(This post originally appeared on Philly.com)
People are starting up businesses at an unprecedented rate — and many of them from home.
According to the latest figures released by the U.S. Census Bureau, more than 492,000 start-up applications were filed last month, an increase of nearly three-quarters from the same period last year. In 2020 there were 4.3 million applications for new businesses filed with the Census Bureau, versus 3.5 million in 2019, an increase of about 23%. The stats are from tax forms filed with the IRS.
The trend is just as big locally. In Pennsylvania, more than 130,000 start-up applications were filed in 2020 vs. 103,000 in 2019, a 26% increase. New Jersey saw a slightly smaller bump from a similar base. Both states saw big jumps in start-up applications beginning last summer.
So who is starting all these businesses? The data aren’t specific. But the great majority appear to be ones that will ultimately provide more jobs.
Most of these start-ups involve ecommerce, retail, financial and health services, which can be run from home. Many factors drive this trend, but perhaps the biggest is that so many people have been newly working from home or — more significant — are unemployed. The jobless not only need the extra income but they also have more time, freedom and flexibility to become entrepreneurs.
“Those who have the resources to be online and a high-speed internet connection as well as some digital literacy were able to take advantage,” said Maura Shenker, director of Temple University’s Small Business Development Center. “Especially now, service-based businesses like bookkeeping and other services that can be done online without bringing people into your home have been popular.”
In particular, Shenker points to people with social media and blogging skills who have started firms to help other small businesses with their online marketing and content.
So what kinds of businesses are people starting from their homes? According to Entrepreneur Magazine, some of the best include accounting services, software development, and editorial assistance. But that’s just scratching the surface.
The volunteers at SCORE Philadelphia, which help mentor small businesses, have been spending a lot of time helping would-be entrepreneurs launch.
“We have received over 40 mentor requests from a variety of start-up ventures; most of them home-based businesses,” said Mary Livingston, SCORE’s local chapter chair.
She said about 40% of the requests came from home-based individual services, such as consulting and home care. And 16% are from those wanting to sell tangible products from their homes, including items they make themselves. A few, perhaps 5%, want to provide online education.
Of course, plenty of advantages mark a home-based business — include rent savings, lower overhead, greater convenience, more flexibility, and a potentially better work/life balance. But there are also significant drawbacks.
Jennifer Kirby, the chef and owner of Piggyback Treats Co., which makes sustainable pet food products, has been operating from her Philadelphia home for three years. Kirby has seen success, but admits that she lacks a “proper” kitchen with the right equipment and storage for her inventory.
“Our business’ main hub is in what used to be my living room and kitchen,” she said. “We truly have almost no personal space. No kitchen table to sit at for meals, no space to entertain friends. Even our porch has been taken over as storage space for business necessities.”
“Waking up ‘in the office’ means you’re still in pj’s when you reply to emails, send out invoices, package-up online orders, and take photos for social media.”
Sherrill Mosee, a designer of handbags and accessories who runs her company, Minkeeblue, from her home in Philadelphia, agrees about the lack of space. She also finds the lack of structure to be sometimes challenging.
“The challenge of working from home for me is that there are no set working hours,” she said. “I seem to work more than being in an office.”
Starting up a home business is not for everyone. Temple University’s Shenker says you need to take the effort seriously and to be prepared to “bootstrap” and to mitigate your risk by creating a formal business entity, such as a limited liability company.
She recommends separating your assets so as not to jeopardize your house or retirement. SCORE’s Livingston advises making sure your home is zoned to allow regular deliveries and foot traffic and to make sure you have a dedicated internet line separate from your family’s.
She also says to check your insurance policies so that they cover business risks and losses.
Both Livingston and Shenker stress that a home-based business needs to be run efficiently, like any other business. Going into it requires not only a good idea, but also the right attitude.
“Nobody knows what’s going to happen or how long this is going to last,” Shenker said of the pandemic. “If you are not good in that environment, this is not the time for you to start a business.”