It allows us to communicate much more quickly and easily, learn from incredible online resources, and work remotely if desirable or necessary.
Most notably here, it allows the smallest businesses to punch far above their weight, achieving more than their resources would otherwise allow. Self-employment is no longer limited to those with formidable means or limited expectations. Even if you can only run a very basic operation, you can achieve some remarkable successes if you get your approach right.
In this post, we’re going to look at the smallest type of multi-person business you can run: a micro business. We’ll more broadly cover what a micro business is, what sets it apart from a regular small business, and what the pros and cons of a micro business are, before running through a few examples of successful micro businesses. Let’s get started.
What is a micro business?
A micro business (sometimes known as a micro enterprise) is a step below a small business in terms of size and scope. What exactly constitutes a micro business isn’t consistently defined, and doesn’t need to be since it isn’t a vital technical term. One definition (used by the UK government, notably) is any business with nine or fewer employees, but that number is somewhat arbitrary.
Micro businesses might be in the early stages of growth, or they might have settled into basic operational stability without aspiring to hire more employees or change what they do. However you define a micro business, though, what ultimately matters is the general meaning – and we’ll cover that in more depth as we look at what sets it apart from a small business.
Micro business vs. small business: what’s the difference?
Since we used the UK’s definition of a micro business, we’ll use the equivalent definition of a small business, that being any business with fewer than 50 employees – disregarding additional notes about turnover and corporate asset value. But the difference between these two business types is greater than a simple disparity in the number of employees on the books.
Small businesses have internal divisions and hierarchies and most of the other trappings of the enterprise world when it comes to structure. They have brands that might not be household names but are likely to be known in their industries. They have leased offices and various other long-term financial commitments.
Micro businesses, on the other hand, retain a lot of freedom from those corporate frameworks. This is good in some ways and bad in others. They involve tight-knit teams that are often related or at least very friendly: indeed, family businesses are often micro businesses because they seek only to pay the bills and provide jobs for all family members.
3 advantages of micro businesses
If you’re running a micro business, then you might be curious about whether you should try to keep your operation going at its current size or try to grow it to the small business level. Let’s first look at some of the biggest advantages of the micro business model:
1. You can specialize in a specific niche
Some companies start out trying to provide numerous services or product types: they hire large teams, invest heavily in growth, and must slowly determine which elements of the business are sustainable and which aren’t. The end result of this can be substantial operational contraction, with unnecessary jobs or even entire departments being eliminated.
Others start out with niche pursuits but expand because they think they can find massive markets for them, only to discover that there just isn’t enough interest to support them. Think of a successful local business launching a nationwide chain that subsequently fails because suitable conditions only exist in that small area.
Running a micro business makes it possible to fully specialize in a niche market and remain highly profitable. It’s all about cornering that niche and serving as the industry standard. If you can do that, and stay ahead of any upstart competition, you can settle into a comfortable groove that consistently makes you money and doesn’t require you to engage in frequent marketing.
2. Your company is adaptable and flexible to change
If you follow the world of startups at all, you’re surely familiar with the concept of pivoting: accepting that your current business idea isn’t workable, and making some major alterations in the hope of yielding better results. Instagram and Twitter both resulted from speedy pivots, and they seem to be doing fairly well these days.
Of course, the teams that developed those eventual behemoths were very small: essentially groups of friends who knew each other from other projects and decided to follow their passions and creativity. A cohesive 40-person small business couldn’t pivot to a new model in a matter of weeks. It couldn’t do it in months.
Since micro businesses function through small teams, they can adapt to changing conditions with aplomb. If their industries suddenly shift, they can band together and come up with ideas to take advantage of their new circumstances. Relate it to warfare: a small unit of elite soldiers is far better equipped to handle hazardous terrain than an unwieldy battalion of soldiers with varying levels of skill.
3. You have low overhead costs and fewer expenses
The bigger a business becomes, the more operational costs it accumulates. Even if you leave aside the need for office space in light of the current move towards remote working, you still need to factor in the need for comprehensive HR oversight and payroll management – and plenty of businesses can’t operate fully remotely, requiring them to invest in expensive office spaces to accommodate their growth.
Micro businesses can be handled much more easily, using modern automation tools to work very efficiently without needing large numbers. Many operations counting as side hustles – such as freelance marketing or dropshipping – can be run with very minimal oversight. You configure the campaigns, set them running, and review them periodically. That’s it.
If micro businesses need to invest in training, they can do so neatly in company-wide sessions instead of needing to break things up. They can support each other directly, drawing on those strong colleague relationships. They can also put more of their revenue into improvements beyond hiring: for example, keeping employees healthy, shoring up operational infrastructure, or running advertising. A well-optimized micro business can be a great company to work for.
