by Dana George | Updated July 25, 2021 - First published on April 2, 2021
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A micro business lets you share your unique skill set while making money.
As the coronavirus pandemic altered the financial landscape in 2020, one frequent piece of advice was for struggling Americans to take on a side hustle. By August 2020, there were nearly 32 million small businesses in the U.S., with the vast majority of those being micro businesses.
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While definitions vary, a micro business typically employs fewer than five people (frequently, just one person) and earns less than $250,000 annually. In addition, to be classified as a micro business, an owner must have invested less than $50,000 to start. Here are some examples of micro businesses:
Most micro businesses function as sole proprietorships, a designation that does not require them to register as limited liability companies (LLCs) or corporations. Still, a micro business can quickly grow into a small business. Micro business owners who intend to expand should consider registering as an LLC so that they'll be protected from personal liability.
Many small entrepreneurs run their own businesses because it's exciting. It feels good to come up with an idea and watch it pay off. While a side benefit of being a micro business owner is personal satisfaction, the primary reason most get into business is financial. Here are five ways a micro business can lift you financially.
If we didn't know it before, 2020 taught us that jobs can disappear overnight. The advice to always have an alternate stream of income in case your primary stream dries up became particularly relevant. Perhaps the best thing about owning a micro business is having another income stream, knowing that it can help cover bills if your main job goes south.
If you're married or in a relationship and count on another person's income, a micro business can cover their income if they're unable to work. That means you can relax knowing that the bills will be paid even if your partner is out of a job.
Let's say your dishwasher needs to be replaced and you don't want to take the money out of your emergency fund to cover it. Once your micro business is established, you'll have the ability to ramp up output to cover unexpected expenses.
For anyone who entered adulthood believing that bad things don't happen, the reality can be scary. Establishing a steady source of income through a micro business doesn't mean that you can avoid difficult situations. But it does mean you can feel more confident, knowing that you can pay for issues as they arise -- like traveling to see a sick relative or helping out a friend in need.
For some, a micro business provides the ideal amount of work and the perfect income. If you decide that you want to grow your business, though, a micro business lets you start small, learn the ropes, and expand the business to fit your goals.
Whether you're curious about what it takes to start a micro business or already have a firm business idea in mind, taking the first step can be tough. Here are some tips for getting started.
Without a proven track record, it can be difficult to secure financing through a traditional lender, like a bank. In fact, more than 77% of micro business owners got started using their personal savings. If you have an idea for a great micro business but need funds to get started, you have several options:
Without customers, there is no business. But how do you attract customers to a new venture? How do you create a marketing plan on a shoestring budget? Here are a few ideas:
One of the trickiest parts of owning a micro business is that you wear all the hats: You're the creator, scheduler, and bookkeeper. The easiest way to keep everything straight is to set time aside each day to organize the paperwork that will morph into tax records. Have a specific spot in your office for sales and expense receipts. Imagine the IRS asking for hard copies of everything and make them easy to locate.
One of the greatest things about a micro business is that it represents you. It's you offering a skill to the world in a way that fits your style. The fact that you can make money while sharing your talent is the cherry on top.
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