Every year more people start home-based business than get married or have a baby. Women are more likely than men to operate a home business. And home businesses contribute $100 billion to the economy every year. So what’s it take to start one?
Motivations vary for people who start home-based businesses. Here’s why the founders of Inc magazines 5000 fastest growing businesses started out on their own:
Inc. 5000 Startup Motivation
44% The challenge of starting a business
30% Best route to financial independence
25% Demand for product/service
24% Creating a high growth company
20% Wanting to work independently
20% Unhappy working for someone else
What’s your motivation? Are you looking for a more flexible lifestyle? If so, be careful to choose a business that will allow you maintain that flexibility even as it grows. Are you out to make your mark on the world? If so, understand that may not be compatible with your desire to work from home. Are you hoping to make a living doing what you love? Don’t forget about all the administrative tasks you won’t love. Are you hoping to build a business you can sell in five years? If so, you’ll need to build it in such a way that someone else can easily fill your slippers.
Where did they get the money?
You may be surprised to learn that few businesses obtain outside capital to fund their start-up costs. In fact, most home businesses start with less than $10,000 in capital.[i] Even the fastest growing businesses in the country are overwhelmingly self-funded at startup:
Inc. 5000 Startup Funding Sources
82% self financed
22% loans from friends, family, business associates
18% bank loans
18% lines of credit
8% venture capital
4% SBA or other government funds
Take a lesson from their success. Have a nest egg. Start small. Stay lean. Don’t burden yourself with debt if you don’t need to. When it does come time to look for money, plan ahead. Don’t wait until you’re desperate for capital, it doesn’t play well with lenders or investors.
We wouldn’t be very good entrepreneurs if we didn’t mention a terrific book on the subject: Finding Money—Secrets of a Former Banker, Confessions of an Entrepreneur. We know it’s good because we wrote it, and it’s available here as a downloadable PDF.
[i] National Federation of Independent Businesses (NFIB), Small Business Resource Guide for the 110th Congress