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Census survey: Home houses 50% of small businesses

More than half (51.6%) of all businesses that responded to the 2007 Survey of Business Owners (SBO) were operated primarily from someone’s home in 2007, according to new data from the U.S. Census Bureau. Only 6.9% of these home-based businesses had $250,000 or more in receipts, while 57.1% of home-based businesses brought in less than $25,000. About 23.8% of employer respondent businesses and 62.9% of nonemployer respondent businesses were home-based.

“Most businesses are started by people who dig into their own pockets for at least some of their start-up capital,” said Census Bureau Deputy Director Thomas Mesenbourg. “This is true for both firms with employees and those without them. Furthermore, more than one in five (20.8%) of respondent businesses used no start-up capital at all.”

The Census Bureau is releasing two data sets from the 2007 Survey of Business Owners: Characteristics of Businesses: 2007 and Characteristics of Business Owners: 2007. The data sets include national-level statistics on owner’s age, education level, veteran status and primary function in the business; family-owned and home-based business status; types of customers and workers; and sources of financing for start-up, expansion or capital improvements. All findings are for respondent firms only.

“Roughly three in 10 (30.6%) of the respondent firms that required start-up capital launched their business with less than $5,000. Of the firms that needed start-up capital, 17.5% of employer firms needed less than $5,000; for nonemployer firms, the figure was 35.8%. At the other end of the spectrum, 1.5% of the firms needing start-up capital required $1 million or more for this purpose.

Other highlights from the reports include:

Characteristics of Businesses

  • In 2007, more than half of women-owned businesses (58.2%) and equally men- and women-owned businesses (58.1%) were home-based; for businesses owned by men, the figure was 49.1%.
  • Most nonminority-owned (54.4%) and equally minority- and nonminority-owned firms (56.0%) were home-based, while 46.5% of minority-owned firms were home-based.
  • Most veteran-owned (55.4%), nonveteran-owned (52.9%), and equally veteran- and nonveteran-owned (55.9%) businesses were home-based.
  • One in 10 businesses (10.4%) was started or acquired by owners who used a credit card to finance the start-up or acquisition of their business. A similar percentage (10.7%) financed their start-up or acquisition with a business loan from a bank or financial institution.
  • Most firms (72.7%) reported that sales to individuals accounted for at least 10% of their total sales; 1.9% of firms reported that sales to the federal government accounted for at least 10% of their total sales; 5.2% reported that sales to state and local governments accounted for at least 10% of total sales; and finally 35.3% reported that sales to other businesses and organizations accounted for at least 10% of their total sales.
  • Among firms with payroll any time during 2007, 75.4% had full-time paid employees and 58.0% had part-time paid employees. In addition, 5.3% of employer firms used paid day laborers; 7.3% used staff from a temporary help service; 1.3% used leased employees; and 36.1% used contractors, subcontractors, independent contractors or outside consultants.
  • About 2.1% of all firms operated as a franchised business.
  • E-commerce sales were reported by only 6.6% of firms.
  • For 7.9% of all firms, exports made up at least some of the sales.
  • About 28.2% of firms were family-owned. These family-owned firms accounted for 42.0% of all firms’ receipts.

Characteristics of Business Owners

  • About half (50.5%) of owners of firms reported that their business was their primary source of income. This was true of 68.6% of owners with employees and 42.8% of those without them.
  • More than three in four owners (77.1%) reported that they founded their business, while 15.8% of owners reported that they purchased their business. Another 7.3% of owners reported they acquired their business through an inheritance, transfer of ownership or as a gift.
  • More than six in 10 (60.5%) owners reported that their primary function was providing services and/or producing goods; 46.9% said their primary role was managing day-to-day operations of their business; and 39.8% reported financial control as their primary role.
  • About 62.9% of owners reported working 40 or more hours per week in their business; the same was true for 34.3% of owners of nonemployer firms.
  • Business owners were well-educated: 50.8% of owners of respondent firms had a college degree.
  • About 36.5% of owners were 55 or older, with another 29.6% between the ages of 45 and 54. On the other hand, 31.7% of owners of firms were between the ages of 25 and 44 and only 2.2% were younger than 25.
  • About 7.9% of veteran owners reported they were service-disabled.
  • About 13.6% of the owners were foreign-born. Among selected ownership groups, 55.9% of Hispanic owners (who can be of any race) were foreign-born, as were 82.3% of Asian owners, and 74.9% of owners reporting some other race, such as Brazilian, Cape Verdean, Sudanese, or multiracial.

The data were collected from more than 2.3 million firms that were asked to report information about the characteristics of up to four individuals with the largest share of ownership (respondent firms); additional owners were not surveyed regarding characteristics. Detail may not add to total because of rounding or because a Hispanic firm may be of any race. Moreover, owners had the option of selecting more than one race and are included in all races they selected.

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