What is a Cottage Company?

In this colossal world of economy, ergonomics and entertainment, businesses are constantly ebbing and flowing. Some companies are super massive with armies of employees and reserves upon reserves of capital.

Other small companies are teeny tiny and are sometimes so little they operate solely out of a home or vehicle. This “cottage industry” is made up of brands that seem modest in the grand scope of money making corporate industry, but are in fact vital to the evolution of creativity and economic society.

When a purchase is not only for a product but a personality, it makes for a more sustainable relationship for both producers and consumers.

That's right, sweet old Susie who bakes that delicious bread down the street is actually holding the massive weight of economic stability upon her shoulders, and she doesn’t even know it. 

Paul Thomas is owner of Thrupack, a cottage company based out of Norfolk, Virginia that specializes in quality waist packs for long-distance hikers.

 

Most people assume all “small business” is the same, but there are some important key points that make up the difference between a small business and a cottage brand. Here we take a look at what makes a smaller than small business and why the cottage industry is worth both recognizing and supporting (besides the delicious taste of Susie’s fresh bread).      

What defines a small business?

A small business is defined as a privately owned corporation, partnership, or sole proprietorship that has fewer employees and less annual revenue than a corporation or regular-sized business.

 

What makes a business smaller than a "regular-sized" business is less-than absolutely specific. Although there is no ubiquitous definition, the U.S. Small Business Administration (SBA) does try to provide their own legal interpretation as shown here: 

For instance, if Susie’s bakery releases an exquisite new cranberry cardamom spice muffin, and it does so well that she is able to move her 80 new employees into a new 6,000 square foot facility, and continues making more than the American baked goods stores average annual revenue of $2 million a year, she is, according to the SBA, still a small business. 

A warehouse with nearly 100 employees isn't exactly what most people think of as the "small local spot" around the corner. 

To the average shopper there is clearly a difference between Susie and her sister Sadie (who sells jewelry that she makes in her spare bedroom), but in a legal perspective, there is not. 

According to the government, the two sisters both fall under the category of small business. To a consumer, however, the difference in size is clear, and when it comes to how consumers spend their money this detail becomes important. As the trend among buyers to “support local” increases, identifying quaint, unique startups becomes increasingly meaningful among shoppers. The smallest of brands are usually operated out of a home or small studio, and are more clearly defined as cottage brands.   

What is a cottage company?

A cottage company is defined as a small-scale, decentralized manufacturing business often operated out of a home or small purpose-based facility. The modern cottage industry is an accessible part of the economy and continues to grow throughout the world, especially as the internet provides more opportunity for at-home entrepreneurship.

 

Although a cottage company may fall under the category of small business, it is unique in that most, if not all of its merchandise is derived from its proprietor or their family, with little or no outsourcing for a finished product. In other words, cottage brand products are produced almost solely by the hands of those who start and own the business themselves.   

Examples of modern cottage industry products include things like clothing, camping gear, jewelry, pottery, music, baked goods, photography, furniture, art, plants, and baskets. Even things like surfboards and bikes are often made out of a garage and sold- making strong and independent businesses for all sorts of people.

 

The sheer diversity of home made products within the cottage industry shows how attainable a self produced industry can be. Skilled creatives are constantly brainstorming new ways to start businesses and get friends and family involved.

Brandon McIntyre and Ashley Thick are the founders of the cottage company Superior Wilderness Designs- an awesome ultralight backpacking brand that features high-quality gear that is all completely handmade in Michigan. 

 

 

For aspiring entrepreneurs, attainability is important. Even a small business can require a substantial investment, but cottage industries can be started by anyone and require little to no capital or overhead. This exciting detail is important, as self-owned businesses are often seen as desirable but also require a level of investment that many are not comfortably able to make.

Because of this low overhead, cottage brands are often so small that employees consist primarily or solely of immediate friends and family members, which means that Susie would have gotten nowhere if it weren’t for her mothers help slinging cinnamon rolls in those early days. 

Even for cottage companies that have moved beyond the garage and into commercial space, their business may still consist of a small number of employees that are made up of a community of friends. Cottage industry brands are often seen at farmers markets or even local retail stores.

Where did the cottage industry start?

Over the years, cottage industries have continued evolving to reflect more modern practices of western capitalism.

The first cottage industries were literally operated out of cottages. That's right, the straw roofed, stucco-wall houses with the horse eating from a pile of hay out front is where the cottage industry first began in the 15th century.

Prominent mostly in the 17th and 18th century, the cottage industry consisted of a system where textile merchants would give materials to skilled families and then contract them to make a product from their home, then return later when it was finished to retrieve and sell. Also known as the “putting out system,'' it became a way for workers to bypass guilds who controlled local industry and since this time, the cottage industry has been crucial to developing countries as a way for homes to become financially independent and for farmers to earn a living during the off seasons. 

During the world's transition into industrial labor, working from home was a major benefit to the working class who had families at home and couldn’t leave the house. No doubt this scene was often unsavory, as people often made work in poor, indigent conditions for little money. However, as society continued to grow more affluent and standards of living up turned, the conditions of the home improved and the cottage industry faded as commuting to a centralized place of work became common practice. 

