Google Hangout With Lewis Howes

Set Your Own Rules and ‘Live the Dream’: A Google Hangout With Lewis Howes

“Living the dream.” It’s something a lot of people talk about and few people actually achieve. Whether it’s a lack of confidence or motivation to start something of your own, or an inability to manage your time after you’ve started setting your own rules.

To address this highly sought-after work-life balance — and all the challenges and opportunities that come with it — we’ll be chatting with entrepreneur Lewis Howes. He’ll join me Wednesday for a Google Hangout to discuss confidence, networking, founding a startup around your passion and growing that business in a way that allows you to live the type of life you’ve always wanted.

You can watch the Hangout here, right on this post, starting at 4 p.m. EST. It’s sure to be informative, insightful as well as entertaining. You won’t want to miss it. See you then.

Hungry for Success? 3 Business Lessons From the Food Network.

Hungry for Success? 3 Business Lessons From the Food Network.

I love food-related television shows like those seen on the Food Network. Even though I don’t cook — I have actually used ovens in the past for storage — I love to torture myself by watching the endless parade of delicious food.  Perhaps surprisingly, I also find a lot of business takeaways from their programming.

Here are three critical business lessons that you can learn from the Food Network and apply in your own entrepreneurial journey.

1. Doing one thing well is the way to go: In virtually every Food Network competition show, one of the chefs tries to show-off by preparing a food item two ways. Whether the main ingredient is rabbit, fish, duck liver or chicken, I cringe when I hear the contestant say that he or she is going to serve it two ways. That’s because by spreading your focus among two dishes, neither gets your full attention. And in every case, while one of the preparations turns out well, the other is a miss. Had the contestant focused all of his or her efforts on the one dish, the person would have helped versus hindered his or her chances to win.

You can take that lesson and apply it directly to your business. Trying to do too many things means that the quality of each of those things individually will suffer. Resist the temptation to add new products and services or to have each employee wear too many hats. Instead, focus on one blow-away effort.  This proves a winning formula- on TV and in the business world- every time.

2. You can lose a battle and win a war: It’s emotionally challenging to be an entrepreneur. You have days when you lose clients or potential client engagements, find out that a potential investor is backing out or some other struggle that makes your business endeavors seem futile. But perseverance is critical from entrepreneurship and you can see that clearly when you watch the Food Network.

In many of the shows, you can fall down on a particular challenge, but still have an opportunity to be the winner. Losing an early round of America’s Best Cook sends you to the “pressure cooker round,” but doing well there puts you right back in contention to be named the overall winner.

Also, chefs that have appeared on others shows — on the Food Network and elsewhere — but didn’t win, often come back as revered judges on future programs. The element of having been there and done that gives the chef credibility and notoriety that the person can leverage, even if he or she wasn’t the winner.

Losing a battle doesn’t mean that you can’t win the war. Get back up and try again because being able to stay in the game is one of the main ingredients for success (pun entirely intended).

3. Embrace improvisation: A large percentage of the Food Network shows, from Chopped to Cutthroat Kitchen, involved twists thrown into the mix to make the challenge more difficult for the participants and simultaneously, more exciting for the viewer watch. Those who are able to maintain grace under pressure and innovate in the face of adversity are the competitors that come away as winners.

The same thing applies for entrepreneurs. No matter how well prepared you are, there will always be surprises along the way. New products will take longer to develop than you expect. You will miss budgets or have a cash flow issue. Your marketing promotion won’t produce the intended results or perhaps it will work too well and you will have a hard time keeping up with demand. Regardless of the issues, you need to be calm in the face of chaos and learn to improvise.

The Real Cost of Giving Terrible Customer Service

The Real Cost of Giving Terrible Customer Service

I’d like to offer you a first-hand account of how one company lost me as a customer in the span of about two short hours.

I frequent businesses where I’ve had great experiences. I also don’t cook. So, when we had a casual party recently, I ordered via DiningIn Chicago “DIC,” an order delivery service that I had used previously and loved. However, our experience this time shows exactly how not to treat your existing customers.

I ordered food through DiningIn Chicago from Portillo’s, the same restaurant that I had used previously with DIC. Portillo’s, through the DiningIn Chicago site, offer catering or individual items for order. What’s great about the catering setup is that it allows you to build your own sandwiches to spec and keep them warm. The items are supposed to arrive in a chafing dish and I also ordered the full heating kit with racks and heat, like I did previously.

Our order arrived with a very friendly delivery man, who unpacked the order for us. However, as we inspected the order, there was no catering set up. Instead of getting pans of hot dogs, hamburgers and separate buns and fixings (yes, I can’t even make hot dogs and hamburgers…), we got sets of assembled hot dogs and hamburgers. This was a problem for three reasons:

  1. There were toppings like peppers, mustard and pickles that not every attendee, especially the kids, wanted.
  2. It would be hard to keep the items warmed appropriately, especially for our guests who were arriving late.
  3. I had spent money on the chafing dishes and liquid heat, which were pretty much useless at this point.
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