Microenterprises – Supporting the Types of Businesses in Your Ecosystem

This multi-part series offers ecosystem builders and economic developers insights into the characteristics of each business type and targeted strategies that help those businesses thrive.  

Small businesses form the crux of the American economy. Recent data from the U.S. Small Business Administration shows the U.S. is home to 33.3 million companies that qualify as small businesses. As a group, they make up 99.9% of all businesses in the country and account for 64% of net new private-sector jobs, 42.9% of private-sector payroll, 46% of private-sector output, and 98% of exported goods, among other economic contributions. 

Although America’s small businesses may be small, they are mighty. And they can be even more successful when ecosystem builders and economic developers understand the different types of entrepreneurs and work collaboratively to strategically support them. SourceLink segments small businesses into four categories, each with unique needs and ways to grow: 

  1. Microenterprises 
  2. Main Street businesses 
  3. Innovation-led ventures 
  4. Second-stage companies 

This series will describe the characteristics of each business type and offer insights into strategies that help those businesses thrive.  

Part 1: How to Support Microenterprises 

In this first installment, we focus on what a microenterprise is, the importance of microenterprises to local economies, and how to assist with their success.  

What Is a Microenterprise? 

A microenterprise is generally defined as a small business employing fewer than 10 people. These businesses are often characterized by minimal startup capital (often less than $35,000) and modest revenue. They are typically self-financed, owner-operated, and intentionally small. 

Microenterprises span a diverse range of industries, from retail and service-based businesses (e.g., local cafes and boutiques) to independent consultants and online sellers.  

Many are deeply rooted in their local communities, making them a foundational component of the economic ecosystem. These businesses frequently serve niche or underserved markets, contributing significantly to economic diversification and stability. 

Like small businesses in general, microenterprises are a significant economic force despite their small size. According to prosperitynow.org, approximately 92% of businesses in the U.S. are microenterprises that employ nearly 32 million Americans. In some communities, microenterprises play an outsized role in the following areas: 

  1. Job creation. Microenterprises create employment opportunities, especially in underserved communities where jobs might be scarce, thus boosting local employment and contributing to the purchasing power of residents. 
  2. Economic diversification. Because they cross so many industries, microenterprises add diversity to the local economy, making it more resilient to economic fluctuations. 
  3. Innovation and niche markets. Microenterprises often occupy niche markets, providing unique products and services that larger businesses might overlook. 
  4. Community building. These businesses are usually deeply embedded in their communities, supporting local events, and contributing to the social fabric. 

The findings of a joint study conducted by SourceLink for the MicroEnterprise Collaborative of Inland Southern California and the Women’s Business Centers of Inland Empire and Coachella Valley support the claims of microenterprises’ economic contributions in the four areas mentioned, notably: 

  • In addition to full and part-time staff, the microenterprises surveyed used contractors to provide goods and services, with most relying on local contractors for assistance.   
  • Nearly 52% of respondents with employees offered one or more benefits, including work from home, training/learning opportunities, and flexible work schedules in addition to traditional benefits like vacation, health insurance, and retirement plans. 
  • They contributed to employment in their own neighborhoods, with 56% of their employees traveling fewer than five miles to work. 
  • The responding companies represented a diverse range of industries, with the highest concentration in services and retail. 
  • Additionally, 67% of respondents said their business was minority-owned and 93% were women-owned. 

Addressing Microenterprise Challenges in Your Ecosystem 

Addressing the distinct challenges of microenterprises is key to unlocking their potential and ensuring their contribution to the local economy.  

How? 

Use data to understand the specific needs of microenterprises in your community. Conduct surveys, focus groups, and market research to tailor your support programs effectively. Also, map the resources that are already present in your ecosystem. You can identify the gaps by comparing the existing resources with the research you conducted. 

Remember to think collaboratively. You don’t necessarily need to create new programs to plug the gaps. Partner with local government agencies, nonprofits, educational institutions, and private sector players that may already have the needed resources and programs or may be willing to develop them. Additionally, because microenterprises can be a challenge to reach since they often work in isolation, a broader network allows more sharing of how to reach and engage them. 

One SourceLink affiliate that has created a vast support system for microenterprises through collaboration is the above-mentioned MicroEnterprise Collaborative of Inland Southern California.  

“Through our network of over 700 partners across Riverside, San Bernardino, and parts of Los Angeles and even Orange counties, the Microenterprise Collaborative has facilitated events and connected small business owners to resources and collaborators in 52 different cities within the Inland Empire region of Southern California,” said Pamela Deans, executive director of the organization. “In addition, we are partnering with each of the 52 cities in the Inland Empire one by one to host our Small Business Assistance Web-Based tool on their websites to exponentially increase our reach to small business owners and entrepreneurs.” 

Out in Washington State, an important tool for business owners is Evergreen BizLink, a platform that connects Washington State microenterprises to a network of resources. The team there took bold action developing a statewide coalition that included the WA State Department of Commerce, U.S. Small Business Administration (SBA), Minority Business Development Agency (MBDA), Washington Small Business Development Center (SBDC), Washington Main Street, and Washington Economic Development Association (WEDA) to improve the statewide environment for microenterprise business success. The implementation included the recruitment of 113 resource partners to join the network and contribute to its success, resulting in easier access for microenterprise businesses to find tailored assistance and grow their operations.  

