October 1, 2014

When Your Small Business Grows, Should You Move it Out of Your Home? Millions of Biz Owners Say No

According to the SBA, there are over 15 million home-based businesses in the U.S.  And based on analysis of data from the Network Solutions Small Business Success Index (SBSI) and the SBA, around 6.6 million of these are serious home businesses providing at least half of their owner’s household income.

The home has long been viewed as a great place to start a business.  Lower costs are, of course, the key reason.  Many large enterprises such as Ford, HP and Apple Computer started as home businesses.

A recent SBA study of growth-oriented firms that began operations in 2004 shows that the home continues to be a great place to start.  About half of the growth oriented start-ups surveyed were home-based.  And almost all of these firms were still home-based 2 years later.

But the home is not just a great place to start a small business.  Data gleaned from the Small Business Success Index shows that homes can also be a great place to operate a business long term.  Data from the SBSI survey of home-based businesses that generate at least half of their owner’s household income shows:

  • On average these firms have been home-based for almost 10 years.
  • These home-based businesses score roughly the same as non home-based businesses in overall competitiveness.
  • These home-based businesses score as well on access to capital.
  • 35% of these home-based businesses generate more than $125,000 in revenue; 8% more than $500,000.

Just as lower costs are a key reason for starting a business at home, they are also an important reason many small business owners keep their business home-based.

With technology making it cheaper and easier to start and operate a home-based business – and traditional employment harder to find – we expect continued growth in the number of home-based business start-ups.

For more information on home-based businesses, see Homepreneurs: A Vital Economic Force.

Editor’s note: this article was originally published at the American Express OPEN Forum under the title:  The Home: A Great Place to Start and Run a Business, and is republished with permission.

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About the Author: Steve King is a partner at Emergent Research and a research affiliate at the Institute for the Future. He is a co-author of the Intuit Future of Small Business report series, and a Senior Fellow at the Society for New Communications Research. He blogs at Small Biz Labs.

14 Comments ▼

Steve King


Steve King

14 Reactions

  1. Many jobs today only require a laptop, phone and internet connection. Not only can businesses continue to operate in homes, often workers can perform their duties at coffee shops or other WiFi-enabled locations.

  2. Hey Steve, thanks for all the facts. I think Robert has it nailed, too. We can do almost everything from micro-offices: Cafe Tables, Libraries, Park benches where communities have Wi-Fi-enabled their towns.

    I wonder if the growth of networking groups and events are part of this trend as working from home can be lonely and the social and networking time is rejuvenating.

  3. Technology is constantly changing every few months. Working from home has never been a better option for any would-be entrepreneur.
    More people are beginning to realize the true marvel of the internet and have begun opening their minds, and exploring the endless opportunities on the internet, working through the comfort from their own home, and anywhere they go, as long as you have a Laptop, pocketPC, or PC and have an internet connection.
    You can make money worldwide.
    It has never been a better time for you to check out the options and be part of this emerging internet bubble.
    Visit http://www.redhotfranchises.com/franchises/Work_from_Home to see many work from home opportunities available

  4. TJ: A lot of research shows that loneliness is the number 1 complaint about working from home – and a major reason many return to traditional offices.

    I think you are right that the growth of networking events and meet-ups is related to the growing number of home-based workers looking for social contact. I go to quite a few of these events and have noticed a high percentage of the attendees are home-based workers.

    Another interesting part of this are the people who work from home to avoid social contact. Although their numbers are relatively small, we talk to a surprising number of people who tell us they like working from home because they don’t have to interact with others.

    My partner calls this group “hermitpreneurs.”

    Also interesting is how many social options there are in places where there are a lot of home-based workers.

    Our town, for example, seems to have more home-based workers than traditional commuters. There is always something social going on during the day – group bike rides, hikes, lunches, coffee groups, civic events, etc. We often joke that we need to go back to a traditional office so we can get some work done.

    With more people working from home, more places will reach this type of scale and make working from home even easier and more inviting.