3 disadvantages of micro businesses
Having looked at the core advantages of running a micro business, let’s look at some of the disadvantages, because there are some good reasons why most companies continue to invest in expansion. Here are a few to consider:
1. More responsibilities with fewer people to manage tasks
Running a modern business is complicated, particularly concerning things like reputation management and content marketing. Just one strongly-negative review on social media can fester if left unaddressed and cause major issues down the line, and generating enough content to make a company blog worthwhile (particularly in competitive markets) is no easy task.
Some tasks can be outsourced, but it’s often relatively expensive to get decent freelancers, and you still need to put time into outlining the tasks, handling the communication, and ensuring that the finished work is suitable. It’s better to handle tasks in-house, but there’s a problem there too: you’re not going to have all the necessary skills, even if you can find the time.
One big reason why companies hire new employees is that they want to shore up the holes in their expertise. Bringing in a full-time graphic designer can help massively with branding, for instance, and immediately improve a company’s potential range of services. Micro businesses lead to people flitting between numerous distinct tasks: something that can be fun at first, but will eventually become grating.
2. Higher risk of failure and lack of funding
You’ve surely heard of the phrase “Too big to fail” used to refer to financial institutions that have contributed to (or even caused) major crises. Those banks and investment funds have been relied upon so heavily that the collateral damage of their outright destruction would be devastating, so governments choose to prop them up.
The point here is that size can protect a company, and it goes beyond the threat of taking other companies with it. Bigger companies have more turnover, more brand recognition, and more clout with their clients: if they encounter difficulties, they can fall back on their savings and downscale if necessary (either temporarily or permanently).
In addition, bigger businesses have more significant financial records and images, making it easier for them to get loans and/or commitments from outside investors. Micro businesses are unproven as larger entities: if they look for investment to grow, they’ll seem risky, and if they pursue it to improve, potential investors won’t see much room to profit.
3. Limited access to valuable resources
Small businesses can afford to get business rates from various service providers, and have enough name recognition to seek (and receive) support from notable industry figures. Offering scaling discounting is a great way to attract bigger contracts, and people will generally offer time to companies likely to have something for them down the line.
Micro businesses don’t get to experience these benefits. They need to negotiate for any rate concessions, and they’re unlikely to get them because they can’t usually afford to pay for large contracts. It also bears noting that small businesses often have experts from various areas who can draw upon their certifications, accreditations and scheme memberships in useful ways.
The bigger you can grow your business, the better prices you’ll be quoted, and the more you’ll be able to convince people to offer you by virtue of the value of a potential business relationship. The leverage that comes with corporate growth is hard to deny.
3 examples of successful micro businesses
Here are three examples of successful micro businesses in existence today.
The perfect example to start with because it’s still a micro business even if you go by the employee number definition, Everhour is a time-tracking SaaS tool that allows easy expense tracking and report generation. Run by entrepreneur and former engineer Mike Kulakov, it picked up its first paid client back in 2015 and hit $1.4m in annual recurring revenue last year – all with a team of just seven people.
Using no external funding and working on it at first as a side project, Kulakov understood what people were looking for and knew that the corporate world needed to make a greater commitment to logging time online. As evidenced by the subsequent rise of tools such as Everhour and Toggl, he had the right idea.
2. Linus Media Group
Linus Media Group was founded by Linus Sebastian and three of his acquaintances back in 2013, and it remained a small operation as it grew, primarily making waves through the YouTube channel called Linus Tech Tips. It was a simple matter of tech enthusiasts bringing in other tech enthusiasts to make entertaining and educational videos, and it just clicked.
Today, the company has many more employees and major infrastructure (including a large amount of office space), so it surely counts as a small business now: but it got there slowly and incrementally through a micro business mentality. If you aspire to grow your business, it’s a great example to follow.
3. Innocent Drinks
Founded by three graduates who went to university together, Innocent Drinks got underway when they worked on smoothie recipes for six months and sold them at a music festival in 1998. Instead of going by gut feeling, they invited the buyers to vote on whether they should quit their jobs to keep making smoothies – and the response was a definitive yes.
Since then, the company has become a dominant force, and according to LinkedIn it now employs 201-500 people, meaning it definitely doesn’t qualify as a small business (let alone a micro business). Those three graduates didn’t have huge resources behind them for some time, though: just fruit and a dream. They made it work because they were passionate. You can, too.
Wrapping up, running a micro business doesn’t mean you can’t still make waves in your industry. Not only can you still make excellent profits and corner your niche, but you can also establish a fantastic platform for growing in a safe and effective way. You just need to decide for yourself which route you want to take. Stick with the team you have, or expand? It’s a tough call, so think carefully!