What are microenterprises
In the business ecosystem there are different business models and legal forms. If you intend to undertake it is necessary that you know what are microenterprises because it is one of the most used. On Hispanic Entrepreneurs We explain in detail how they work.
Classification of companies
Classifying organizations allows us to understand how they work, to accurately calculate VAT and income tax. Also to promote the liquidity of entrepreneurs because depending on their classification they are granted various benefits. In addition, it allows them to carry out a strategic planning of their finances, operational and technological needs.
One of the most common ways to catalog them is by their size.. For the division, some criteria are generally used, such as the number of employees, turnover, assets and technological innovation.
According to the number of employees, it is defined by the number of collaborators who work in the company. In terms of billing, the size of your income or annual sales is taken into account. Heritage is measured by the relationship between your assets (properties), your rights (credits) and obligations (debts).
While, for technological innovation, the technological tools that the company has are analyzed. Although this element is little used.
In this way we can know that there are:
1-Large companies: They are the ones with large capitals and usually have their own facilities. Its sales exceed 50 million dollars and 250 workers. They have an advanced administration system and loans in national and international banking entities.
1-Medium companies: They invoice less than 50 million dollars and have less than 250 employees. Its areas are defined by functions and its procedures are automated.
3-Small businesses: The volume of your business is less than 10 million dollars and sum less than 50 workers. They are independent and profitable.
4-Microenterprise: They are businesses that have up to 10 workers on their payroll and earnings of less than 2 million.
But do you want to know more about the latter? Then read on.
What are microenterprises
As we mentioned before, this organization has up to a maximum of 10 employees and a more limited turnover and benefits than the rest. Although the sales limit criterion varies according to each country, for example, in Mexico it should not exceed 4 million pesos.
Its dimensions are small compared to other types of companies, and it is one of the predominant categories in the productive fabrics of the world. Despite this, they do not have a significant impact on the markets because they do not provide a large amount of capital.
Apart from this, they do not have a structure that helps them to have a chain production process. But they do make use of raw materials and labor. Its actions are local and in a very small market niche. Their workers often have family or friendship ties because they are the small circles to which the owner has access.
Most of the micro-enterprises have affiliated services that are not of the nature of their sector, such as tax advice or logistics. They are developed in agricultural, livestock, industrial, craft, trade, repair and hospitality sectors. Examples of the model are shoe stores, bakeries, hairdressers, beauty salons, locksmiths, creating an application, mobile advertising, certain startups, among others.
They use few materials to develop their activity, but in some cases they can take on large projects. Their owners have control and supervision of the work they carry out.
Microenterprises are created for various reasons, among which the need to generate income to survive stands out. Also for wanting to develop a base to get to install a medium or large company. The microentrepreneur has the ability to run several microenterprises as one more worker.
Types of microenterprises
1-Survival
They are developed out of economic necessity and do not have a capital base to manage their operating costs. They are dedicated to immediate and limited production like street vendors.
2-Expansion
They accumulate more income than the survival ones, but it is not enough for them to grow more.
3-Transformation
This invoice more than the previous two because your income allows you to accumulate capital and thus have a greater chance of growing.
Depending on their activities, they can be productive by converting into raw materials such as shoe stores. Of services that satisfy the needs through their knowledge as do mechanical workshops or hairdressers. Those of commerce are dedicated to the purchase and sale of products, an example is grocery stores.
Advantages and disadvantages of microenterprise
The main advantage is that this type of business is the source of income and sustenance for several families. It has the facility to be modified if it does not work on the first try. Depending on the country, they are granted aid from the government or from banks.
Their structure is easily modified, they generate employment and they are creative with what little they have. On the other hand, decisions are made quickly by having the owner in permanent contact with the activity. The formation of it can be the first step for entrepreneurs to organize their project. By formalizing it, you have the possibility of accessing banking and growing.
They adapt better to economic changes, they need less investment and administrative structure costs. With the microenterprise, a greater distribution of the income generated is achieved, the attention is direct and personalized. They can be born anywhere, becoming the spirit of the socioeconomic organization of the area where they arise. Meet your immediate needs at lower prices and high quality.
