In recent years, micro businesses have soared in popularity. With more people than ever before venturing into self-employment it seems that micro businesses are showing no signs of slowing down.
But what exactly is a micro business? Is a micro business any different from a small business? And, in today’s highly competitive world, what can micro businesses do to stand out from the crowd? Let us find out.
Defining a Micro Business
As with any relatively new definition, precisely what comprises a micro business can be difficult to pin down. There are plenty of companies out there that would class themselves as a micro business while more accurately falling under the category of a small business.
Put simply, a micro business is a company with annual sales and assets valued at less than $250 000 per year. Additionally, a micro business usually has fewer than nine employees including the owner.
As a subcategory of small businesses, micro businesses can develop in diverse industries including catering, computing, and cosmetology. With this in mind, micro businesses still require the same level of skill, dedication, and commitment to success as larger companies.
Through experience and growth, some micro businesses even go on to become much larger entities capable of competing with other companies in the small business market.
How is a Micro Business Different from a Small Business?
With the definitions of what comprises a small business changing on a regular basis, there is nothing to stop a micro business from labelling itself, or being viewed by others as, a small business. Similar to micro businesses, a small business is usually an independently owned, for-profit enterprise, that operates within, but does not dominate its industry or local market.
One key distinction though is that a small business can employ up to 500 employees and own assets of up to $1 million per year. Moreover, because of this, small businesses are much more able to secure capital loans and credit as their companies are classified as more financially solvent.
Of course, once a small business is registered as an LLC or a corporation, it is eligible to pay taxes at a corporate tax rate. Micro businesses, however, are much more likely to pay the personal rate of tax, which has advantages in terms of saving money and growing the company.
Accordingly, small businesses often rely on outsourced or in-house bookkeeping and accounting services to ensure that the payroll is correctly managed, that tax compliance is adhered to, and that any relevant government fiscal policies are considered.
Furthermore, the operating costs for small business are usually higher than those encountered by micro businesses. Everything from recruitment and hiring, to employee management is usually much more expensive for a small business.
What Can Micro Businesses Do to Stand Out?
When running a microbusiness, it is fundamental that all employees are passionate about the products and services on offer. The unique workplace lifestyle is a hugely important part of working for a microbusiness, so whether your interests lie in antiques, blogging, or health and fitness, it is vital that everyone onboard is knowledgeable and enthusiastic about the company.
By the same token, as a microbusiness, it can be surprisingly easy to get carried away by spending money that you simply do not have. Micro business owners should only invest in what they need to deliver quality products and services and any money earned should be put straight back into the business.
On the topic of finances, micro businesses must be even more frugal with their money than small businesses. All expenses need to be kept under control and accounted for. It could even be useful to set up a profit and loss (P&L) sheet to ensure that everyone knows where the business is going, what it can do better, and why sales might be fluctuating.
One advantage of running a micro business is that you can find a lot of free or cheap items to cut your expenditure down. There is always plenty of office furniture in thrift stores that can you purchase for your headquarters and you could even reach out to other businesses in case they have any old equipment that is no longer needed.
Finally, although running a micro business is a unique process, it is still important to operate in a way that is as thorough as a large company. Get all and any business agreements down in writing, and always fulfil your promises.
The Future of Micro Businesses
Ultimately, whether a company identifies itself as a small or micro business, there are clear advantages to both classifications.
The intimate feel and personal touch of a micro business provides a level of expertise and a commitment to quality service that some larger businesses simply cannot offer.
Thanks to their low start-up costs and high-quality offerings, it is safe to say that micro businesses will be with us for some time to come.
Above all, as long as micro businesses are able to provide customers with goods and services tailored towards a targeted audience, there is no reason why they cannot play an important part in the economy.