Posted: Fri 10th Mar 2023
People like to say the ditching of 9 to 5 jobs equates to the rise of start-ups. Alternatively, I like to shine the light on other terms; micro-businesses and sole proprietors.
These are the underdogs we love to not pay attention to. The smallest of all businesses. Micro-businesses and their owners have their own unique problems.
The strategies small and medium enterprises can afford to employ don’t always apply to micro-businesses or serve their owners.
With that said, this post will talk all about micro-businesses and sole proprietors.
What is a sole proprietor?
A sole proprietor is the owner of the simplest form of business. These are types of businesses that typically have no legal entity outside of the owner and cease to exist without the sole proprietor.
Sole proprietors handle everything that concerns their businesses, i.e. business risks, decisions, income tax returns, debts, etc.
A sole proprietor typically signs contracts in his or her own name without the privilege of separating oneself from own business when it incurs debts and any other misfortunes.
Sole proprietors typically start off as exclusive owners of their businesses. But in their steady growth, sole proprietors can source external help for their businesses. And for as long as the number of people they turn to is below nine, we consider their entities micro-businesses.
What is a micro-business?
A micro-business, often mistaken for a small business, is any business that employs anywhere between 0 and nine employees. Once the number surpasses nine, it is considered a small business.
Presenting their own challenges, micro-businesses are often placed in the same category as small businesses when, in reality, both experience unique problems that set them apart.
For example, micro-businesses are not always eligible for funding reserved for small businesses. But this does not make them need the funding any less.
Though micro-businesses can boast up to nine employees, they typically have fewer, if not just one person running them. And this circumstance can prevail for years.
This is because freelancers, sole proprietors, hustlers and solopreneurs often develop and own these businesses with little help, missing out on growth opportunities.
Though size and scale are the main things that separate a micro-business from other types of businesses, size and scale also present these businesses with major problems.
We need to tend to these challenges without shifting the focus to include businesses in other categories. Because when we refuse to acknowledge their unique problems, we cannot nurture their potential to grow and expand into new categories.
The worst of it is that this makes them stagnant for years to come after development.
Micro-business life cycle
Despite the challenges micro-businesses face, many have the potential to grow and become stable businesses. As a matter of fact, there are many micro-businesses that have been operating for years. All they need is support to expand growth.
Ideally, your micro-business is expected to go through five stages, which we call the business life cycle. It is when a business reaches the 5th stage we can be sure of its strong existence even though this does not make it invincible.
Stage 1 - Existence
A micro-business is at the 1st stage; the existence stage. Like all the other stages, this stage has its own unique problems:
How should I deliver my products and services?
How can I build revenue-driving brand awareness?
How can I get customers and have consistent sales?
How can the business make money to keep it afloat?
If your micro-business cannot account for these questions, it will die before it has the chance to grow. But if it succeeds, you will proceed to other stages.
Stage 2 - Survival
While reaching this stage is a good sign, a sole proprietor will definitely feel the pressure of having to manage multiple clients and growing responsibilities.
This is because reaching this stage means you have a successful customer acquisition strategy. But this brings its own problems.
How can I best manage revenues and expenses?
What do I need to adapt to manage current growth?
How to make sure we remain profitable and stay in business?
How can I manage growing customer growth without losing momentum?
Failure to remain profitable and simply have needed cash for whatever reason can fail the business.
Stage 3 - Success
For people who start businesses venturing from freelancing or are okay with being sole proprietors, this stage may be conflicting, but you certainly have a choice. This is where you must decide if you’re okay with just being profitable or want to expand operations.
Are there any market changes we need to adapt to?
Is our competitive position still strong or under threat?
Are there growth and expansion opportunities to leverage?
If you decide to expand, the next stages will be Stage 4; the Take-Off Stage and Stage 5; the Maturity Stage. The Take Off Stage is about achieving rapid growth and potentially getting investors and sponsors.
In the Maturity Stage, your business will have grown to employ versatile staff, have financial resources and decentralised management with well-developed systems.