Limited production is one of its disadvantages, covering only the immediate context, likewise, the inconveniences to obtain credits. The use of technology and equipment is scarce, limited or outdated, requiring greater effort from workers who do not have specialization.
Nor do they have references to hierarchical structures, moving away from the models of large companies and the salary is lower.
Importance of microenterprise
These organizations have become important in the economy of the countries, especially for the vulnerable sectors. They represent an opportunity for the subsistence of people who are unemployed or housewives.
Crafts, small-scale gastronomy or professional consultancy can eventually become a larger-scale SME.
The United Nations Organization considers microenterprises as "the backbone of most of the world's economies", and celebrates since 2017 every June 27 the Day of Micro-enterprises and Small and medium businesses.
According to the World Bank, they represent more than half of the formal jobs on the planet. The entity points out that they provide effective solutions to fundamental problems.
In Latin America, the support of the state has helped micro-enterprises to multiply, contributing to economic growth and job creation.
They help increase national income and boost local economic activity. It is considered one of the best ways to start a business.. They combine the illusion of creating a business by mixing the skills of a team that has the goal of becoming a great company.
supplies those market niches which the big companies do not reach. They have become consumers of capital goods, that is, buyers par excellence of machinery produced in their countries.
At the same time they are producers of a large part of consumer goods and intermediate goods for industries.
Some microenterprise data
-They represent more than 90% of all companies, 70% of total employment and 50% of GDP. (UN)
- Almost 62% of small businesses run by women have been greatly affected by the crisis. (UN)
- Micro, small and medium-sized businesses make up 99% of the industrial fabric. (ECLAC)
How to start a micro business?
For those who dream of creating their own business and being their own boss with a small business, they must follow some guidelines. You need to follow a plan to do it successfully. The first thing is to define what the company will be dedicated to and the characteristics of its target audience.
Set your goals, then choose your team well if you need one. It is best to surround yourself with people who know you and understand how important the project is to you. Take some time to decide all aspects of the company, the name, heading, and when to start each phase. All elements must complement each other.
Formulate a business plan It is essential to run the business. This will help you know everything you will need to make it successful and the times you will require for it.
On the other hand, it is essential to have an amount of money greater than that required to start up the microenterprise. This forecast is taken in case extra expenses appear. Calculate all the expenses and investments in detail so as not to fall into potholes that you cannot solve.
You must have a website whether you sell online or not. Nowadays it is essential for any business because having a platform to give information to potential customers will always be good. Use promotion through business cards, brochures, pens, etc. As well as in social networks.
Find a place where it will work and develop the product or service. When you check that everything is ready for the launch, organize an event for the inauguration. Remember that it is essential to plan, organize, execute and supervise all activities to correct failures.
In order for the microentrepreneur to manage the resources well, he has to manage the different management areas. In finance or business money, the entrepreneur must get it, invest it, lend it and collect it. He has to control it through records of income, expenses and inventory.
In the production aspect, it proceeds to transform the raw material into products. Its function is to set the characteristics, materials, design, process, quantity, etc. You must lead the work group with an example of organization, punctuality, cleanliness and other aspects.
While, in the sales process, in addition to meeting the needs of the client and treating them well, it is important that you listen to their suggestions. A microenterprise is profitable when it sells enough to cover expenses, family needs and to continue investing.
Difference between microenterprise and small business
These two concepts are often confused. Microenterprises are generally newly created and have less presence than small businesses. They start with a small amount of capital and are all around us.
On the other hand, small companies are larger, they have between 11 and 30 workers, in some countries up to 50. They are sole proprietorships or companies. They are present in all industries, operating as convenience stores, manufacturing plants, restaurants, inns, law firms, dry cleaners, etc.
They have a patrimonial, financial and administrative structure superior to that of the microenterprise with which they can give mortgage guarantees and request loans. They produce small quantities of products or services, they have a more organized process. In addition, they have a local and regional range of action. Its growth, division of functions and personnel is greater.
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