Collaboration ensures a comprehensive support network for microenterprises, covering needs ranging from funding to technical assistance. Keep in mind these major challenges as you build out your network of support for microenterprises: 

1. Access to capital. One of the biggest challenges for microenterprises is securing funding. Traditional banks often view these businesses as high-risk due to their small scale and limited financial history.  

“This lack of financial resources can hinder their ability to invest in growth, acquire necessary equipment, or navigate economic downturns,” noted Deans. 

Economic developers can bridge this gap by advocating for microloans, grants, and crowdfunding initiatives specifically designed for microenterprises. Here are some of the national funding programs available to microenterprises and to organizations that support microenterprises:  

  • The SBA’s Program for Investors in Microentrepreneurs (PRIME) provides grants to nonprofit organizations that help low-income entrepreneurs access capital for starting and growing their businesses. 
  • Kiva is a global nonprofit that allows individuals to lend money to microentrepreneurs. They focus on providing microloans to underserved communities. 
  • Local Initiatives Support Corporation (LISC) supports community development projects, including microenterprise programs. They offer financial and technical assistance to help small businesses thrive.

2. Training and education/technical assistance. Providing tailored training, advice, and mentoring on business fundamentals is critical to helping microenterprises overcome initial barriers to growth and operational challenges (e.g., basic financial management, marketing, digital literacy, business planning, legal advice, and IT support).  

In-person workshops, mentorship programs, and online courses that address these basic skills can be offered through your local business development centers, universities, and other business resource organizations in your ecosystem.  

3. Networking opportunities and market access. Marketing can be particularly challenging for microenterprises due to limited budgets and capital. In particular, microenterprises benefit from support in areas like product development, customer engagement, and establishing an online presence (e.g., social media, digital marketing, website development, and ecommerce platforms).  

Creating networking opportunities is often game-changing, as microenterprise businesses love to connect with one another, potential partners, and mentors.  

Consider hosting regular meetups, business expos, online forums, business fairs, and pop-up events where microentrepreneurs can share experiences, advice, and their products and services. Participating in local events and partnerships with other businesses can increase visibility and promote community-based marketing.  

SaveYour.town provides several examples of creative ways small (and even large!) cities have converted empty lots into marketplaces for microbusinesses. 

4. Regulatory guidance. Navigating legal and bureaucratic landscapes can be daunting for microenterprises, especially since many may be operated out of their home. Economic developers can remove significant barriers by offering guidance on compliance, taxation, and other regulatory matters.  

In addition to providing awareness of and training on legal and regulatory matters, ecosystem developers can advocate for streamlined licensing processes, reduced fees, and supportive policies to make it easier for microenterprises to start and operate. The Association for Enterprise Opportunity (AEO) is a national membership organization that supports microenterprise development through advocacy, research, and training. Likewise, the Aspen Institute’s Business Ownership Initiative also provides resources, research, and advocacy. 

Microenterprises serve as a cornerstone of local economies. By understanding the unique opportunities associated with these businesses, ecosystem developers can foster environments that nurture the growth and sustainability of these businesses, thereby contributing to economic diversification, job creation, and social cohesion.  

“It is crucial to understand the specific challenges and cultural nuances of the communities in which these businesses operate,” said Deans. “Establishing strong partnerships with community organizations, educational institutions, and financial institutions can further amplify the impact of support initiatives. Additionally, advocating for policies and regulations that create a favorable environment for microenterprise growth is essential.” 

As this series progresses, we will continue to explore other business types, offering insights regarding how to foster vibrant businesses through each segment of the entrepreneurial community. Stay tuned for our next discussion on Main Street businesses. 

WHERE ARE THE MICROENTERPRISES IN YOUR COMMUNITY? 

“Microenterprises often operate in informal settings and can be difficult to reach through traditional channels,” noted Pamela Deans, executive director of the MicroEnterprise Collaborative of Inland Southern California. “The key is to employ a multi-pronged approach, working closely with community stakeholders and meeting microenterprises where they operate rather than expecting them to find centralized services on their own. 

Here are some strategies she and her team use to find microenterprises, engage with them, and create awareness of the MicroEnterprise Collaborative’s services and programs: 

Leverage local partners and networks. Tap into existing community organizations, business associations, city websites, chambers of commerce, microfinance institutions, and other local groups that have connections with microentrepreneurs.  

Conduct grassroots outreach. Go directly into neighborhoods, markets, and informal business hubs where microenterprises operate. Engage with owners face-to-face, distribute flyers, and build relationships on the ground.  

Leverage local media. If your budget allows, advertise services through community newspapers, radio stations, and other local media channels commonly accessed by microenterprise owners.  

Word-of-mouth. Encourage existing microenterprise clients to refer others in their networks.  

Leverage technology. Use social media and other digital platforms popular among microentrepreneurs to promote services and programs.