The New Wave of Micro Businesses
Historically, tough economic times have forced many people into some level of self-employment, and our current economic downturn is no exception.
When people’s hours are cut they may start a side business to make ends meet. And if they are laid off in a period if increasing unemployment, they might need to establish a startup company for work. Typically, there is a 4%-6% growth of very small businesses during a recession.
Of the more than 27 million companies in the U.S., 90% of them are micro businesses, which are companies with fewer than 5 employees. This definition includes non-employer (single person) businesses. Micro businesses are also usually classified as having startup costs of $15,000 or less. Business loans to these companies tend to be very small, less than $5,000 on average.
Besides their low startup costs, micro businesses can more easily withstand business slowdowns. Bare-bones operations and flexible business models allow them to change as needed. And if they do survive, they will be in a better position to grow when things cycle around and the economy improves. All of these characteristics make micro businesses an attractive employment alternative for people.
According to The Enterprise Center at Salem State College, as the national unemployment rate reached 9.4% this past spring, the number of micro businesses grew. In the last two years, according to The Association for Enterprise Learning in Chicago, micro businesses added more than 2.5 million jobs to the U.S. economy. The actual numbers may be higher because many very small businesses operate below the radar.
The recession is definitely fueling the increasing number of micro businesses, but it is not the only factor. In the last 25 years self-employment has risen by 300%. That growth has been largely driven by people looking for more satisfaction from their work. Additionally, the tremendous advances in technology have opened up the playing field in unprecedented ways. Americans have been redefining the nature of employment for several decades and our current economy is accelerating these changes.
Micro businesses are often started out of the home. These enterprises offer all sorts of goods and services. As people leave the corporate world, voluntarily or not, there is an increase in the variety of micro businesses. Beyond the expected child care, house cleaning, and catering companies, you can find graphic designers, web programmers, PR and marketing specialists, virtual assistants, and consultants from every field.
Over the next year, small and medium size businesses will continue to lay off employees. In place of full-time employees, they will contract with micro and non-employer businesses on a project-by-project basis. It is a cost-cutting tactic that will help them survive, and it fuels the proliferation of micro businesses. This change in hiring practices may stick around long after the recession, and even become a permanent change in a rapidly evolving employment landscape.
As these changes take place, a number of sites and tools are appearing that support the micro business trend. Facebook, Twitter and LinkedIn continue to evolve and add features that support businesses of all sizes. In the last 2 years there has also been a dramatic rise in the number of social networks geared toward small businesses. These developments allow self-employed people access to marketing and PR opportunities that would have been beyond their reach several years ago. Additionally, sites such as Etsy (an online marketplace) provide a chance for people to test the market for their product, with very little monetary investment.
Currently there are about 350 entrepreneurial/micro business support centers around the country that provide resources, training, and access to funding. The Renaissance Entrepreneurship Center in San Francisco and The Micro Business Development Program in Vermont are just two of the many that can be found online. These centers focus on people who want to start their own business but lack the skills and financing to do so. Most of these facilities are set up to serve disadvantaged communities. As the micro business segment becomes a bigger player in the U.S. economy, though, more support organizations that are geared toward a broad range of users, will appear. There are already some effective groups out there, such as Ladies Who Launch, but more will definitely emerge to meet the growing need.
Micro businesses have always comprised the largest segment of American business, but the economic downturn has placed a new spotlight on them, and subsequently, their significant impact on the U.S. economy. Lawmakers at the state and federal level are shifting more of their attention to small businesses, and if the trend continues, the voice of the very small business owner could begin to have a noticeable impact on policies.
A unique situation is occurring and it is creating a golden time for entrepreneurs. The increase in micro and non-employer businesses is creating a need for more micro and non-employer businesses. There is a new market being created and the needs of this market can best be met by themselves. As has happened in the past, this recession is creating many opportunities and a new wave of entrepreneurs is already taking full advantage.
About the Author:
Beth Andrus is the author The Essential Business Handbook: The Nuts & Bolts of Getting Up and Running Fast, a step-by-step guide through the formal process of setting up a small business. She writes a blog with a strong focus on micro businesses. Beth also coaches new entrepreneurs through the beginning stages of the business setup process, using her experience as a business owner and over 15 years in corporate and cost accounting. For more information visit her website http://www.theessentialbusinesshandbook.com or blog http://www.minibizbuzz.com.
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admin | Jul 31, 2009 | Comments 0
Filed Under: Entrepreneurialism • Industry News • Startups
