From the December 1996 issue of Entrepreneur

Companies of all sizes are courting the hottest market of the '90s--homebased entrepreneurs.

A powerful combination of forces--new technologies, corporate layoffs and a desire to simplify life--has fueled the tremendous growth of homebased businesses. Those entrepreneurs who run their businesses from home have needs that have become the underpinning of a huge consumer market.

Numerous companies, from insurance businesses to telecommunications giants, are trying to target their products and services toward the more than 31 million homebased business owners. Some of these firms have been marketing to the industry for years; others simply know a good business move when they see one.

"We've been targeting this market for years. We had products geared toward [homebased workers and entrepreneurs] before there was even a market," says Russell Marchetta of Canon USA Inc., which markets desktop copiers, faxes and other electronic equipment. "When the explosion of home offices came about, we were already there."

Among the products Canon aims at home business owners are personal computers, laptop computers, word processors, and multifunction machines that combine faxing, copying and more.

Perhaps one of the best examples illustrating how companies are rapidly jumping on the home office bandwagon comes from the insurance industry.

According to Peter van Aartrijk Jr. of the Independent Insurance Agents of America (IIAA), 18 months ago only four to six companies were selling an insurance plan specifically for home offices. Now there are more than 20 firms jockeying to sell to these entrepreneurs.

"Long-term players in the market include RLI, Allied, Fireman's Fund and Continental, which was purchased by CNA," says van Aartrijk. "The industry is still waking up. We saw activity in earnest early last year, and it's been exponential growth."

Change In The Air

But even those companies that have long served the homebased entrepreneur are finding that the current explosion is changing the way they do business.

Postal service franchisors PostNet and Mail Boxes Etc. are both good examples. Mail Boxes Etc. positions its franchise locations in upscale neighborhoods where homebased entrepreneurs tend to reside. These centers offer everything from copying to mail services. PostNet has provided volume copying services and mail order warehousing and fulfillment almost from its inception.

"As long as we've been in the industry, homebased businesses have always been our key focus. We [provide] equipment, products and services that are not regularly available to homebased businesses," says Steven J. Greenbaum, president and CEO of PostNet.

To stay on top of their market, both companies have recently added more high-tech services. Entrepreneurs can now go into any PostNet location and rent an e-mail address that gives them a global presence, or send e-mail messages to fax machines. Mail Boxes Etc. is testing kiosks in their centers that will allow customers to access the Internet as well.

Van Aartrijk says even the insurance industry is creating new products to meet the rapidly changing needs of this growing group of entrepreneurs.

"Before, policies were more [standardized]," says van Aartrijk. "There were [policies for homebased] professional service firms like accountants and architects, and for consultants, freelance artists and interior designers. Now the list of homebased professions is growing even more [extensively]."

Insurance companies have created new policies for these more diverse homebased businesses, such as the Business Owner's Package (BOP), which is distinct from the commercial policy. There is also an in-home business policy that has low deductibles and low premiums.

"The insurance industry mirrors society," says van Aartrijk. "I think what you're going to see happening [as the homebased business market matures] is more riders to address specific needs."

If the statistics are any indication, the homebased business market will only continue to grow, and all smart businesspeople will be looking for ways to reach this lucrative market. So if you're working from home, stay alert to new developments because what's coming down the road could be just the innovation you need to put your company on the fast track to profitability.

Its The Law

Legislative changes affecting homebased entrepreneurs

Homebased business is a hot topic, with everybody from Fortune 500 companies to the federal government sitting up and taking notice. In 1996, a mixed bag of legislative changes that affect entrepreneurs working from home was passed by the 104th Congress.

On the plus side, the Internal Revenue Code was amended to allow entrepreneurs to treat product samples the same way they do inventory when taking a tax deduction for the location in the home where such items are stored. This means a room used for storing product samples is now eligible for a home office deduction tax credit.

A home office deduction clarification, originally introduced by Sen. Orrin Hatch (R-Utah) as part of S.327, remains in the U.S. Senate Finance Committee, where it is expected to die and will need to be reintroduced again.

Budget-cutting priorities were the primary reason it was not approved; according to a Senate Finance Committee estimate, the bill would have cut $1.92 billion from government coffers over a 10-year period.

In other legislative action, Congress approved an increase in the tax deduction self-employed individuals can take for health insurance costs. The deduction will increase from 30 percent to 40 percent in 1997, to 45 percent in 1998, to 50 percent in 2003, and thereafter by 10 percent each year until 2006, reaching a maximum of 80 percent.

The final legislative action involving homebased business was a clarification of rules regarding independent contractors. For more details, see June's "Capitol Issues" column.

Contact Sources

Canon USA Inc., (800) OK-CANON, http://www.usa.canon.com

Independent Insurance Agents of America, 127 S. Peyton St., Alexandria, VA 22314, pvaartrijk@aol.com;

Mail Boxes Etc., 6060 Cornerstone Ct. W., San Diego, CA 92121, (800) 789-4MBE;

PostNet International Franchise Corp., (800) 841-7171, http://www.postnet.net

U.S. Senate Finance Committee, (202) 224-4515.