Home business – definition and meaning

A home business is a small company or business that people operate from their home. We also call it a home-based business. Most home businesses do not have many employees. Employees in such organizations typically either work from home or for agencies that operate as subcontractors.

Starting a home business makes sense if you want to minimize startup expenses. It is also ideal for individuals who cannot leave their home every day for long periods.

For example, caregivers (British: carers) find it easier to organize their schedules if they have a home business. Parents with babies or young children can also work around their family commitments more easily if they work at home.

However, working at home is not for everybody. Above all, it requires a great deal of self-discipline and commitment. Even so, the benefits can be considerable, especially during a business’ crucial start-up period.

Wikipedia says the following regarding home-based businesses:

“Home businesses are usually defined by having a very small number of employees, usually all immediate family of the business owner, in which case it is also a family business.”

Home business – rules and regulations

If you are considering running a business from home, remember that you must follow all local and national laws and regulations. If you need a license to have certain businesses, running it from home does not exempt you.

You should also check that there are no residential zoning regulations that prohibit commercial activities where you live.

Home business - definition and examples
Many successful business people started off with a home business.

Home business – pros and cons

Having a home-based business comes with several advantages and disadvantages.


When you work from home, you make better use of your time. Americans, for example, spend nearly fifty minutes each day commuting. That is nearly one hour each day of ‘dead time.’ In other words, this is time when they cannot work or carry out any family or personal chores.

If you work from home, you can use that commuting time to work, do the laundry, clean the kitchen, sleep, etc.

A home business has much more flexibility than an office-based concern. You can scale up or down more rapidly than if you had rented office space.

Downsizing quickly is not possible if you signed a long-term lease. Downsizing means reducing the size and operating costs of your business.

There are tax benefits. In most jurisdictions, you can deduct a percentage of your home’s expensive such as property taxes, utilities, maintenance and repairs, and mortgage interest. Specifically, you can deduct a portion of those expenses from your business income.

If you suddenly wake up at 2 am with a brilliant idea, you can walk to your home office and start working on it. Having a home-based business gives you flexibility regarding your working hours.

Being able to work virtually whenever you like is great if a client suddenly sends an urgent request.

Working from home keeps down your overhead costs. Overheads are all ongoing business expenses, i.e., operating expenses.


If you have a secure job with a regular income, remember that you will lose that with your home-based business. Especially, during the startup period, you will have an uncertain income.

If you are not the type of person who likes being on your own, working from home is not for you.

Until the business grows and you have an office full of colleagues, you will be working in isolation.

If you do not have an enormous amount of self-discipline, having a home business might not be a good idea.

Our homes have many distractions. There may be household members you can chat to and a fridge full of nice food. Friends and relatives might drop in without warning. There is a TV to enjoy in front of a comfortable couch or bed, and maybe video games too.

In other words, remember that your home is full of things to do during your leisure time. That is what homes are basically for, i.e., places we stay in when we are not working. If you are easily distracted, working at home may not be a good idea.

However, despite the disadvantages, home business ventures tend to be more successful than office-based ones.

Regarding the risk of failure, Reference for Business says:

“Only 20 to 25 percent of home-based businesses fail within five years, compared to a failure rate of over 50 percent for all small business ventures.”

Video – a home business

This Young Entrepreneurs Forum explains what you have to do if you want to start a home business.