07-07-2008, 06:15 PM
While looking at website, consultants, etc. that talk about home based businesses/small business, etc. I came across one of the many that seem extremely dubious. Here are the claims:
40% of American homes have a home based business
The average home based business owner is in the top 2% of the U.S. for income
95% of home based businesses succeed in the first year
The average home-based business household earns nearly twice as much as the average American household
Ok, so what do those "stats" tell us? (Assuming the figures are correct). 40% of the households have home based businesses, and the presumably mean income for those 40% is top 2% in nation (or in the top appx. 6 million people). Let's play with some figures, that are admittedly inaccurate on the conservative side. Let us say that there are 10 million households in the U.S. 40% of 10 million households means that 4 million of those households have home based businesses. Here's where the 'average' figure comes in. Assuming that the average is a 50/50 split, then that means 2 million home based business holders are in the top 2% of income. Given the small number worked with here, it's readily apparent that "average" cannot mean 50/50, despite what the casual observer may notice. (Inflate the figures even 5 fold, and this becomes obvious).
So, what's going on, that this group doesn't say, is that the "average" or mean, is more of a description of a pyramid. With a few having massive income, and the rest being considerably lower. But, the way the webpage packages the fact, that's not what it tries to show.
The 95% statistic is interesting, considering other stats relating ot the start up of business activities. Some how, I believe other statistics more. I admit to being a pessimist, but having researched a business start up of my own (law practice), I have encountered information that business start ups of all types suffer a higher failure average. Some sources place it as high as 80% and others as low as 50%. Whatever the true figure is, the percentage is of little value. What is of value is figuring out why something succeceds or fails.
It seems like this 95% figure is yet another rosy, and manipulated image from a business seeking suckers (er, workers) for its pyramid (er, home based) scheme (er, business).
40% of American homes have a home based business
The average home based business owner is in the top 2% of the U.S. for income
95% of home based businesses succeed in the first year
The average home-based business household earns nearly twice as much as the average American household
Ok, so what do those "stats" tell us? (Assuming the figures are correct). 40% of the households have home based businesses, and the presumably mean income for those 40% is top 2% in nation (or in the top appx. 6 million people). Let's play with some figures, that are admittedly inaccurate on the conservative side. Let us say that there are 10 million households in the U.S. 40% of 10 million households means that 4 million of those households have home based businesses. Here's where the 'average' figure comes in. Assuming that the average is a 50/50 split, then that means 2 million home based business holders are in the top 2% of income. Given the small number worked with here, it's readily apparent that "average" cannot mean 50/50, despite what the casual observer may notice. (Inflate the figures even 5 fold, and this becomes obvious).
So, what's going on, that this group doesn't say, is that the "average" or mean, is more of a description of a pyramid. With a few having massive income, and the rest being considerably lower. But, the way the webpage packages the fact, that's not what it tries to show.
The 95% statistic is interesting, considering other stats relating ot the start up of business activities. Some how, I believe other statistics more. I admit to being a pessimist, but having researched a business start up of my own (law practice), I have encountered information that business start ups of all types suffer a higher failure average. Some sources place it as high as 80% and others as low as 50%. Whatever the true figure is, the percentage is of little value. What is of value is figuring out why something succeceds or fails.
It seems like this 95% figure is yet another rosy, and manipulated image from a business seeking suckers (er, workers) for its pyramid (er, home based) scheme (er, business).