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Home-based business sectors in the rural economy

Robert Newbery
Centre for Rural Economy, Newcastle University, Newcastle upon Tyne, UK, and

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Gary Bosworth
Faculty of Business and Law, University of Lincoln, Lincoln, UK
Abstract
Purpose The purpose of this paper is to challenge calls for a monolithic rural home-based business (HBB) sector and instead propose meaningful sub-sectors of HBB that t within contemporary rural economic development theory. This informs business support and policy objectives. Design/methodology/approach Survey analysis of rural microbusinesses in the North East of England compares home-based and other rural microbusinesses to illustrate their dening characteristics. Case study interviews are then used to test theory development and provide greater understanding about the motivations and aspirations of HBB owners. Findings The research demonstrates that the rural HBB sector is not homogenous. For some, the home is the business, for others it is a convenient location and for others it is not the place of work, simply the registered business address. This has signicant implications for the needs of each type of business and their prospects for growth. Research limitations/implications This paper introduces the concept of sub-sectors of HBBs but more detailed survey work can establish whether these are fully inclusive. With a changing economic climate, further research might also examine the resilience of these businesses in recession and their ability to react to growth opportunities in a period of upturn. Originality/value As an emergent area of study in the elds of small business and rural economy, HBBs are potential vehicles for both social and economic development. With large numbers of HBBs in rural areas, this paper illustrates the need to understand both their potential and their limitations in order to maximise their contribution to vibrant and sustainable rural economy. Keywords Small enterprises, Self employed workers, Homeworking, Rural economies, England Paper type Research paper

1. Introduction The practice of home-working is now possible in a wide range of businesses with the rapid development of business and communications technologies. As the accessibility and efciency of these technologies continue to spread beyond urban centres, this has increasing implications for more peripheral rural areas. Although research into home-working has existed for some time (Hakim, 1987; Felstead et al., 1996), a specic interest in home-based businesses (HBBs) has emerged only recently (Carter, 2002; Dwelly et al., 2005). HBBs have been dened as:
Any business entity engaged in selling products or services into the market operated by a self-employed person, with or without employees, that uses residential property as a base from which they run their operation (Mason, 2008, p. 10).

This is a wide denition that includes sectors traditionally thought of as home-based, such as agriculture, hotels and restaurants and unexpected areas, such as energy, water and defence (Carter et al., 2004). It also covers businesses conducted in the home

Society and Business Review Vol. 5 No. 2, 2010 pp. 183-197 q Emerald Group Publishing Limited 1746-5680 DOI 10.1108/17465681011055596

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and others where the home acts purely as an administrative base (Mason, 2008, p. 10). Views are polarised, either dismissing HBBs as marginal lifestyle or hobby businesses, or championing the economic, social and environmental benets linked to local development, job creation and community vitality (Mason, 2008). For this reason, a detailed investigation that combines statistical data with case study evidence is used to address the question of how we might better categorise and understand this increasingly important sector of the rural economy. In some literature (Dwelly et al., 2005; Carter et al., 2004) the home is viewed as a business incubator, allowing entrepreneurs to test out an idea on a small scale without major investment. Despite the cost saving and convenience, using the home as registered business premises does have disadvantages. In some instances, HBBs may be perceived to be smaller, more informal or less professional (Walker and Webster, 2004) and HBB owners may miss out on the opportunity to build promising support and business networks (Totterman and Sten, 2005, p. 488). There have been calls to view rural HBBs as a discrete sector, to bring them above the radar (Dwelly et al., 2005), as the HBB sector represents a large proportion of the business population, accounting for 36 per cent of small business owners (Carter et al., 2006) and a signicant geographic skew indicates that HBBs account for 50 per cent of rural compared to 26 per cent of urban-based businesses (Mason, 2008). Driven by factors such as: growth in services; labour force mobility; and technological convergence (Dwelly et al., 2005); and the globalisation of markets, the sector is growing, representing a third of respondents to a Federation of Small Business survey in 2006 compared to a quarter of respondents in the 2004 survey. Correspondingly, treatment as a sector has resulted in recommendations for regional and national policy prescriptions with a popular assumption that HBBs are mostly the knowledge rms of the future (One North East (ONE, 2006); Abdy et al., 2007; Taylor, 2008). At this point, it is useful to set out the rural development context. Historically, the economic development of rural areas has been determined externally, by the state, where big issues such as modernisation in agriculture took priority over local sensitivities (Terluin, 2003). Criticised for a one-size-ts-all approach, this exogenous approach failed to deliver sustainable rural economic development (Lowe et al., 1995). In contrast, the bottom-up or endogenous approach embraces local diversity as the basis for emergent economic development, respecting local values and keeping benets within the community (Slee, 1994). This, in turn was criticised as being patchy, undermined by local apathy and dominated by minorities (Lowe et al., 1995; Ward and McNicholas, 1998; Shortall and Shucksmith, 1998). This led to a mixed exogenous-endogenous development theory where extra-local factors are recognised and regarded as essential but which retains belief in the potential of local actors to shape their future (Ray, 2001, p. 4). It is the contention of this paper that proposals for a discrete rural HBB sector are oriented within the exogenous paradigm and are therefore unsuitable for contemporary rural economic development. This is readily apparent in the way that this sector is conated with externally driven developmental groupings such as the creative or knowledge intensive business service sectors. The diversity of rural HBBs mirrors the diversity of the rural communities they are situated within and as such endogenous models are more appropriate. However, problems with simple, laissez-faire, endogenous development remain, and a typology of rural HBBs that recognises diversity but allows intervention from extra-local factors is proposed in this paper.

