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Business Opportunities - Home-based Businesses

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A home-based business, as defined by the U.S. Small Business Administration, is "a business that is conducted out of a residence with no other headquarters location." According to researcher Harry B.R. Beale in Home-Based Business and Government Regulation (Microeconomic Applications/SBA, February 2004), home-based businesses comprise about half of all U.S. businesses. More than two-thirds of sole proprietorships, partnerships, and S corporations are based in owners' TABLE 9.6 The safest and riskiest small businesses, 2002homes. About 52% of home-based businesses are in service industries, 16% in construction, 14% in retail trade, 5% in finance, insurance, or real estate, 4% in transport, communication, or utilities, 3% in manufacturing, 3% in wholesale trade, and 3% other. A full 78% of all businesses in the forestry, fishing, and hunting sector are home-based as are 92% of residential general contractors.
TABLE 9.6
The safest and riskiest small businesses, 2002
Rank Type of business Industry % with profits % with losses
All sole proprietorships All 74.9% 25.1%
 1 Surveying and mapping (except geophysical) services services 93.7% 6.3%
 2 Optometrists health care 93.0% 7.0%
 3 Dentists health care 91.8% 8.2%
 4 Certified public accountants services 91.2% 8.8%
 5 School and charter bus drivers transportation 90.8% 9.2%
 6 Special trade contractors construction 88.2% 11.8%
 7 Mental health practitioners and social therapists health care 87.8% 12.2%
 8 Physicians (except mental health specialists) health care 87.1% 12.9%
 9 Taxi and limousine service transportation 86.3% 13.7%
10 Residential building construction construction 85.9% 14.1%
11 Medical and diagnostic lab services health care 85.4% 14.6%
12 Architectural services services 85.1% 14.9%
13 Land subdivision and land development construction 85.1% 14.9%
14 Child day care services health care 85.0% 15.0%
15 Legal services services 84.6% 15.4%
16 Administrative and support services services 84.6% 15.4%
17 Home health care services health care 83.5% 16.5%
18 Physicians (mental health specialists) health care 83.1% 16.9%
19 Educational services services 83.0% 17.0%
20 General freight trucking, local transportation 82.8% 17.2%
21 Architectural, engineering, and related services services 82.7% 17.3%
22 Drafting, building inspection and geophysical survey services 82.4% 17.6%
23 Support activities for mining services 82.4% 17.6%
24 Motor vehicle towing and other transportation transportation 82.0% 18.0%
25 Personal and laundry services services 81.5% 18.5%
26 Couriers and messengers transportation 81.0% 19.0%
27 Machinery manufacturing manufacturing 80.9% 19.1%
28 General merchandise stores retailing 80.9% 19.1%
29 Religious, civic, professional and similar organizations services 80.6% 19.4%
30 Chiropractors health care 80.4% 19.6%
31 Nursing and residential care facilities health care 80.2% 19.8%
32 Social assistance health care 79.9% 20.1%
33 Publishing industries information 79.8% 20.2%
34 Engineering services services 79.8% 20.2%
35 Miscellaneous repair services services 79.7% 20.3%
36 Real estate agents, managers and appraisers real estate 79.6% 20.4%
37 Nonresidential building construction construction 79.5% 20.5%
38 Automotive mechanical and electrical repair services 79.0% 21.0%
39 Podiatrists health care 79.0% 21.0%
40 Leather and allied products manufacturing 78.9% 21.1%
41 Transportation equipment manufacturing 78.4% 21.6%
42 General freight trucking, long-distance transportation 78.1% 21.9%
43 Building material and garden supplies retailing 78.1% 21.9%
44 Accounting services (except CPAs) services 77.9% 22.1%
45 Forestry and logging agri services 77.7% 22.3%
46 Food manufacturing manufacturing 77.5% 22.5%
47 Scientific research and development services services 77.2% 22.8%
48 Automotive equipment rental and leasing rentals 77.1% 22.9%
49 Automotive body shops services 77.0% 23.0%

TABLE 9.6 The safest and riskiest small businesses, 2002 (CONTINUED)

