What Is a Microbusiness? Definition, Examples & Why They Matter
Updated: 3 hours ago
When most of us hear small business, we picture the businesses we interact with every day.
The boutique on Main Street. The landscaper who takes care of our neighbor's yard. The local photographer. A food truck. A home-based baker. The freelance bookkeeper. The maker selling at the farmers market.
But how does the Small Business Administration define small business?
According to the U.S. Small Business Administration's Office of Advocacy, a small business is defined as an independent business with fewer than 1500 employees and $40 million annual revenue depending on the industry.
That means a self-employed photographer working from home and a manufacturing company employing hundreds of people can both fall under the broad umbrella of "small business."
Both are small businesses, but they don't have the same challenges, resources or support needs. That's where the term microbusiness becomes useful.
What Is a Microbusiness?
A microbusiness is a very small business, typically owner-operated and having fewer than 10 employees. Many have no employees at all.
Think about the businesses in your own community:
A boutique owner with two employees
A self-employed landscaper
A photographer working from a home studio
A baker selling at farmers markets
A food truck operated by a husband-and-wife team
A freelance graphic designer
A maker selling products online
A hairstylist renting a chair
A bookkeeper working from home
A contractor with a three-person crew
A retailer with a small downtown storefront
These are the businesses most people already think of when they hear "small business."
Calling them microbusinesses gives us a way to talk specifically about this segment of the small-business economy and, more importantly, understand what these business owners actually need.
Microbusinesses Aren't a Small Part of the Business Economy
Here's where the numbers may be surprising.
More than 96% of U.S. businesses are microbusinesses. (source https://research.aeoworks.org/dashboards/mees/)
And most small businesses are even smaller than that.
According to the U.S. Small Business Administration's 2026 small business data, 82.3% of America's 36.2 million small businesses have no employees at all. The owner is the business.
That changes the way we should think about the term "small business."
The smallest businesses make up the overwhelming majority of businesses in America. Their individual businesses may be small. Collectively, they are anything but.
Is a Microbusiness the Same as a Small Business?
A microbusiness is a small business, but not every small business is a microbusiness.
That's an important distinction.
"Small business" encompasses an enormous range of companies. Depending on the industry and purpose of the classification, businesses with hundreds of employees may still meet federal small-business size standards.
A one-person photography business and a company employing hundreds of people can therefore both exist within the broader small-business category.
Their needs are obviously very different.
A microbusiness owner may be trying to answer questions like:
Do I need an LLC?
Do I need a business license?
Can I operate this business from my home?
How should I price my product?
Where can I sell locally?
How do I get my first customers?
Who in my community can help me?
A larger small business may be focused on workforce development, commercial financing, exporting, succession planning or facility expansion.
Both businesses matter, but support designed for "small businesses" isn't automatically designed for microbusinesses.
Microbusiness vs. Startup: What's the Difference?
Microbusinesses also sometimes get grouped together with startups.
There can be overlap, but they aren't necessarily the same thing.
The word startup is often associated with businesses designed around rapid growth and scalability. Startup companies may be developing technology, pursuing outside investment, building prototypes or preparing to enter large markets.
Many microbusiness owners have different goals. They may want to:
Create income for their household
Turn a skill or hobby into a business
Replace income from a traditional job
Build a flexible career
Serve a local market
Open a storefront
Create a few local jobs
Build a sustainable owner-operated business
Some microbusinesses eventually grow into much larger companies. Others intentionally remain small.
Success doesn't have to mean employing 100 people or raising outside investment. A sustainable business that provides its owner with income while serving customers and contributing to the local economy is still a successful business.
How Do Microbusinesses Start?
Microbusinesses often begin quietly.
Someone starts baking for friends and family. A hobby begins generating sales. A skilled employee starts taking independent clients. Someone starts selling products online. A parent creates a business that offers greater flexibility. An employee starts a side business after work.
Eventually, that activity may develop into a formal business or a thriving side-hustle business that looks very different from what traditional entrepreneurship programs were built to serve.
This creates an important challenge for communities.
Many of these entrepreneurs are operating long before they ever appear on the radar of traditional economic-development or business-support organizations. They may not attend entrepreneurship workshops. They may not apply for a business loan. They may not join the chamber of commerce. They may not lease commercial space.
Their first step may simply be searching online for an answer to a question.
That means a community can have far more entrepreneurial activity than its traditional business-development metrics reveal.
Why Do Microbusinesses Matter?
It's easy to underestimate a business with one owner or a handful of employees. But when more than 96% of businesses fall into the microbusiness category, their collective impact is significant.
Microbusinesses generate household income, create jobs, provide goods and services, fill storefronts and help dollars circulate through local economies.
They're also an important part of a community's future business pipeline.
Today's home-based baker could become tomorrow's commercial bakery. A vendor at a farmers market may eventually occupy a downtown storefront. A solo landscaper may eventually employ a small crew.
Others may remain one-person businesses for decades and still provide meaningful income to their owners and valuable services to their communities.