Survey data guides our research but the richness of individual experiences drawn out from case study interviews enables this paper to not only categorise but to explain the diversity within the HBB sector. 2. Literature review HBBs tend to be the smallest businesses (Carter et al., 2004) are likely to be sole traders or couples (Carter et al., 2006) and have lower sales (Mason, 2008) and turnovers (Carter et al., 2006), being consequently less likely to be VAT registered (Carter et al., 2004). About 75 per cent of owners work more than 40 hours a week in their business (Mason, 2008). Others may still work long hours but their working week may be inated by the greater likelihood that they will have other sources of income, such as full or part-time employment (Carter et al., 2004). HBB owners are more likely to use personal credit, such as credit cards and savings, than business nance, such as loans, overdrafts and factoring (Carter et al., 2004). Perhaps, related to this, they also have small to moderate ambitions for growth (Carter et al., 2004, 2006). Although sometimes perceived as incubators for new, young businesses (Dwelly et al., 2005; Carter et al., 2004) the home is seen by many as a permanent business location with only 3 per cent stating any intention to move out of the home as a result of future growth (Carter et al., 2006). Data shows that older businesses are less likely to be home-based (Carter et al., 2004, 2006) but the same is not true for older business owners with 60 per cent (54 per cent) of those aged 45 or above being based at home. The conclusion from this is that HBBs are less likely to be sold or passed on to new owners. There are higher proportions of sole traders compared to other, more accountable, legal forms (Carter et al., 2006). This is where a rural focus becomes especially valuable, given that approximately 92 per cent of rural rms have less than ten employees (Countryside Agency, 2001). These micro-rms are vulnerable to the regulatory burden associated with VAT registration and employment and this may tie in with a fear of being identied, taxed and regulated that is linked with the HBB sector (Mason, 2008). Owners of HBBs have diverse motivations for operating from home such as cost minimisation, the convenience of the location and lack of need for alternative premises (Carter et al., 2004). This diversity is reected in wider debates about dening rural entrepreneurs (McElwee, 2008) whose categorisation also depends on a range of issues that go beyond basic spatial criteria. Diverse motivations would in turn suggest diverse needs that may be eclipsed by a focus upon a homogenous sector. This paper challenges calls for a monolithic rural HBB sector and instead proposes meaningful sub-sectors of HBB that t within contemporary rural economic development theory. This informs business support and policy objectives by providing a deeper understanding of the HBBs and their owners. 3. Methodology Quantitative analysis of a survey of non-agricultural microbusinesses is used to inform theoretical postulations on the composition of the HBB sector. The original survey, (reported in Raley and Moxey (2000)), sampled the microbusiness population in the rural North East of England, aiming to understand the nature and support needs of these businesses. The North East economy has lower levels of employment and productivity than most other UK regions (NERIP, 2008) and has some of the most remote and sparse rural areas in England (ONE, 2002). Policy focusing on city regions

