The age of the virtual company is upon us. Future historians may look back and declare that the concept of offices began their slow but inevitable extinction some time around 2011 A.D. Our grandchildren will watch movies like Office Space with a touch of bewilderment—did people really have to sit in front of a desktop computer for eight hours every day?
Yes, this is all an exaggeration. After all, some offices will need to provide a space for face-to-face meetings. But it’s hard to argue that the growing popularity of the home-based business model isn’t becoming a characteristic of the entrepreneurial mindset. Now, more than half of all small businesses in the United States are based out of the entrepreneur’s home, according to the Small Business Administration. That’s around 15 million home-based businesses, and represents about $500 billion in revenue every year.
Obviously, the costs of running a business from home is advantageous because it’s cheap.
It’s simple, says Danny Wong, co-founder of Blank Label, a start-up that offers custom men’s shirts. Wong and his co-founders have a completely bootstrapped approach to their business model—and opening an office just didn’t make sense for them. “We just didn’t want to pay,” Wong says. Blank Label is also a paradigm for the 2011 version of a virtual company. They use video chat and Google Wave when the team isn’t together, and they’ve never even met one of their developers, who lives in Orange County. “We video chat with him, but he’s always kind of in the dark,” Wong says.
Cutting costs early on can be attractive to investors, too. “Bootstrapping in this fashion creates a lean, efficient business model that will appeal to investors and buyers later on,” says Sam McRoberts, founder of Vudu Marketing, which is based out of McRoberts home in Provo, Utah.
But for many, running a business from home has very little to do with the money it saves them. It’s all about, as one entrepreneur put it, the “10-step commute.”
Hakan Nizam, who runs a web development company out of his home in Brooklyn, enjoys a more fluid approach to his business model. When Nizam needs to meet with clients, he rents a conference room at a co-working facility in a location that’s convenient for them. If one of his temporary employees wants to work at a desk, he rents them one. Nizam doesn’t have any permanent employees—he mostly just hires freelancers and independent contractors, when needed. “It’s like a team,” he says. “I am happy, they’re happy. It’s all virtual.”
For Emily Newman, founder of Once Wed, an online resource for brides-to-be, working from home was pretty much a necessity. “My father lives with us,” Newman says. “He got sick a while ago and working from home allows me to be there for him. It’s been a huge benefit of my business.”
Raising a family is no longer a reason—or excuse—to prevent the launch of a company, either. Stacy Blackman, for example, chose to keep her consulting company based from home in Los Angeles, California to be closer to her three young children. “I transition between the ‘professional me’ and the ‘personal me,'” she says. Jenny Ford, who runs Monkey Toes, a home-based shoe and clothing retailer in Denver, Colorado, says she works during her daughter’s naptime.
Home-based franchises, which often swell with popularity during a recession or a tough labor market, can be an easier transition for someone looking to launch their business from home. The franchise model is known for its hands-on services—maintenance, repairs, and services—but according to Chris Couri, the founder and CEO of We Do Lines, a Ridgefield, Connecticut-based parking lot striping franchise, it’s really just a sales and marketing job. “Other than the paint on pavement, which you hire a crew to do, we built the system around making it easy for someone to run this business off a Droid phone and a laptop,” he says.
Stewart Vernon, the founder of America’s Swimming Pool company (ASP), one of the country’s largest pool maintenance franchises, says that the home office is the ideal place to start your business, and that most of his franchisees eventually segue into retail or office space. “Our business model is certainly based around home offices,” he says. “But the longer term goal is to have offices or retail space,” he says.
Still, there is a darkside to running a home-based business. For many entrepreneurs, starting and running a business out of a home office has felt like a carefully guarded secret.
“It almost has a negative connotation, like you’re doing this cute little thing,” says Chris McCann, co-founder of Startup Digest, which is based out of McCann’s home in Palo Alto, California. But Startup Digest is anything but “cute.” In less than a year, its subscriber base has grown to reach over 100,000 subscribers in 50 cities.
Perhaps another Inc. writer put it best. “Outsiders are apt to view even the most successful virtual companies with a measure of skepticism, if not outright derision,” wrote senior writer Max Chafkin in an April 2010 Inc. feature story. “Convincing them otherwise means carefully managing perceptions about yourself and your company.”
But managing these perceptions has become a relatively easy task. Services like Google Voice offers specialized phone settings to make your company appear larger than it may actually be, and project management tools like Acunote let you work in the cloud with clients.
Another concern for the home-based business model revolves around the fear of distractions. But these fears tend to be largely unfounded. A 2009 survey conducted by CISCO, for example, found that 67 percent of its workers found working from home—verus working out of an office—improved the quality of their work.
This is because work does not get done at work, said Jason Fried, founder of 37Signals and Inc. columnist, at a recent TED conference. “I’ve been asking this question for 10 years—where do you go when you really need to get things done?” he said to an audience. “I’ll hear things like the porch, the deck, the kitchen, an extra room in the house, coffee shop, basement, train, plane, car…you almost never hear anybody say the office.” Why? Because the office is filled with interuptions that you can’t control.
But beyond the improved productivity, the low barriers of entry, the convenience of removing a commute, and the ability to be close to a family, there’s a more intangible advantage of working from home. It’s liberating.
“To me, the best part about it, was that I just feel much more alive doing this,” says Alex Martin, a tax consultant who launched his company, Productive Pricing, from his home in Plymouth, Michigan after over a decade working a corporate job. “I do things my own way.”
Eric Markowitz [assistant producer at Inc.com] writes about start-ups, entrepreneurs, and issues that affect small businesses.