Growth is definitely nice for businesses. But in the first stage, it all comes down to the owner. A micro-business’s success depends on the owner’s ability to take it from nothing to something. Can you step up and be the multiple things your business demands you to be?
We advocate for micro-businesses to have representation because they face their own unique challenges that require an intentional approach. Some of these problems may be relatively small but need to be tended to either way. The following are some of the major problems micro-businesses face.
1. Limited labour
Essential to every business’s growth, labour is a necessity. For micro-businesses, this is an expensive luxury, since these businesses are usually owned by sole proprietors. This challenge means the owners are overworked and probably unable to attend to all business needs without being overwhelmed.
2. Brand awareness
For the sake of growing the business and also bringing money in, it is important for a micro-business to establish a strong foundation and perpetually grow. Developing a marketing strategy and committing to it will certainly help.
But you’ll need to put in the time you may not have and maybe learn marketing skills if they are not your strong point. Brand awareness is particularly a big problem because even micro-business that have existed for years easily struggle with this part.
3. Lack of money
With money, a lot can be possible for your micro-business. You can afford to hire employees to help you out and afford all the necessities you need to run a business. But that is ambitious for a new business still trying to build up brand awareness.
Ultimately, you may find yourself not affording the software, tools and operations you need to run the business.
4. Unstable income
Micro-businesses typically depend on small-time clients to keep afloat. Sometimes they land a jackpot client that wants a long-term working relationship. While this is not a bad thing, such a relationship-ending abruptly puts the business at a disadvantage.
This is especially true for old micro-businesses that are suddenly dropped by their lifeline clients. Ideally, don’t rely on one client for tangible income.
5. Fatigue from wearing multiple hats
A given reality for a sole proprietor is having to take care of everything on your own. You will have to stretch yourself to take care of everything, i.e. operations, marketing, finances, clients, etc.
This is definitely a lot for one person, and it will be worse if your clientele accumulates over the years and they demand more. In the end, you’ll be overworked.
Micro-business owner tools
Now that you understand what makes up a micro-business, it’s time to adopt tricks that will help you deal with its unique challenges accordingly and become a successful micro-business owner.
Though these businesses are affected by the same struggles, different sole proprietors will have a unique set of problems influenced by their unique strengths, weaknesses, business models and varying capacity to deal with different factors.
Many of these problems will be determined by the mindset you approach your work with.
Figure out your negative working style
Working with many sole proprietors and professionals, I have noted four overworked-mindset profiles: the busy badge wearer, the best, the people pleaser and the uninspired.
These are not at all good working styles to adopt, but they are not far-fetched for sole proprietors running micro-businesses.
The key is to note apparent characteristics in how you commit to your business and the relationship you have with success as an individual.
The busy badge wearer
If your approach to work is that of a busy badge wearer, then you probably exhibit the following traits.
You struggle to relax
There is always something to take care of
You use being busy as an excuse to get out of plans
You do not prioritise your needs and yourself altogether
You feel empty inside and busy gives you a sense of self
You always keep busy to keep your sense of pride and purpose
Constantly on the go because you believe being busy is important
You are rarely fully aware of everything happening around you that does not concern work
The best people also have their unique approach to work, exhibiting some of the following traits.
You are likely drowning in work
You struggle with delegating tasks
You have an extreme fear of being inadequate
You get work completed but sacrifice yourself in the process
You are an all-or-nothing person who will not accept less than perfect
You are always keeping up the appearance of being in control while overworking
You either don’t start at all or do not finish what you started paralyzed by perfection
You buy into the latest trends and work gadgets to keep up an appearance of being in control
The people pleaser
People pleasers struggle with their own defeating working style with the following traits.
You struggle to say no
You lack self-belief and struggle with confidence
You suppress your needs and characteristics to fit in
Your self-worth is determined by others receiving you well
You can’t set and maintain healthy boundaries with people
You accept work from clients you know you don’t want to work with
Also influenced by its own things, the uninspired work approach has its own traits.