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(Ward, 2006) leaves the rural North East marginalized at both the national and regional level with the result that new vehicles for rural development are required. With an agricultural heritage based on less protable pastoral farming with a high proportion of upland grazing, the exploitation of new economic opportunities that enhance the sustainability of rural communities is seen to be an essential component of rural development in this region. The survey asked whether the business was located at the respondents home and, although this was not seen as important to the original aims of the study, it provides the basis for this new analysis-based around HBBs. From a sample frame constructed from business directories sourced from local business links and district councils, 5,314 questionnaires were sent out with 1,294 usable returns. This sample had the added advantage of including microbusinesses both above and below the VAT threshold. Almost 60 per cent of the rural microbusinesses surveyed were registered at the owners home address and with microbusinesses making up 91.7 per cent of rural rms in 2000 (Countryside Agency, 2001), this suggests that over half of all rural businesses in the region were HBBs, some 4,760 in total. Also, over 70 per cent of non-agricultural microbusinesses based in the most rural areas[1] were HBBs highlighting the value of further investigation into the role of this sector in the rural economy. The dataset is analysed to explore questions relating to the characteristics of rural HBBs. To enable further conceptualisation, the research then employs follow-up interviews with a selection of rural HBB owners. A sampling frame was developed to provide ve case studies tting the critieria of the main sub-sectors identied in the quantitative analysis. The interviews provided narrative biographies of the business owners from prior to starting the business until the present. Through the conversations it was possible to explore the different people, opportunities and concerns that inuenced the ongoing trajectory of each business. There is always the danger that such stories will be subject to memory bias (Davidsson and Honig, 2003) neglecting to mention some of the opportunities not persued or some of the less successful decisions. However, it is the experiences and motivations of each individual that are seen to be dening features of their businesses and the challenges that they face so a detailed account of each business owners perspective on the development of their business provides the most valuable data for deepening our understanding of this sector of the rural economy. 4. Characteristics of the rural HBB Rural HBBs are less growth orientated than other rural microbusinesses with only 28 per cent of rural HBB owners reporting that they denitely wanted to grow their businesses compared to 34 per cent of other rural microbusiness owners. In line with these ndings, rural HBBs have lower turnover levels compared to other businesses. On a more positive note for the local economy, the survey indicates that HBBs conduct higher proportions of trade, both in terms of sales and purchases, within a 30 mile radius. A further observation is that at the time of the survey, the threshold for VAT registration was a turnover of 51,000 per annum and as Figure 1 shows, businesses below this level were signicantly more likely to be HBBs. In terms of employment, there again appears to be a threshold where rural HBB owners are much less likely to employ more than two additional members of staff (including both full and part-time positions). Almost 60 per cent of HBBs have no regular staff apart from the owner and HBBs employ an average of 1.4 (0.76 full-time)

30 25 20 % 15 10 5 0 < 5,000 5,00010,00020,00051,0009,999 19,999 50,999 99,999 Note: Figures show the percentage of each type of business falling into the different turnover categories Home-based microbusiness Other microbusiness

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Figure 1. Comparing the turnover of 100,000- > = 250,000 HBBs and other rural 249,999 microbusinesses

members of staff compared to 2.7 (1.59 full-time) in other rural microbusinesses. Aggregating the full-time gures to the regional level, it was possible to estimate that over 7,700 people were employed full-time in home-based microbusinesses in the rural areas of the North East at the turn of the millennium (Newbery and Bosworth, 2008). Some 13.6 per cent of rural HBB owners had other forms of employment and this is signicantly higher than among other business owners (8.0 per cent). There was no signicant difference in the instances of home-based or other business owners running more than one business (in each case the gure was just under 14 per cent). The hours worked by owners of rural HBBs provides further insights into the diversity of this sector. The graph in Figure 2 show that owners of these HBBs are considerably more likely to be in the higher or lower working hours categories. This was supported by ndings in the North East of England where owners of HBBs were more likely to have a degree or diploma. Grouped together, 41 per cent of HBB owners compared to 34 per cent of other business owners had at least one such qualication. If education is connected to business success (Chell, 2001) it appears that HBBs have signicant potential for growth.
50 45 40 35 30 % 25 20 15 10 5 0 <15 15-30 31-45 46-60 61-80 Number of hours worked per week >80 Non-HBB HBB

Figure 2. The average weekly hours worked by HBB and non-HBB owners

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In the North East survey, HBBs were slightly less likely to have consulted business link or council organisations and considerably less likely to have used private sector consultants for business advice. Low-growth ambitions combined with a lower inclination to participate in business networks raise certain questions about the scope for HBBs to boost rural development so the following section explores barriers to growth among different types of HBBs. While HBBs are clearly a signicant feature of rural economies, our data also suggests that these businesses face certain barriers to growth. There is a particular growth ceiling for HBBs with rms that are above the VAT threshold for turnover and those having more than two employees being less likely to be based at home. Looking at HBBs that are close to this threshold, they are signicantly less likely to be seeking growth. Overall, 28 per cent of HBB owners reported growth ambitions but of those in the 20,000-50,999 turnover category, less than 22 per cent want growth and of those employing two members of staff, the percentage is below 21 per cent. Evidence that homes may be useful incubators for new businesses should not be taken to indicate high-growth aspirations, with over 70 per cent of HBB owners in the survey aged over 45 (compared to 65 per cent of non-HBB owners), there is a potential difference in aspirations for growth. It seems plausible that these older owners have different motivations for running a business, being more likely to hold a lifestyle aim than a growth aspiration. There is a popular conception of the pre-retired downsizing to run bed and breakfasts or hobby business in the countryside. Indeed, 76.3 per cent of hospitality HBBs were run by owners over 45 compared to 71.7 per cent of non HBB hospitality businesses. There is however a broader picture, with a higher proportion of HBB businesses being run by those over 45 compared to non-HBBs in all sectors except manufacturing, construction, transport and land-based services. This data not only suggests that there is a ceiling for the potential of HBBs, but also that the majority of their owners are not looking to move the business away from their homes in order to grow beyond that ceiling. Figure 3 show the proportion of home-based and other business owners who report space, staff or capital as restrictions for growth.
60 50 40 % 30 20 10 Home-based microbusiness Other microbusiness