TABLE 9.6
The safest and riskiest small businesses, 2002 (CONTINUED)
Rank Type of business Industry % with profits % with losses
50 Broadcasting and telecommunications information 76.8% 23.2%
51 Outpatient care and miscellaneous health practitioners health care 76.6% 23.4%
52 Credit intermediation and related activities finance/insurance 76.6% 23.4%
53 Water transportation transportation 76.3% 23.7%
54 Plastics, rubber, clay and glass products manufacturing 75.8% 24.2%
55 Nondurable goods (including food, chemicals, etc.) wholesale 75.8% 24.2%
56 Paper products manufacturing 75.7% 24.3%
57 Insurance agencies and brokerages finance/insurance 75.3% 24.7%
58 RV parks and recreational camps accommodation 74.4% 25.6%
59 Other activities related to real estate real estate 74.2% 25.8%
60 Waste management and remediation services services 74.1% 25.9%
61 Other insurance related activities finance/insurance 73.8% 26.2%
62 Management, scientific, and technical consulting services 73.6% 26.4%
63 Electrical equipment, appliance, and components manufacturing 73.5% 26.5%
64 Apparel manufacturing 73.0% 27.0%
65 Food and beverage stores retailing 72.9% 27.1%
66 Amusement, gambling, and recreation industries entertainment 72.9% 27.1%
67 Printing and related support activities manufacturing 72.7% 27.3%
68 Market research and public opinion polling services 71.3% 28.7%
69 Durable goods (including machinery, wood, etc.) wholesale 71.1% 28.9%
70 Investment bankers and securities dealers finance/insurance 70.9% 29.1%
71 Auto services (including oil change shops and car washes) services 70.3% 29.7%
72 Computer systems design services services 70.2% 29.8%
73 Other miscellaneous services services 70.2% 29.8%
74 Fabricated metal products manufacturing 69.6% 30.4%
75 Advertising and related services services 69.5% 30.5%
76 Furniture and related products manufacturing 69.2% 30.8%
77 Food services and drinking places accommodation 68.9% 31.1%
78 Rooming and boarding houses accommodation 68.5% 31.5%
79 Testing laboratories services 68.1% 31.9%
80 Medical equipment and supplies manufacturing 67.8% 32.2%
81 Electronic and appliance stores retailing 66.8% 33.2%
82 Furniture and home furnishing stores retailing 66.7% 33.3%
83 Rental and leasing services rentals 66.6% 33.4%
84 General rental centers rentals 66.2% 33.8%
85 Lessors of real estate (including miniwarehouses) real estate 66.0% 34.0%
86 Specialized design services services 65.8% 34.2%
87 Motor vehicle and parts dealers retailing 65.8% 34.2%
88 Heavy construction construction 65.8% 34.2%
89 Information services and data processing services information 65.5% 34.5%
90 Investment advice and other financial activities finance/insurance 65.1% 34.9%
91 Air and rail transportation transportation 64.9% 35.1%
92 Wood products manufacturing 64.1% 35.9%
93 Fishing 64.0% 36.0%
94 Motion picture and sound recording information 63.9% 36.1%
95 Hotels, motels, and bed and breakfast inns accommodation 63.2% 36.8%
96 Gasoline stations retailing 62.9% 37.1%
97 Commercial and industrial equipment rental rentals 62.6% 37.4%
98 Other ambulatory health services (including ambulances) health care 61.7% 38.3%
99 Securities brokers finance/insurance 60.1% 39.9%

According to Beale, most home-based business owners work alone. Nine out of ten home-based businesses have no employees; 7.2% have between one and five employees; 1% report having five to nineteen employees; and 0.2% have twenty employees or more. In addition, most of these businesses are quite small in terms of receipts. Most (77%) have gross receipts less than TABLE 9.6 The safest and riskiest small businesses, 2002 (CONTINUED) Patrick O'Rourke, "The Safest and Riskiest Small Businesses," in Useful Business Statistics, Bizstats.com, 2003, http://www.bizstats.com/sprisk2.htm (accessed January 10, 2006)$25,000, and 96% have gross receipts less than $50,000. Only 3.5% report receipts of $100,000 or more.

TABLE 9.6
The safest and riskiest small businesses, 2002 (CONTINUED)
Rank Type of business Industry % with profits % with losses
SOURCE: Patrick O'Rourke, "The Safest and Riskiest Small Businesses," in Useful Business Statistics, Bizstats.com, 2003, http://www.bizstats.com/sprisk2.htm (accessed January 10, 2006)
100 Clothing and accessories stores retailing 59.5% 40.5%
101 Securities and commodity exchanges finance/insurance 59.1% 40.9%
102 Performing arts, recreation and related entertainment 57.6% 42.4%
103 Utilities utility services 57.3% 42.7%
104 Chemical manufacturing manufacturing 56.8% 43.2%
105 Sporting goods, hobby, book, and music stores retailing 55.0% 45.0%
106 Support activities for agriculture and forestry agri services 54.9% 45.1%
107 Oil and gas extraction extraction 54.3% 45.7%
108 Miscellaneous store retailers retailing 50.7% 49.3%
109 Textile and textile product mills manufacturing 50.5% 49.5%
110 Health and personal care stores retailing 49.5% 50.5%
111 Other miscellaneous manufacturing manufacturing 48.8% 51.2%
112 Nonstore retailers retailing 48.8% 51.2%
113 Videotape and disc rental rentals 48.4% 51.6%
114 Primary metal industries manufacturing 41.0% 59.0%
115 Nonmetallic mineral mining and quarrying mining 38.3% 61.7%
116 Commodity contracts brokers and dealers finance/insurance 36.6% 63.4%
117 Computer and electronic products manufacturing 35.4% 64.6%
118 Animal production (including pet breeding) breeding 34.5% 65.5%
119 Scenic and sightseeing transportation transportation 33.8% 66.2%
120 Hunting and trapping hunting/trapping 23.6% 76.4%

The 1999 U.S. Small Business Advocacy report Homebased Business: The Hidden Economy (http://www.sba.gov/advo/research/rs194tot.pdf) gathered information from 125,000 businesses and remains the most extensive consideration of the demographics of home-based business in the United States. Included in the sample were businesses owned by women (33%); by nonminority men (59%); by African-Americans (3%); by Hispanics (4%); and by "other minorities," mainly Asian and Pacific Islanders, and Native Americans or Alaska Natives (4%).

Based on 24.8 million nonfarm business tax forms filed in 1998, the SBA report estimated that the number of home-based businesses had increased between 11% and 33% (from nine million to ten-twelve million) between 1992 and 1999. Among home-based businesses, 90% are sole proprietorships; only 2.1% are franchises. More than 86% of home-based businesses are likely to be run by the founder, as compared with 72% of businesses that are not based in homes.

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