The rise of the micro-business

home-based business is on the rise

The term micro-business is used freely these days as a catch-all phrase without much regard to its true meaning. The traditional definition of a micro-business is a company that employs less than five people, with annual sales of less than $35,000. Some might dismiss businesses that fall into this category as minor players in our region’s economic development, assuming they’re a mere hobby or “cottage” businesses.

But in reality, today’s version of a micro-business model takes on various forms and, collectively, these smaller operations provide additional income to families and new employment, and they are the proving to act as a feeder system for future fast-growth companies.

More and more these days, people want to run a business on a small scale that can be worked into their lifestyle, and one started without huge financial investment. The advent of the internet has been the catalyst to this, a significant wave of small business development that delivers both job growth and economic development in northern Michigan.

One can look at Hagerty Insurance in Traverse City as a classic example: a company literally started in a basement office that now employs more than 500 people.

Success like this is becoming more common with the new micro-business models because they often involve less financial risk than their traditional counterparts. They can be started – or exited – without a lot of fanfare.

Even better, the time to assess if the micro-business model can sustain itself and succeed can be determined quickly – sometimes in a matter of months rather than years, as has been traditional.

So what is a micro-business exactly? Here are the forms you’re seeing more and more of these days:

The Part-Time Business
Changes in our national and regional economics have created micro-businesses that people start out of necessity. This could be any type of part-time work that supplements other employment: people who start a company to fall back on if they believe they might lose their full-time job, or early retirees who are well-positioned (both financially and by experience) to start a small company.

The Virtual Workplace
A micro-business can also be a company that is started on a very small scale, using skills and resources that an entrepreneur has accumulated along with his/her career path. Think of a graphic designer who wants to be home with his or her kids and now has some time to work virtually from a computer, supplying professional work to a company located elsewhere. The flexibility of the virtual workplace allows people to live where they want to and to keep from being tied so tightly to commuting to a larger urban center, thus breathing new life into villages and schools outside city centers that were suffering from population loss.

Small-Farm Operations
Farms producing specialty crops (think: hops, heirloom tomatoes, specialty wine grapes) and value-added food producers are growing in a number throughout northwest Michigan. This includes small-scale community supported agriculture (C.S.A) farms that sell shares to members prior to the growing season. On an even smaller scale, it could be the woman who grows rhubarb in her garden and sells it to the farm stand up the road to help pay for housing expenses, or the family farm passed down to heirs that continues to supply income, or the innovative young farmer that leases land from an established farmer to grow a new commodity.

Value-Added Food Producers
This sector includes agricultural commodities that are transformed into products (such as wine, beer, preserves, salsas, dessert toppings, or dried fruit) that command a much higher price. The variety of these products will continue to grow and fit particular market demands. Going forward, it appears that value-added food production will serve as a substitute of sorts for traditional industrial manufacturing.

Web-Based Commerce
Products that are produced locally can now be shipped to retail or wholesale customers throughout the world. Niche market communities can be developed through online marketing venues that circumvent capital-intensive advertising methods.

This area also provides potential growth for existing local retailers who want to sell their traditional summer customers throughout the year, as well as to writers, publishers, and artists.

In short, the rise of the micro-business economy plays into the hand of our region’s economic development and attracts people who choose to live here because of the area’s lifestyle and natural attributes.

The region’s population is projected to grow significantly in the next decade. Expected: a growth of 14 percent in the 30-39 and 34 percent in the 60-69 age groups. With that growth will come a wide variety of entrepreneurial companies starting on a small scale. Many in these population sectors will provide jobs – not just from their own self-employment, but also from the employees they hire as these new companies grow and expand. Look forward to it, northern Michigan.

Need advice?
If you’re thinking about starting a business and would like to schedule a free, confidential consultation contact Kimberly or call (231) 631-2119 to make your appointment.

Article by: Chris Wendel
Published in the February, 2011 Traverse City Business News

Chris Wendel is the Regional Director for the Michigan Small Business & Technology Development Center (MI-SBTDC).
The MI-SBTDC offers business counseling, entrepreneurial education, and technical assistance for established and emerging businesses in the Grand Traverse Region and throughout the state of Michigan.