This can be particularly important in small and rural communities, where entrepreneurship provides another path to economic growth alongside business attraction and large-employer development.
We've explored the research and data behind this in more depth in our article, The Economic Impact of Microbusinesses on the Local Economy.
Why Are Microbusinesses Often Overlooked?
Traditional economic-development systems tend to be good at measuring things that are easy to see: Jobs created. Capital investment. Commercial property occupied. Loans made. Businesses formally launched.
Microbusinesses don't always show up neatly in those measures.
An entrepreneur working from home might create no immediate jobs. Someone testing products at a farmers market might not yet have a storefront. A side-hustle entrepreneur might still work a full-time job. A freelancer may never need employees.
That can make these entrepreneurs easy to overlook.
But if we only measure entrepreneurs once they create jobs, borrow money or occupy commercial space, we're measuring them very late in their journey.
Communities also need to ask:
How many entrepreneurs have we identified?
How many have we engaged?
How many are getting the help they need to move forward?
Microbusinesses Need a Different Kind of Support
Supporting microbusinesses isn't simply a matter of offering more entrepreneurship programs. It's about providing the right help at the right time.
An entrepreneur who is still deciding whether an idea could become a business doesn't need the same resource as an established company preparing to hire its tenth employee.
Early-stage microbusiness owners may first need help understanding:
Whether their idea is viable
Basic business setup
Licenses and regulations
Pricing
Marketing
Recordkeeping
Funding options
Where to sell
Who can answer a specific question locally
Communities often already have many of these resources. Economic-development organizations, chambers, Small Business Development Centers, lenders, accountants, attorneys, mentors, makerspaces, commercial kitchens and other organizations may all play a role.
The problem isn't always that resources don't exist. The problem is often that entrepreneurs don't know which resource they need, when they need it or where to find it.
A long list of links and organizations doesn't necessarily solve that problem. For someone who doesn't know what their next step should be, a resource directory can simply become another thing to navigate.
Effective microbusiness support helps the entrepreneur understand what comes next and then connects them with the right resource at that point in their journey.
This challenge is one of the reasons we created the SmartStart Navigator. SmartStart helps communities create a clearer front door for entrepreneurs support by giving microbusiness owners a step-by-step path through the process of starting and growing a business, along with curriculum, tools and connections to the right local resources at the right time.
What Does This Mean for Communities?
If your community wants more businesses, stronger downtowns and a healthier pipeline of entrepreneurs, don't look only at established businesses. Look earlier.
Who is selling from home?
Who is testing products at the farmers market?
Who has started freelancing?
Who is running a side business?
Who is selling online?
Who has an idea but doesn't know what to do next?
These entrepreneurs may not appear in your traditional economic-development pipeline yet, but they are already part of your entrepreneurial ecosystem.
And when 96% of businesses are microbusinesses and more than 8 out of 10 small businesses have no employees, supporting the smallest businesses isn't a niche economic-development strategy. It's small-business development.
Frequently Asked Questions About Microbusinesses
What is considered a microbusiness?
A microbusiness is generally a very small business with fewer than 10 full-time employees.
How many employees does a microbusiness have?
Microbusinesses typically have fewer than 10 employees. Many have no employees other than the owner.
What are examples of microbusinesses?
Microbusinesses include freelancers, consultants, home-based businesses, makers, food entrepreneurs, photographers, landscapers, contractors, online sellers, boutiques, salons and other small owner-operated businesses.
Is a microbusiness a small business?
Yes. A microbusiness is a subset of small business. The term helps distinguish the smallest businesses from the much broader category of businesses considered "small."
Is a freelancer a microbusiness?
A freelancer who independently sells services and earns business income can generally be considered a microbusiness or self-employed business owner.
Is a side hustle a microbusiness?
It can be. A side hustle that sells products or services may function as a microbusiness even if its owner also has a traditional job.
Can a microbusiness grow into a larger business?
Yes. Some microbusiness owners choose to remain small, while others use a microbusiness as the starting point for a larger company. A home-based business can become a storefront, an owner-operated business can begin hiring employees, and a side business can eventually become someone's primary source of income.
Building Stronger Microbusiness Communities
Microbusinesses are easy to underestimate because each individual business is small. The numbers tell a very different story.
They represent the overwhelming majority of American businesses and millions of people creating income, testing ideas, providing services and building businesses in communities across the country.
For community leaders, the opportunity isn't simply to create another entrepreneurship program. It's to make entrepreneurship easier to navigate.
That means identifying entrepreneurs earlier, giving them a clear place to start, helping them understand what to do next and connecting them with the right local resources at the right point in their journey.
Because supporting microbusiness isn't something separate from supporting small business.
For most businesses in America, this is what small business looks like.
Want to build a stronger microbusiness ecosystem in your community?
SmartStart helps communities identify, engage and support microbusiness owners by making the entrepreneurial journey easier to navigate. Learn more about how the SmartStart Navigator works.
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