What Is a Micro Business?

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Just how small are today’s smallest businesses? Well, technically, they could be just one or two people — and that would be something called a micro business, which is a business that employs fewer than ten people. These businesses are an important subset of the small business community and the U.S. economy at large. At last count, in 2017, the Small Business Administration (SBA) estimates there are 3.8 million of these businesses at work in the U.S. alone.

But what is a micro business? Does it have different obstacles to overcome when compared to a small business? And what do these obstacles say about the meaning and nature of small business generally?

Defining the Micro Business

Many experts suggest that, besides the ten-person threshold, micro businesses also operate below a $250,000 per year revenue limit and require a minimal amount of capital to get started. Yet despite their small staffs, modest income and lower barriers to market entry, micro businesses have an outsized impact on the economy. In 2017, they provided 11 percent of private-sector jobs. And there are an additional 41.8 million “solopreneurs” (who found and run a business alone) operating in the U.S., such as freelance writers or photographers working from home.

Two young handsome florists working at flowers shop.

Micro businesses can also be small teams that serve a variety of needs in their communities, such as:

  • Small hair salons
  • Local law office
  • Community medical private practice
  • Construction or landscaping team

Starting a Micro Business: Pros and Cons

If you’re exploring the possibility of opening a micro business, there are several factors to consider. Here are just a few.

Pros

Often, the startup costs for a micro business are low. For example, when Mark Dalton began driving for rideshare companies, all he needed to do was add a small waiver to his current insurance plan. “I wanted something that I could do easily after I was laid off from my last job. I wanted to give running my own business a try, but many of the options that I looked at required huge investments that I couldn’t afford,” says Dalton.

A micro business also offers the ability to choose from a variety of structures with different tax and legal implications. Forming an LLC, for example, offers protection to the business owner in case of any disputes or accidents.

Cons

However, running a business of one — or with limited support — means that a micro business owner is likely to wear many hats. “I’m the guy who is up late at night dealing with my accounting and finances, and I’m also the guy who has to stop at Costco to restock snacks and waters,” quips Dalton. His experience underscores the importance that micro business owners should be ready to do heavy lifting across functions.

Further, many traditional banks aren’t accustomed to working closely with micro businesses. As a result, when Dalton was ready to upgrade his vehicle, he had to seek out alternative funding solutions. Being ready to trail blaze and find creative paths to funding when you’re ready to grow should be part of your long-term plans to navigate the business landscape as a micro business.

The Bottom Line

Micro businesses are an important part of the economy, providing jobs that benefit the community and allowing individual entrepreneurs the flexibility to run their own operations. Whether you’re seeking more freedom or you’re simply in the early stages of growing your business, ensuring your micro business thrives can be another shining example of how these critical entities offer their own take on the meaning and nature of small business in the U.S. today.

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