What Is A MicroBusiness?

What is a microBusiness?
It’s apparently a difficult word to define--that’s what it is. A microBusiness (herein referred to as mBiz or micro) is smaller than a small business. Way smaller. Defining the term microBusiness is even more elusive than defining "small business", or "entrepreneur". Ask six business people to define any of these terms and you'll get six different answers.

So how much smaller is an mBiz than a small business? I've heard small business defined in many ways: A small business has less than 500 employees; or a small business has less than $300 million in sales; or a small business is where the owner knows all of his employees. I’ve also read that a microBusiness is a company with less than $1 million in sales; or a micro has five or less employees. Defining the category of a business by the volume of sales, or the number of employees strikes me as a method that serves the IRS and large insurance companies much better than it serves the business owner.

The definitions of a microBusiness (just like small business and medium-sized business), are all over the map. State governments, if they’ve given it any thought at all, have their own definition.

Vermont has the “Micro-Business Development Program” . They define an mBiz as “a business with 10 or less employees”.
The State of California defines mBiz as: “A small business that, together with affiliates, has an average annual gross receipts of two million seven hundred fifty thousand dollars ($2,750,000) or less over the previous three years… or a small business manufacturer with 25 or fewer employees”
Just shy of $1 million dollars per year is not what most people would call a microBusiness—neither is having 25 employees. I know there are microBusinesses that enjoy revenue of $1 million per year or more, but they are the exception, not the rule. But, I don’t see how having 25 employees even relates to the word micro.

The definition offered by the Association of Enterprise Opportunities (AEO) is more realistic: "In the United States, a microenterprise is usually defined as a business with five or fewer employees, small enough to require initial capital of $35,000 or less; the average microloan is about $7000"

Put microBusiness in the search function of the IRS site and you’re likely to get nothing. The Feds use words like sole proprietor, small business, part-time business, self-employed, and independent contractor. If you want a dizzying array of information on small business, go here, but be sure you’re well rested and clear-headed before you go into that territory.

Even Wikipedia doesn’t have a good definition of microBusiness.

Here’s What I Think
For the purpose of this Knol, and the millions of people who aren’t sure how to characterize themselves, I’m going to be so bold as to create a characterization and a definition. When I’m out talking to microBusiness owners, I’m talking to people who refer to themselves as soloists, independents, consultants, craftsmen, artists, musicians, freelancers, free agents, and self-employed people. The majority of these companies are one-person enterprises. The majority of these companies operate out of their homes; and many of these companies have part-time help from a family member or friends.

So here is my characterization of microBusiness.
A microBusiness is a very small business; in fact, it’s the smallest of all businesses. Most micros have come into existence as a result of the founder following one or more of these pathways:

Corporate Dropout: The owner has developed distaste for corporate life, and yearns for something smaller, simpler, and more personally gratifying. He or she starts an mBiz.

Qualifications: The owner is either overqualified, or under qualified to do a particular job, and so will not be hired by the corporation. But she has the talent for the job, and decides to create her own job by starting a microBusiness.

New-Life Retirees: The owner was retired (either forcibly or by choice), but still wants to be a creative, productive citizen. The microBusiness is the ideal "new-life" vehicle.

Unemployable: The owner is effectively unemployable for reasons of age, education, credentials, health, or physical limitations. The mBiz owner can work around these issues.

Entrepreneurial: The owner is a dreamer, a thinker, an independent spirit. She has an idea for creating something better, and has always wanted her own business—and so she starts one on her own.

Home Business: The owner wants to earn a primary or secondary income on his own while staying close to the home front and caring for other family members. Home businesses are probably the largest segment of micros.

Accidental Entrepreneur: The owner was downsized, laid off, or otherwise dismissed from his job, and his job search turned up nothing. He was forced to use his ingenuity to create an income independently, and so he became an “accidental” microBusiness owner.

Lifestyle: The owner wants to have more control in her life. She wants to be autonomous, grow at her own rate, operate by her own rules, and have the freedom of her own schedule. Nothing provides for these demands better than a microBusiness.

An mBiz often has no employees (i.e. the soloist or one-person business), or maybe one, two, or three (perhaps more) employees who are often family members or close friends. Micros are often operated from the owner’s home, or a small executive suite office. Income can range from a few dollars a week to over a million dollars a year. Micros are trades people, professionals, doctors, designers, artists, writers, consultants, inventors, technicians, craftsmen, manufacturers, or workers from a variety of other disciplines.

Often, micros don’t have access to traditional financing, and the business is either started with little money, self-financed, financed creatively through friends or angel investors; or more and more, through one of the microfinance options that are starting to multiply, like Kiva or Accion-USA.

Micros are so small they are often exempt from things like worker’s compensation, liability insurance, and certain professional licensing. They are so small that they often fly under the radar of suppliers, manufacturers, and vendors that have products and services that they require. Most micros aren’t operating in this business model to become rich. More than money they are attracted to the lifestyle that their mBiz provides for them. They enjoy a superior level of autonomy and freedom that is typically unavailable has a wage warrior, or as a manager in a larger business or corporate framework.

How do you define microBusiness?
Here’s my stab at a simple definition. "A microBusiness is the smallest of all businesses, created by a self-reliant person (who often considers himself a survivor), for the purpose of making a living and making a life, and whose goal is not necessarily wealth and worldly goods, but rather a sustainable enterprise that can provide for the comfortable wellbeing of the owner and his family."

This definition would never suit a bureaucracy, but rather is intended to give mBiz owners something to hang our hats on. There are millions of us out there. The origins mentioned above shed some insight on where the millions came from. We are the smallest of small, but we are an incredibly important part of the American economic landscape. AEO estimates there are “more than 24 million microenterprises in the U.S., representing 18% of all private employment and 87% of all businesses. One out of six U.S. private sector employees works for a microenterprise. Historically, microenterprises have been considered the backbone of the U.S. economy.”




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