If you’re a small business owner working out of your home, you need to get out. Here’s why.
The Small Business Owner Next Door
When you picture small business owners, what do you envision? If you envisioned a solo entrepreneur operating out of their home then you are right. The United States Bureau of the Census sent surveys to 2.3 million business owners across the country as part of the official “Survey of Business Owners.” As the data from this survey is processed, the Census Bureau will release data sets and analysis to the public.
What I found most striking about the data is how small small businesses really are. Only 1.5 percent of companies started with more than $1 million in capital, compared to 30 percent that did so with less than $5,000. Fifty-two percent of small businesses operate from someone’s home. Only 6.9 percent of these businesses generated sales in excess of $250,000. The majority had less than $25,000 in sales.
What are the implications of the survey results?
First, we need more growth businesses, not small businesses. While there is nothing wrong with being a “solopreneur” with a lifestyle business, those types of companies don’t move the needle when it comes to rapid economic growth. Our economy needs companies that start, hire and scale. Scalable companies generate jobs, pay taxes and invest and innovate at higher rates than lifestyle businesses. The impact of five new Google-type companies on the U.S. economy would be enormous.
If you are working in the basement of your home—get out! Home-based businesses sell less, grow more slowly and have higher failure rates. Half of business owners have college degrees and report that their business is their primary source of income, so if you are in this group you need to make more money and you are smart enough to know that you do. If you haven’t taken your business out of your home, why haven’t you?
Second, if your company sells to small businesses, make sure you understand them. Significant demographic changes are underway among small business owners. Hispanics represent one of the most entrepreneurial groups in the country right now. They are starting businesses at a much higher rate than the overall population.
People over age 55 comprise over one-third of small business owners. Adapting your marketing strategies, products and services to cater to the cultural nuances of these groups could give you a competitive advantage as many large companies miss the boat entirely in this regard. Effectively targeting Hispanics goes beyond translation into Spanish and Baby-Boomer business owners need more than age-appropriate stock imagery on a website.
