Microenterprise – Concept, types, advantages and disadvantages

We explain what a micro-business is and what its main characteristics are. In addition, the advantages and disadvantages that it has.

What is Microenterprise?

The concept of microenterprise is a term used to differentiate a company by the monthly or annual income it owns, in addition to the size. It is contained within the category of SMEs.

The micro-enterprise is usually created for various reasons, including the need for income to survive or to find an inexpensive outlet for various skills. Also for wanting to develop from the base, that is, they aspire to medium and / or large companies.

The microentrepreneur is a person capable of starting one or more small micro-businessesIt is not only the owner, but also has direct participation in its development, that is, it is another worker. There are even microentrepreneurs who do not have employees.

Characteristics of the microenterprise

A small business has certain characteristics that make it fall into this category:

• It has a maximum of 6 employees, only in some cases this figure is exceeded to a total of 10.
• The owner is counted among the workers (although there are exceptions).
• It has a limited turnover, which means that it does not easily allow growth.
• They do not significantly affect the economy, be it your city or national.
• They are created with relative ease, depending on the country, since they can start from the sales of food at home.

Small Business Advantages

• The main thing is that it becomes a source of income, being a livelihood.
• Being small, it has the facility to be modified in case the first one does not work.
• Depending on the country, there are grants or contests to which you can apply and thus receive help from the government. Or, within banks, various types of financing have been created so that those who have projects to undertake can access them.
• Its structure can be easily modified.
• They are generators of employment, although not on a large scale, but they do give someone the possibility of having a salary.
• Decisions are made quickly, since it is usually the owner who has the reins of the business or a small group that reaches agreements quickly.

Disadvantages of small businesses

• They have problems getting credits.
• Its technology or equipment is usually scarce, limited and little evolved, so it requires more effort from its workers.
• Workers may lack training and specialization.
• Its production tends to be limited, in some cases for immediate consumption that responds to the needs of the immediate context.
• Company workers do not usually have too many hierarchical structures and are far from the corporate models that characterize large companies.

Types of microenterprises

• Survival. They are created out of economic necessity and do not have a base capital with which to manage the costs of operations, but rather it is of immediate and limited production. For example, street vendor.
• Expansion. They have a little more income than the previous one. However, this remaining money is not enough to further develop the SME.
• Transformation. It is more superior than the previous ones as far as turnover is concerned, since the income allows to form a capital and therefore has greater possibilities of growth.