The Future Of SOHO

This story appears in the December 2000 issue of Startups. Subscribe »

Take a look in the home office of Kevin Karten. Six years ago, the former investment banker ditched the steady paycheck, camaraderie and relative stability of the corporate hive to go it alone, starting a homebased general contracting business in Hollywood, Florida.

Today, his home office has 10 lines for phones, faxes and modems, flexible hours plied from a custom workspace, and more than enough business to keep his income higher than the average national homebased business household figure of $63,000 a year. Kevin's wife, Alisa, left her post with an international public relations firm to launch her own consulting firm and watch their two children from home. Even their bookkeeper quit her job with a Big Six accounting firm to go freelance.

"I happen to love what I do. I enjoy working with clients, and I enjoy doing the family trips [that being homebased allows us to take]," Kevin says. "I'm able to touch something, complete it and bring it to fruition."

The Kartens aren't alone in their desire to build a business from home. Homebased entrepreneurs are among the fastest-growing segments of the New Economy. Driving this style of entrepreneurship are lifestyle choices, work styles driven by advances in technology, changes in government policy and an entrepreneurial spirit revived in the American worker's psyche.

Though individualistic in nature, homebased entrepreneurs have several unifying characteristics, like the use of technology, the desire to establish credibility for their micro-businesses, and the need to grow. While that won't change over time, the numbers of like-minded individuals and the tools at hand will-which will likely help shape the face of the homebased entrepreneur, says Beverley Williams, president of the American Association of Home-Based Businesses Inc. "They are becoming a larger, stronger force, but they are individualistic," she says.

What will the tools and attitudes of tomorrow be? We've talked with some of the experts in technology, government, research and home office trends to sketch an image of today's-and tomorrow's-homebased business owner.

---

Journalist and author Jeff Zbar has worked from home since the 1980s. He writes about home business, teleworking, marketing, communications and other SOHO issues.

Technology: The Driver Of The Home Office

Think technology hasn't driven the transition to the home office? Consider these statistics, courtesy of PC Data:

Some 39 percent of U.S. households own at least one personal computer, and 16.2 percent have more than one.
52.8 percent of home PC households are connected to the Internet.
56.6 percent of households own a mobile phone.
6.6 percent of households use a personal digital assistant (PDA).

Just small and home office spending in the tech sector alone speaks volumes to how reliant we are-and will continue to be-on technology. In 1998, the small and home office segment spent $51.1 billion on technology; by 2002, the number should grow to $71.2 billion, according to International Data Corp. (IDC).

Homebased entrepreneurs' reliance on technology is destined to grow dramatically, says Milosz Skrzypczak, an analyst in personal technologies with research and consulting firm The Yankee Group. Technology and high-speed connectivity is just starting to grow. Broadband Internet access should be in 16.6 million U.S. homes by 2004, Skrzypczak says. That makes sense, he theorizes, "[because] these days, everything starts with the Internet."

Small offices in the next three years will become networked like the big boys. In-home networking products like Intel's AnyPoint and 3Com's HomeConnect link multiple computers with plug-and-play ease. In fact, home networking will become more common as a standard feature on newly built homes. Category Five (Cat 5) wiring will enable computers and other home technology, from kitchen appliances to home theaters, to be linked and driven off a main computer.

Two coming technologies that are already making their way onto the scene are application service providers (ASPs) and voice-recognition software. ASPs take everything from calendaring, bookkeeping and document storage off local PCs and move it to a service provider's server. The benefit is that users can "rent" powerful, high-end software that is hosted remotely and receive constant tech support from the ASP. This allows approved staff or partners to check the company's ledger, calendar or documents from any computer terminal in the world.

Voice recognition will eliminate awkward data entry into PDAs and even PCs, Skrzypczak says. While it's currently available, advancements in the coming years will make it more powerful-and less prone to errors.

"The dominant theme will be simplicity," Skrzypczak says. "Computing and networking now is tech-heavy, but it will get easier."

		Note This In 1998, SOHOs spent $52.2 billion on technology; by 2002, the number should grow to $78.8 billion Tomorrow's technologies for today's home office: application service providers and voice-recognition software

Government Trends make At-Home Work More Acceptable

As a certified homebased management consultant and government affairs director for the American Association of Home-Based Business, Ron Wohl tracks trends on government reaction to home officing. And in recent years, Wohl has liked what he's seen. Congress has loosened the IRS's policies on what qualifies as for a home office deduction, and cities have loosened zoning restrictions on the use of homes as offices.

With rising real estate costs and commute times and the volatility of gasoline prices, expect more of the same, says Wohl. Governments will continue to ease restrictions on business use of the home, and will encourage corporate teleworking.

The long-held but slowly disappearing laws forbidding homebased businesses will continue to fade-or become moot, Wohl says. Governments will increasingly enact laws that forbid businesses that disrupt a neighborhood with noise, odors or electrical interference, but other than those emissions, most businesses will be allowed, he says.