Figure 3. The percentage of microbusinesses reporting space, stafng and capital as restraints to growth

Space Staffing Capital constraint constraints restraints Note: This is based only on the responses of businesses who want to expand

These statistics show that a lack of suitable premises or a lack of space to expand on site provide greater restrictions to businesses that are not home-based. Breaking this down into the different sectors, however, is more revealing. Of those HBB owners seeking growth, between 37-38 per cent in the retail and hospitality sectors reported space constraints. For manufacturing, the gure dropped to 29 per cent, for business and domestic services, 19 per cent, and for construction just 10 per cent. In Figure 3, we also see that stafng constraints are a slightly greater concern for rural HBBs compared to non-HBBs. The sectoral break-down is particularly interesting here. In the rural North East, sectors populated by a higher proportion of HBBs included Hospitality (28.8 per cent cf. 11.3 per cent), Business and domestic services (18.7 per cent cf. 11.3 per cent), and Construction (11.7 per cent cf. 2.8 per cent). By contrast lower proportions of HBBs included, Retail (13.2 per cent cf. 39.8 per cent), Manufacturing (7.7 per cent cf. 14.7 per cent) and Health and Social (1.3 per cent cf. 5.6 per cent). There are clearly differences between businesses conducted in the home and those where a proportion of work is carried out elsewhere. Some 83 per cent of construction rms report stafng as a constraint to growth, illustrating the lack of suitable employees in rural areas. Availability of staff was also a restraint for 50 per cent of HBBs in manufacturing, 47 per cent in business and domestic services, 31 per cent in retail and just 14 per cent in hospitality. Capital restraints are a barrier to HBBs, but less so than for non-HBBs. The differences between sectors are less marked here although 61 per cent of manufacturing rms report lack of capital as a major constraint, perhaps indicating that the potential for growth exists and the space exists if only they could fund expansion and recruitment. 5. Conceptualising sub-sectors of rural HBB Within this exploration, it starts to become clear that if policy-makers were only to consider one homogeneous HBB sector, then that would be negligent of the diverse needs of rural business. Retail and hospitality businesses have greater space restraints and fewer stafng problems compared to other sectors and we propose that this is because for these businesses, the home is the business and the only way that they might expand capacity is through building an extension or moving both home and business into totally new premises. By contrast, very few construction rms suffer space constraints yet they report much higher stafng constraints. For these businesses, the home is often no more than a registered address with physical work carried out elsewhere, the home is not the place of work. The third category, applying to manufacturing and service sector rms then relate to businesses where the home is a convenient location only, with a corresponding cost saving benet. This may relate to the high incidence of manufacturing HBBs reporting capital constraints. These three categories are explored in further detail in the following section with the introduction of case-studies to highlight some of the specic issues faced by business owners. The cases are representative of the ve main sub-sectors of rural HBB (retail, hospitality, business and domestic services, manufacturing and construction) as well as covering each of the three categorisations described above. Further categorisation according to growth constraints can then improve both the design and targeting of appropriate business support policies.

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5.1 Home is the business The signicance of this sector is that the property asset fulls two roles simultaneously as with a pub or shop with living accommodation or a guesthouse or hotel. In the microbusiness survey the two broader sectors of retail and hospitality made up over 40 per cent of HBBs. This dual role creates certain barriers to business development which is heightened in the UK by the propensity for home-ownership. Not only does the size of the home restrict the scope of the business but the time and money costs of moving house also restrict the exibility of business location. The personal attachments developed towards a home are a further consideration. Two examples, one from the hospitality and one from the retail sector are used to highlight some of the issues that affect these business owners. The rst is the owner of a guesthouse in a small village in north Northumberland and the second in a shop in a larger, more accessible village in the south of that county. Case 1 Home is the business
The bed and breakfast was established in 1995 after a marriage break up. The owners main motivation was that she wanted to be at home for her children and at the time, Northumberland was seeing a boom in tourism on the back of the Alnwick garden and increased marketing of the North East. Her most important goal is, customer care and providing something thats unique. This initial ambition could not be achieved without difculties but the vision has sustained her business and enabled it to grow both in turnover and reputation. Her focus on quality is reected in her business outlook Word of mouth and return business are the main factors for success. The shop is run by two elderly brothers who have always live locally and had the shop for 40 years. They learned the business from helping their parents and subsequently just learning from experience and from their customers. Originally they just sold newspapers but people ask for sweets, bread, then greengrocery, ice-cream [. . .] and it just evolves. They employ two part-time staff and one paper boy and benet from being on a relatively busy route for through trafc as well as being in the middle of a village.

