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Characteristics of Home-based Businesses
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In 1999 we worked with CREEDA Projects Pty Ltd on a major survey of home-based businesses. The survey used a range of techniques to identify and approach home-based business operators in the Australian Capital Region (the ACT and 17 surrounding shires in South East NSW) and Queensland's Sunshine Coast, and resulted in a sample of 867 respondents - the largest non-ABS survey of home-based businesses in Australia to date.
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The survey focused on two broad issues:
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Testing the perception that home-based businesses are not real businesses - that they are 'pretenders', 'intenders' and 'tyrekickers'; and
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Segmentation of the market for training and learning presented by home-based business operators.
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The project had the support and backing of three tiers of government (DEWRSB, ACT, and three Sunshine Coast councils) and the ACT's Home-Based Business Association.
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The biggest challenge in gathering data on home-based businesses is to get responses to surveys. There are two main reasons for this:
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Difficulty in identifying home-based businesses to approach; and
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A strong reluctance from those that are identified to take part in research.
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The age of the home-based business and the experience of the operators are the two characteristics most critical in determining training and learning needs. The ABS estimated that 11% of Australian home-based businesses are less than a year old, 34% are 1-5 years old and 54% are 5 years old or more (ABS 1998).
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This data suggests that a small proportion of home-based businesses are new start businesses, but these are hard to locate through anything other than 'bottom-up' survey approaches that approach large numbers of households, then ask about any businesses that may be operating in them.
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Our identification processes involved coming from the business-end down - locating businesses that were potentially home-based and then finding out more about those that were. Our sample thus focuses on those past the start-up stage (Figure 1).
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Figure 1: Age of Business
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Using the ABS data as a benchmark, our sample, for example, shows a lower proportion of new businesses, and a higher proportion of businesses over 10 years old. Both age profiles (from our survey and from the ABS) suggest that a large majority of home-based businesses are in fact well-established businesses well past the difficult start-up phase. Our survey showed that most home-based business operators are working more than full-time hours of 35 hrs per week, and that their businesses provide the major share of their income. When asked about other sources on income, 39% of those with another source of income nominated investment or superannuation, indicating that they may have retired or otherwise left the employed labour force.
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These results point to the existence of a body of home-based businesses that are very well established, which take up a lot of the operators' time, and that are the major contributors of income to operators - not the characteristics of 'pretenders', 'intenders' or 'tyre kickers'.
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Similar to broader small business sector
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According to the ABS, home-based businesses have similar characteristics to the broader small business sector in terms of diversity of industry, business age, hours worked, and gender of operators.
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Our survey found that most home-based businesses are deliberately choosing to work from home for a range of sound reasons:
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Lower overheads
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Lifestyle
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Family needs
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No need for a shop front
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Flexibility and convenience
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Independence
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Improved health and lower stress levels
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No commuting
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The focus groups also revealed that some home-based businesses are started by people who have left the mainstream workforce due to stress, injury or other illness, but who still have entrepreneurial drive and ability. This suggests that home-based business is being used as a vehicle for people otherwise disadvantaged in the workforce to get back into productive work and independent income earning.
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But our survey also showed that home-based business operators recognise and face some serious disadvantages:
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Image is a problem
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Clients' perceptions are often negative
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Working on your own is lonely
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Risks involved in blending home and work are many and diverse
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Barriers to Growth
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The survey focused on three types of barriers to growth: business, lifestyle and local regulations. The barriers mentioned most often were lack of time (35%), lack of demand (34%) and lack of finance (31%). Lifestyle and other self-imposed limits on business growth were nominated by 15-20% of respondents. Local government restrictions were nominated by a small proportion (less than 8%) and red tape in general was nominated by less than 15%.
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It is worth noting here that the relationship between local government and home-based business is usually an awkward one, with most of the home-based businesses in the focus groups reporting that they didn't know, and didn't want to know, their local government's requirements of them. Similarly, many local authorities seem to often tell enquiring home-based businesses, particularly those that are in non-polluting industries, to not bother with formal registration processes, even when these are technically a requirement of operation.
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Learning Needs
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The survey found that home-based businesses are an untapped market for services to help their businesses grow.
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Sales pathways dominated the kinds of advice being sought with 48% looking for marketing information or advice and 38% for more contacts (Figure 2). Business management issues also rated highly with 28% looking for help with business planning and 23% for information or advice on finance.
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Figure 2: Business Advice Required
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We also asked operators about the training and learning they had undertaken in the last twelve months, and their intentions for the next twelve months.
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Again, marketing rated highly, with 36% intending to improve their marketing skills; 33% computer/IT skills, 26% business management and 25% financial management.
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But Figure 3 shows that operators are not following up on most of their perceived skills needs, with much greater emphasis given to training that yields quick and practical returns - particularly products and service knowledge. And marketing shows the biggest gap, with 36% indicating they would like to learn more in the next twelve months, but only 8% had undertaken marketing training in the last twelve months.
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Almost 54% of respondent operators had not done any formal training in small business management, and 27% said they would like to in the next twelve months. But, again, only 7% had done so in the last twelve months. We suspect that if we asked the same question of the same businesses in a year's time that the answers would not look very different.
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Figure 3: Training completed and planned
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Survey respondents reported that they have tended to obtain business advice via their accountant (64%) or a colleague (21%). However, the preferred future means are through an accountant (still relatively high, though dropping to 25%), independent business advisor (25%) or a Business Enterprise Centre (18%). The Sunshine Coast responses were very similar to the Australian Capital Region responses although showed a greater preference for using accountants for business advice in the future, perhaps reflecting the lack of independent advice services in the region.
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