They'll also come to realize that banned businesses mean license revenues not realized. "It's going to take a little while longer for communities to understand that if they [legislatively prohibit] homebased businesses in their communities, it will be a hollow law [because homebased entrepreneurs] will do what they did in the past and violate it," Wohl says. "By making it illegal, they're losing out on taxes."

Wohl believes more government employees will be encouraged to become independent contractors and, in turn, will contract their services back to the government. But instead of people working only for a single client, more people will become true "free agents," working with a number of clients and on a variety of projects, he says.

These emerging work styles in government and the private sector are part of an effort to "rehumanize" the workplace, explains Wohl. Corporations are harmonizing their values with those of their employees and vendors, which is opening more doors to independent contractors and alternative work arrangements, including working with homebased vendors.

Finally, as local governments free citizens from regulations banning home enterprises, a wider audience will become comfortable with the at-home workplace. A new generation will become accustomed to working from the quiet environment of the home office, Wohl surmises, and that's how people will grow their experience in working at home.

The Bonus Of SOHO: The Home Office Workstyle & Lifestyle

Where will homebased entrepreneurs work in the future, and how will they feel about their chosen work style?

They'll work anywhere they want to-and feel increasingly good about it, surmises Paul Edwards, a home office expert and author who moved earlier this year with his wife and business partner, Sarah, from bustling Santa Monica, California, to quaint Pine Mountain, California.

With high-speed Internet access and a growing acceptance by clients and radio listeners to work with the Internet, the transition was seamless and painless for the Edwards, who produce a radio show, write articles and books on working from home, and are also our new "Start It Now" columnists. "The cable modem and ISDN was the enabling technology," said Edwards, co-author with his wife of the best selling Working From Home, now in its fifth edition.

		Note This: Hot new homebased businesses include coaching, computer consulting, computer programming, elder services, financial advising, security and Webmastering.

Technology will also influence the types of businesses being started. While today's hot homebased businesses are in the professional and consumer services fields, including consulting, cleaning services and building trades (according to IDC), Edwards envisions the hot homebased businesses of the future being those empowered by technology. He envisions coaching, computer consulting, computer programming, financial advisor, computer security specialist and Webmaster being among the hot prospects.

Few can argue the influence the currently robust economy has played on enabling people to launch homebased enterprises. This "economy of abundance," as Edwards has coined it, "has enabled people to have life choices like never before and to alleviate the pressures created by 24/7 [service] and the 60 or 70 hour work weeks that many people have."

But even short of a red-hot economy, people are making lifestyle choices to head home to work, Edwards says. It's a social component, he notes. People want family in their lives. To wit, even an economic downturn will fuel at-home work, he adds. "Economic cycles cause people who may have not been interested before to be interested in work at home," says Edwards. In fact, the client-vendor relationship itself is destined to change. It's what Edwards called "disintermediation," or the removal of layers from the way transactions and business gets done-like insurance agents or other brokers.

"We can all expect what we do, for whom we do it and how we do it to change," Edwards says. "A complicated and complex society leads to tremendous transition."

		LearnMore To find more hot homebased business ideas, check out the 10 Hottest Homebased Businesses For 2000.

A Snapshot Of Tomorrow's Homebased-Business Owner

Home officers are not like the average American. Not today, and not tomorrow. They're more affluent, educated, mobile, married and satisfied with their lot in life. And that rosy outlook is only expected to grow in time.

A snapshot of today's home office entrepreneur shows a slight majority are men (55 percent), with the average age to be the early 40s and the average annual household income nearing $63,000, according to the Home Office Demographics Update 2000 from IDC. In addition, some 60 percent have attended college, 64 percent are married, 80 percent own their home, and 45 percent have at least one child under the age of 18 in the home. Ethnically and culturally, home officers are a slice of Americana, with all racial groups equally represented among the current population. "It's such a widespread and broad trend that it doesn't skew toward specific demographic niches," says Mary Porter, a senior research analyst with IDC.

The number of home offices in operation in the United States today (including teleworker and after-hours workers) is expected to hit 39 million by 2002, she says. Income-generating home offices should rise to 21.8 million in 2002, up from 20.3 million today.

Though the numbers will grow, the picture painted shouldn't change much in the coming years, Porter adds. The group will remain affluent and educated, she says. In fact, many college graduates will still opt for traditional jobs, if only to garner experience and contacts-and then quit to go it alone, she says.

Tomorrow's homebased entrepreneur will likely grow older as the baby boomers age-and increasingly head home to work. As they wind down traditional careers, Porter explains, "[they'll be] looking to homebased business as the next pre-retirement stage of their lives."

		Note This Fifty-five percent of home office operators are men, the average age is early 40s, and the average annual household income is $63,000. While most homebased demographics are expected to stay the same, the average age may increase as baby boomers age and look to homebased business as the next step in their lives