Distinguishing Between a Micro Business and a Small Business

There are many ways to determine the size of a business. Some companies have a tiny number of people working in them, but they are earning massive revenues. Some other companies have employed a large number of employees and are divided into various departments based on their functions, but their revenue streams are small and they run on a tight budget.

How do you really determine how big or small a business is? Well, the best way is to place a business on a pointer system or a scale, with one side being the smallest and the other side being the largest. Then combine all the factors that contribute to determining an organization’s size, and figure out where to place a particular business.

By using this method, we can categorize businesses into the following sizes.

  • Huge multinational companies
  • Large and established businesses
  • Medium-sized firms
  • Small and medium enterprises (SMEs)
  • Small businesses
  • Micro businesses

What is a Micro Business?

According to the definition given above, micro businesses are entities that are commercializing some skill or product idea and making money out of it, but are overall smaller than small businesses.

If a business stands large in terms of the following factors, but is small in the remaining factors, it will be considered a small business, not a micro business. Micro businesses are those that are small in terms of all the following factors.

  1. Number of employees
  2. Quarterly and annual income
  3. Average monthly and yearly sales volumes
  4. Business premises, retail outlet, office space, or any other form of real estate in use for running the business operations
  5. Brand equity
  6. Time passed since the business was launched or started
  7. Market share
  8. Market capitalization
  9. Expansion strategies
  10. Customer base
  11. Availability of finance
  12. Managerial ability

Differences Between Small Businesses and Micro Businesses

Let’s differentiate small businesses and micro businesses based on each of the parameters listed above.

1. Number of Employees

Small businesses can have a different number or range of employees, depending on the industry they are operating in. But generally speaking, if a company has less than 1,500 employees, it is considered a small business.

A micro business, on the other hand, is much smaller than that. Micro businesses usually have less than 10 people working in them. A micro business can even be run by a single entrepreneur, who has full determination to make his or her business grow, and hire more staff at a later stage if needed.

Micro businesses, even though they have very few employees, can still be making a good amount of money. Since their salary expense is low, a large part of their revenue serves as their profit.

2. Quarterly or Annual Income

According to a study conducted by Nina Godlewski in Small Business Revenue Statistics (2021), most of the small businesses earn an average revenue of $46,978 a year. In 2016, small business owners who were self-employed in their business earned a median income of $50,347. Profit margins are generally low in small businesses.

These figures are not as small as you might have expected. Micro businesses, on the other hand, fall shorter than small businesses in this parameter as well. A micro business is one that generates a maximum annual revenue of $25,000. Many micro businesses make less than that. Those that are sole proprietors even make less than $10,000 a year.

3. Average Monthly or Yearly Sales Volumes

Very few small businesses make high-volume sales. Many successful entrepreneurs start off as small businesses that struggle for months to get their first few clients. They are able to survive just because they keep their personal and business expenses low.

When a small business cannot increase its average sales volume even after months of struggling and surviving, it comes into the category of a micro business. Micro businesses have very small sales volumes, like those of most beginner freelancers.

4. Business premises, retail outlet, office space, or any other form of real estate in use for running the business operations

The amount of real estate space a business uses also contributes to determining its size. For example, if a boutique has a large retail store, it wouldn’t look like it’s a small business. Large retail space requires large lease amounts or an enormous amount of monthly rent to be paid, which a business can only afford if it’s making a large amount of sales.

Photo of a Boutique

A small business would either have a small retail outlet or a small office to operate from. A micro business would generally begin its operations from the home of the business owner or entrepreneur. Micro business owners start off with working from home, even when there is no pandemic and lockdown. They save the capital expenditure budget required to rent any commercial space to do their work from.

5. Brand Equity

Small businesses have very small brand equity, whereas that for micro businesses is almost non-existent unless they grow bigger. Having good brand equity means having a large number of repeat and loyal customers. This is something a business gets only after it becomes well established and grows big in size.

6. Time Passed Since the Business was Launched or Started

This factor is important because it tells what stage the business is at. Is it a startup company that was just registered last month? Is it a firm that started offering consulting services two years ago, but has been out of projects for the past 8 months and running out of cash?

The phase a business is at is one factor that determines its size. Small businesses can stand on any level when it comes to the phase of business. But a micro business is usually in its survival stage. Micro businesses are often trying to make ends meet so that they can generate enough income that enables them to scale up.

7. Market Share

Since both small businesses and micro businesses hold very negligible market shares, it is pointless to compare the two based on this factor.

8. Market Capitalization

This is the same as the previous point. Market capitalization is only relevant for SMEs, medium-sized, and large businesses.

9. Expansion Strategies

Smart businessmen always conduct a SWOT analysis to keep an eye on any opportunities the market may present to them to give them a chance to grow. Based on those, they come up with expansion strategies.

A micro business can grow into a large business by implementing effective expansion strategies. The same is the case for small businesses.

10. Customer Base

The number of customers or clients a business has also determines its size. Small businesses generally have less than 5 customers by the end of the first year. A micro business might only have 1 good client and survive on the income coming from the single client for more than a year.

Both, however, might have a slightly larger email list or subscriber list, if they are able to manage their communication with their subscribers well. When a business has a relatively larger email list than its customer list, it still has a chance of growing its customer base in the near future. Many firms get their first 100 customers by influencing the buying decisions of their subscribers.

11. Availability of Finance

If small businesses or micro businesses suddenly get a huge availability of finance, for instance, by suddenly getting access to a large fund, they have a chance to use it to scale up their business and expand it exponentially. Under normal circumstances, neither of the two have access to any large funds.

12. Managerial Ability

Generally speaking, small businesses have better managerial ability than a micro business. This is because they have a larger number of people or employees working for them.

Some Examples of MicroBusinesses

Some examples of microbusinesses in this day and age could be as follows.

  • Agents earning on commission-basis on closing deals for the sale or renting out of real estate properties
  • YouTubers or other content creators, earning small amounts in ad revenue before growing big
  • Bloggers running their own blog and earning passive income via Google AdSense or affiliate marketing
  • Average or newcomer Amazon affiliates
  • New Grab Car or Uber car drivers
  • Retirement business investors who have not received their first return on investment yet
  • Beginner freelancers offering services through freelancing platforms like Upwork and Fiverr
  • Dropshippers who sell the products of other firms by promoting them through their networking over the internet
  • Influencers who promote different brands to their followers and charge a small fee in return

If any of the above have a registered company in their name, they will be called micro business owners. Many of these micro business owners have a website of their own, because it is not difficult to create a website on your own these days, especially if you use a website builder like Strikingly.

Screenshot of Strikingly landing page

Image taken from Strikingly

Below are some sample websites created by micro business owners using Strikingly.

A micro coffee beans seller's website built on Strikingly

Image taken from Strikingly user’s website

A micro educator's website built on Strikingly

Image taken from Strikingly user’s website

A micro illustrator's website built on Strikingly

Image taken from Strikingly user’s website

A micro illustrator's website built on Strikingly

Image taken from Strikingly user’s website

If you also want to start a micro business and are interested in building a beautiful website on your own, you can also sign up for your free Strikingly account to begin with. You wouldn’t require any coding or programming skills, as we provide you with ready-made website templates that can be installed within seconds to help you get started.

You can build an online store, a blog, a simple one-page website to just introduce yourself and your services, a full-fledged multi-page website to serve as your marketing platform, or an ecommerce site to offer dropshipping services by selling products from other companies.

We are here to support you no matter what kind of micro business you want to start. We wish you all the best in your pursuit of developing an independent stream of income for yourself.