Business to Consider: Microbusiness

UPDATED: May 28, 2010
PUBLISHED: May 28, 2010

The term microbusiness officially applies to businesses operating out of the home with fewer than five employees and little required startup capital. Unofficially, the term can apply to all the independents out there who consider themselves self-employed.

Experts predict the number of microbusinesses will continue to grow through 2009 in direct response to the shrinking of traditional businesses. Those who are laid off are creating their own jobs. Also, at-home parents are creating side jobs to bring in additional income, like the mom who offers scrapbook services to neighbors or does event planning on the weekends.

Some microbusinesses start out as small supplemental jobs and turn into full-time operations. You may have heard of a certain pretzel company called Auntie Anne’s, which started as Anne Beiler’s single pretzel stand at a farmer’s market.

If you make something—whether it’s homemade biscotti, such as rapidly expanding Miami-based Jennifer’s Homemade baked goods, or a stylish diaper bag for guys, like the Los Angeles-based Diaper Dude—then this could be the right business for you.  

Additionally, there is also growth in the virtual sector of at-home business. Telecommuting in areas ranging from copywriting and Web design to computer tech support, customer support call services and even tutoring are gaining popularity.

The Bottom Line
Check your state and local requirements for registering your business name and to determine whether you need permits or licenses for operating out of your home.

Working from home, especially if you have a designated work space, allows you all kinds of tax deductions. It’s also a good idea to talk with an accountant before you get started about expenditures you should monitor.

Although microbusinesses involve low startup costs, that doesn’t mean you won’t need any money. Figure out what kind of materials/equipment and marketing/advertising you’ll need and apply for a loan. The Small Business Administration offers microloans to qualified entrepreneurs.

Is It Right For You?
Personality traits required: Passion for business, self-motivation, proactive work style, organization, discipline.

Risk: It all falls on you to succeed, which can be said for any business owner. However, a microbusiness, by definition, has very little or no support.

Potential income: $0 to the sky is the limit.

Pros and Cons at a Glance

1. Work from home

1. Hard to separate work/personal life

2. Tax benefits

2. Inconsistent income

3. Low operating expenses

3. Have to wear many hats
(e.g., marketer, manager, bill collector, etc.)