When I started my business back in 1991, my office for the first three years was based in my home. A recent study shows that this is very common (http://smallbiztrends.com/2013/07/home-based-businesses-startup.html). The study found that 69 percent of startups were home based. What was surprising was that 59 percent of established businesses were also home based.
I guess it isn’t that surprising that so many businesses are run out of the home. Many businesses today involve work that is done “virtually”. Technology is much more important to the business than an actual physical location. This is especially true in the “knowledge” businesses. A quick tour of fiverr.com and elance.com reveals thousands of people running online businesses doing thousands of jobs as independent contractors. Most of these independent contractors can easily run their business from anywhere in the world. All they need is a computer and the Internet.
Here are some other interesting facts covered in the study:
- It costs much less than you would expect to start a business. The study found that the median amount required to start up a business was only $15,000. This is a fairly reasonable amount that most Americans can afford.
- Most startups are self-funded or funded by friends or family members. An amazing 82 percent of start-up funds were from the entrepreneur’s personal savings or from loans from friends and family.
- Venture capital is so rare it probably isn’t worth the effort. Only one in 1,000 entrepreneurs in the study received venture capital. Basically you’re better off forgetting about pitching to venture capitalists and just spending your time increasing sales and growing your business.
- Businesses are started by individuals in all age groups. Roughly 15 to 20 percent of adults across all age groups are entrepreneurs.
- Startups do follow age patterns, however. Most businesses are started by younger entrepreneurs, mostly between the ages of 35-45. This drops during mid-career, and then starts rising again at age 65.
- Female entrepreneurs are more likely to have home-based businesses. Among start-up businesses that operate out of the home, 72 percent are run by women. Established businesses (the study counts businesses that have been in operation more than three and half years as established) showed 68 percent of female-owned businesses running out of the home.
- Senior citizens who continue to work tend to be entrepreneurs. Many seniors are retired. But of those still working, more than 42 percent run established businesses. About 10 percent are starting a new business, and another 25 percent intend to start a business.
- Outsourcing, family help, volunteers, and part-time help are the most common sources of labor. Over 20 percent of business owners say they employed family members, had unpaid help (often family members), or part-time employees. Another 30 percent outsourced at least some activities.
This study shows that the way entrepreneurs run businesses in this country is very different from the government’s rigid and limited ways of measuring employment. It also shows that it is much easier to start businesses than most people are led to believe.