Home-based businesses account for 66 per cent of all small business operations in Australia, fast outgrowing its cottage industry image, as Tracey Cook reports.
THE home-based business sector is shedding its cottage industry image and is starting to demand government and service providers recognise it as a significant market.
No longer merely a category of backyard arts and crafts operators, today’s home-based business sector is yielding innovators, service providers that tap the world for information resources, and producers of corporate and lifestyle packages.
Eschewing the usual trappings of traditional employment, home-based business operators are taking full advantage of advanced technology and providing myriad services and products from their homes.
Many are providing services that fill the gaps created by our cash rich and time poor society, while others are mobile professionals who are cashing in on the corporate climate of outsourcing and consultancy.
Changes in our corporate culture also have led to the rise of mobile professionals working as consultants, not only to Australian organisations, but also to companies across the globe.
The sector’s growth is due in part to the introduction of GST, with many businesses required to register ABNs because of their income threshold or to meet requirements by trade suppliers.
However, the 20 per cent increase in home-based businesses bet-ween November 1999 and June 2001 is a strong sign the sector is gaining in prominence.
Small Business Development Corporation managing director George Etrelezis said the image of home-based business as being dominated by women with young children was outdated
Mr Etrelezis said 70 per cent of home-based business operators were men who worked in the service industry.
“I think from the early 1990s there was a change in business practice in major corporations, when a lot of them began to outsource, down-size, break into smaller units, in terms of cost component areas,” he said.
As a result, many professional people found themselves in the position where they could work from home. Mr Etrelezis said the huge growth in the services sector, the technology boom and the increase in work outsourced by the government sector had also contributed to the increase in home-based businesses.
Public relations consultant Sue Roberts has been working from home for the past 12 months.
Ms Roberts said it was a decision that has allowed her to lead a less stressful life, as well adding to job satisfaction.
“I have a lovely home office that opens onto a deck and a pool; I do a fair bit of my work in bathers now,” she said.
“These days it is so easy to do with mobiles, computer PDFs and doing work online.
“More and more people are choosing to do it, whether through redundancy or choice, and some councils are encouraging home-based business.”
Ms Roberts said she had not taken a pay cut as a result of her decision to work from home and was earning more than she did before.
Mr Etrelezis said the sector was attractive because it overcame a significant amount of traditional business start-up costs and took some of the risk out of launching a business.
Commercial lease, staffing, stock, fit-out, bank overdrafts and a second mortgage
are all costs that can push small operators into bankruptcy if their business fails.
“When setting up a home business there isn’t a fit-out cost, although there may be additional costs for technology and an extra phone,” Mr Etrelezis said.
“Staffing costs you usually manage because you are dividing your time between that and running a family and you might get family support.”
Despite the cost advantages, home-based businesses still encounter start-up difficulties. Marketing and conversion of sales is still one of the biggest hurdles facing home-based businesses.
Family Business Australia executive officer Kate Gorce-Macham said corporate image was vital to home-based business.
“It is not necessarily the workplace that has bearing on the kind of work that you
do, you can run a very professional outfit from home,” she told WA Business News.
Meeting at a café or the client’s premises was a way of fostering a corporate image.
“Sometimes home-based businesses struggle with getting out and meeting people face to face,” Ms Gorce-Macham said.
Business networks, trade fairs and expos were important as opportunities to home-based business to build up networks, she said.
Local government regulation, access to technology such as broadband, and trying to create an image of corporate legitimacy are other barriers.
There also can be a limit to how big a home-based business can grow before it has to enter the mainstream market.
“The concept is often born at home and then when you get to a critical mass threshold you have to take the operation elsewhere, at least in terms of a manufacturing or production stage from home,” Mr Etrelezis said.
“Surprisingly quite a few of the operators still manage to work from home.”
For many operators, continuing to be able to work from home involves outsourcing the production stage to other premises or sub-contracting the work out.
“The operator doesn’t have to accompany the actual production phase, it can be done remote from the home,” Mr Etrelezis said.
He said the SBDC had started customising several of its services to cater for the home-based business market and was looking at incorporating a start-up kit for home-based business.
“A simple thing like the technology requirements for a home-based business are quite different to an office set-up and anything from how you respond to phone calls, to how you might interact more quickly through broadband,” Mr Etrelezis said.
The value of the Internet as a research tool is greater for home-based business operators than traditional businesses, and the cost of using broadband should be weighed against its use as a competitive tool, he said.
As home-based business gains legitimacy in the marketplace there is a growing need to have local government authorities standardise regulations. Fees and regulations for home-based business in the State’s 144 local government authorities vary widely.
Mr Etrelezis said while some local governments had recognised the social and economic benefits of the home-based business sector, there was still a long way to go to change the more traditional views of some councils.
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