These home business are smokin'; the secret: identify a hot trend, then build a business around it

Kiplinger's Personal Finance Magazine, March, 1998 by Ronaleen R. Roha, Ed Henry

Tyler Harwood designed missile guidance systems until his job was torpedoed by defense-industry downsizing in 1989. Then he and his mother began a company that manufactured girls' clothing, which wound up with 300 employees. But "overhead, managing and dealing with employees was a nightmare," Harwood says. Plus, he had a four-hour roundtrip commute every day.

So Harwood looked for a way to earn a living from home--and found the Internet. Working out of his converted garage, he now runs a Web-site design firm. He also sells cigars and wine from a Web-based virtual storefront--without having to stock inventory. All told, Harwood surfed the Internet to more than $100,000 in revenues last year.

Harwood's business success at home is hardly unique. Fueled by major developments of the '90s--corporate downsizings, "outsourcing," the rise of the Internet, and introduction of ever-more-sophisticated and cheaper home-office technology--home-based businesses have taken off. According to IDC/LINK, a market-research firm in Framingham, Mass., the number of people with full- or part-time businesses based at home has grown to almost 23 million, up from just 17.5 million in 1991. By next year, the number is expected to top 26 million.

Working from home is attractive on many levels. It can make a business startup affordable. It offers control and flexibility, especially if children are part of the mix. And home businesses are getting more respect from corporate types these days.

The secret to making a home business pay off is to capitalize on trends in technology, demographics and business. For example, America is getting older and busier, so some companies make life simpler for those short of time. We are drowning in paper at work (at home, too), so professionals help us work more productively. Small businesses need more professional services, such as public relations and marketing. And the Internet offers a mother lode of opportunities.

Home businesses aren't for everyone. The most successful home entrepreneurs, like the seven whose stories are told here, share not only a good idea and a passion for their business but also a tendency toward workaholism, which invariably takes its toll on evening and weekend family time.

Mining the Internet TYLER HARWOOD: Aromatic Stogies

Although consumers are spending billions of dollars buying products and services over the Internet, it's still tough to turn a profit. But Tyler Harwood, 37, is doing it.

Harwood, no stranger to technology thanks to his defense-industry career, learned to design Web sites on his own. His firm, Final Touch Internet Systems, designs sites for other small businesses. That is his "16-hour-a-day job," he says, from which he earns dose to a six-figure income. He works with several other people--including his fiancee, mother and sister--all in his Northridge, Cal., garage. He is a Microsoft- and IBM-certified webmaster, which has provided a marketing boost.

But Harwood is making the Internet pay in other ways, too, such as with his sideline venture, Aromatic Stogies (www.aromaticstogies.com). It's a virtual retail store that sells cigars, cigar accessories and wine--which he describes as "a party site with music, animation and digital photos." He has asked local businesses if they would let him act as middleman by offering their products on the Web under the Aromatic Stogies name. It was a pretty easy sell, he says, because retailers are always looking for new customers. The site even sold three $72,000 Jaguar XK8 convertibles for a local dealership. The best part is that "I stock no product and buy nothing until it's paid for," he says.

The "store" has been profitable from the beginning. The beauty of a concept like Aromatic Stogies, he says, is that anyone can do it for the cost of a Web-site design (perhaps $1,500 to $5,000) and maybe $75 to $150 a month to keep the site up and running. Harwood earns about $2,500 a month, of which about 85% is profit based on the difference between the retail price and the discount price he pays the merchants.

Tending to Aromatic Stogies takes only about four to five hours of his time each month, the largest chunk of which is spent promoting the site for free on the Web, primarily among newsgroups that attract cigar aficionados. Even for a retail operation, "working from home is not a problem," he says. "UPS picks up anywhere, or companies can drop ship goods directly to buyers if you don't want to stock inventory."

Harwood networks--including once-a-month business breakfasts and evening mixers--to make business contacts. That's how he met the insurance agent who gave him a good deal on group health insurance. He already has retirement savings through his former employer, and he is in the process of setting up a 401(k) plan for Final Touch.

BEST ADVICE: In any business, but especially on the Internet, "do everything on time and do exactly what you say you are going to do." If you don't, your lapse will spread quickly among the newsgroups and related sites, "and then it's over," he says.