If you operate your business from home, you’re not alone. A recent survey of U.S. businesses indicates the majority of entrepreneurs do the same.
And that’s not just in the startup phase either. According to the 2012 Global Entrepreneurship Monitor report (PDF), more than half of U.S. entrepreneurs continue to operate their businesses from home long after those businesses are up and running. The study examined Total Entrepreneurial Activity (TEA) across industry sectors in the U.S.
It’s also a mistake to think of the majority of these owners as so-called solopreneurs who never grow their businesses beyond a staff of one. Study authors observed:
Home-based businesses may evoke an image of the sole entrepreneur working out of a spare bedroom or garage, perhaps with one or several cofounders. Somewhat surprisingly, though, only one-fourth of the entrepreneurs surveyed stated they had no employees working for their businesses. Given the high prevalence of entrepreneurs operating at home (two-thirds of TEA), this finding suggests that many actually had employees in their home-based businesses.
The sense of awe in that statement — that home based businesses “actually” have employees — is interesting. It shouldn’t be surprising that so many businesses are being run out of entrepreneurs’ homes. Today in many businesses, work is done “virtually.” Workers’ technology (computers, mobile devices and Internet connections) is much more important than their physical workspace, especially in knowledge businesses.
Stats on Home-Based Businesses and Entrepreneurship
Here are some additional factoids of interest from this fascinating study:
It costs less than you might think to get a business off the ground — According to the study, entrepreneurs required a median of $15,000 to start a business. On the one hand, that’s a lot. But on the other hand, it’s an amount that many people in the United States can save up or raise from family. Keeping overhead costs low is a key driver of starting a business at home.
Most startups are self-funded or family/friends funded — The vast majority of startup funds (82%) came from the entrepreneur himself or herself, or family and friends.
Venture capital is rare – Only one in 1,000 entrepreneurs in the United States receive venture capital funding, according to a finding cited from an earlier study in 2009. In other words, forget about venture capital. You’re better off spending your time growing your business than searching for VCs.
Entrepreneurship is not limited to a certain age group — Roughly 15% to 20% of adults across all age groups are entrepreneurs.
Entrepreneurship does follow age patterns, however — Young entrepreneurs have the highest intentions to start a business, with 30.5% saying they intend to start one. The intention to start a business drops during mid-career, and then starts rising again at age 65 and up.
Women entrepreneurs are more likely to have home-based businesses — Among startup businesses that operate out of the owner’s home, 72% are operated by women — versus 61% of men. Among established businesses more than 3 and a half years old, 68% of women still operate the business from home, versus 53% of men.
Senior citizens who continue to work tend to be entrepreneurs — Many seniors, of course, are retired. But of those still working, more than 42% run established businesses (i.e., businesses more than 3 and a half years old). About 10% are starting or running new businesses of less than a few years old. And over 25% intend to start a business. So if you want to stay actively working in your senior years, consider your own business.
Outsourcing, family help, volunteers and part-time workers are sources of labor — Over 20% of business owners say they employed family members, had unpaid help (often family members), or part time employees. And 30% outsource some activities.
Businesses not only are started from home, but tend to be run from them — The 2012 survey says 69% of businesses now start in the home. And 59% of established businesses more than 3 and a half years old continue to operate from there.
More businesses are consumer businesses than any other type — We all know home businesses can include services like freelancing, independent contracting, consulting and virtual assistance. But the 2012 study shows only 33% of all businesses surveyed fall into this category.
Another 41% of businesses include companies in the consumer sector. This could include hotels, restaurants or real estate. But it could also include Internet businesses based from home like eCommerce.
Other businesses covered in the survey are “extraction” businesses concerned mainly with natural resources like farming, mining and forestry and “transforming” businesses like manufacturing. These are usually capital intensive and so unlikely to include many businesses started in or operated from the home.
The study did not break down how many of each industry sector specifically are home based, however.
Why This Study is Important
The U.S. study was completed by researchers at Babson College and Baruch College who interviewed about 6,000 respondents.
Work was sponsored by the Global Entrepreneurship Research Association including Babson College, London Business School and representatives of the Association of GEM national teams. The Global Entrepreneurship Research program aims to describe and analyze entrepreneurial processes within a wide range of countries including the U.S.
This study tends to look broadly on the economic contributions of entrepreneurs who otherwise get short shrift in standard government statistics. For instance, recognizing the prevalence of home-based businesses is important, and recognizing that they employ people and outsource services is also important. Recognizing that outsourcing helps grow employment in other companies is another positive point.
