Business Not as Usual

National statistics have shown that 80% of all new businesses fail within the first year. The Rhode Island Department of Economic Development reported that small businesses within the state open and close on an hourly basis - a fact indicative of a healthy economy because this flux in business activity hones the competitive edge.1 Home-based businesses tend to be especially fragile because of the normally interruptive environment and lack of expertise in business management on the part of the entrepreneur.

Using guidelines proposed in the National Initiative of Cooperative Extension for Family and Economic Well-Being,2 we decided to test an educational program in developing home-based businesses. The purpose was to encourage young homemakers to use their talents for profit while remaining at home with their families. By providing technical help and information, Extension education could try to prevent a family financial disaster for entrepreneurial homemakers.

Need for such a program was determined by a two-step pilot program. The first step was to test the relevance of educational materials and resources on a group of five new entrepreneurs (some of whom also had corporate business experience). The second step was to advertise the program statewide to test response. Fifty people enrolled in the class within two days of the appearance of the advertisement.

These 50 people eagerly participated in class discussion and reacted favorably to the information presented. The response indicated that a need existed for basic business start-up information. The course was refined and offered as a statewide program strategically located in all counties throughout Rhode Island. One district home economics agent designed and delivered the program statewide. Geographical limitations of this state accommodate a one-person program delivery system. Audiences averaged 12-15 people.

The overall program included an eight-hour business awareness start-up course; optional advanced seminars on specific subjects like marketing, taxes, or insurance; short special interest group presentations; TV three-minute concept spots; a study group; and a quarterly newsletter.

The course was designed to make the participants aware of the many obligations, advantages, and hazards of being in business for oneself. An immediate increase in income wasn't an objective of the program, although informed decision making should result in increased income over time. The first priority was to save money by averting failure.

A total of 216 participants were surveyed six months after completing the initial six day-long courses. Participants were sent a 46-question evaluation instrument that covered course content, presentation methods, future program topics, and overall effect of the program on established and/or beginning home-based businesses.

The anticipated target audience was young mothers seeking to augment family income while staying at home with the children. It soon became evident that this intended audience was in a minority. The majority of participants were 31-40 years old and were one of the following: corporate refugees, single, self-employed, married people preferring the economy of working at home, or those seeking to develop a second income at home after the normal working day. The second largest age category was 60-plus, retirees wishing to augment their retirement income or to profitably pursue a hobby of many years. Part of the original target audience was met: the majority of participants, 55%, were female. Sixty-one percent of the respondents had been in business less than six years.

As a direct result of taking the course, 50% had developed business cards and/or stationery, 39% had established a pricing schedule, 58% made sales of their product or service, 50% set up a bookkeeping system, and 39% set up a business checking account. Eight percent became incorporated, while 47% chose not to take that step; the remainder were undecided. An increase in income was reported by 39% of the respondents. A similar finding was reported in an Extension National Impact Study.3

It's significant to the program goals that of those who were vacillating about being in business, 19% chose to "go for it," and 44% deliberately made a decision not to be in business.

People in the 60-plus age category were significantly less interested in preparing a business plan, or in networking with others. In contrast, participants age 31-50 valued networking opportunities.

Program participants indicated that further information was needed on marketing, taxes, and record keeping. One approach to respond to those needs has been the formation of a business study group that gives entrepreneurs with diverse business interests a chance to meet to share experiences and provide technical help and support to one another.

The marketing issue will be addressed in part in an Extension seminar for interested businessowners on running instruction courses that will bring potential clients to the point of purchase and provide them with information that could lead to future sales. For example, a picture framer would teach a how-to class on do-it-yourself framing, having on hand supplies for purchase and anticipating that the course will lead to additional sales of custom-made frames. Another example is a computer software retailer who would give classes on home computer operation.

Extension of this home business start-up education program might be enhanced by developing a Master Business Consultant training program. These consultants would provide educational programming to small groups and work one-on-one with individual entrepreneurs at various stages of start-up and development.

The basic survey course will continue to be given as long as enough public interest exists to make this educational program needed.

1. Vincent Harrington, research analyst, Department of Economic Development, University of Rhode Island, Providence, telephone interview, February 1989.

2. "Cooperative Extension National Initiatives: Focus on Issues," official report of Extension Service-USDA and Extension Committee on Organization and Policy (ECOP) (Washington, D.C.: U.S. Government Printing Office, 1988).

3. "National Impact Study: Financial Planning and Management Programs" (Columbia: University of Missouri and Lincoln University, in cooperation with Extension Service, USDA, 1988).