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The Microenterprise
Part One


See also:
The Microenterprise — Part Two
The Microenterprise — Part Three

T
here are a total of 6,317,690 business establishments in the United States.1 Three-quarters of all of these businesses (4,723,398) employ less than 10 persons. While the Small Business Administration defines any business with fewer than 500 employees as a small business, an increasing number of analysts and economists are characterizing businesses employing less than 10 persons as microenterprises. Three out of every four businesses in the United States are microenterprises. While individually quite small, these aggregated businesses constitute a dominant segment of our economy.

          Microenterprises employ 14.5 million persons; one out of every six persons in the workforce is employed by a microenterprise. The annual payroll generated by this segment of our economy is $318 billion! While microenterprises are often perceived as inconsequential and may be spoken of derisively, these businesses are indeed the bulwarks of our national economy.

          Of course, the interests and the concerns of the owner/ manager of the microenterprise differ dramatically from those of larger businesses. These differences may best be summed up as vulnerability. While often exhibiting unique competitive advantages and strengths, the microenterprise lacks many of the resources enjoyed by the larger business. These asset deficiencies most commonly include people and money.

          People weaknesses may be either qualitative or quantitative -- or both! Obviously, the microenterprise simply cannot afford a diversity of sophisticated talents or the luxury of intense specialization. With 9 employees or less, almost every employee will be performing more than one job. Cross training occurs innately simply to survive; it is not part of a corporate human resources policy. On-the-job as well as off-site training to upgrade technical skills is commonly perceived to be an inaccessible "luxury," not the budgeted cost of competitive necessity. The loss of a key employee can be debilitating -- and frequently devastating -- to the microenterprise. Only 100+ percent performance by each employee can be tolerated; there is no room for stragglers.

          Precarious cash flow is an unavoidable weakness of most microenterprises. The venture that has not been under-capitalized from startup is truly an exception. Surprisingly, one in four of Inc. Magazine's 500 (1992) fastest growing companies was founded with less than $5,000. Thus, cash flow is a relentless problem for the microenterprise. Meeting Friday's payroll is a weekly crisis. Badgering even slightly delinquent receivables can be a distasteful daily task. And staving off creditors is a lamentable -- but critical -- skill when cash receipts may be tardy. "Reserves" is a term seldom found in the vocabulary of these businesses. Perversely, the acceptance of profitable new orders at the wrong time and under the wrong conditions has crippled many microenterprises through the cash hemorrhaging resulting from this otherwise attractive business.

          People and money are the two most dramatic differences between the microenterprises and its much larger neighbors. But in nature, both the large and the small -- the elephant and the ant -- demonstrate strengths and weaknesses. Hand wringing does not alleviate or change deficiencies; weaknesses must be assessed realistically. Once a vulnerability is understood, a complementary power is quite commonly discovered. Pathetically weak and awkward, the chameleon is helpless in the face of direct assault, but the amazing weapon of camouflage gives it an efficacious defense. Similarly, the microenterprise can never outgun its larger competitors with people or money, but it can employ weapons with which it can creatively out-maneuver its competition.

          An elephant is no more invincible than an ant; it is simply big! Similarly, the microenterprise is no more disadvantaged than the General Electric Company; it is simply small! Careless growth and bloated bigness have propelled many large companies to extinction. Properly understood and assessed, small can be the prerequisite of a winning competitive strategy.

1 All data is derived from U.S. Bureau of the Census, County Business Patterns, 1992 (Washington, DC: US Government Printing Office, 1994) CBP-1992-1, pp.ix,3.


 

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Thomas A. Faulhaber, Editor

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