Ask anyone what they think of when someone mentions ‘a business’ and they will probably say a shop, workshop or factory.
That is why the recent report by the Federation of Small Businesses is so surprising; it revealed that half of all Scottish businesses are based at home.
Home-based firms generate £19.7 billion of turnover and 291,000 jobs, equating to around one-in-five private-sector posts.
The first in-depth profile of Scottish home-based businesses in modern times dispels many of the popular myths about these 188,000 firms. For instance, the research reveals that almost two-thirds of home-based businesses employ at least one member of staff.
The study, by Professor Colin Mason from Adam Smith Business School at Glasgow University and Dr Darja Reuschke of St Andrews University, calls on local government, regulators, banks and enterprise support agencies not to ignore these businesses, and to adapt their approach to better meet their needs.
Professor Mason said: “Policymakers have been slow to appreciate the importance of home-based businesses to the Scottish economy. This report shows that Acacia Avenue is as much the home of entrepreneurship as any business park.
“These are serious businesses, accounting for 10% of private-sector turnover and 17% of private-sector employment. If our economic salvation lies in broadening and strengthening our small business base, we ignore their contribution and their needs at our peril.”
The FSB studied data from 999 business owners, 39% of whom were home-based while a further 19% owned businesses that grew out of the home.
The biggest concentrations of these enterprises are in catering, leisure, tourism, hotels and entertainment (24%), and providing business services (12%).
Smaller clusters were found in creative services (8%) and construction (7%).
Up to 6% of enterprises in all other business sectors including engineering, real estate and health and social work are based in the home.
Far from being start-ups, 54% of Scotland’s home-based businesses have been established for at least 10 years.
Almost three-quarters (73%) turn over less than £100,000 a year, and 3% generate more than £500,000.
The majority of the businesses regarded home as the permanent location for their operations because of the nature of the business (65%), convenience (61%) and the need to reduce costs (56%).
Almost one-in-three (31%) highlighted the high cost of commercial premises, with the same number citing improved work-life balance (31%) and more than a quarter (27%) saying they wanted to avoid commuting.
The survey also challenged ideas of home-based businesses being parochial, with a larger proportion trading nationally and internationally and utilising e-commerce compared to firms in commercial premises.
Andy Willox, the Federation of Small Businesses’ Scottish policy convener, said: “This report tells some home truths about how important this army of businesses is to our economy.
“Some people start up in the home to supplement their household income and work around other commitments, while others are manufacturing, trading internationally and turning over hundreds of thousands of pounds a year.
“They are all proper businesses, providing services and generating revenues. Many are also creating jobs.
“Regulators and local authorities need to make sure that their policies and regulations are right for those based in the home.
“We also need to tackle these firms’ biggest bugbears: unreliable broadband and a lack of suitable finance products. ”
The UK Government’s announcement this week that small businesses in Dundee, Stirling, Inverness and Glasgow will be able to apply for up to £40 million of funding to boost their broadband connection will therefore be welcomed by home businesses.
Home businesses are a major part of the economy and should be supported. The FSB report should be heeded.