Microbusiness vs. Small Business: What’s the Difference?Even the smallest of the small can have a big impact.
If you think all small businesses are more or less the same, think again.
The U.S. Small Business Administration (SBA) defines a small business as any enterprise with 499 employees or fewer. But a company of 400 has very different needs and infrastructure than a tiny business with only a handful of employees.
In recent years, the term “microbusiness” has made its way into the vernacular as a way to designate the smallest of the small. But what exactly is a microbusiness, and how are these tiny enterprises different from other — larger — small businesses?
To find out more, NCR Silver dug into these questions with Donald Smith, director of entrepreneurship education at the SBA, and Katie Vlietstra, vice president for government relations and public affairs with the National Association for the Self-Employed (NASE).
The meaning of ‘micro’
Both the SBA and NASE define a microbusiness as a firm having nine or fewer employees. “These are businesses that are ‘mom-and-pop’ shops or sole-proprietors,” explained Vlietstra.
While they may be small in size, microbusinesses have a big impact on the economy. According to new research from the SBA, there are an estimated 3.8 million microbusinesses in the U.S. that serve as employers. In fact, these tiny enterprises accounted for 11 percent of the 13.7 million private-sector net job gains in America between 2010 and mid-2016.
In addition to firms that employ others, more than 24 million microbusiness owners are “solopreneurs,” self-employed individuals who run their business by themselves.
“I think one of the things really to consider are owner-operated businesses, where the owner is not just the owner, the owner is the primary employee,” said Smith. “Within that definition of being less than nine people, we most often find [micro]businesses that are really one person.”
In fact, moving from sole proprietorship to hiring employees is one of the top challenges microbusiness owners face. Transitioning from working alone to actually managing another person is “an incredible leap in growth for a microbusiness,” he said.
Related: How to Hire Your First Employees
“Small businesses are the engines of the American economy,” Smith continued. “Taking an owner-operated business and getting them to go beyond just that owner-operator to that one additional employee, that would be fabulous — not only for them but for our economy.”
The microbusiness philosophy
Vlietstra said the biggest difference between microbusinesses and their larger counterparts is their stay-small philosophy. “It’s an intentional decision,” she said. “I think there are many self-employed individuals who have found their niche. They’re successful, they can support their families, but they’re not interested in growing their business.”
Microbusiness owners tend to be very attached to their business and passionate about what they do. While a small business entrepreneur may be focused on building up a company with the intent to eventually sell, many microbusiness owners are happy to stay small and keep their workload manageable.
The future of work
Vlietstra views microbusiness as the future of the American economy. She said many NASE members have ample opportunities to grow their businesses, but instead choose to keep their companies small and modest — just enough to provide for themselves and their families.
“With this whole ‘future of work’ idea, I think you’re going to see more and more of this,” she said. “You’re going to see more people who want the flexibility and freedom of being self-employed. They want the economic or financial security of having some level of steady income, but they can ramp up; they can ramp down. I think it’s going to be really interesting to have this conversation in 10 years. It’s going to really challenge everything we think about work and how people want to work.”