You are easily swayed and influenced by external factors
You feel disconnected from yourself and what you are doing
You maintain the appearance of being in control while overwhelmed
You lack structure and guidance, which makes you easily distracted
Get into the habits of being a micro-business owner
The above traits won’t apply to everyone, but it is definitely a good thing to take on precautions that will help you become a better micro-business manager, especially if you are transitioning from working for other companies and being managed by other people.
The same applies to people who have been running their businesses for years but haven’t reached an equilibrium.
It will benefit you to sync yourself with the demands of a business and the mindset of a business owner, starting with the following.
1. Establish a personal development plan
Not everyone may feel the need to embark on a personal development journey, but it may do more good than harm if you are your own boss. It will help you establish how you want to present yourself as a brand and also hold yourself accountable for your responsibilities.
You will also get to know yourself better, and learn your strengths and weaknesses and how they can affect your business growth.
2. Adjust your life to accommodate the demands
Our premise is to restore life balance, so we are certainly against overworking. However, it is not bad advice to anticipate the demands a business owner places on a person.
Can your current lifestyle accommodate these demands? How is your environment? Are there things that may or already hold you back? Because your business will always demand some hours out of you.
3. Learn what you do not know
Not everyone starts a business because they are brilliant at it. In fact, the digital age allows people to start businesses that revolve around their passions. In retrospect, the other necessary qualities can be missing. If you can, start learning the necessary business skills you lack, i.e. finances, marketing, your market, taxes, etc.
4. Teach yourself to always show up
Good bosses appreciate employers who go above board, but they know not to expect anyone to show up for their business as they would. As a business owner, you should always be prepared to always show up.
Whether it’s going good or bad in the business, be prepared to show up.
Learn to network
In its existence stage, the most important thing a micro-business can do is to establish itself and attract customers. But since at this point, brand awareness is low to non-existent, owners may need to network vigorously. Years into it, strive to nurture the connections you make.
This is because micro-businesses actually gain success through word of mouth and referrals they earn from business relationships they forge and nurture. You have to get yourself out there.
There are different ways to network. The route you choose will depend on your business, the market you compete in, where your target audience spends time and how you prefer to communicate.
For others, social media platforms are the best way they reach people, whereas other people join specified networks. We host mastermind groups that bring like-minded micro-business owners together, which is another way to build close business friendships.
Networking can also be indirect and a long play. This is when you develop the best marketing strategy for your business and commit to it. If it works well, you’ll gradually build up brand awareness.
Business management theories you can apply
Aware of your challenges, the best thing you can do for yourself and your business is to learn efficient ways to manage your business without exhausting yourself.
There are many ways to manage your business, and the preferable method depends on the unique factors you perceive as the owner.
Above all, you want to set up your business to grow perpetually while also taking care of your mental state and physical abilities as far as your business is concerned.
1. Frederick Taylor’s scientific management
Frederick Taylor’s scientific management approach asserts that making people work as hard as they can is not efficient. Rather, increase productivity by optimising and simplifying jobs and tasks.
This theory is summarised by four principles:
Develop a science for each element of work
Scientifically select, train, teach, and develop the worker
Cooperate with the worker
Divide the work and responsibility
Basically, the one shoe fits all approach is not efficient. You should approach work tasks with scientific methods that consider the specifics each task boasts and determine the best way to perform that task.
As per the principles, this management style is best for when you delegate tasks and start hiring ongoing help.
You can also apply it as a sole proprietor. Instead of exhausting yourself because you’re running a one-person show, you can optimise your work systems and simplify tasks according to one person’s limited energy.
2. Henri Fayol’s principles of administrative management
Interested mainly in those in managerial positions, Henri Fayol outlined six functions to comply with to successfully manage subordinates:
Once a manager gets these functions in order, they should be prepared to incorporate the following administration principles how they see fit depending on unique situations a business encounters.
