The challenge of America’s economic recovery from the Covid-19 pandemic is how it’ll spread to every community – especially those who have been historically excluded. The key to meeting this challenge is to appreciate the civic and economic value of an ignored resource: home-based businesses.
There are roughly 16 million home-based businesses in the United States – approx half (52%) of 31.7 million small businesses – and they play a key role in American employment. About a quarter of employer firms (24%) are home-based firms, and latest firms most of them start at homecreate virtually all net employment growth in America.
In small towns and villages you’ll find firms conducting business activities. There are home-based businesses that operate full-time and operate from every room in your own home, and others that operate part-time to provide additional income or pursue a passion. Each of them contributes to our communities and is essential to a more equitable economic recovery in every city.
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Historically, home-based businesses have been ignored by economic development officials in communities of all sizes. Officials typically focus on attracting and retaining larger firms, which regularly consider relocating in exchange for tax cuts, ending up creating mostly low-wage jobs or creating only a few latest jobs. Instead of creating significant numbers of latest jobs, officials compete for the same jobs and take credit for victories that simply move those jobs (or prevent them from moving) from one place to one other.
It’s time to adopt a different economic strategy. One that is built on sustained economic growth, inclusion and opportunity in any neighborhood, town or city.
Every community can profit and create more jobs that grow and stay local for one easy reason: every community has local talent and people with skills to draw on.
Home-based businesses won’t generate immediate jobs for cutting a ribbon, but they provide so much more. They draw from local talent and local skills, spend money in the community, increase the diversity of business ownership and due to this fact increase the wealth and capital of the community. They offer distinctive products and can grow to fill downtowns with unique and intriguing storefronts – not the same stores in every mall. And because they are so rooted locally, they have and proceed to put down deep roots to help the community thrive in the long run.
As a result, every community can profit and create more jobs that grow and stay local, for one easy reason: every community has local talent and people with skills to draw on. It is essential to invest in and support home-based businesses – and the ecosystem they need to thrive – to enable them to expand, open stores and build local revenues.
In my work advising communities across the country, I have found that it is crucial for community leaders to take five steps:
First, build connections with and among home-based business owners. Because home-based businesses have been ignored, they are often unknown to local economic development officials. Great places to find them are farmers markets and vendors at local festivals. These events should increasingly be viewed as business development pipelines and incubators. This is where many home businesses test products and prices. This is where local officials and property owners can assess growth prospects.
The connections between home-based businesses are equally vital. Research shows that business owners profit from exposure to other owners with similar experiences – each through mentoring and close personal relationships – which doubles the likelihood of business success.
Second, offer technical assistance to help home businesses grow. Make sure this is the type of show you how to need (for example, manufacturing firms or services). Make it convenient and accessible for them. Engage historically excluded community leaders to gain the trust of business owners, ensure outreach is culturally appropriate, and ensure assistance is well designed to overcome past exclusions (for example, through program localization or additional financial training required).
Focus particular attention on small producers – firms that produce products that sell online and in person. They have greater than one source of revenue, making them potentially stronger tenants of downtown storefronts because they are not solely reliant on foot traffic and can bring revenue to the community through online sales.
Third, make capital available. According to Kauffman Foundationat least 83 percent of entrepreneurs have no access to bank loans or enterprise capital. Nearly 65 percent use personal and family savings as starting capital, and nearly 10 percent have balances on personal bank cards. However, home-based business owners may not have friends and family to borrow from. They could also be in a rented apartment and have no security. This is much more likely to occur in communities that have historically been excluded from wealth-building opportunities, as was the case with the historical exclusion of black households from FHA loans or GI Bill advantages.
Community leaders, especially philanthropic organizations and nonprofits, should talk to small business owners to assess their needs and consider establishing microgrant and microloan funds to catalyze critical business growth. For many home-based businesses, small injections of capital can make a huge difference.
Fourth, provide shared business and production spaces making the transition from home-based to store-based business more accessible and reasonably priced. Many home-based businesses may take up space step by step. That’s why farmers markets and local festivals where produce vendors sell are so vital to growing accessible business. They allow firms to take up only as much space as they need and for only as many days as they will afford, while testing product-market fit, marketing and customer support. Shared storefronts, integration of product businesses in food halls, and coworking space for small manufacturers also meet this need.
Fifth, communities should promote locally produced products. Larger cities often have such programs – e.g Made in SF style in San Francisco and Made in Baltimore. Every community and state can assist promote local products by making them visible on social media (for example by repeating a shared hashtag), encouraging the media to highlight them (tell their stories!) and showcase them at seasonal events (where local entrepreneurs are sellers).
Early visibility can provide latest businesses a huge boost that they otherwise couldn’t get. It can expand its markets in a catalytic way.
To expand America’s economic recovery to every community and advance economic equality, we must look home. Home-based businesses should develop into a national priority – valuing them for what they already are and supporting them to develop into what they aspire to be.