From “Microbusiness and the Human Economy”

From “Microbusiness and the Human Economy”

Microbusinesses are generally defined as firms with fewer than five or ten employees. That sort of quantitative definition is useful in the context of getting basic information about them, such as their numbers, their industry sector distribution, their owner demographics, their annual receipts and their overall contribution to gross domestic product (GDP).

However, that definition does little to explain why it makes sense to view microbusinesses as a separate category of small businesses. Thus, in The Entrepreneurial Economy, I proposed an alternative, qualitative definition of a microbusiness:

A microbusiness is a small business in which no one employee performs a single function or task for the business, and all employees (including the business owner) have functional responsibilities in multiple areas of administration, production and management for the business.

This definition is useful in that it creates a set of parameters around which to view the operations of microbusinesses and to see, from a practical point of view, just how they differ from other firm size classes.

There have always been microbusinesses, of course. But the business form known as the microbusiness has evolved in significant ways over the past ten to fifteen years, assisted by technological advances, to events, and to changes in the consumer landscape.

As was discussed in The Entrepreneurial Economy, microbusinesses are defined less by their size than by the way in which their size dictates how they operate. Microbusiness owners have developed alternative business models that allow them to operate in their chosen industry sector in spite of their size. They are notoriously fast, frugal and flexible, usually willing to experiment and operated by people who are almost always determined to enjoy what they do.

While it is true that the size of a microbusiness is the deciding factor in the difference between the way they and larger firms operate as businesses, it is also true that being a microbusiness is, to a very large extent, a matter of the choices made by microbusiness owners.

They are not forced to run microbusinesses. There are all sorts of public and private sector service providers available to help microbusiness owners pursue more traditional small business growth trajectories, if that is what they want to do.

For that matter, they need not operate their own business at all. A microbusiness owner who feels that his venture is a failure because it has never grown beyond micro size does have the option of closing his or her firm and accepting a position in a more traditional work environment. Except in a particularly dire economic climate, they can usually find work of some sort and, in fact, doing so would often entail working fewer hours for better financial rewards.

From these observations, it seems reasonable to deduce that, for the most part, microbusiness owners run microbusinesses because they want to run microbusinesses. The microbusiness choice has to do with the goals and motives of the microbusiness owner, among which making money may number but would not necessarily be the top priority. And it is, in part, because money is not necessarily the only reason for running a microbusiness that their owners have evolved a distinctly different way of doing business than that of other firm size classes.

[There are plenty of folks who assume that microbusiness owners are simply having trouble growing their firms to a larger size along a more traditional growth trajectory. Recent firm size class trends, however, call that assumption into question.]

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