  5. Very Interesting post Steve.
    I’m not sure what the statistics are in Australia but there are plenty of home based businesses here to. The only thing that I think you can miss in a home based business is the ‘water cooler’ talk which can happen where a small business is based in with a number of like minded businesses. We have recently moved our business in with two others in shared premises which is working incredibly well.
    I also wonder what the outlook for commercial realestate will be if the trend to home based continues. I believe Seth Godin is right when he states it is the day of small and that mass markets are on the way out. This change will radically affect real estate requirements and prices as we see this change happen over the next couple of decades

  6. Having worked in both the home and now a traditional office, I find the daily content stimulating and motivating. It’s great to be able to bounce ideas off colleagues a few steps away. And know that you’re not alone in your work. That does require enjoying the people you’re working with (which I do). Although much of what I do daily keeps me tied to a computer and could be done from home, the home office lacks the spontaneity of a quick in-person meeting.

    The key to working from home is to have a schedule, to get ‘dressed’ for work and have outlets for social contact through networking and the meetups becoming popular. Fortunately, technology is making it easier to stay connected. And having a conference room available for a more professional meeting is helpful. All in all, there’s nothing better than keeping the overhead low.

  7. The revenue stats are pretty impressive since a lot of “out of the home” businesses do not bring in that kind of revenue. And, since we know there costs are lower at home – we can only expect their profit to also be higher.

    I have seen many home based businesses sold for millions in the last few years – especially those of bloggers and website operators.

    But I have to agree with many of the comments – it does take a special discipline to do it and has some real drawbacks in the area of personal interaction.

  8. The talk around home-working and that lovely buzz-word, the ‘micro-office’ (referring to working from libraries, coffee houses, etc) always centres around the interaction and social aspect. I see home-working being used in combination with office-share services such as those offered by Regus and others to get the best of both worlds. There’s really no need to do one or the other exclusively.

  9. Michele FitzGerald

    The premise of a home based business is a virtual business model as opposed to the traditional business model. Websites provide a store front to home based business whereas traditional models are defined by brick and mortar. Opportunity to reduce operating costs as home based that is found in hiring independent contractors over employees in a virtual business model. However the “virtual hurdle”, as I call it, is hard to clear while mythical comparisons are made between traditional and virtual. For example, without physical presence humans tend to think they are not in control. This is particularly evident in accounting. Traditional business owners tend to think that if a bookkeeper, for example, is not on site checks and balances are not in place and risk of embezzlement is higher. Checks and balances and embezzlement have nothing to do with where the bookkeeper works and more to do with policy and procedures that strengthen checks and balances and reduce risk and liability. Embezzlement is a crime and therefore based on motivation and opportunity, not a particular business model. The accounting industry leads the way in virtual models if not home based business. Only good managers can produce revenue streams beyond $100,000 annual revenue; most small business owners are not good managers. We see social networks all over the web that reflect network models for home based businesses to remain “virtual”. Home based businesses can be seen also as homeland outsourcing when corporations so conservative in mindset and so entrenched in the traditional business model seek ways to reduce costs through outsourcing. Both win as cost saving enterprises.

  10. Working out of the home is great. However, there’s still lots of distractions around the house. Kids wanting to play, wife wanting o talk and the refrigerator 10 feet away. But, overall I still get a lot work done from the home. I give this article my seal of approval!

  11. There comes a point when having a home based business can actually be a drawback. Other businesses may be reluctant to use your services, thinking that because you are home based, you may not be around too long.

    Also, if you are operating a business in a gated community which does not allow it, you are just asking for trouble eventually.

    When the business is big enough to support it, better to move it out.

  12. This is a very interesting finding. As a home business owner, I have been toying with the question as to “when” is the right time to get an office. The longer I don’t have one, the more reasons I find not too. The only downside is the impression that a home address has in terms of impression to possible clients – but there is a great variety of excellent virtual offices around that can perhaps overcome that problem. My partners can all work remotely but we have enough room that we all can work here as well.

    This article might have helped me make up my mind to stay put – at least for a while yet.

    Thanks for sharing.

  13. I have been looking out for office spaces for the past 3 weeks and am not able to find something suitable…

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