Are Small Office Home Office (SOHO) Businesses Affected by Down Economy

“Smack!” “Thank you sir! May I have another?”

“Smack!”

Thank you sir! May I have another?

That rather masochistic exercise from the fraternity initiation in the “Animal House” movie actually paints a fair illustration of the small office/home office (SOHO) universe in a down economy. Even when hammered relentlessly by an unforgiving economy, SOHOs keep asking for more.

It’s a fascinating picture of American resilience. Contracts have dwindled, pay rates have skidded and enough pink slips have floated onto employee desks to more than cover the New York Yankees after winning another World Series (one estimate says an average of one employee is being laid off every 30 seconds in the United States).

But a staggering economy seems to have no effect on SOHOs. Like the frat boy who keeps asking for more, the number of home-based businesses just keeps rising. According to IDC, a research firm that tracks a variety of business trends, the number of home office households increased to 34.3 million in 2002, about 500,000 more than in 2000 and will reach 67.9 million in 2012.

Here are five possible catalysts:

1. When the going gets tough . . .

Small Office Home OfficeA sputtering economy affords entrepreneurs the chance to react rather than merely taking it on the chin. Corporate employees can take getting downsized only so many times before thinking there’s another way to approach work. “Layoffs always expand the SOHO market,” notes Neal Zimmerman, author of “At Work At Home.” “If nothing else, people are sending out résumés from a home office. Some of those have no desire to work for anyone again, considering the lack of security. Now, they’re looking for independent opportunities.” Meanwhile, entrepreneurs can act rather than react to tough economic times. Faced with declining income, a self-employed entrepreneur can boost his or her marketing efforts, nurture new contacts and, ultimately, fight back. And that can mean more profits rather than just letting the door slap you on the derriere on your way out: “When times get tight, a SOHO business can always market more,” says Jeff Zbar of Goinsoho.com. “Product development, networking, marketing — there’s always something you can do when things start to slow down.”

2. What is growing benefits SOHO

Not every element of the economy is on the ropes. For instance, one of the fastest growing sectors centers on communication — making things faster, more efficient, less expensive and, ultimately, more autonomous. Those and other developments that have preceded it, such as the Internet, cell phones, fax machines and the like, all have contributed to making a home or small office less expensive and every bit as functional as its behemoth counterparts. “Small businesses now can become so much more prosperous because of innovations such as the Internet,” says Tom Egelhoff of Smalltownmarketing.com. “Even the most isolated businessperson can get products and services out into the real world and at a very low cost.”

3. Lower budgets mean more business

Faced with what some might call a recession, most of us likely have lost some work at home business. It’s a plain fact that some companies can no longer afford to farm out work. But that same dynamic also holds true further down the line — the bigger the business, the higher the cost, which makes smaller, less pricey companies more attractive to those who are still outsourcing. “Companies still need quality work done, but they’re looking for lower costs more than ever now,” says Egelhoff. “A home office can provide that quality of goods and services but at a lower cost than a bigger company.”

4. The lure is still there

For many, the promise of a lifelong corporate job has no allure whatsoever. “With the economy the way it is, I think a lot of people are paying attention to the upsides of working on your own that have always been there,” says James F. Smith, professor of finance at the University of North Carolina. “At least two of my neighbors work from home because they know nobody really cares what they’re dressed like.”

5. A long-term perspective

One final aspect is as much a benefit as it is a boost. Understandably enough, many downsized workers can only see a fast fix — find another job as soon as possible, even though it may not match the career track you have in mind. Again, prevailing conditions are tough, but an entrepreneur who has invested time and money in a business may be less prone to chucking the whole deal in favor of a paycheck. Realizing one’s long-term ambition often can see a professional dream through lean times and lends itself to a broader view of what we really want. “When you lift weights, all you’re doing is tearing down the muscle so it can rebuild itself stronger than before,” says Egelhoff. “That’s really what we’re going through now with this economy.”

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