Data extracted from the 2002 Survey of Business Owners (SBO) reveals that almost half of all businesses (49%) in the United States are now home-based.  More than 6-in-10 owners used their own money to start the business.*  What does this mean for those considering a home-based business?

The survey reveals a surprising trend in the home business arena – more and more entrepreneurs are foregoing the normal business route and not borrowing for start-up costs from a financial institution.  Instead, the majority of new businesses are being formed from personal funds or loans from friends and family.  Consider the following facts*:

• People using their own money or family assets for business startups included 77 percent for businesses with paid employees and 59 percent for businesses with no paid employees.
• Nearly 3-in-10 (28 percent) of all entrepreneurs started or acquired their business with no capital at all.
• Nearly 1-in-10 U.S. businesses -- both employer firms and non-employer firms -- were started by owners who used personal or business credit cards to finance the startup or acquisition.

* Source: U.S. Census Bureau

Part of the reason that people are not borrowing heavily to finance their new start-up is that traditionally new businesses required a retail location, equipment, utility set-up, and so on.  With more businesses being started within the home, the overhead is almost completely bypassed.  While there may still be some minimal start-up costs, the benefits increase significantly, such as:

• Reduced overhead
• No commute (save on gas and time)
• No utility activation fees

With recent advances in technology that enhance capabilities while saving time, smaller businesses are better able to not only find their own niche to excel in but go up against the larger companies on an almost equal footing.  High-powered computers at reasonable prices, home phone service with unlimited long-distance, affordable Off the Shelf software components . . . all of these add up to a home-based business only being limited by the owner’s creativity and dedication. 

Most reports indicate that smaller businesses still have difficulty competing with larger companies because they don’t have the financial resources available to compete effectively.  However, with the trend of more businesses being home-based and not burdened with hefty interest and loan payments, more resources can be dedicated to leveling out the playing field.  In addition, a portion of the equipment needed for a home office is normally already in the home (computer, printer, scanner, fax, phone, email).