Assume authority and responsibility
Be consistent in commanding
Unite under the same goals
Uphold company over personal interest
Balanced hierarchy and power
Clear defined roles
Fair treatment and respect
Be encouraging and open to initiatives
Support each hired individual
These principles will come in handy when your micro-business crosses over from the Existence Stage to having growing responsibilities that require you to hire for specific roles.
It’s not unlikely they already apply to sole proprietors who’ve been running their micro-businesses for years.
3. Max Weber’s bureaucratic management
Max Weber’s bureaucratic management approach benefits upcoming businesses that are discovering and implementing systems that will maximise their growth.
Max Weber asserts that when structuring your business into a hierarchy, with clear rules and leadership, consider the following principles:
Outlining clear division of labour
Having a hierarchical chain of command
Separating the owner’s personal and organisational assets
Keeping accurate records and documentation
Having consistent rules and regulations
Hiring and promoting based on qualifications and performance, and not personal relationships
Applying bureaucratic management to your micro-business will help it maintain order the more it grows and needs standards, procedures, and structure.
4. Theories X and Y
According to social psychologist Douglas McGregor, what managers believe motivates their employees affects their management styles, which are between the following two management styles, i.e. theory X (authoritarian) and theory Y (participative).
Theory X managers employ an authoritative management style because they believe employees are apathetic and dislike their work. They keep tabs on their workers and have performance-based appraisals.
Theory Y managers employ a participative management style because they believe employees take their work as a fulfilling challenge and are motivated to take on the challenge. They like collaborating and trust their professional relationships.
As a micro-business owner, it’s better to establish work relationships that put you in a position to be a theory Y manager. This means delegating any overwhelming work to people who:
Need little direction.
Seek and accept responsibility
Happy to work on their own initiative
Happy to make crucial decisions
Self-motivated to complete their tasks
Enjoy taking ownership of their work
View work as fulfilling and challenging
Solve problems creatively and imaginatively
Concerned with your business success
5. Contingency Management
Contingency management theory advocates for a flexible management style, asserting that how you manage contingencies at a time is situational.
Contingency management is great for micro-businesses because businesses in their foundation phases are subject to constant changes. There’s no point in binding yourself to a strict management style when you’re actively setting up and readjusting structures.
Above all, the manager or business owner should be prepared to step up and make the best decision for their organisation in light of contingencies without fail.
The following are the primary characteristics of contingency management.
There is no one best way to do things. Do what works for you.
Decisions made depend on factors surrounding a situation.
A manager should anticipate and diagnose environmental changes.
Managers should have sufficient human relations skills to manage change.
Managers must communicate effectively when managing environmental changes.
There’s no harm in adjusting managerial policies and practices to changes in the environment.
Growing beyond your initial business model
Many micro-businesses are born because an individual recognised a unique skill set they have and decided to service it in exchange for money.
In its simplicity, a micro-business is a transactional entity. This is why they are typically owned by sole proprietors. This is also why micro-businesses can remain stagnant in one position for years. It is because their owners expected nothing beyond just selling their skills for money.
The question is, how do you grow from just being a freelance writer, a hairdresser, a photographer, a consultant, etc.? How do you package your skills to be a lucrative business? How do you go from existence to at least a success stage?
The key to building a successful business is building for your targeted audience and not for yourself. Initially, you might have started your business because you were excited about monetising your inherent skill.
But as you grow within a market, you have to think big.
Ask yourself, what gaps and unaccounted-for pain points exist in my market and how can I package my skills to bridge these gaps and solve these pain points?
Considering that you have competitors offering the same skills as you, it is important to differentiate your skills by developing a unique value proposition.
In your UVP, address the following:
Solve a pain point that happens frequently
Don’t guess your price, apply a strategy
Connect with your audience’s emotions
Address what is lacking and create tension
Study your broad market and niche down
Work from what already exists and give people what they are ready to receive
Looking for more support? Connect with Tammy on Enterprise Nation today!