How Tiny Businesses Are Born

At dinner a few years ago, I was sitting next to a fellow talented, tiny business owner and we were talking the way we do, swapping stories and offering advice to each other. A friend of a friend sat down and said that she wished she owned a business…so that she could work fewer hours and do whatever she wanted all day long as we did. This was followed by silence and blank stares from both of us.

At the time, I was still running a jewelry brand and the friend was a personal trainer. We were both exhausted, although I don’t remember it being a busy season for either of us, simply a Tuesday night.

Sure, she was fresh out of college and worked in a law firm, so she had a skewed perspective of the hours someone employed by someone else would work, but still, we could only tilt our heads in wonder at her comment and finally laugh in response. She had no idea what the reality of owning a business was really like. She most likely didn’t grow up with parents or family members who were entrepreneurs, and her views were formed from reading success stories and watching Shark Tank. That or she was picking a fight.

Either way, let’s clear this up. We all think we know what it will be like before we start. But it’s so different when you are in the middle of it. When you are living through days that begin at 6 a.m. and finish (and how many business owners ever feel finished?) at 6 p.m. on a regular basis. Not everyone chooses to work these hours, but for many of us, it’s the love of the work itself that brought us to self-employment. That near-obsession with wanting to show up and do this thing every day is what has driven most tiny business owners to take the leap.

You’re not pushed by the thought of quick riches or dreams of working only one hour a day. Rather, you’re driven by a love of what you do. You want to run your own show. You don’t want to manage a big team or staff. You want to be able to do the work you love and do it in your own little bubble. You hope that once you have established a strong foundation for your business, you will be able to step back if you choose. However, if you want to achieve a six or seven-figure income or have a business that will last more than a few years? You will need to put in the time and hard work to create that solid foundation that you can build on top of.

If you picked up this book and are excited about breaking a million in sales year one or can’t wait to kick back and enjoy the easy life, you’re probably going to be disappointed. But if you are reading this with a twinkle in your eye, a head full of ideas, and you cannot wait to get started—know that this was written for you.

What Is All This Talk About Tiny Businesses?

A few years ago, I started calling businesses with five or fewer employees, tiny. Why? Well, according to the SBA (Small Business Association), a small business is any business with 500 or fewer employees.[1]?That struck me as odd, as those are such different businesses than the ones I see every day. It makes you wonder how they can even be in the same category. Interestingly, small businesses in the US are shrinking in employee size but growing in revenue. That’s a really good sign! In fact, 99.9% of all businesses in the US are considered small businesses.[2]?And yes. I agree that this all seems ridiculous. Why not make a few categories to help differentiate? Because really, all businesses except for the 0.1%, which you can name them easily, the Uber’s, the Google’s, the H&R Blocks, and are classified as Enterprises, are considered small businesses. How is this a thing?

I’ll give the SBA a bit of credit, there is one more level of small businesses. The classification for very small businesses means less than 50 employees.

What does this mean? That almost all businesses are considered small businesses. And many are so much bigger than what most of us ever want to own. If you are looking at a course or a service marketed towards small businesses, the chances are high that it will not be geared towards tiny businesses. It may be priced for a 400-person business or created to benefit a business with 80 employees. In short, you are faced with information (for example about the management of large teams), systems (for sales teams, not people), and costs (services that cost more than your business may make in a year). These topics are not even in the same universe of what you are probably looking for.

Another fact is that two-thirds of businesses make it to two years, half make it five years, and one-third of businesses make it 10 years. It is very tough to have a business going for a decade. A depressing statistic is that 86.3% of small business owners take a salary of less than a hundred thousand dollars and 30% of small business owners take zero salaries.[3]?The average CEO makes $160,000 a year, the?average?CEO[4]. If you are the CEO of your own small business and taking zero salaries, you’re working for free for something that may not make it more than two years.

If a small business has outside financing (money from beyond the sales within the business), 75% of that financing is coming from either business loans, business credit cards, or lines of credit. The other 25% is from personal savings, friends and family investment, or Kickstarter, or something similar. They are rarely VC funded or have had large amounts of cash handed to them just to see what they can do. Tiny businesses, especially in the first few years, are often excluded from traditional funding sources, as banks require two years of P&L (Profit & Loss) statements and most tiny businesses are not aiming to sell quickly or go public.

The reality is that 29% of businesses fail from a lack of cash flow. While 42% fail for lack of market need[5]. And unfortunately, for the talented people that create businesses around their talent, well, the market doesn’t always want what people are talented in.

So where do Tiny Businesses fit into the definition of small businesses? Well, the SBA has added a classification for these. Businesses with 1-9 employees are technically called Micro Businesses[6]. And there are a ton of them. The term micro however just doesn’t sound as good with business as tiny does though. So I have taken it upon myself to rename these businesses and focus on the smallest of them, those with 5 or fewer employees. About 75% of small businesses in the U.S. are Micro businesses and about 45% of small businesses are single owners and operators. That means you’re in great company! It’s okay to set out to build a tiny business. Especially for those who love freedom and flexibility (more on that in a minute). Don’t feel like you have to have 30 employees or make $2 million a year in order to be successful. Create your own idea of what success looks like, take action and you’ll be amazed at what you can do.

Just keep in mind that being in business for yourself is going to be vastly different, well, everything, than being a business with 500 employees. Unfortunately, this means that so much information out there for small businesses feels completely irrelevant to you. Because it is. It’s written for the 50-500 employee small business owners. Which frustrated me to the point that I realized that I wanted to create a change. Everything you are about to read in this book is written for tiny businesses. Why?

Because I am a huge fan of tiny businesses and have had a fantastic unconventional career thanks to owning and running my own since 2002. With my last business, I soared past the 10-year mark and profited for the entire 16 years. I closed that business because I craved new challenges and felt such a drive to help people, just like you, learn how to start and run amazing tiny businesses. And then I immediately started my current Tiny Business.

I want you to love owning a tiny business as much as I do, but like that friend of a friend at the beginning of the chapter, I don’t want you to jump in blindly.?You need to know what you’re signing up for. But you also should get excited and I can’t wait to see you soar!!

[1]?The SBA determines business size for the ability to obtain government contracts:?https://www.sba.gov/sites/default/files/advocacy/2018-Small-Business-Profiles-US.pdf

[2]?SBE Council and Facts & Data on Small Business and Entrepreneurship:?https://sbecouncil.org/about-us/facts-and-data/

[3]?Fundera has some sad facts about small business owners salaries:?https://www.fundera.com/blog/study-finds-business-owners-earn-less

[4]?For a look at what CEOs who are not Fortune 500 level make:?https://www.payscale.com/research/US/Job=Chief_Executive_Officer_(CEO)/Salary

[5]?To see the stats from the US Bureau of Labor Statistic via Fundera:?https://www.fundera.com/blog/what-percentage-of-small-businesses-fail

[6]?More charts about Micro Businesses:?https://advocacy.sba.gov/2017/08/01/the-role-of-microbusiness-employers-in-the-economy/

This is an excerpt from the book?Smarter Starting?by Sierra Bailey.