New SBA Study Examines Home-Based Businesses

A recent study by the Small Business Administration of sole proprietorships claiming the home-office deduction showed the average home-based business had revenue of $62,523 and a net profit of $22,569.

(PRWEB) June 8, 2006 -- A new study by the Small Business Administration (SBA) shows home-based businesses have lower revenues but higher profit margins than comparable non-home-based businesses. The study compared 2002 tax returns for sole proprietorships claiming a home office deduction to sole proprietorships not claiming the deduction.

According to the study, the average home-based business had revenue of $62,523 and a net profit of $22,569. The average profit margin of home businesses was 36%. Overall, 1.6 million sole proprietorships claimed the home office deduction with a total revenue of $102 billion.

Businesses renting office space had average revenue of $178,194 and an average income of $38,243. Their average profit margin was 21%.

"It makes sense that home businesses have a higher profit margin than non-home businesses," says Peter Hupalo, author of "Getting Rich In Your Underwear: How To Start And Run A Profitable Home-Based Business" (http://www.hcmpublishing.com). "Home businesses tend to have fewer overhead expenses. There is no rent to pay."

The most profitable home businesses included wholesale trade businesses and travel accommodation businesses, such as operating a bed and breakfast. Only one in four home business owners relied upon a home business to provide their entire income. Over 90% of the home business owners had no employees.

The study noted that middle-age and older workers make up a relatively large percentage of the self-employed. Home business owners typically worked fewer hours.

"Many people who start home businesses are looking for lifestyle businesses. They don't want to work sixty hours per week. They want to be able to take time off. Operating a home business allows them to scale the business to a size they find comfortable," says Hupalo.

Resources:

"The Impact of Location on Net Income: A Comparison of Homebased and

Non-Homebased Sole Proprietors" (http://www.sba.gov/advo/)

"Getting Rich In Your Underwear: How To Start And Run A Profitable Home-Based Business" (http://www.hcmpublishing.com)

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