Focusing on the lack of exibility, the guesthouse owner realised that her business would attract more guests if it were located in a market town such as Bamburgh or Alnwick. However, she described how her attachment to the property was too strong, saying, Id love to be in Bamburgh but only if I could take this old house! Partly, this was because it was an old, character property but it was also related to the fact that she had made signicant personal investments in developing the property in her own style and to meet her own exacting standards. In rural areas, the social upheaval associated with leaving a small community with close social networks can also be a signicant barrier to expansion. For the shopkeeper, there is a more distinct separation between living quarters and business premises but similar restrictions associated with the property do apply. In this example, he was acutely aware that if he sold the business, he would not be able to afford to buy another house in the village. The alternative solution was to rent out the business premises but he conceded that a tenant would struggle to make a living from the business. As well as the time commitment, from early morning deliveries to after-hours stock-taking and cleaning, a village shop serves a community function. Some of the additional roles require the shopkeeper and shop to be viewed as one and the same. This shopkeeper was aware of his community responsibility, explaining that:

[. . .] you become very involved, like it or not, because everything that happens from a whist drive to a childs carol service, you are involved, youre expected to sell tickets, put posters up and do things.

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For businesses that are fully integrated with residential accommodation, the plot size is a nite barrier to growth without signicant nancial investment. In an ofce park or trading estate, it may be possible to rent extra space or move into larger premises nearby but where the character, location and layout of the property are so important, it is unlikely that such an opportunity will exist. Even where expansion is possible, planning permission can be costly an, especially in small rural settlements, the likely outcome can be highly unpredictable. The guesthouse owner described the planning system as pernickety because it took a year for her to secure permission to erect a sign at the front of her property. With the recent Taylor (2008) Review advocating a more relaxed approached to certain forms of commercial development, this may become less of a concern but as we saw above, space constraints are always likely to be more of a problem for this group of businesses. The intimate nature of a home compared to other business premises also impacts on the propensity for this category of HBB owners to take on staff. The guesthouse owner commented that If I need anyone else, Id get someone local because Id have to trust them, recognising that staff would sometimes be alone in private rooms or may be left with keys when the owner is away. For a shopkeeper the division between work and private space combined with the more public work environment makes it easier to take on staff and trust other people to be on the premises but as with all small businesses, trust between owner, staff and customers is critically important. This retailer employs his niece part time and commented that the type of business we have, we have to rely a lot on trust, you cant just leave the business to anybody. With these stafng and space issues in mind, it is clear that business support that takes the form of development grants or employment subsidies would be unsuitable whereas marketing, smaller capital grants, tax-breaks or consultancy may be more benecial. The guesthouse owner, however, felt that the personal nature of her business meant that even specic business advice might not be suitable saying:
You can go on training courses to increase your customer potential and your marketing things but as for running the B&B [. . .] it is a personal thing, its nothing that can come in training, thats up to the personality of the person running it.

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Similar sentiments were expressed by the shopkeeper who recognised the need to listen to customers and make sure to address their needs, skills that cannot be gained outside of the business. With so much of the activities of these businesses tied to both the premises and the people that they serve, it seems logical to consider them a discrete category. The business owner does not have the opportunity to leave the business every evening. As the shopkeeper explained, You dont close the door and nish, you close the door and then sometimes start, referring to the bookwork and other jobs that happen behind the scenes. Since the business is so tied up in the lives of the owner, however, it is perhaps more likely to survive for longer. In the case of the shopkeeper, he explained that the business chose me, it just evolved and added when youve worked all your life, you nd it hard to stop. These quotes show that there was no grand plan at the start and now, well beyond retirement age, he is continuing to provide a key service for the village.

