What Is a Micro-Entrepreneur? [+ Getting Started]

Leaving full-time employment to start your own business is a big change. You probably never realized how different your life could be if you were in control of your schedule and earning potential.

As you start out, you’re likely what is called a micro-entrepreneur.

Don’t be insulted — this term is used to refer to the founder of a small business where they are the sole owner and operator.

There are a few other features that characterize this type of business, and millions of gig workers are happy to stay in the micro-entrepreneur industry for life.

But if you are already there and thinking about expanding your business, there are benefits to that move, too.

So what makes up a micro-business, and what are the pros and cons of staying small versus growing?

This guide breaks down all the details so you know what you’re getting into either way.

What’s a Micro-Entrepreneur, Exactly?

In a nutshell, a micro-entrepreneur is a person who owns and operates a business that they started with minimal financial investment.

Micro-entrepreneurs work in every field, from carpentry to photography to ridesharing to real estate. If a person runs a small-scale operation and doesn’t go into significant debt to start their business, they are considered a micro-entrepreneur.

Typically, micro-entrepreneurs work alone or with the help of a few outsourced subcontractors.

However, a business can have up to nine employees and still be considered a micro-business by the Small Business Administration and other lenders (the SBA actually uses the term micro-enterprise to describe a micro-business with employees).

Most freelancers and gig workers start out running a micro-business. While some eventually choose to expand, others prefer to stay small.

We’ll get into the pros and cons of each option later.

How to Become a Micro-Entrepreneur

Becoming a micro-entrepreneur means combining determination and motivation with your skills.

What product or service will you be providing? How are you going to pay your bills until your business is profitable?

Those are just some of the questions you’ll ask as you walk through these crucial steps:

1. Figure Out How to Fund Your Business

Sometimes, people prefer to hold onto their steady paycheck and slowly invest in their startup. Others quit their full-time jobs and jump straight into the world of entrepreneurship.

The best option for you will depend on how much funding your business requires.

If you have relatively low startup costs and will earn a livable salary right away, it’s easy to switch gears and go self-employed. This might be the case if you’re a copywriter or graphic designer working from home.

Many businesses need an upfront investment to get started, though, especially if a product is involved.

In that case, you may need some microfinancing in the form of a loan.

Micro-Loans for Micro-Businesses

Funding a startup through traditional bank loans can be difficult. What lender wants to give money to someone without a solid financial history behind them?

That’s where microcredit comes into play.

This type of funding deals with microloans, which are small loans designed for borrowers trying to start a business. Instead of a traditional bank route, microcredit uses funds from private loan distributors or government programs made explicitly for micro-entrepreneurs.

There are plenty of websites and apps you can use to search for microloans. For starters, check out Kiva.org, where you can pitch your business to private donors, and SBA.gov, where you can research government-funded microloan programs.

Some microloan programs have very few eligibility requirements and are awarded based solely on your business idea. As long as you have a solid business plan and a product or service with value, you may be eligible.

These loans can be a good option for those with no credit history, collateral, or employment history since they ensure a lack of financial history doesn’t stop you from starting your business.

Not all startups need to borrow money, but many successful micro-entrepreneurs do. Don’t let a lack of working capital block your dream when a microloan might be your springboard to a thriving business.

2. Know What You Can Do (and What You Need Help With)

Before you take any action steps, make a list of your strong and weak areas. This is the time to get real with yourself. If you try to pretend those weaknesses don’t exist, they’ll turn into stumbling blocks later.

For instance, it’s not uncommon for someone to be an expert in their trade but clueless about the accounting side of things.

If setting up an LLC is intimidating or you don’t know about income tax laws, add those things to your “get help” list. As you learn more about entrepreneurship from people who’ve done it and understand its ins and outs, you’ll increase your chances of financial success.

3. Putting It All Together

Now, it’s time to come up with action steps.

Every micro-business is different, so the planning process is different for every entrepreneur.

Overall, though, here are some things you must do in the early stages of establishing any company:

• Research the competition and see what works for them or what you could do better
• Check going rates for similar services in your area
• Design a portfolio with examples of what you offer
• Establish yourself with an online presence, including social media, LinkedIn, and Google My Business
• Build a marketing plan to help you reach your target audience

On top of putting your business structure together, you’ll also be dealing with legal necessities.

Things like getting the right insurance policies and licensing take time. You’ll need to register with the IRS and get your tax documents sorted, too.

