“A ‘small business,’ also called ‘mom and pop store’ by some in the United States, is a business that is privately owned and operated, with a small number of employees and relatively low volume of sales. Small businesses are normally privately owned corporations, partnerships, or sole proprietorships. “- Wikipedia
So often you hear the terms “small business” and “micro business” thrown around like everyone understands what constitutes these two separate types of businesses. Exactly how small is a “small business?” Is it 50 employees? Is it 10 employees? What is it?! It’s important to mention that the legal definition of “small” is going to vary from country to country and by industry, so we’ll only be focusing on the United States for now.
Politicians are probably the most guilty of throwing around “small business,” like everyone understands what they mean. Now, I have no desire to get political on anyone so don’t worry. FactCheck.org said, “The Small Business Administration’s Office of Advocacy defines a small business as one of with fewer than 500 employees. And that’s the standard politicians often use.” Wow. To be considered a “small business” you have to have fewer than 500 employees? Ask yourself, so what does that make the five guys that run and operate their own mechanic shop or the two sisters that have started their own cupcake bakery out of their home?
According to Wikipedia, “in addition to number of employees, other methods [can be] used to classify small companies [including] annual sales, value of assets and net profit.” There’s a multitude of factors that go into determining if a business is a “small business” or not. Do you or your business fall into any of these typical examples of small businesses?
• Online business such as web design or programming
Alright, so we’ve established a very basic overview of what constitutes a “small business,” and you’re probably still scratching your head trying to figure out where you and your homegrown business fall.
Just as difficult to define as a “small business,” there’s really not one specific definition for a “micro business.” For the sake of this post, we’ll go with the common definition of a “micro business,” which according to Lloyd Lemons is something much smaller than a small business. How much smaller? Well, a small business has less than 500 employees so obviously less than that. Basically, the definition is all over the place depending on the country or state being discussed. Some states define a micro-business as being less than 10 or employees, and some say 25 employees or less. The Association of Enterprise Opportunities is probably the most descriptive and helpful, “In the United States, a microenterprise is usually defined as a business with five or fewer employees, small enough to require initial capital of $35,000 or less; the average microloan is about $7000.”
For arguments sake, Lemons characterizes “micro-businesses” as those who
…refer to themselves as soloists, independents, consultants, craftsmen, artists, musicians, freelancers, free agents, and self-employed people. The majority of these companies are one-person enterprises. The majority of these companies operate out of their homes; and many of these companies have part-time help from a family member or friends.
So with this basic knowledge… where do you fit in? Ignore the definitions and ideas put forth for a second, what do you consider yourself?