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A signicant issue relating to this sub-category is the succession of the business. In the case of the shopkeeper, the value of the business is signicantly lower than the residential value of the property, hence the most likely outcome is the closure of the shop. For the guesthouse, however, the business may add value to the property so there is a higher chance that it will be bought as a going concern. Since the business cannot exist outside of the specic premises, this issue of succession is highly signicant for the vitality of the rural economy. For this category of business, a more exible approach to planning policy that does not restrict business growth should be encouraged. Where the existence of the property has added value for a community, in the sense of a shop or pub, or for the local economy, in the case of a hotel or guesthouse, certain tax relief policies or payments to provide additional community or tourism related services could be designed to boost the business. Such policies should be used to ensure that the public good value is preserved and this can be achieved by internalising these values into the nances of the businesses. 5.2 Home is a convenient location Some of the cited motivations for business owners operating from home include cost minimisation, the convenience of the location and not having a need for alternative premises (Carter et al., 2006). For the previous category, there were stronger reasons such as personal service, the need to be on-site and the physical nature of the property. This category, however, is characterised as those businesses that could exist in alternative premises and therefore have the potential to grow beyond the limitations of the home. They are dened by the fact that at a given time, a signicant proportion of the actual work of the business is conducted in the home or a part of the home. Examples from earlier research include a semi-retired person making jam to sell to a handful of local shops to a market research rm with upward of 20 employees operating out of parts of the house and a converted outbuilding. To expand upon this, two case studies are used, one where the business is still run from the home and a second which has subsequently relocated. The rst is a wholesaler/distributor who has both ofce space and storage on the site while the second is a marketing consultant. The motivation of the owners were quite different with the rst having a clear business plan when moving to the property while the second started as a relatively small concern having previously worked in the city. Case 2 Home is a convenient location
The distribution business has been running for some 25 years. Having outgrown their rst home, they moved to the North East saying it would be nice to come back here and we thought if we could nd a farm type building, it would cut down on the overheads and we could have a house and warehouse all on the one site. They now employ 13 full-time members of staff and trade across the UK and increasingly internationally. The lack of congestion more than compensates for the rural location and the ability to sell through agents means that the head ofce can function very effectively from their countryside home. The marketing consultant used to work in Newcastle before setting up her own business from home because she did not like the urban working environment. With much of the work involving meetings at clients premises or via the computer and telephone, the rural home base was not an issue. Her established business networks also meant that she was well known in that business sector. It was only when her son joined the business to expand into new services that they relocated into new rural ofce space where they now have one part-time and 7 full-time employees.

For each business owner, family and lifestyle concerns were important reasons for basing their businesses at home. The rst explained that he spent a long time searching for the right property to have enough space for the business but also commented that we knew it was a good area for schooling [. . .] and [. . .] the children were mad on horses so they had a paddock as well. The second person explained that the rural setting was ideal, because it was home, adding, its a very unprofessional reason but we wanted to have a dog! Its also so much cheaper to work from home. As a new business with fewer overheads, the second owner also recognised that, It gives you the power to control your own destiny. You take the risks but you take some of the control. This attitude demonstrates that the home can be a good incubator for certain types of businesses although in the case of the wholesaler, more signicant investment was required at the outset so he took on greater risk despite being home-based. This demonstrates that being home-based does not necessarily imply an aversion to risk or growth but equally, if the home is seen as an incubator, the time for incubation can vary dramatically. The marketing consultant in this example worked from home for ten years, saying that before her son joined the rm, I just assumed Id retire, its different now completely. The wholesaler hopes to expand on site but recognises that planning issues are a huge uncertainty that cannot be written into a business plan. For him, this will have major implications on the potential for growth but if permission is refused, he does have the opportunity to re-locate. Should re-location occur, there will again have been a long time period between start-up and incubation, in this case over 30 years. For these businesses, staff can be a barrier to growth, especially where skilled workers are required. If the rural economy has a lack of suitable staff, there may be little point in relocating to larger premises so this can result in businesses owners accepting the status quo. In manufacturing, capital was also cited as a signicant barrier to growth, demonstrating that the potential markets and premises may exist but that the size of the investment and unwillingness or lack of understanding on the part of banks makes it difcult for the owner to realise their ambitions. Since businesses in this category of HBBs are not restricted to one property, the challenge for policy is twofold. Some require support to survive and grow within the home while others may require additional support to evaluate and manage a larger move. While there is a great diversity among HBBs in this sub-sector, they will predominantly be in the professional services and manufacturing sectors. In the microbusiness survey, these sectors combined made up some 25 per cent of HBBs in the rural North East so providing the opportunities for these businesses to start and encouraging their development provides a valuable opportunity for rural development policy. 5.3 Home is not the place of work The nal sector of HBBs is dened as those for whom the home is little more than a registered business address, with the majority of business conducted elsewhere. This may include the construction sector (12 per cent of the survey) and also mobile services such as gardeners and plumbers, mobile retailers, taxi drivers and driving instructors or consultants who are required to attend clients workplaces such as those dealing with manufacturing equipment or IT facilities. In each case, a certain amount

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of administrative work may be conducted at home but the main function of the business occurs elsewhere. For some, the administrative function may require alternative premises but the driver of business growth and the place of employment is not the home. Case 3 Home is not the place of work
A sole trader with his home as the registered place of business, the plasterer has been in business for 15 years. Based in a rural market town, his trade takes him anywhere in the county, where his primary business is conducted at the clients premises. He spends ve hours a week in a converted loft ofce working on administration tasks. He also uses a large shed in the yard for storage of work materials.

