Everything You Ever Wanted To Know About Micro Businesses (But Were Too Afraid To Ask!)

By the end of 2015, there were already over 5 million micro business in the UK, and this figure only continues to increase. That means a significant proportion of all new businesses are run on a microscale. It is surprising then that for many people this is a term they are just coming across. With this in mind check out our guide below to find out what a micro business is and the advantages and disadvantages of starting one.

What is a micro business?

There are a lot of terms in business that are bandied around, and it can really pay to know exactly what each one refers to. Especially if you’re in a situation where you are investing in or working with a particular type. To this end, it’s important to define exactly what a micro business is.

Sadly, different organisations define this in different ways. For the EU, for example, a micro business or enterprise is one that has less than 10 employees and a turnover of below 2 million Euros a year. However, other sources make a distinction between a solopreneur that are working completely alone and class a micro business as an organisation where there are just two people working. Confused yet? Well, I don’t blame you, but as a working definition let’s say that a micro business is one that contains less than 10 employees.

What are the advantages of a micro business?

Now we have some sort of idea as what counts as a micro business we can take a look at the benefits of setting up a company in this fashion.

One advantage that is particular to the micros business is the level of control that the founding member or members can have on a day to day basis. This is because smaller companies tend to be close-knit in their working practices, something that can allow the CEO to interact with their employees on a regular basis and get a sense of what is working well and what is not. They can then feedback this information into the system and improve things, all without having to go through a more formalised auditing process that can take valuable time and energy away from other tasks that need doing.

They are also able to keep a tight rein on things in a micro business because there will be fewer departments and department heads to pass information through. That means the path from top to bottom is much quicker, allowing greater precision in instructions and working methods as dictated from the CEOs.

Another advantage that is worth noting in relation to micro business is that it can be significantly easier to maintain a decent cash flow. Something that can allow a business to keep generating income in both the short and medium term.

The reason for this is that there are plenty of finance options for LTD companies that micro business can explore that don’t include heading to the bank for a loan. This means that not only will they have access to additional funds if they need to make sudden changes, but they will also not have to play the long waiting game regarding the banking making a decision on the funding they need.

Additionally, micro businesses can benefit from the availability of business loans tailored to their specific needs, providing them with the financial support they need to grow or manage their operations. Open accounting, a transparent approach to financial management, can also help micro businesses effectively track their finances, improve decision making, and establish trust with investors or lenders. By implementing open accounting practices and considering business loans, micro businesses can further enhance their financial stability and maintain a healthy cash flow.

Also, because micro businesses usually have lower overheads including fewer wages and less rent and utilities to pay, there isn’t such a large strain on their cash flow in the first place. Something that can make all the difference when trying to keep afloat in a difficult market.

What are the disadvantages of a micro business?

However, there also some distinct problems that those running a micro business can encounter that wouldn’t be an issue in a larger company. These include the enhanced importance of the team dynamic in a micro enterprise. After all, the smaller the team, the more important it is that everyone is integrated and gets on in a professional sense. Otherwise, you could see big problems in motivation and productivity that can severely affect the performance of your business.


Keeping everyone on the team happy can be quite a task in a micro business.

Another issue that many micros business face is that they do not always have the necessary knowledge and expertise to complete a project, but also do not have the resources to employ another person to fill this gap. Luckily, the advent of the gig economy and the availability of experienced and reliable freelancers is usually enough to bridge this gap. Something that can allow micro business to surmount the obstacles in expertise that stand in their way and continue on the course to success.


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