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FAQ on Marketing to SOHO

Working Solo, Inc. has worked with dozens of companies over the last decade to help them connect with the SOHO market. Here are answers to some of the questions I'm asked most frequently.   -- Terri Lonier

What is SOHO?
SOHO is an acronym that stands for "small office/home office." The term is nearly 30 years old now, and as best we can track down, originated with analysts in the technology industry. It's most commonly confused with lower Manhattan (SOuth of HOuston Street) or the neighborhood in London.

SOHO encompasses a range of entrepreneurial activities and business structures -- from individuals working solo to companies with 20 or fewer employees. This includes a myriad of worker categories and terms: home-based businesses, free agents, independent contractors, telecommuters, e-lancers, and other independent professionals.

The majority of the SOHO market is made up of soloists, however. If you think of the SOHO market as a large target, the outer circle would be companies with 12-20 employees. Working from the outside, the next inner circles would be firms with 6-11 employees and 2-5 employees. The solid center area of the target is where you'll find the core of SOHO: individuals who are working solo.

How big is the SOHO market, and where can I get statistics?
The figures for SOHO vary considerably -- from between 19.5 and 40 million people -- depending on how you define the market. For example, some organizations are interested in workers with a home office, whether they're employed by a company or on their own. Others organizations focus on self-employed individuals who are the financial decision-makers.

One of the reasons the statistical data on SOHO is such a slippery slope is due to the transient nature of self-employment, as well as the informal quality of many SOHO businesses. Many soloists don't consider themselves "in business" -- a factor that endangers their business survival and adds to the complexity of compiling accurate data.

The U.S. Census Bureau tracks the economic impact of SOHO businesses. They do not use the acronym SOHO, however, so finding relevant data for your needs admist the reams of reports they generate each year can be frustrating.


The U.S. Government considers soloists to be "nonemployer businesses" and they publish a major statistical analysis every five years. The data is gathered from Internal Revenue Service (IRS) administrative records of nonemployer businesses that filed tax returns with a Schedule C, as well as a selected group of partnerships and corporations.

The most recent Census Bureau report was published in June 2006 (based on 2004 Census data). This report, Nonemployer Census Statistics 2004, is available as a 465-page PDF file that can be accessed at: http://www.census.gov/prod/2006pubs/ns0400a01.pdf. A few of its summary findings include:

* The US is in the midst of a major boom in self-employment.
* There are 19.5 million Americans who are self-employed, and their numbers are growing.
* Between 2003 and 2004, the number of self-employed grew by 1 million (about 4.7%).
* Overall, these businesses without employees account for 70% of all US businesses and generate annual receipts exceeding $887 billion.
* Electronic shopping and mail order houses are among the fastest growing sectors (up 12.7%) for new self-employment ventures.
* Even faster growth can be found among building finishing contractors (up 22.5%), Internet service providers (up 18.7%) and nail salons (up 14.7%).

Another important source of research data on the SOHO market is the US Small Business Administration. The SBA's Office of Advocacy is the voice for Small Business in the US Government and a valuable site for small business statistics. In particular, its Office of Economic Research provides a substantial amount of data on small business, including hotlinks to recently published governmental reports. The 2007 Report on the Small Business Economy (for Data Year 2006) runs 368 pages in length. They also host a detailed FAQ featuring numerous hotlinks for data on Academic Research on Small Business issues.

For a global picture on entrepreneurship research, particularly regarding nascent ventures, visit GEM, the Global Entrepreneurship Monitor. Launched in 1999, this consortium of researchers publishes annual studies on entrepreneurial activity. Since its founding, researchers from more than 60 countries have participated in the GEM studies. In 2008, they introduced a new Global Report on Women and Entrepreneurship.

Is there a "typical" SOHO worker? What are the most common businesses, and the best businesses to start?
SOHO entrepreneurs are as individual as the businesses they create. You'll find them everywhere. They sell us food, clothing or gasoline; they cut our hair, do our taxes, tutor our children, fix our cars, repair our homes, and much more.