The way entrepreneurs run businesses in this country is very different from the government’s rigid (and limited) ways of measuring employment and economic impact. It’s good to see a stellar source like the GEM Report and Babson calling attention to some of these structural changes.
Starting a business at home makes a lot of sense (and saves a lot of cents) because you eliminate the overhead of a separate location. And using outsourced labor for tasks allows you to scale up and down quickly with fluctuations in the business.
Cynthia Taylor Bigge
Robert. You are spot on about the cost savings but to me it’s more about the independence and the creative thinking that results.
marc
yep thats me – Home office, until you make a lot of money stay at home. I rent a storage/unit -glorified one that is for my cleaning business and it works out perfectly. Until business gets booming I will choose to save my money at home!!
Interesting article. I started my online business at home (in my room). The business didn’t make me a millionaire, but it provides enough money for me to make a living. More importantly, it provides me the freedom that I always wanted.
Anita Campbell
Hi KM –
A lot of home-based business owners make a conscious decision NOT to expand, but to keep their businesses at a profitable steady level. Otherwise, they might simply add overhead that would require them to jump through hoops. And they would add complexity but wouldn’t make any more profits at the end of the day…
– Anita
Cynthia Taylor Bigge
KM, The independence and creativity that comes from having your own home based business is so freeing. I’m enjoying this new life after 30 years of being on the clock. Funny thing. I probably work more but it doesn’t feel like work!!
Anita,
I start my business at home – and I still work at home today 🙂
I don’t work at home to save money; rather, I love the freedom of working whenever I want – whether it’s 3 PM or 3 AM.
And yes, I do have employees – virtual employees.
Anita Campbell
Hi Ivan – Good for you! “Livin’ the vida home-based” huh?
I like the fact that my life doesn’t feel as fractured and fragmented any more. When I worked in an office building, I would leave at 7 in the morning and get home at 7 at night. I felt like I lived two separate lives.
– Anita
Anita,
It’s not as easy as people think, but I love working at home 🙂
Working in an office building is the least thing I want to do. I can’t stand the traffic and I think it strangles my creativity.
Kip Marlow
Thanks Anita. Great article on a very significant study. I especially like the data on “senior” entrepreneurs. I never want to retire.
sometimes a home-based business works better because there are little overhead costs.
Gail
Agreed, home based business makes a lot of sense and dollars. The only thing I find sometimes is its too much flexibility. It’s too comfortable sometimes. You have to develop discipline and the structure like a job to make sure you are building your business to profitable status. But otherwise, I could not see doing it any other way. HOME BASED BUSINESS ROCKS!!
Marc Payne
It seems this is the new way to get a business going. It almost has to be with all the hits our economy has taken the last few years. Those without business sense seem to try the garage sale/ebay route, those with a little more try Networking . Real entrepreneurs (even 1st timers) seem grasped for their own, trying to launch those dream businesses-but everyone needs to make a little more. I would suggest everyone start looking into Mobile Marketing. Think about it, everybody has a mobile device, and they spend ALOT of time on it. If you’re not represented there, do you think your business is missing out.
Wanda Einfeldt
I like the freedom of a home-based business. I’ve done the 9-5 thing and at my age, convenience wins 🙂
Hassaan Khan
Home Business and especially E-businesses are really getting popularity which is so amazing to hear! I think we should try to get-in as soon as possible.
Carmin Wharton
Starting business from home makes good sense. Don’t let lack of funding stop you either. Look at your budget and while you are still working for someone else, look at ways you can cut back on expenditures and dedicate that extra money to starting and building your business. Get up a couple of hours earlier to work on your business and cut out most or all evening TV. You’ll be surprised at how much you get done in launching and building your home-based business.
It used to be that people viewed starting a business out of their home as merely a starting point but now it seems that many people are not only starting but continuing to operate their business from home. It’s a win-win situation.
The reason I would support starting your business from home is because you would have work time and flexible working hours. This also allows you to reduce overhead costs and helps you to test out new business concepts. Your work environment can make or break your business if it’s not favorable at all.
Trinise L. Kennedy
Hello everyone,
I’m thankful that my home-based business has allowed me to stay at home with my precious baby boy. Nothing could be more special to me.
The key is to find something you love doing and build a business around it. That’s the joy of working for yourself!
jonathan
hey guys id like some advice or ideas on what kind of home based business I can start up !
id like to hear some feedback and great tips
thank you
Great article, one of the people here said it best find something you love and build your business around that!
Aziz
I am one of those who is included in that statistics. If the business is small and you want to keep it small then it makes total sense. Especially now most of the business is done online and business owners don’t really need to get a store front.