Micro-Enterprises and How to Grow Them into True Small Businesses?

A “Micro-Enterprise” can be defined in a number of ways but essentially it is a business with less than 5 employees and very often operated by a single person. Generally speaking these types of businesses have been started with less than $35,000 in seed capital (although my experience tells me they are usually started with less than $2,000). Micro-enterprises normally do not have access to commercial lenders nor extensive lines of credit and yet they continue to proliferate especially in the service industries (cleaners, handymen, pet groomers, computer repair, personal assistants, hair stylist, consultants, home based businesses etc.).

However, almost every company starts with just one person. New technologies, new products, medical or other professional practices all have to start somewhere.  The question becomes what can you do to grow your micro-enterprise to become a small, mid-size or large business particularly when the economy is in dire shape? The answers are common sense, sociability and to always remember “Cash is King”.  

First, let us review some tips for starting the business and then take a look at some methods of organic marketing to get and keep you going.

Starting the Business:

It takes money to grow, so make sure you check your ego at the door, the faster you spend cash the less likely you will survive the first year in operations. “Cash is King” tips:

• Start your business from your home if possible. Avoid signing any leases or purchasing office space until the last possible moment or unless you have an absolute need. Meeting rooms can always be rented. 
• If you lease or buy office space, never buy new furniture of furnishings. New furniture is a waste of money. By looking for bargains you will find that banks and other investors realize you are intelligent and pose a lesser credit risk than someone who burns through cash. This applies even if you are starting a professional practice. Nice desks and furniture can be found if you look.  
• Be cautious when purchasing computers and software if needed for your business. Buy only what you must have. Avoid all long-term commitments.  
• IF and only IF your business requires a website, shop around for the best value. You can save thousands of dollars by utilizing the global economy to find a company to develop your website. Do not be fooled by false promises of web optimization. True optimization can be very expensive and is often not needed initially. 
• Be thrifty when purchasing office supplies and promotional materials. Only purchase what you must have, such as business cards, paper etc… Pens, hats, t-shirts with your company name on them are just a cash drain and have limited value. Letterhead in most cases is a luxury item and not needed. 
• Use a cell phone instead of a telephone system. If you have determined that your business needs a telephone system, shop around for a used system.  
• Use your credit wisely, when negotiating with vendors, ask for terms and avoid upfront or cash payments as much as possible. Many vendors and suppliers often claim they do not set up terms with new businesses. This is not always true. You may be able to sell products on consignment or achieve discounted pricing if you ask. You are there customer also. If you must obtain a credit line – NEVER agree to personally guarantee payments. 
• Do the work yourself. The number one ongoing cash drain for a new business is its labor costs. If at all possible do the work yourself. Every person you hire is money not going to your bottom line. Be prepared to work 10-16 hours a day initially. Pay yourself only enough to survive for at least 2 years. 
• Buy used when possible – vehicles, durable goods, tools. 
• Don’t purchase lists or services for sales or fund raising leads, advertising blasters, potential client lists, web optimization. These are a waste of money and 90% of the time a scam or virtually useless. 

Marketing yourself and your company/services:

The number one most difficult task when starting a business by yourself is managing your time. To grow your business you need to establish a positive image, network, follow up on leads and at the same time take and work any jobs that come your way. If you are working from home the challenge is even more difficult unless you are disciplined enough to control the distractions.

A completed business plan is not required to start a business**. What is required is that you have given thought to what your target market is and how you will obtain and deliver your product or services.  After defining what your business will be, a good place to continue your business development is through “Organic Marketing” (stuff that costs very little if any money). Some methods of marketing for a micro-enterprise are:

• Blogging
• Guest writing for local flyer’s, magazines or internet feeds.
• Joining business development networks such as “Linkedin”, minority commerce groups (if you qualify), local commerce groups. 90% of these are free.
  • Joining as many sub-groups as your time will allow
  • Avoid membership upgrades until cash flow is available and the need is absolute

• For consulting start-ups – avoid providing more than 1 hour of free consultation.
• Talk to people in your business. People love to talk about their successes and themselves. Learn, learn,and  learn, as it is unlikely you know all the answers.
• Be willing to negotiate your terms but try to avoid people who ask you to provide free or super discounted prices for the possibility of a long term opportunity. Always charge for your core services. Add value by offering something additional at a reduced price.
• Talk to everyone you know – leads can be generated from almost anywhere.
• Make a schedule around your clients to set aside 2-3 days a week for networking.
• Schedule follow-up with leads. This shows professionalism.
• Get involved in the community.
• Offer to speak at professional organization meetings by addressing a need or providing information that they might be able to use. This is not a sales pitch it is an opportunity for you to enhance your image. Be available for side meetings (this is where your leads are generated from).
• Develop channel partners and cross sell. Channel partners can be horizontal or vertical in nature. There purpose is to provide additional outlets for both of your products.  Examples: exchange web links with other vendors, agreements with competitors if you each have a product the other does not, talk to vendors who supply you they have a stake in your success too.
• Show genuine concerns for your clients and build the relationship. Make your client feel special and wanted. Telephone clients and show appreciation and obtain feedback after the sale. Ask them what you can do better. Send them thank you for your business note.
• Under Promise and Over Deliver. Exceed your customer’s expectations. Nothing will add to perceived customer value more than exceeding their expectations. Conversely, if your service or product fails to meet expectations the consumer will look elsewhere.

The above items are far from inclusive of all types of organic marketing. However, the key to their success is your ability to manage your time. To enhance the success of organic marketing make sure your first employees or partners understand that they will wear many hats and everyone is accountable for success.

Without a doubt time is your most valuable asset. As you develop clients, it is  critical that you think through how you are going to continue to grow. This is the design of your business plan. Make sure your strategic planning is updated often.

** Business plans are essential for the development of any business. But a business plan does not need be 100 pages and detailed before you begin a micro-enterprise. The key is thinking your idea through before you begin. A business plan should be a dynamic and flexible TOOL that helps guide you through growth and business fruition. In many cases it is simply a constantly updated plan of action (organizational to-do list).

The Entrepreneur’s Advisor™ strongly suggest completing a business plan as you grow your business and certainly before you seek to obtain capital from an outside source.

Have a question on how to start and/or grow your business? The Entrepreneur’s Advisor™ is unique in their ability to assist new ventures. Our understanding of the emotional roller coaster, the details of starting a business, the experiences of running a business, change management  and a passion for what we do separates us from others because “We have been there and done that”. Our innovative Pay-As-You-Think” program is designed to be a sounding board for start-ups. Talk to us – “We love getting our hands dirty.” 

Previous articles can be found at:  The Entrepreneur’s Advisor
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