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Interestingly, HBBs in the transport and construction sectors are much less likely to be seeking growth, with just 14 and 17 per cent, respectively, reporting a positive desire to expand their business. This compares with 30 per cent in professional and business services, 33 per cent in hospitality and 35 per cent in retail. The plasterer, introduced in Case 3, has always had plenty of work, either sub-contracting to builders or directly for private clients. Growth at this level in the construction sector relates to employment growth and in the past he has taken on an apprentice and a local labourer. However, these led to frustrations with red-tape and after being shot in the foot by tax credits he now works alone. This red-tape is seen as the key barrier to growth. Not due to an administrative burden, but rather from the risks of non-compliance, with the plasterer stating I cant be bothered with the risk of employing someone. The home itself does not appear to be a barrier to growth and support needs do not relate to the incubation of business, nor providing a means of networking. In this case, the only support that would help growth would be reliable and regular support in employing people. 5.4 Contrasting the sub-sectors Within this sub-sector breakdown the predominate rural home sector is home is the business, which Table I shows as accounting for 42 per cent of all home-based, rural micro-businesses in the region. This is an interesting nding given the rhetoric on HBB and their support requirements, as clearly those using the home as the business do not
% Home is business Hospitality Retail Home convenient location Manufacturing Business and domestic services Table I. 80 per cent of home-based rural microbusinesses are in just ve sectors Home not place of work Construction 28.8 13.2 42.0 7.7 18.7 26.4 11.7 11.7 80.1

t the knowledge intensive business services prole that has been associated with the HBB sector (ONE, 2006; Abdy et al., 2007; Taylor, 2008). However, as a rural sector, the component sub-sectors are important for the sustainability agenda, namely retail and hospitality. Focusing upon rural HBBs, we have shown that three sub-sectors provide a better argument for policy direction than one homogenous sector. Clearly, the sub-sector home is the business has different needs to home is a convenient location, which in turn has different needs to home is not the place of work. Table II shows how these sub-sectors have different barriers to growth and support needs. As such, this typology allows policymakers to better understand the needs of these businesses and highlights the limitation of the homogenous, one-size-ts-all approach. 6. Conclusion Using a secondary data-set to explore contemporary concerns with the rural HBB sector, this paper has provided evidence contributing to an explanation of this aspect of the rural economy. The paper has provided agreement with existing research, adding robustness in a nascent area of study, and extended it further suggesting the utility of an enhanced sub-sector breakdown. While HBBs may be found across the spectrum of sectors, just ve sectors characterised 80 per cent of home-based, rural microbusinesses in this research. Over 40 per cent of these used the home as the business. This suggests that any regeneration or development resources need to be carefully targeted at the correct sub-sector, as the majority of HBBs in this study t a rural sustainability prole rather than a knowledge intensive business services one. This paper aimed to challenge the idea of a monolithic rural HBB sector and in doing so proposed a typology of sub-sectors. Whilst, we feel a degree of success in this, further research is necessary to establish whether these sub-sectors are fully inclusive. This research focuses on just one region and was carried out prior to the global recession but we highlight the importance of HBBs and our evidence provides a valuable benchmark for future studies. Rather than HBBs being treated as a homogenous sector, we argue that in heterogeneous sectors, consideration should instead be given to the specic impacts and needs of HBB. As a result, we should be sensitive when exploring and examining a particular industrial sector to the existence and particular needs of its specic HBB members. To nish on a positive note, the multiplicity of rural HBBs highlighted by this research demonstrates that rural communities are home to a growing number of successful enterprises. In a period of transition for the rural economy, HBBs provide new
Barriers to growth Home is the business Home size and character Planning permission Support needs

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Marketing of local area Flexible planning policy Tax relief and subsidies Home is a convenient location Availability of skilled staff Networking Capital Planning and relocation support Home is not the place of work Availability of staff Continuity of support employing people Risks of non-compliance

