Is this the year you'll to start a small business from your home? If so, what opportunities provide your best bets for success? Menlo Park (Calif.)-based Homestead Technologies, which helps entrepreneurs design and maintain their Web sites, has come up with a list of the best home-based business opportunities for 2007. Manvinder Saraon, the company's vice-president of marketing and business development, discussed a few of them recently with Smart Answers columnist Karen E. Klein. Edited excerpts of their conversation follow.
How did you determine which business opportunities have the most potential for home-based entrepreneurs in 2007?
We looked at the business areas where there's a lot of spending going on and the areas that are hugely popular right now. We also looked at commonly held "pain points" for consumers, and trends where there are markets breaking out. We also looked at how difficult it is to get started, in terms of experience, education, and money. For instance, we feel that one of the best opportunities presenting itself for the home business market is being a garage organizer.
Why specifically focus on garages?
Because there's been a popular trend toward home makeovers and interior design and closet organizing for a few years. You don't have a big barrier in having to educate the marketplace about whether this is a valuable idea. But the one area of the home that's not been focused on so far is the garage. And garages of typical Americans tend to be very cluttered. So there's a market there, and it also presents easy entry: You don't need a specific degree to organize a garage. You're offering your skills and your time and hard work.
What are some other categories with a similar familiarity in the marketplace?
Another one is a niche market created by the eBay phenomenon. There are more than 700,000 businesses selling on eBay, and many of them recognize that they would be more successful if they had access to market research like pricing strategies, shipping information, and product analysis.
Home-based entrepreneurs who have some experience with eBay themselves could provide educated recommendations to these sellers or would-be sellers on a consulting basis. It's a classic business-to-business niche, but with an application in a new and growing marketplace (see BusinessWeek.com, 9/7/06, "EBay Sellers Go Back to School: 10 Tips").
A similar idea would be doing specialized outsourcing jobs. Outsourcing is integral to many firms that have limited resources and need to focus on their core competencies, and a lot of companies prefer doing business with other small-business owners. So we could see home-based entrepreneurs doing outsourcing jobs for small companies.
What kind of outsourcing services would they provide?
It depends on their backgrounds. They could specialize in business functions like sales, customer service and support, human resources, recruiting, accounting—any competency that they have and that a small business cannot afford to build in-house, or chooses not to establish in-house. For instance, there are people who love interacting with the public and who are very good on the telephone. Small companies could hire a home-based person like that to answer telephone or e-mail inquiries and take orders, as long as they can get them the proper training and familiarize them with the company's products, policies, and services.
One of the specialized services that we pull out for inclusion in the list on its own, by the way, is running a home-based debt-collection agency. There is so much outstanding debt that we currently have more than 6,000 debt-collection agencies in this country. But we believe there is going to be more growth in that area and more fragmentation in terms of individual debt-collection services popping up to specifically service small businesses.
Doesn't that require the entrepreneur to have education or some special training?
Yes, you do need to know about the federal laws that cover debt collection and small business, and those specific to your state and any other states where you'll be doing collections. There are also laws that are specific to home-based businesses and what they can do vs. what office-based businesses can do in terms of debt collection. The best way to familiarize yourself with the whole arena might be to get a job working for an established debt-collection agency for a while. That's also a good way to figure out whether it's something you are good at and enjoy doing.
Related to that idea is another outsourced service: doing background checks for employers who are considering potential hires. Small businesses with limited resources understand that pre-employment screening is becoming mandatory because of security concerns and issues like workplace violence. But they don't have a human resources department that can do this. So they are turning to background-check companies to handle reference checking, criminal background investigations, and due diligence. This business is ideal for startups who want to operate from home and provide a vital service to companies. Again, they will need to understand the legal requirements involved, particularly those having to do with privacy.
Here's another idea that you think is going to pop in 2007: pet sitting.
Right. Providing companionship for pets while people are out of town is another great home business idea that doesn't require specialized education, just a love of animals. People don't like to keep their pets at veterinary clinics in a cage, but they may be reluctant to impose on their friends and neighbors if they travel a lot. There's a $34 billion-a-year industry in pet services in this country, and 135 million dogs and cats in the U.S., so again we know there's a huge market out there.
Digital photography also provides what you think might be a huge market in "scrapbooking." But hasn't that trend already peaked?
You're right that people have been teaching scrapbooking workshops and selling products for several years now. But our idea is a twist on that, as an opportunity for the home-based entrepreneur to market herself as a professional scrapbook artist. The reality is that we all have these digital cameras that take beautiful pictures, but they're all stuck online or in a computer or a camera and nobody ever looks at them.
Also, most of us don't have the time or the talent to download the photos and put them together to make a tangible memory or a gift for a relative or friend. Someone creative who has done this for herself as a hobby could turn it into a business. We suggest they get started by doing things like donating their services to their kid's school as part of an auction, or teaching a summer class through a community college or local recreation center. Once they can show potential customers their work, those people will hire them to do the same thing with their own photos. It's a great gift business for holidays and birthdays.
Finally, you also recommend that creative types get into the business of providing children's art education.
Yes. The tutoring market alone is around $4 billion annually, so home-based businesses that create products or services aimed at educational companies should find a lot of customers. Schools long ago reduced art budgets, but parents are recognizing that creativity and innovation are important skills for their kids to have. And art, music, drama—these all foster those kinds of skills.
Karen E. Klein is a Los Angeles-based writer who covers entrepreneurship and small-business issues.
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