Today, a traditional “putting out” system still exists in less economically developed countries. In western culture the cottage industry has shifted to a modern, more entrepreneurial template that uses methods of self production, management and advertising.

With the creation of the internet has come a new way for visionaries and creatives to start businesses from their home. People have access to community, education and resources that weren’t as easily available before the age of information.

 

With this novel tool to do business, entrepreneurs wield a power of self creation that allows them to take to their living rooms, often startling their roommates with drop cloths and pottery wheels as they emerge to begin their new prospects in painting and ceramics. 

Why are cottage companies important?

 

Individually, a small cottage brand may seem benign to the grand economic system, but collectively, they make up an impressive portion of all business in America. 

 

For instance: 

 

According to the Office of Advocacy, in 2020 there were 31.7 million small businesses in America. When compared to the 20,139 large businesses, it clearly shows the overwhelming power of small firms.

 

In addition, almost half the private sector's labor percentage is made up of small business employees at 47.1% of total employment belonging to institutions of 500 or less (about 61 million people). Where 500 people may seem like a large threshold, the fact is that the average employment size of all small businesses in 2020 was only 22 people. For startups, the number is even more reflective of the true cottage industry with an average size of only 4 employees.

Modern industry is born in the spare bedroom. 

Families also clearly like to drag each other into their crazy business schemes with one in three (31%) of all small firms registering as family owned with family employees. This, of course, only comes after kids, parents and siblings band together to clean out the old pantry because that's where Susie’s brother Seth wants to start brewing his kombucha business.

In 2016, 24% of all small enterprises were home based. Nearly a quarter of all small firms were made from home as cottage businesses, and that is an increasing trend. Houses make fine places of business for big visionaries with little capital to invest. And, same as two hundred years ago, keeping a business close to home yields less impact on a family that has to stay close to children or other loved ones. 

It is true that as businesses grow over time, they do inevitably evolve away from the home and family into larger spaces with more diverse labor pools. Production demand often necessitates this, as even cottage companies usually aim to succeed beyond their initial capacity. The essence of a small business, however, remains just as strong when a cottage brand operates from home or from small facilities with limited employees. 

If it wasn’t for the small but critical and immediate resources available to the average start up, small businesses could not be born. Large corporations that employ hundreds of thousands often start out as garage dwelling seeds of hope and hard work. These cottage brands are important to the economy both for their size and potential to grow, as any creative should be entitled to the opportunity to make money by exercising a skill that contributes more passionately to our current system at large. 

Why support cottage brands? 

“Support local” is an increasing trend among consumers towards small business and cottage brands.

 

Related: Garage Grown Gear is a great place to discover both new and well established outdoor cottage brands.

As large corporations continue to dominate more financial resources and physical real estate, this subtle and powerful trend is gaining traction to counter the forces of big business and to return a sense of passion and ownership to the workers of the world.  

 

The main reasons to support local cottage businesses are to preserve local character and community, ensure product diversity and keep more money within a local economy.

The importance of supporting the local economy expands beyond the product being purchased. It encompasses several personal and practical aspects of economy that connect love and labor:

• Preserve local character and community- Supporting the cottage industry by buying products you see at farmers markets or online through websites like etsy.com or even Instagram enable the production of things that have human charm and uniqueness. Preserving this local character of the people who live in a relatable community gives meaning to the art and tools that surround us. Furthermore, it also helps to build connection between buyers those who they consider friends.

• Ensure product diversity- As larger businesses often operate by specific goals to increase profit, cottage industries usually feature more original items and are more likely to take risks to produce something creative. This risk, or willingness to create something they believe in, more often suits the demand of their own interests and reflects the interests of those in the individual community where they live.

• Keep money in local economies- As industry continues to trend toward large corporate infrastructure, a wage gap has emerged between executives and employees. With cottage brands, employees are the executives. A higher percentage of revenue remains in the pockets of cottage business owners and they are more likely to spend that money at other local businesses. According to the SBA, of every $100 spent locally, $48 of it is recirculated into the local economy. This, in comparison to only $14 recirculated when money is spent at large box stores, makes a drastic economic impact in a community. 

 Owner of Waymark Gear Co. Mark Benson is an avid outdoor enthusiast who, with a small team in West Valley Utah, specializes in stitching and designing hiking backpacks in a variety of styles and colors.  

 

The cottage industry is a small part of the economy with big implications. Beyond even the financial responsibility of supporting local, there is also the charm in reminding each other that businesses are indeed owned by people. People have their own personality, individuality and charisma, of which all are often reflected in their products.

 

The big world of tiny business

 

The cause we serve by supporting cottage businesses is one of both creativity and humanity. Making what one loves helps to serve a deep feeling of purpose, and supporting those passionate individuals drives a feeling of belonging and inclusivity.

 

 

The cottage industry nurtures a relatable aspect of business. When a purchase is not only for a product but a personality, it makes for a more sustainable relationship for both producers and consumers. By supporting cottage brands, you’re also supporting Susie, Sadie, Seth and the whole family. Not only are they together in contributing to our local economies, but ultimately, we all are, so it's best to use money in a way that encourages a lifestyle where we give as we spend, the cottage industry being the easiest, most rewarding way to do so.