Pros and Cons of Owning a Micro Business

Small and medium sized businesses enjoy large scale popularity, but the knowledge databases and big players often ignore micro entities. They are not recognised like the major brands in New Zealand because of their smaller contributions to the economy. They have a limited customer base and are relevant in their communities. Outside their areas of operations, they are nonexistent. This is because of limited funding and a lack of broader marketing techniques. However, micro businesses have a valuable role in the country and have been growing in numbers.

These entities have less than five employees but have been propelling economic growth with their profit making endeavours. Many businesses in the country are small and operate in almost every industry, including retail, ecommerce, construction, food, etc. These are not side hustles but fully developed businesses that require full time operations and supervision. With many aspiring entrepreneurs looking for business opportunities in New Zealand, here are the pros and cons of owning a micro business. These can help understand the strengths and vulnerabilities of these ventures.

1. Pros of Owning a Micro Business

According to the Ministry of Business, Innovation and Employment (MBIE), there are 102,000 micro businesses in the country. Many of these entities are owned by sole traders and operate without employees. Here are the advantages of owning these ventures.

Low Initial Investment

Micro businesses do not need lavish workplaces or an elaborate list of equipment, fittings and furniture. Most of these businesses can be run from home or using a vehicle to deliver mobile services. Thus, the initial setup cost is reduced considerably. With many entrepreneurs opting to be sole traders, they do not need an office or plant and machinery. They can start operating with the help of their computer and internet connection, such as ecommerce businesses and consulting services. These businesses are booming because of the high demand for skilled consultants working remotely.

Flexible and Turnkey Businesses

Since micro businesses have limited employees and simple operations, they do not develop complex workflows or processes. They maintain flexibility to adapt according to customer needs and satisfy them. Because of the straightforward procedures, these turnkey entities can be operated by anyone without prior experience in running an organisation. Many budding entrepreneurs prefer buying these businesses for sale in New Zealand to understand the organisation and management quickly.

Using Expertise for Sales

Micro businesses can even be operated on the skills of one person if they are offering freelance services. A sole trader can easily offer online tutoring, car detailing, commercial cleaning, accounting, yoga, painting, cooking, catering, etc. It is easier to manage the business as an owner operator because of flexible work hours.

Accessible to a Wider Population

New entrepreneurs can easily start a micro business because of the ease of doing business in the country. Sole traders can establish an entity effortlessly since it requires minimal paperwork and compliance. In addition, the simple tax system makes it easier to manage costs and claim deductions for home office expenses, equipment costs and vehicle and travel expenditures.

Favourable Economic Conditions

New Zealand has an open market and a stable political and economic environment. Micro businesses have limited legal implications and can start operating after registration and getting permits and licenses. The free market economy ensures entrepreneurs find operating and navigating regulations easy. The growing population and many small businesses ensure micro entrepreneurs find their niche and operate safely.

Low Risk of Failure

Many individuals prefer buying a business for sale in New Zealand to reduce the risk of failure. In addition, they can opt for a micro business that can turned successful venture through continuous improvement and adaptability. Entrepreneurs can evolve and offer personalised services to stay profitable. They can use government support to stay afloat and build a stable business.

2. Cons of Owning a Micro Business

Micro businesses are mushrooming in the country post the pandemic with a wave of entrepreneurship. However, founders must learn about the disadvantages that can challenge their goals before jumping on the bandwagon.

Securing Funds for Expansion

Seed funding is necessary for businesses that must procure materials, package them and deliver them to customers. They also need to market the goods and promote the brand to generate sales. The business start up costs cannot be met through bootstrapping. However, securing funds for micro businesses with no concrete financial projections is not easy.

Managing A Positive Cash Flow

Sometimes, new entrepreneurs may falter to sustain profits because of their inexperience in business and financial management. They can suffer losses due to delayed payments, unnecessary expenses, low sales, and inaccurate tax calculations. Since they have limited funds, it can become challenging to generate a steady income. Buying an existing New Zealand business for sale can help prevent this problem with a loyal customer base and accurate financial projections.

Unlimited Liability for Sole Traders

Since most of the micro businesses are owned by sole traders, they have to bear the brunt of unlimited liability. The owner is responsible for all the business debts because they are not separate from the legal entity. So, if the business fails to pay debts, creditors can sell the owner's personal assets to get their compensation. Entrepreneurs must prevent this situation by keeping the business financially healthy.

Lack of Resources and Talent

One of the reasons micro businesses suffer is that a single person often operates them. It is difficult for an individual to be a jack of all trades. Every entity needs specialised people to complete tasks like accounting, marketing, administration, distribution, inventory management, customer service, etc. Managing sales can become challenging when sales start growing, but the resources are limited. Thus, budding entrepreneurs must look for a business for sale in New Zealand with a talented team to manage operations skilfully.

Marketing Challenges

Marketing is expensive because of the high cost of creating videos and images for attractive campaigns and running them on popular media channels. Although digital marketing helps create cost-effective campaigns, not every business can build traction due to mistakes. High competition in business categories, limited budget, a lack of tech innovations and changing marketing trends impact micro businesses. They must have a solid hold on marketing to stay relevant and gain new customers.

Wrapping Up

Micro businesses are often overlooked because of their small size. However, they make a significant impact when they perform successfully and scale up to capture a significant market share. Individuals planning to enter this segment must understand its pros and cons to make an informed decision.