Number of Home Based Businesses on the Rise

Number of Home Based Businesses on the Rise

By Robert Boroff | Google +

In many service industry jobs such as professional services, construction, retail, and personal services, many companies are beginning to be headquartered in a home instead of a physical office location. In fact, according to BusinessWeek, more than half of all businesses are headquartered in somebody’s home. This may seem like a very high number, but if we take a look at the reasoning behind it, it really begins to make a lot of sense. A lot of the at home businesses came about as a result of America’s adjustment from working mainly in the manufacturing industry to more knowledge based, problem solving jobs. It is also due to the fact that the World has seen more technological advancements in communication in the past two decades than it had seen in the past two centuries. This has allowed people the luxury of working from their homes while still being able to contact employers and/or clients. Another huge factor that is pushing employees to work in their own, 1 to 2 person, home-based businesses is the fact that so many large companies are making huge cutbacks to their workforce.

Although it may seem like this is a relatively new trend, it is not the first time in United States history when it was popular to run a business from a home. Prior to the Industrial Revolution, most business activities were actually conducted from an individual’s house versus a shop or store. It was not until the mid 18th century through the mid 20th century when it became crucial for businesses to begin working in factories, offices, schools, and other big business enterprises in order to achieve economies of scale.

In the 1980s the service industry began to see many small businesses revert back to the ways of our forefathers by bringing back the trend of home based businesses. Many of these changes can most likely be attributed to the introduction of the first affordable personal computer along with other technological devices. People were finally able to perform specific tasks at home that before could only be conducted with the technology in an office. Jobs that allow an individual to work from home are now even more prevalent with all of the new technology like blackberries, iPhones, video conferencing, etc. It is no surprise that this trend became a quick hit since it is so easy for home based businesses to market to other businesses and consumers from the comfort of their own homes.

In fact, these home based businesses employ more than 13 million people across the United States, so it is very obvious that they are not uncommon. Many people wonder why there are so many individuals running businesses out of their homes, these days, instead of working for a larger, more stable corporation. Most of these companies barely produce enough revenue to support one person and stay in business. According to a report conducted by Emergent Research in Lafayette, CA, that analyzed data from the US census, Small Business Administration, and the Small Business Success Index, it was found that only 35 percent of these businesses have revenue of more than $125,000 per year. Despite this small amount of revenue, most of these businesses are more favorable than traditional small businesses in regards to the benefits they provide to workers, their approach to marketing and innovation, and their access to capital. This is a very important underlying reason why many individuals who have lost their jobs with traditional small to large corporations have adjusted to this new style of business.

The last huge draw that has encouraged many people to get involved in home based businesses versus traditional small businesses is the larger amount of profits that they end up keeping. When compared to small businesses, on average, home businesses kept about 15 percent more of their revenues as profits. This statistic has a lot to do with the difference in overhead costs that would have been caused by paying for and maintaining an office. This along with the large number of people that just do not feel secure in their jobs, because of all of the layoffs that are taking place, has helped to lead to this new style of business. Many people believe that the only way that they are going to be where they want to be, is to be their own boss. Now, owning your own business from home is seen as a more secure venture than working for many of the companies that are so eager to get rid of employees at any sign of an economic downturn.

With all of the facts laid out, it seems like this is a trend that will continue into the future, especially with the ever increasing forms of communication and constant pressure on companies to cut costs. Many companies will begin to look for these small home based businesses to hire as contractors. This is a hug benefit for the hiring company, and is why it is so attractive and popular, because it will allow them to receive services from the contracted business but will not require them to hire the individuals on as part of the core of the business. As the baby boomers begin to retire from their traditional jobs, they will also become key players in this relatively trendy type of organization. Many of them have already begun to make a presence as they search for new challenges to occupy their free time.