Help is especially important if you think you might be open to growing your business in the future.

Being a micro-entrepreneur has its perks, but so do expansion and partnerships. The opportunity to expand could be on the horizon, and setting up your business the right way now will make for a smoother transition later.

Why You Might Want to Stay a Micro-Entrepreneur

For some people, micro-entrepreneurship is the best option. Staying small doesn’t mean you have to play small.

It’s possible to have fewer than ten employees and still live the quality of life you want. In fact, millions of small business owners prefer to stay at the micro-level.

Advantages of Micro-Businesses

Running any business takes a lot of resources, including your time and energy. But running a large business takes even more effort.

You’re the one in charge, so even if you hire hundreds of staff to do the job, they’re ultimately your responsibility.

When you choose to keep your business small, you avoid this headache and still get plenty of benefits:

• Lower overhead and expenses
• Access to small business discounts, grants, and loans
• More control over your schedule (better work-life balance)
• The personal touch of knowing your clients and employees
• Better staff loyalty, resulting in lower turnover thresholds
• The ability to catch and fix problems quickly before they escalate

If you want to be free to run your life on your terms while staying financially independent, owning a micro-business is tempting.

But Expanding Can Be a Good Idea, Too

Entrepreneurship is exciting in every form, and it comes with lots of advantages. It can also reach a plateau where you have to decide if you’re satisfied where you’re at or ready to grow.

Signs You’re Ready to Expand

You’re a small business success story to everyone who knows you. But you still don’t feel quite complete.

This feeling that something is missing could be a sign that you’re ready to expand. If growth is something you’re thinking about, look for other fact-based evidence that it’s time to leave microentrepreneurship behind for good.

Here are some signs you might be ready:

You Have a Solid Customer Base

Before you can grow your business, you need to know that you’ll have clients who will follow you. With a steady customer base, you know that at a minimum, you’ll have the same demand you had before you grew.

From there, you’ll be able to predict how many more customers you need to acquire. This target is essential as you create new budgets and marketing plans.

You Have Encouragement

No, you don’t need cheerleaders (although they’re always helpful).

The encouragement you’re looking for comes packaged as the little hints and suggestions from your customers that they have other needs you could fill.

Here’s an example of a ready-to-grow micro-business:

You own a small restaurant that provides food for pick-up only. The shop next to you is unexpectedly empty, and the property manager offers it to you with permission to connect the stores.

Your current business is booming, and your customers are always saying they’d love to come sit down and eat. Expanding means hiring more staff and extra overhead, but you have the stable foundation to make the jump.

Whether you do it or not is up to you, but your cheerleaders are ready to encourage your growth.

Your Books Are in the Black

The ultimate goal of every entrepreneur is to make a profit. Your books are steadily showing that your business is successful, and you can afford to take a risk.

Growth always requires an investment of resources. You’ll need time, energy, and money to turn your micro-business into something bigger.

Do you have liquidity in your assets to put toward expansion? If a lender reviewed your net income and accounts receivable, would they see you as a credit risk?

Do the math (or take your paperwork to your accountant) to see where you stand.

If your gross income minus expenses is positive, you’re making a profit. When the profit is steady or increasing, you can either stay satisfied where you’re at or look for opportunities to grow.

You Have to Turn Away Business

Let’s look at the restaurant example again as an easy example of a ready-to-grow micro-business:

If your staff is standing around bored on a Friday night (the busiest night for restaurants) in the middle of the busy season, there’s a problem — you need to figure out why no one is coming.

But if it’s so busy that you have to take the phone off the hook just to keep up with takeout orders, you have another problem: you’re turning business away, and customers are going to go elsewhere.

If they like this “elsewhere” place, their second choice will become their first choice, and you’ll lose them.

When your business is so busy that you have to send people to someone else, it’s time to grow.

You can choose to ignore these signs and stay in your comfort zone or take steps to expand your operation. As a micro-entrepreneur, the choice is yours.

Conclusion

Becoming a micro-entrepreneur is an exciting step, but it can be scary. You’ll have freedom and unlimited earning potential, but you may be leaving behind a steady paycheck.

Keep this in mind:

If it pays off, it’ll be the best risk you ever took.

The good news is that you don’t have to do it alone. You have an army of resources behind you — like Selfgood — ready to help you through any challenges on your way to business success.

If you want access to a benefits package that includes financial advice, supplemental health insurance, and more, check out Selfgood today.