Table II. Barriers to growth and support needs for rural HBB sub-sectors

SBR 5,2

opportunities for both social and economic development that can be led by endogenous actors valorising indigenous local resources and attributes to revitalise their rural areas from within. As such, further research might examine the resilience of these businesses in recession and their ability to react to growth opportunities in a period of upturn.
Note 1. Those areas scoring 0-10 in an urbanisation index where anything scoring below 30 is considered rural (Coombes and Raybould, 2001). References Abdy, M., Jennings, J., McLaverty, D., Macguire, K. and Truscott, F. (2007), Readjusting the radar: identifying and supporting innovations in home-based working, paper presented at the 5th Rural Entrepreneurship Conference, February, University of Lincoln, Lincoln. Carter, J. (2002), Home-based Business Survey: Report on Research to Assess the Business Support and Other Needs of the Home based Economy, Horsham District Council, Horsham. Carter, S., Mason, C. and Tagg, S. (2004), Lifting the Barriers to Growth in UK Small Businesses, FSB Biennial Membership Survey, University of Stirling, Stirling. Carter, S., Mason, C. and Tagg, S. (2006), Lifting the Barriers to Growth in UK Small Businesses, FSB Biennial Membership Survey, University of Stirling, Stirling. Chell, E. (2001), Entrepreneurship: Globalization, Innovation and Development, Thompson Learning, London. Coombes, M. and Raybould, S. (2001), Public policy and population distribution: developing appropriate indicators of settlement patterns, Government and Policy ( Environment and Planning C ), Vol. 19, pp. 223-48. Countryside Agency (2001), The State of the Countryside 2001, The Agency, Cheltenham. Davidsson, P. and Honig, B. (2003), The role of social and human capital among nascent entrepreneurs, Journal of Business Venturing, Vol. 18, pp. 301-31. Dwelly, T., Maguire, K. and Truscott, F. (2005), Under the Radar: Tracking and Supporting Rural Home based Business, Commission for Rural Communities, Cheltenham. Felstead, A., Jewson, N. and Goodwin, J. (1996), Homeworkers in Britain, HMSO, London. Hakim, C. (1987), Home-based Work in Britain: A Report on the 1981 National Homeworking Survey and the DE Research Programme on Homework, Department of Employment, London. Lowe, P., Murdoch, J. and Ward, N. (1995), Networks in rural development: beyond endogenous and exogenous approaches, in Van der Ploeg, J.D. and Van Dijk, G. (Eds), Beyond Modernisation: The Impact of Endogenous Rural Development, Van Gorcum, Assen, pp. 87-105. McElwee, G. (2008), The rural entrepreneur: problems of denition, International Journal of Entrepreneurship and Small Business, Vol. 6 No. 3, pp. 320-1. Mason, C. (2008), Invisible businesses: the characteristics of home-based businesses in the UK, Presentation to the Centre for Knowledge, Innovation, Technology & Enterprise, Newcastle University, Newcastle upon Tyne. NERIP (2008), State of the Region: North East England, North East Regional Information Portal, Newcastle upon Tyne. Newbery, R. and Bosworth, G. (2008), Revisiting the radar: home based businesses in the rural microbusiness survey, paper presented at the ISBE Conference, November, Belfast. ONE (2002), Rural Action Plan, One North East, Newcastle Upon Tyne.

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ONE (2006), Home-based Working in the Rural North East, One North East, Newcastle upon Tyne. Raley, M. and Moxey, A. (2000), Rural Microbusinesses in North East England: Final Survey Results, Centre for Rural Economy, Newcastle University, Newcastle upon Tyne. Ray, C. (2001), Culture Economies, Centre for Rural Economy, Newcastle University, Newcastle upon Tyne. Shortall, S. and Shucksmith, M. (1998), Integrated rural development: issues arising from the Scottish experience, European Planning Studies, Vol. 6, pp. 73-88. Slee, B. (1994), Theoretical aspects of the study of endogenous development, in Van der Ploeg, J.D. and Long, A. (Eds), Born from Within: Practice and Perspectives of Endogenous Rural Development, Van Gorcum, Assen, pp. 184-94. Taylor, M. (2008), Living Working Countryside; The Taylor Review of Rural Economy and Affordable Housing, Department for Communities and Local Government, London. Terluin, I.J. (2003), Differences in economic development in rural regions of advanced countries: an overview and critical analysis of theories, Journal of Rural Studies, Vol. 19, pp. 327-44. Totterman, H. and Sten, J. (2005), Start-ups: business incubation and social capital, International Small Business Journal, Vol. 23 No. 5, pp. 487-511. Walker, E. and Webster, B. (2004), Gender issues in home-based businesses, Women in Management Review, Vol. 19 No. 8, pp. 404-12. Ward, N. (2006), Rural development and the economies of rural areas, in Midgley, J. (Ed.), A Paper from the Collection A New Rural Agenda, IPPR, London. Ward, N. and McNicholas, K. (1998), Reconguring rural development in the UK: objective 5b and the new rural governance, Journal of Rural Studies, Vol. 14, pp. 27-40. Further reading Commission for Rural Communities (2005), Under the Radar: Tracking and Supporting Home Based Businesses, CRC, Cheltenham. Department of the Environment Food and Rural Affairs (2004), Rural White Paper Review, DEFRA, London, available at: www.defra.gov.uk/rural/rwpreview/default.htm (accessed 2 June 2005). Lowe, P., Ray, C., Ward, N., Wood, D. and Woodward, R. (1998), Participation in Rural Development: A Review of European Experience, Centre for Rural Economy Research Report, Newcastle University, Newcastle upon Tyne. About the authors Robert Newbery is a reformed Engineer and Entrepreneur, Robert Newbery is currently investigating the costs and benets that rural business associations bring to their members and the small towns they are based in. He is particularly interested in the sustainability of microbusinesses and the communities in which they operate. Robert Newbery is the corresponding author and can be contacted at: robert.newbery@newcastle.ac.uk Gary Bosworth is a Research Fellow in the Enterprise Research and Development Unit at the University of Lincoln. Having recently completed his PhD at Newcastle University, he is pursuing further research in the eld of rural development and small businesses.

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