To provide a better understanding of the SOHO market, Working Solo, Inc. teamed with Bigstep several years ago to create a Portrait of Small Business USA. This study offered a new way of looking at the Small Business universe, and used underlying business category details to shed new light on how small firms impact the quality of life of daily Americans. Lucy Reid, then CEO of Bigstep, analyzed U.S. Census Bureau statistics in detail. Our goal was to paint a picture of the SOHO market based on the question: "If there were only 100 small businesses in the United States, what would they be?" Bigstep has posted a pdf of the Portrait of Small Business USA as well as highlights of the study. While this study relies on Census statistics of a few years ago, it can still provide valuable insights about the SOHO market.

Most solo businesses are service businesses, because they require little capitalization to get started and can often be operated from a home-based setting. With the growth of technology in the last decade, many SOHO businesses are computer-focused -- from Web site design to freelance writing to a host of eBay entrepreneurs.

What's the best way to market to SOHO?
A simple question, with no easy answer. The SOHO market is "a mass market of individuals" -- millions of potential customers, but each is an extremely busy business owner who is bombarded with marketing messages.

In trying to reach the soloists and small business owners, it can be helpful to adopt a five-stage approach:
1. Pinpoint your specific objectives.
2. Identify your target market and how their needs overlap with your product or service.
3. Connect with the SOHO audience in ways that are most effective for producing your end results. This may include: direct mail, selective email messages, trade shows, partnerships with associations, educational training sessions, and more.
4. Engage the audience: make the offer, close the sale, capture the data.
5. Retain the connection and build the relationship.

Recognize that there is no single SOHO market. It's like saying there's a "teenage" market. Yes, small businesses share many characteristics, but your marketing efforts must be individualized to your organization's specific objectives, budget, timeframe, and needs.

In consulting with companies seeking to reach the SOHO market, Working Solo, Inc. acts as a bridge between this broad audience and companies with products and services that want to reach them. Working Solo helps companies better understand the SOHO mindset, including what drives their buying decisions. Over the past decade Terri Lonier and Working Solo have worked with some of the world's leading corporations -- you can read more about that here.

SOHOs rely on word-of-mouth for many purchases. They are often fiscally conservative, because they don't have a finance department on the 27th floor to take care of their bills. Reputation, customer service, and quality are very important factors in SOHO buying decisions.

What are SOHOs biggest concerns?
A Working Solo, Inc. survey of more than 1200 SOHO workers revealed these top three fears as small business owners:

1. Not having enough money to keep the business going
2. Long-term illness of self or key employee
3. Losing customers to a larger company

All three reveal the challenges of balancing small size with big demands. Maintaining a sufficient flow of work and cash in the business is a primary burden for SOHO firms. Many often fall victim to their own poor billing and collection practices, or delinquent receivables from larger clients and customers.
Other survey comments showed the depth and range of business concerns, from "driving my spouse crazy" to "getting bored and disillusioned." Long-term SOHO workers often comment that their greatest fear would be to go back to working for someone else!


What are SOHOs key motivators?
A Working Solo, Inc. survey of 763 SOHO workers delved into the drivers behind this entrepreneurial lifestyle. Here's what our research discovered

* Four "Fs" ranked highest as the main reason to launch a SOHO business: Freedom (30%); Flexibility (25%); Fun (12%); and Financial rewards (12%).

* Among the biggest misconceptions voiced by family, friends, and colleagues: that the SOHO worker has a lot of free time; that s/he doesn't have a "real job"; and the s/he has enough extra money and doesn't need to work.

* The one activity SOHO workers would most like to delegate: Bookkeeping (26%); Marketing/Sales (26%); Tax forms (15%).

* If forced to choose one piece of technology that the could not live without, they selected: a computer/laptop with Internet access; a telephone/cell phone; and a fax machine.


What's the best way to gather data on SOHOs?
SOHOs, by their very nature, are not a traditional demographic, nor are they "joiners." So there is not a single best way to gather data. However, if you have a product that requires registration, you can glean very valuable information about your SOHO customers -- IF you take the time to carefully design the registration process. Working Solo has helped companies refine their data collection process, which translated into a significant competitive advantage for these firms.

We also conduct email-based questionnaires to our newsletter subscriber list. (Sorry, the names are not available for rent or exchange.) Companies often receive more than a thousand responses within a week to ten days, giving them important data when designing or refining products.

For further information on the SOHO market, feel free to
contact us.





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Copyright 1995-2007 Working Solo Inc.