When John Imel, CEO of Midway Technical Services, Inc., is ready for lunch, he travels the 30 feet from his business to his kitchen and eats at home.  Four years ago, when John found his employer was bankrupt and he was unemployed, he began operating a business that manufactures custom parts for the telecom industry…from his garage.   He and others like him are part of a growing trend of workers choosing to operate businesses from home.  According to figures released by the Small Business Administration division of the U.S. Government, home based businesses account for roughly half of all U.S. Businesses.  While a large percentage are sole proprietors in the traditional construction and service industries; manufacturing, retail trade, insurance agents and many more businesses are well represented.  What makes home based businesses so attractive?

Affordability
One of the top reasons that new businesses fail is undercapitalization.  In other words, the business owner is unable to weather the period between business startup and the beginning of profitability.  Start up costs for any new business are divided into two general categories: fixed expenses (rent, utilities, certificates and licenses) and variable expenses (inventory, payroll).  The advantages of a home business are obvious.  An entire category of expenses is virtually eliminated, allowing entrepreneurs to concentrate their funds on the income generating side of the business. 

It is possible to launch a home based business for less than $100.  Savvy business owners in certain sectors such as freelance web designers, graphic artists, consignment sales managers, retailers utilizing drop shipping, and others can often operate their business for the price of an internet connection.  Those that choose to act as a sales representative with a national merchandise company should expect to make an initial investment in merchandise for demonstration purposes.  But, for many companies, the investment is less than $1000.   Some types of businesses will require more advertising, the purchase of special equipment, or minimum inventory levels.  Even with the greater initial investment, most home based businesses are launched for less than the national average of $10,000 to launch a small or home based business reported by a recent Wells Fargo/Gallup Small Business Index study. 

Accessibility
With the advent of the internet, home based businesses have the ability to compete in the world marketplace.  Retail showrooms have been replaced by virtual showrooms.  Formerly a strictly controlled and expensive proposition, the electronic payment process is conveniently and affordably available to virtually anyone with an e-mail account.  Extensive sales calls and consultations can be accomplished quickly and easily via an internet camera teleconference.  The internet has leveled the playing field for many small businesses.

Cellular telephones have effectively cut the strings of a dedicated office and land line.  Home based business owner can answer customer calls, place merchandise orders, or fine tune custom jobs from virtually anywhere.  For those tired of the corporate rigmarole, the ability to control a schedule can be the most attractive feature of business ownership.

Stability
Many home based businesses are supplemental income for their owners.  For some, their intention is always to keep the business “on the side”.  But, for others, it is a way to slowly ease themselves out of their original job without placing a financial burden on themselves or their families.  They can let the business grow without the uncertainty that parallels any new business.  When profitability is sufficient, their primary job can be eliminated. 

Maybe you have a great idea rumbling around your brain or a great prototype in your garage.  Launching a totally new product from home is a sound strategy.  Many aspiring business people have used their homes as incubators for ideas, experimenting, refining, and testing the market.  If the product is not well received, the financial impact is much less.  And, if the product has market potential, the availability of sales and financial data can attract investors. 

The advantages of home based businesses are clear.  And, the types of home based businesses are as varied as the people operating them.  It can be overwhelming trying to decide what kind of business is best.  Here are five common home based internet business models and some critical considerations for each.

1) Information Sales
The information superhighway has allowed the information business to flourish.  The traditional subject areas are more accessible and the internet itself has spawned an information industry based on the effective use of the internet.  Many entrepreneurs are making their living assembling and disseminating information.  There are multiple approaches to information sales, but premium memberships, e-books, and database sales are the most popular.  Some information websites lure visitors with free content and then offer premium content to members who pay a fee to join.  The premium content usually consists of insider secrets or proprietary databases.  Another strategy is to launch e-mail campaigns or e-newletters that tout the potential uses and gain of the information product.  The receiver can follow a link in the message to buy and download more exclusive detailed instructional products called e-books.  A natural progression of all the memberships and e-mail subscriptions is sales of the accumulated personal information.  The website owner markets and sells member lists to those wishing to launch their own campaigns.  Keep in mind the vast nature of the internet.  Mass information is available without fee or obligation.  You will have to produce truly unique and valuable content to attract customers.

2) Advertising Sales
Closely related to the sales of information products is the sales of website advertising. Have you ever thought about why sites like hotmail, myspace, and youtube are free to users? The site sponsors make all of their money from the advertisers that buy impressions on their pages. But, you don’t have to be as big as myspace to profit from advertisers. The best way to get started is to have a unique website in a niche market. Think about your hobbies or interests.  Say you enjoy Medieval battle gear. You can bet there are others who share your interest.  At the same time, there are vendors wishing to find purchasers for their chain mail, trebuchets, and maces. You can reap the benefits of helping them find each other. The profit can be astounding, but takes a while to produce.  Advertisers buy based on the number of “eyeballs” that visit your site.  After funding your website, expect to spend several months producing interesting content to attract visitors and letting your website traffic increase before your first advertising sale. And, even when you start to sell a few ads, the creative work will never end. If the site is not constantly offering new information, your web traffic will slow and your advertising sales will be jeopardized.

3) Product Sales (E-Commerce)
CNN Money online reports that over 180 billion dollars in merchandise was purchased on the internet in 2007, an almost 20% increase from the previous year.  Purchases ranged from groceries to electronics.  Whatever you are selling, there is a market for it.  (Didn’t you hear about the lady selling tumbleweeds?)  The challenging aspects of e-commerce are the computer programming skills that you must have (or pay to have) in order to have a functional website that can be found in the search engines, financial outlay for inventory, and the record keeping required to process orders and payments.

4) Commissioned Sales
One way to get around the cost and storage of inventory is to promote other people’s products for a share of the profit.  Many companies offer what is called an affiliate program.  You simply place their advertisement on your website and when visitors “click through” and purchase products, they send you a commission.  You can also set up a website and sell products that you never touch.  This is called drop shipping.  Customers place their order through your site.  You then forward the order information to a second company that packs the product and sends it to your customer.  The low initial investment makes this option very attractive, but keep in mind that there is a maximum profit potential for any item.  Your slice of the financial pie will be smaller because you will be sharing it with the product provider. 

5) Selling Services
An internet business selling services is usually one of the most economical businesses to start.  A brief website with contact information is usually adequate for services in the construction, home security, and home maintenance sectors.  Service providers in creative or information intensive fields; such as web designers, photographers, and insurance sales; would benefit from more detailed sites.  Content should include samples of their work or details about how to utilize the services.  The down side of service businesses is that the competitive nature of the internet can drive down pricing and make it difficult to turn a profit without a high volume of work. 

For those looking to increase their income or reduce their reliance on corporations, starting a business can be the answer.  The Small Business Administration division of the U.S. governments reports that 2005 was a record breaking year for new business start-ups, 672,000, a figure that outpaced even the dot-com surge of 1996.  And, with 37% of those in the top income bracket claiming to be business owners, it is easy to see why businesses are starting in record numbers.  By starting a business from home, entrepreneurs can reduce expenses and shorten the time between investment and return on investment.