The most significant similarity between a factory and a cottage industry business is that both manufacture or produce goods. A factory is a business that operates in a building with the sole purpose of making products, while a cottage industry is a production business operated out of the operator's home.


The histories of the cottage industry and factory are closely linked. In fact, the factory system evolved from the cottage industry at the start of the Industrial Revolution in the late 1700s, according to Scholastic. Prior to that point, most manufacturing was completed by independent workers out of their homes or adjoining shops. At the onset of the Industrial Revolution, production began to move into buildings, and more formal manufacturing operations were established.

Equipment and Tools

Another key similarity between a factory and a cottage business is that both use typical equipment and trade tools involved in production. A factory normally has a much larger-scale operation with more expensive equipment and a larger supply of materials and tools. A cottage business is inherently limited in scope because, by definition, it is operated from the producer's home. Therefore, fewer pieces of equipment and more limited supplies are typical. Additionally, a cottage operator owns her own equipment, while a factory usually owns equipment and tools used by employees.


A manufacturing company generally produces goods and then sells them to wholesalers or retailers for mass market distribution. Factories often store finished goods and then ship them to resellers after orders. A cottage business may distribute goods in the same way, but it is also likely to sell directly to consumers. A cupcake maker, for instance, might make customized orders and deliver them directly to customers. This may require special zoning in some cities for a cottage business because of the potential for increased traffic to your home.


Operational efficiency is key to both cottage-based and factory-based manufacturers -- just at different levels. In general, manufacturers want to produce the largest number of the highest quality goods possible with the lowest costs of equipment, materials and labor. In a cottage business, the labor is essentially the value of the time the operator invests in her business. In a factory, managers try to avoid unnecessary or inefficient labor. In both setups, efficient equipment and processes, as well as the affordable costs to attain them, are considered.