April 21, 2020
By Christina Sandefur
As the coronavirus pandemic continues to devastate the American economy, putting more companies out of business and more employees out of work each day, home-based businesses are becoming an increasingly attractive alternative.
Of course, it’s hard to start a new business even in times of plenty. According to the Bureau of Labor Statistics, nearly half of all small businesses fail within their first four years. And only one in 1,000 entrepreneurs receive venture capital funding, meaning that the vast majority of startups must be self-funded. But home-based businesses have many advantages. Many can be headquartered in homes with no disruption to their neighborhoods. Tutors, web designers, accountants, lawyers, gift basket designers, florists, personal trainers, podcasters, music teachers, bookkeepers, and countless others can all operate without causing noise or disruption to people next door.
And not having to rent, maintain, and commute to a separate office means overhead costs are lower. In fact, 69% of entrepreneurs start their businesses at home, and over half continue to operate from home even when they’re past the startup phase.
Perhaps because they’re relatively easy to start and are less risky than traditional office-based ventures, Americans who are out of work or in need of additional income during this crisis are turning increasingly to home-based alternatives. NameSnack, an online service that helps new businesses find and register their business names, has seen an average increase in traffic of 362% each day, mostly from founders of businesses that don’t intend to work out of a separate store or office.
And innovation begets innovation. As more people are starting home-based businesses, companies are offering new services to help make those ventures successful. Take SmartHouse Integration, for instance, which offers a full-service program that upgrades a home’s networks, installs and maintains security and surveillance systems, provides power management and backup, and offers a virtual technician who can respond remotely to problems. Not all homes are equipped with the technology to operate a business, but market innovations make starting and running a business from home possible without an in-house IT department.
There are also many companies that give home-based workers options to help them get off the ground. Direct sales companies like Beachbody fitness, Avon cosmetics, and Tupperware kitchen products provide sales representatives with the tools to start and run their business, and it costs only a couple hundred dollars to get started. And drop-shipping companies like Oberlo allow people to sell goods from their homes without keeping any stock on hand by sending orders to another party that ships the items to customers.
Unfortunately, outmoded zoning regulations make it difficult for many people to take advantage of these opportunities at a time when they are most needed. For example, online platforms like eBay and Etsy allow people to sell things like clothing and crafts to customers around the world without ever leaving their living rooms. Yet as I’ve recently pointed out, many local zoning codes prohibit people from running retail businesses from home—even if those businesses do not serve customers in person.
The coronavirus crisis has rendered many Americans’ jobs unfeasible and even temporarily unlawful. State policymakers are being called upon to help get America back to work. They should start by legalizing the safest and most flexible enterprise: home entrepreneurship.
Christina Sandefur is the Executive Vice President at the Goldwater Institute.