Challenges of Operating a Micro Business

May 23, 2017

It is said that small businesses and SMEs are the backbone of any economy. To further elaborate on the statement, it might be said that micro businesses make up the large majority of the "small business or SME" market. A small business is usually described as a for-profit business, independently owned and operated, not dominant in its field, and typically having 500 or less employees.

A micro business might be described as an owner-operated business with perhaps no more than five or ten employees. These businesses generally start with very little capital and might be limited in ability to borrow funds from traditional lenders (depending on the business and country). Micro businesses serve a tremendous purpose in not only bolstering the economies of the world and benefiting individual communities but provide income and livelihoods for owner families and a small number of employees.

Micro ownership, however, comes with many challenges. 

Oversight and Supervision – The micro owner with no employees or very few employees has no choice but to oversee the entire business operation himself. This means supervising employees since there is essentially no one else in "management" to ensure that all the various tasks and functions of the business are handled properly. Although micro owners are always pressed for time because they have so much to do and no one to delegate some of the work to, they must still oversee operations and supervise any employees. It is only through diligent oversight that owners will know what employees are actually doing. The lack of personal follow-up and supervision can lead to a break down in operations and eventually disgruntled customers.

Operational Knowledge – Operational knowledge in a micro business is more than simply knowing how to sell a product or provide a service. While most micro owners know the technicalities of their individual businesses, they lack the "A to Z" fundamentals of operating a complete and efficient business. 

Without proper training, mentoring, or learning skills on their own through some form of ongoing education (reading, webinars, business courses, etc.), business growth can be stymied. Although few micro businesses do any planning for the future, some type of business training should be a short-term priority. Micro businesses cannot achieve the next level of success without a diversity of overall business knowledge.

Finances – Finances in a micro business are twofold...making a profit and record keeping. For many micro owners just having cash in a lock box or money in a bank account equates to profit and success although a stack of bills might remain unpaid. Making a profit, of course, is more than making sales. It is the owner understanding the direct costs involved in whatever product or service is offered for sale in addition to general operational and administrative costs. Without knowing all costs of a business, then a correct selling price cannot be determined.

While a micro business will certainly not have an elaborate set of financial statements as larger SMEs, they still must maintain some type of records to determine profit or loss, the need for additional capital, or necessary business changes. Even the simplest record keeping system is better than no record keeping at all.

Training – Employees must be trained in any size business. Without proper training, employees do not know how to do their individual jobs or if they are doing their jobs correctly or incorrectly. Since there is no one else in a micro business to train employees regardless of how simple a job might be, the responsibility falls upon the owner. He or she must spend adequate time training any employee. Although there might be constant employee turnover in a micro business due to salaries and benefits offered, this cannot be an excuse for lack of training (i.e. no sense training employees since they will leave anyway). Training improves products and services and ultimate customer satisfaction.

The Ultimate Challenge

While micro businesses due to their very nature will not operate the same as larger SMEs, business principles that prove successful for larger enterprises can still be implemented in micro businesses. Although budgets and objectives will be different and success defined in a different way, micro businesses still have a goal to grow and be profitable. The challenges of operating a micro business must be confronted and overcome.