Jump onto YouTube right now, and you can find hundreds of videos where people excitedly tell you how you can work from home and make your fortune. Yet, there is a reason why so many home businesses never become anything bigger or more successful. Before you take your career-path quiz and pick your money-making venture, understand that the fact is that some businesses simply cannot be scaled up. Some small home enterprises are destined to remain forever small. There are many supply, demand, cost-benefit scalability reasons why this is the case, but it is best explained with examples.
Proofreaders And Text Editors Work Alone
The problem proofreaders have is that their efforts are finite. A good proofreader can only spend a limited number of hours per work doing their job. In many cases, proofreaders work within a network of friends where they hand off their clients to other people because they cannot take on more work than they can handle.
In many cases, the way to scale up this business is to add technology, but even the best spelling and grammar software cannot compare to a human proofreader and especially to a human editor. Therefore, the other way to scale up is to add staff members to the team.
The problem with adding team members is that whomever you hire, could just as easily work alone. Getting clients is not difficult, and clients tend to pay pretty well. Plus, the bigger you make your business, the more you have to charge, and the more likely it is that your clients will find somebody cheaper.
Even outsourcing isn’t an option, firstly because the people you outsource to could easily work for themselves. Secondly, the people you outsource to will probably steal your clients. Thirdly, if you outsource to other countries where prices are cheaper, the proofreading and editing quality level goes down.
There is simply no way to scale up a proofreading and editing business unless you already have a large client who is very loyal to you and is willing to pay you more than if they hired an in-house proofreader.
Web Developers and Web Designers
It is a very different story for people who work on other people’s websites from home. The tasks that can be handled by one person may be conducted at home, from designing a website and developing it. However, in order to pull in larger clients, a home worker needs the staff, tools, and technology to perform the tasks required, and people at home simply do not have the resources.
It is a similar problem that small car garages have. They can work on older cars and lower-cost cars because they have the tools and equipment. But, when it comes to Smart Cars, Jaguars, Mercedes, etc., the job requires proprietary computers and software to access the car’s maintenance computer, and there are even custom-made tools required to open up the car that smaller garages cannot get their hands on.
Smaller garages are limited because they are small, which creates a very harsh bottleneck that stops smaller garages scaling up to larger ones.
The seemingly obvious solution to scaling up a web design and development business would appear to be a large investment. If the home worker had access to a large fund, then they could rent the required office space, hire the right people, buy the right computers, and then use Cloud Computing as a stop-gap solution for computer power until the company could afford to own and maintain its own servers.
The problem with this solution is that most small home businesses could never secure that amount of funding. The second problem is that jumping from smaller clients to the type of clients who can afford the solutions you are offering, is that they are all tied up. Established businesses dominate all advertising platforms, social media platforms, and even offline media. You would be lucky if it only cost you 300% more for each lead, compared to what you are paying now per lead.
Final Thoughts – One Problem or The Other
Let’s classify what we have learned in this article. The proofreader example could be liberally called the “Finite Resource” example. The web designer example could be liberally called the “Competitive Bottleneck” example given that if the industry were not already so competitive, the businesses could easily scale up.
If you think about most of the home businesses that do not include the production or sale of goods (making pot plants, making soaps, selling antiques, etc.), they all fall into one category or another. Just to hammer the point home, here are a few home businesses that fall into each category.
- Massage therapist
- Dog groomer
- Pet sitter
- Bicycle repair
- Social media manager
- Clothing designer
- Party Planner
There are even some home businesses that dance the line between both of these problems. For example, if a hair stylist wants to scale up, hiring people is difficult because those same people could do the job alone. Secondly, marketing the service is difficult because almost every area already has established hair salons.
That is why, in many cases, hairstyling salons do not hire people directly, but instead they rent out chairs in their salon to independent hair stylists. The rent is used to draw profits, and to pay for the required marketing, while the hair stylists themselves have a fully functioning, legal, and safe working space with a constant stream of customers for the price of whatever rent the salon charges.