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Tips to run a successful micro business

Brian A.  Trzcinski

Posted on July 26, 2023

MassMutual specialist in business market development.
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Define what makes a micro business and the challenges it faces.

Provide 10 tips to help the micro-business owner with finances and marketing.

Note where the micro-business owner can turn to for help.

Are you a micro business? You might be if you:

  • Employ fewer than 10 people.
  • Operate out of a single location.
  • Have less than $250,000 in annual sales.

And whether you identify as a solopreneur, freelancer, side hustler, or small-business owner, there are unique challenges micro businesses face and specific solutions that are needed to move the business forward.

There are many successful micro businesses in the United States, and they are a great way to satisfy an entrepreneurial spirit. They typically have smaller startup costs, allow for greater decision-making flexibility, and cater to a specific market niche.

However, sales and marketing, raising capital, and managing operations with a small staff can make running a micro business a challenge.

Here are 10 tips to help make sure that your micro business not only survives, but also thrives.

1. Become creditworthy: Regardless of the bank you choose, becoming creditworthy is important for gaining access to capital. Keep in mind the 6 C’s of lending: character, cash flow, capital, collateral, capacity, and conditions. And remember — lenders could want owners to contribute at least 25 percent of the capital and will usually need to see cash flow equal to 1.3 times the debt.

2. Seek out alternative sources of funding: If you can’t get — or don’t want — a traditional bank loan, crowdfunding or getting a Community Development Financial Institution (CDFI) loan could be an option. CDFIs cater specifically to underserved entrepreneurs in low-income communities.

3. Manage cash flow: Managing how much money comes in versus how much goes out is essential for every business. To do this, it helps to forecast expenses and earnings, create a cash flow budget, and improve inventory management by keeping your record-keeping up to date.

4. Choose the right entity structure for your business: Choosing the right structure for your business is a critical decision that will affect many things. Whether you become a sole proprietorship, S or C-corporation, LLC, or partnership, the type of business entity should depend on three main factors: liability, taxation, and record-keeping requirements.

5. Separate your personal and business finances: While it may seem easier to keep your personal and business funds in one account, it’s much smarter to keep them apart. This allows you to easily track your cash flow, make your accounting more efficient, take advantage of tax deductions, and protect yourself from liability.

6. Stick to a low-cost marketing plan to attract customers: With social media marketing and other forms of digital advertising, micro-business owners no longer need enterprise-level marketing budgets to promote their businesses. And most modern digital marketing tools are simple and intuitive to use.

7. Use digital tools to help complete tasks: Handling several jobs at once can often be difficult for a small team. To automate and streamline many of these tasks, use digital tools, including accounting software, project management platforms, and point-of-sale systems with inventory management features.

8. Know your ratios: There are several ratios that all micro-business owners should be aware of: employees per square foot, sales per square foot, and revenue per employee. Learning these can help you streamline your business, assist with cash flow, and increase profits.

9. Protect yourself and the business: As a micro-business owner, your business often depends entirely on you. If things take an unexpected turn, it’s good to ensure that you and everyone who depends on you — family, employees, and customers — are covered. This is where life insurance and disability income insurance can help entrepreneurs. (Related: 3 reasons an entrepreneur needs life and disability insurance)

10. Get free small-business support services: Micro-business owners can get free support services offered by nonprofits like SCORE, the nation's largest network of volunteers, expert business mentors, and government agencies. With SCORE, you can get access to business mentoring both in person and remotely.

MassMutual and its team of financial professionals have the experience and tools to help you protect your business. Talk with us today and learn how we can help you better position your business for the future.

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The information provided is not written or intended as specific tax or legal advice. MassMutual, its employees and representatives are not authorized to give tax or legal advice. You are encouraged to seek advice from your own tax or legal counsel. Opinions expressed by those interviewed are their own and do not necessarily represent the views of Massachusetts Mutual Life Insurance Company.

Insurance products issued by Massachusetts Mutual Life Insurance Company (MassMutual)and its subsidiaries, C.M. Life Insurance Company (C. M. Life) and MML Bay State Life Insurance Company (MML Bay State), Springfield, MA 01111-0001. C.M. Life and MML Bay State are non-admitted in New York.