A microbusiness, also known as a microenterprise, is a business operated by fewer than 10 people and with annual revenue of less than $250,000.
Microbusinesses are a very popular form of business because they require very little startup capital and have low operating costs. Microbusinesses are often started as a hobby or side hustle that generates additional income for the owner or sole proprietor.
Despite their size, small businesses account for a significant portion of the U.S. economy and employment.
In this article, we explore the difference between a microbusiness and a small business (and why it matters), the opportunities and challenges of owning a microbusiness, and tips for getting started.
Micro and small businesses
Microbusinesses differ from small businesses in size and scope. Although small businesses tend to be smaller and focus on a specific field, such as technical writing or fitness coaching, small businesses offer a variety of products and services.
Small and medium-sized enterprises are subject to guidelines regarding their size and scope, particularly with respect to loans and financing. For example, to qualify for government-backed small business loans, the U.S. Small Business Administration (SBA) requires small and medium-sized businesses to Defining a company. ).
Actual sizing parameters for SBAs are defined by North American Industry Classification System (NAICS) codes, and there is no one-size-fits-all parameter. For example, a baked goods business (NAICS code 445291) can only qualify as a small business if its annual revenue is less than or equal to his $16 million. On the other hand, cracker and cookie manufacturers (NAICS code 311821) must have fewer than 1,250 employees.
Example of a small business
Small business owners often fall into different categories, each with one name. All of the following are considered small businesses:
- independent contractor
- startup business
- e-commerce business
- street vendor
- small local independent retailers
Microenterprises include a variety of professions, from accountants to web designers. Some may operate as a home-based business, while others may have a storefront or commercial office.
micropreneurs and entrepreneurs
Micropreneurs and entrepreneurs are similar in that they enjoy flexible schedules, unlimited income potential, and set their own terms.
But that's where the similarities end. Micropreneurs aren't necessarily focused on rapid growth. They focus on meeting and servicing their clients' needs without making significant investments in operations, employees, or assets. Entrepreneurs have big ideas and usually secure funding and hire people to help them grow.
This is not to say that micropreneurs don't have an entrepreneurial spirit. They choose to pursue their dreams by simply owning and operating a “small” business rather than taking the financial and business risks that come with entrepreneurship.
What are some of the challenges of running a small business?
Managers of small businesses must make a variety of efforts and run their businesses with limited resources. They must navigate marketing, IT, billing and collections, customer service, taxes, and business regulations.
Let's break down some of the main challenges of running a small business.
- get noticed: Standing out from the crowd is a challenge for small business owners. With limited marketing budgets and resources, it is difficult to reach your target audience and differentiate yourself from your competitors.
- financial stability: Finding and maintaining a steady source of income is a common challenge. Customers come and go, seasons change. Maintaining cash flow requires foresight, planning, and sometimes just plain luck.
- Regulations and legal requirements: Starting any business, small or otherwise, requires staying compliant with regulations. From business licenses to tax laws, understanding what laws apply to your business and staying compliant can be extremely difficult, especially as laws and regulations are constantly changing.
- Scalability: Many small businesses don't have the infrastructure, capital, or resources to scale up to meet demand. No matter how much business comes your way, you may not be able to handle the extra load.
- technology: New tools and software are making businesses' lives easier than ever, but knowing when to invest in new innovations and how to implement them can be difficult.
How to start a micro business
If you're looking to start a microbusiness, there are steps you can take to ensure your venture is successful. Consider the following:
- make a business plan: A business plan helps focus your vision and goals, guide your strategy, and identify potential risks (and a plan to overcome them). You can also define the investment or funds you need to get started.
- Choose your business structure: Even if you're a micropreneur, there are plenty of options. You can choose a sole proprietorship, limited liability company (LLC), corporation, or partnership. The business entity you choose will affect your daily operations, ownership, taxes, and the risks you choose with respect to your personal assets.
- Please select a business name: When naming your business, choose a name that is easy to remember, describes your business, and fits your brand.
- Register your business: Depending on your business structure, name, and location, you may need to register your business with state and local governments.
- Obtain federal and state tax identification numbers: Again, depending on how you structure and operate your business, you may need to register with the federal government (also known as an Employer Identification Number or EIN) and state tax ID.
- Open a business bank account and credit card. Separating personal and business loans is important if you have large business expenses, are seeking financing, or want to reduce your personal liability.
- Obtain insurance, licenses, and permits
- Arrange the accounting for your business and arrange for financing if necessary.
- market your business