What Is a Microbusiness?

So what is a microbusiness anyway? How’s that different from a small business?

Lets take these one at a time. In the US a business with up to 500 employees is considered to be a small business. Other countries have different notions about but generally they trend more toward the 100 or less employee view.

So That’s What It Is

So what does that leave as a microbusiness? In the U.S. it generally means a business with zero to five employees. According to the U.S. Census about three quarters of all U.S. business firms have no employees. Most are self-employed people who operate unincorporated businesses that may or may not be the owner’s principal source of income. Estimates are that up to 90% of all American businesses are microbusinesses. That is is a lot of businesses. And these numbers are before the recession forced many people into starting their own businesses because they have been downsized from larger firms. The funny thing is that despite being so small, microbusinesses on the whole create lots of jobs, way more than small and large businesses combined. When big business contracts, microbusinesses are there to take up the slack.

Microcredit

Another feature of microbusinesses is that microbusiness usually means access to microcredit, which is another way of saying that even when microbusinesses can get bank loans they tend to be small. What does that leave for funding? The biggest source is self-funding, through savings, severance, equity loans and credit cards. Another source is loans from friends and family. A very lucky few can get outside funding through angel investors or venture capitalists, but they are almost non-existent for microbusinesses. Its no secret that more than any other cause a lack of adequate funding leads to failure or limited success.

Who Are These People?

Who starts microbusinesses and what do they all do? They are plumbers, writers, artists, craftmakers, accountants, bakers, handymen, consultants, free-lancers, solo, home office workers, bloggers, designers…you name it. Some are full-time businesses, but many are part-time businesses done for fun or supplemental income. Many of these businesses are started by women, minorities and the economically disadvantaged. All certainly want to make money, and microbusiness does not always mean microprofits, but many are also often motivated by other reasons like a love of what they do, a sense of pride and worth for working on their own for themselves.

In short, microbusinesses are a driving force in people’s lives, their communities and the economy as a whole. They contribute financially and help build communities through sustainable jobs and local re-investments. We all depend on these micro-entrepreneurs.

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