Home bodies

By Friona Rotherham

Saturday 1st May 2004

Hitesh Patel's Epsom house looks like any other in the tree-lined, tony street. Yet the entire ground floor of the Auckland family home is given over to his 12-year-old EnergyPro business. Patel is a qualified engineer who couldn't speak English when he immigrated here from India 20 years ago. Made redundant by Telecom in 1991, he opted for self-employment rather than seeking another job after spotting a market niche to help corporates save big money on their energy bills through efficiency.

His clients include The Warehouse, the University of Auckland, NZ Post and the National Bank, and he's planning to expand into Australia later this year. The business has grown from a single room in his former home in Blockhouse Bay, to a double garage, and now to a whole floor accommodating four staff. Patel set up the business at home to save money. "The only reason I'm still in business today is because I had such low overheads when I was starting out."

Patel's story is typical. Many high-profile Kiwi companies have their roots in the garage or spare room. Peter Maire started his digital navigation equipment company, Navman, in the family basement. Last year, he sold a 70% stake to US giant Brunswick for $56 million. Patel has big plans, too. Plastered on the wall of his home-based office are numerous inspirational business success stories. He wants more than a bach and a boat, but he's not driven by greed. He says he wants to create something lasting: "Something that works like a well-oiled machine."

In this, he is less typical. Overall, New Zealanders are entrepreneurial (we ranked fifth in the world in this year's GEM report) but we are not great wealth creators. The GEM report is critical that home-based entrepreneurs frequently lack the vision needed to create larger companies. A survey of home-based entrepreneurs, conducted for the first time this year with the help of Home Business New Zealand, bears out this concern. Some 12% of respondents said they were satisfied with the profits they were making even though they were less than they had anticipated. Most were content with their business performance.

The report questions whether the owners of home-based businesses have often worked so hard they don't have the energy to move to the next level, or because they lack the skill to take the necessary leap. A lack of understanding of global markets and an aversion to risk are also cited as limiting factors.

Many home-based businesses don't start with the vision of growing big and don't have the self belief they can do it, says Heather Douglas, managing director of Home Business New Zealand (which runs the www.homebuzz.co.nz website). Some don't want to grow because it will have a negative impact on their lifestyle, and some want to but don't know how, she says. "These three things prove there is a need to concentrate on encouraging people to broaden their horizons so they start out in business with a bigger goal," Douglas says.

What are they like? Our home-based entrepreneurs tend to be solo operators with few employees. The most common character trait is self-motivation (54%), and the ability to manage time ranked second among those surveyed. Good communication skills and a strong personality were also deemed necessary to business success. It's best suited to those who have a good work ethic and are self-disciplined enough to separate work life from family life. When Patel started out at home his biggest challenge was not being distracted by family life. Now he struggles not to work too much because the business is just downstairs.

A desire to "be your own boss" is the main influencing factor for setting up a home-based business. Not having to cope with rush-hour traffic and having the flexibility to work the hours you want also rated highly. Ready availability of technology, costs savings and tax advantages all make working from home easier than ever.

But there is a downside. Some problems identified are the same any small business faces - financial concerns, tax and employment-related compliance issues. Isolation is the killer. The social environment - having the same surroundings all day and trying to separate business from family life - was the most commonly cited problem. Motivation and time wasting were also challenges.

HBEs are no longer disparagingly thought of as "hobby enthusiasts" yet many still find it difficult to meet clients in the privacy of their home. For years, Patel didn't tell clients he was home-based, fearing it would detract from his credibility.

The ratio of opportunity and necessity entrepreneurs among HBEs is similar to the overall body of entrepreneurs surveyed in the GEM report - about 83% citing opportunity and 13% necessity. The biggest influence is seeing a gap in the market. Take Theresa Watson and Sally Wilson. They launched their Auckland home-based business, Wilson & Watson, six months ago, making ceramic kiwiana trinkets to stick inside Christmas puddings. It was Watson's idea: the potter could see there was nothing else like it in the market.

She wanted to work with Wilson, as they had got on well when previously working together on a house renovation. It made sense to have someone else to bounce ideas off and share the workload. The co-preneurs (as the GEM reports calls them) work part-time while their children are at school, doing the pottery work at Watson's home studio in Devonport and shifting to Wilson's studio for the packaging and paperwork.

Neither had run a business before but in their case that didn't matter so much. Theresa is married to broadcaster Danny Watson and Sally to Tim Wilson, who's involved in retail management. Both men provide business expertise and mentoring.

They cold-called retailers, and were amazed to get immediate orders from the likes of Smith & Caughey and Milly's Kitchen Shop in Ponsonby. They've already expanded the product range into ceramic Christmas decorations and are now worried about not having enough stock to meet demand. Nice problem.

Like Patel and unlike most HBEs, Wilson and Watson are not content with building just a lifestyle company. Their long-term goal is to be owners rather than hands-on managers of a successful company, exporting worldwide. The proof (pardon the pun) will be in the pudding.

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