As wages stagnate and Americans look for new ways to supplement their household income or escape the 9-to-5 life, the small home-based business is booming.
According to the most recent numbers from the U.S. Census Bureau, there were 23 million businesses without paid employees in the United States in 2013, up 24 percent from 2003 and 1.2 percent from the year before. Altogether, these businesses earned $1.1 trillion in 2013 — a $21.1 billion increase from 2012, according to the Census Bureau.
And while, together, these non-employer businesses are raking in more than a trillion dollars, the ventures often are mom-and-pop shops and tiny home-based business, launched from entrepreneurs look for ways to earn extra money without spending a lot of it. The U.S. Small Business Administration says 52 percent of all small businesses are based at home.
From their home-based business, these individuals are building all kinds of ventures, taking advantage of their skills and training to boost their incomes. Some are developing software, creating websites or providing lawn care services; others are planning events, baking birthday cakes or providing daycare for frazzled parents.
They aren’t all earning millions, but they are making big impacts on their budgets. According to a survey from Bankrate, of those who work monthly on a side business, about 36 percent earn an extra $500 each month. That’s $6,000 a year. The average revenue for a non-employer business owner, most likely working full-time on an enterprise, was about $45,000, according to the U.S. Census Bureau.
Sounds great? Great! But, before you make the leap to home-based business owner, here are four questions to ask yourself.
- Are you really passionate about your business? Starting and sustaining a small home-based business takes a lot of time and energy. If you don’t truly loving building websites for clients or watching other people’s children, you might want to think twice about your business plans. Find something that you enjoy doing.
- Have you done all of your homework? The businesses that succeed are truly prepared. They’ve completed a business plan that considers the market for their products or services, who their competitors might be and how they’ll grow. They’ve thought seriously about the type of business they’ll own and whether they’ll incorporate or create a limited liability company to protect their personal assets if something goes wrong, for instance. And they’re aware of the permits and licenses they’ll need to legally run their business.
- Can you afford it? Maybe you already have all of the cake baking supplies that you need to launch your home-based bakery. But will you need a license from the health department to sell those goods? Or, if you get a big order, do you have the money to rent space in a kitchen incubator to meet your client’s needs? The Small Business Administration offers guidance to determine startup costs.
- Do you have support? That includes support from family and friends. It also should include help from fellow business owners who can provide advice when questions come up or when the going gets rough. Forbes magazine listed six essential local small business associations that small business owners should belong to.
Home-based business has allowed many to improve their family’s financial health. With them, they earn extra money to pay off debt, buy a new home, save for retirement or simply cover daily living expenses without going into debt. But, before the launch, make sure you go in with your eyes wide open, aware of the risks and ready for the possibilities.
Consumer Education Services, Inc. (CESI) is a non-profit committed to empowering and inspiring consumers nationwide to make wise financial decisions and live debt free. Speak with a certified counselor for a free debt analysis today!