Weakening Economy Forces Some Small Businesses To Move Back Home

By Joyce M. Rosenberg
THE ASSOCIATED PRESS
2008-05-29

NEW YORK - When a small business graduates from being home-based to having premises of its own, it's quite an accomplishment. But in this economy, some small company owners are deciding it makes more sense to move back home again.

Robin Stein's company, Portamee, was started in her Manhattan apartment in 2006 and found quick success selling its baby carriers to big retailers. So Stein and her partner, Jennifer Gilbert, moved to an office in the garment district.

But the weakening economy is making it harder for this young business. Stein said the company needs capital to be able to grow, but it's having a hard time raising it in the difficult economic climate.

"It's a lot more challenging to get customers to buy a new brand without supporting (it) with advertising and marketing, and that's expensive," she said.

So, at the end of June, Portamee will relocate back to Stein's Upper West Side apartment.

"We need to be cautious so that we can manage this stage in business," Stein said. "I think we'll be fine in the long run."

Richard Boggs, CEO of Los Angeles-based Nationwide Tax Relief, said he's seeing an increase in the number of his clients moving businesses back home.

Boggs' company helps businesses resolve tax problems with the government, and he's seeing more companies unable to pay taxes because their cash flow is being hurt by the aftermath of the credit crisis. They tried to shore up their financial situation by not paying their taxes - never a good idea. And some of these businesses are in such trouble, Boggs said, that the owners have to convert to a home-based company.

It's a painful process. "To give up your office space is sort of a death in the mind of a small business owner," Boggs said.

Although a home-based business has become much more widely accepted, Boggs said moving back when you're in financial distress might carry some stigma. He said a client recently was unable to get a loan from a bank because "the business didn't appear healthy because he had moved back home."

While economic issues can be a big impetus for a small business owner to move back home, there can be other factors as well. Back in October 2006, graphic designer Darren Moore needed to save money, and he also needed a better work environment.

Moore, owner of Titus d, Co. in Lawrence, Kan., had originally worked at home but, with four children, "summers at my house are a little crazy." So he had moved to downtown Lawrence and worked in an office for about 18 months.

One problem there was that his officemates tended to interrupt a lot. But finances were also a concern. Moore found himself in a seasonal slump, and soon maintaining the office had to be reconsidered.

"It's not just the rent - there's parking, eating out more often, insurance," he said.

Moore set up a home office that would give him more peace and quiet. And, because he does so much of his communication with clients via e-mail, he discovered he didn't need a commercial office anymore.

Many business owners who move back home find a lot of advantages, often rediscovering the benefits they lost when they moved to an outside office.

Nancy Michaels began her business consulting company, Grow Your Own Business Network, in her house, and moved to an office when she had employees. But a combination of economic and personal issues led her to move the business back to her Concord, Mass., home. The switch has brought a series of pluses, including some that have made her more competitive.

"There's relatively no overhead, so you pass those savings on to clients," she said.

Another upside is the flexibility that working at home can bring. "I can get a lot more work done during odd hours," Michaels said.

Michaels said she doesn't feel any stigma about moving back home. She said her clients for the most part don't know where she's located.

But it's not a perfect situation. "It's a bit more lonely working alone," Michaels said.

Alexandra Levit also found a benefit - more time to work on her communications business - after she moved it from downtown Chicago to her home in suburban Oak Park in March after her son was born.

"My commute was three hours a day - all that time to be more productive now instead of commuting," she said.

Levit said she didn't move for economic reasons, because she had been given free office space by one of her clients. Still, she said, "I've saved money on train fare, cab fare, food - I didn't realize how much I was spending eating out every day."

Great article. I think today with so much VOIP and other virtual products available, working from home is not as bad as it used to be. There are offices U can rent for the hour or by the day that can make it look like "U got it going on" with your name on the door and all-LOL. So U meet with new clients or employees at "your office" but U can work from your home.