Census Finds Half of Small Firms Based in Homes

Home-based businesses make up about half the country’s roughly 17 million small businesses, according to a report released today by the U.S. Census Bureau.

But almost three-fourths of these home-based businesses brought in less than $25,000, and only 2% had receipts of $250,000 or more, the report said.

The data, part of a larger 1992 study analyzing the nation’s small businesses, is considered significant because this is the first time the government agency has studied the fast-growing home-office segment.

“There’s been a tendency by the government to minimize the home-based business population,” said Paul Edwards, a book author and columnist on home business. “But now candidates for Congress should recognize that there are more than 8 million people who fit into this category.”

The data is part of a report the Census Bureau releases every five years called “Characteristics of Business Owners.” The Census Bureau surveyed a sample of business owners who file federal income taxes as either self-employed, as a partnership or as a legally incorporated business with 35 or fewer shareholders.

According to Mary Frauenfelder, author of the report, the figures will be used by the Small Business Administration and Minority Business Development Agency to set policies and establish programs. In addition to analyzing the home-based population, the Census Bureau found that most of the nation’s small businesses draw modest revenues, require minimal start-up costs and are operated by one owner. It found that:

* About 82% of the country’s small businesses had no paid employees.

* About 62% had receipts totalling less than $25,000, and only 8% brought in more than $250,000.

* A quarter of the owners did not require capital to start their businesses, and 57% started or acquired their businesses with less than $5,000.

* More than half did not depend on their businesses as their primary source of income.

But of all the figures in the 269-page report, the most striking are those related to home-based businesses, because they document how the workplace has evolved in an era of corporate downsizing, technological advances and changing lifestyles and priorities.

“Many of the home-based workers are disillusioned about working for corporations because they fear being laid off,” said Ronald Wohl, a board member of the American Assn. of Home-Based Businesses. “They also want to raise their children and enjoy their lives.”

Personal computers, fax machines, the Internet, pagers, phone services and other office technologies have also made it easier to run a business out of a home.

“I have a Web site for my business, and I’ve been contacted from people in Hong Kong and Indonesia,” said Judith Corbett, who runs a costume manufacturing business out of her North Hollywood home.

Corbett was not surprised by the Census findings. In her own neighborhood, there are numerous home-based businesses.

“My son has his own production company right across the street from me. There’s also a psychologist, a florist, Mary Kay and Amway salespeople, a guitar-repair person, two electricians, a painting contractor and computer consultant within a few blocks from me,” she said.

Some believe the Census data will help home-based entrepreneurs win support from lawmakers, who might have doubted the extent to which people are working from their homes.

The home-based population still is battling over such issues as health-insurance deductions on their federal taxes. And cities across the country are struggling to amend business regulations to permit people to work from home.

“The numbers show that home businesses are a force to be reckoned with,” said Nick Sullivan, editor of Home Office Computing magazine in New York. “It’s important because government officials are more likely to recognize government figures than market research numbers.”

But the Census figures also indicate that most home-based businesses draw minimal revenue.

Sullivan said he believes the figures are skewed because they are 5 years old.

“I think things have changed quite a bit since 1992,” Sullivan said. “There’s been a gradual shift in the home-office market. It used to be mostly part-time people, and a lot of people involved in hobbies and crafts. But it’s gotten increasingly more professional since then.”

Wohl agreed, noting that many skilled workers started their home-based businesses only in recent years.

“I think you’re going to see significant differences when the 1997 figures come out” in five years, he said. “Business is not the same as it was in 1992.”

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