There’s no doubt that running a micro business is a very scary and stressful endeavour. In this piece, I’m investigating the key elements of running a micro-small business that many business owners (and even small to medium enterprises) don’t think about. The most important question of all: are you feeding a starving crowd? Here’s my take on the struggles of micro businesses in 2023 and beyond.
Remember the days of early YouTube and dudes leaning on lambos?
Do you remember in the early days of YouTube when you’d open up a new video and up would pop a douchebag leaning on a Lamborghini? He’d immediately leap into, “Here I am just in my garage with my lambo in my 4m dollar house…” The rest is so obvious I haven’t committed it to memory. In short, however, he would immediately start telling you about how you can also make the same type of coin by basically just sitting around on your ass all day.
Okay mate.
Cut to early 2020 and Covid suddenly kicks in. Big business see their profits melt like our ice caps. Except for Facebook, of course. Suddenly, we’re all stuck inside and we’ve got nothing better to do than worry about toilet paper and surf social media.
This is when the trouble starts for micro business
I re-launched Dellar Media during Covid-19. From predominantly media production focused to a digital marketing agency. My Masters was complete, and I was ready to start making waves in the digital marketing space. This is also when I saw a disturbing trend emerge on social media.
The trend of ‘follow my formula, and you’ll make a million bucks just like I did’. Sound familiar?
It was a great time to see all these amazing ideas blossom into micro businesses. But too many budding business owners were putting their savings into quick-fix formulas that work only for – well – the person that’s selling the formula.
The only content I’ve ever come across that tells the truth about launching a micro business is Alex Hormozi’s book $100m Offers. Before you ask, no, this is not a sponsored post.
Are you selling to a starving crowd?
In his book, Alex Hormozi offers a marketing anecdote that’s so excellent I refer to it almost every day.
A marketing professor asked his students, “If you were going to open a hotdog stand, and you could only have one advantage over your competitors… which would it be…?
“Location! …. Quality!…. Low prices!…. Best taste!”
The students kept going until eventually they had run out of answers. They looked at each other waiting for the professor to speak. The room finally fell quiet.
The professor smiled and replied, “A starving crowd.”
p.32
We saw a massive influx of micro business during Covid-19 for these reasons…
- There was a lot of people that needed a surplus income
- Facebook was ahead of the curve and created the ‘support community’ and ‘support local’ stickers on IG stories (they were making a tonne of money on FB ads at the time. Plus they see social trends happen way before anyone else does)
- There was an increase in community and local business support as the general public realised the importance of community in their lives
- Large enterprise started to struggle with supply and demand so micro business owners started coming up with their own ways to feed that supply
- We all had a lot of time on our hands
- There were way too many gurus telling people they could circumnavigate marketing tactics with pretty much zero effort and make a tonne of money while doing it
Now that Covid is mostly over and everyone is back to work, interest rates are up, the cost of living is up and we’re all worried about the looming recession.
Marketplace trends are shifting. People are worrying about their hip pocket and finding cheaper alternatives. Micro business is now trying to compete with big business stealing their ideas and undercutting them horrendously.
The focus on environmental impact and supporting local still exists but it’s drowning in tiktock trends, shortcuts and cheap alternatives.
A dire state to be in for a micro business
How do you know if you have a micro or small business that’s got legs?
I too fell into the trap of ‘follow my formula and you’ll be able to have a full-time nanny just like me’. I needed advice from a fellow digital marketing agency owner. Granted, she gave great advice – and continues to do so. However the numbers don’t lie. If you want to know whether your micro or small business has legs, let’s look at the reality of the numbers.
What are your numbers telling you?
In one of our workshops, our amazing agency guru gave us the numbers. We were all agency owners in our small group and we each had our specific area of expertise and experience level.
To make your agency viable, you need to pay yourself a CEO salary.
I know that if a small business breaks even in the first 12 months it’s got potential to survive. With the advice of my agency guru, I set to work. I paid myself a tiny salary in the first 12 months but I also paid my team and helped my clients hit some truly awesome milestones.
The second 12 months saw a healthier salary for myself and my agency grew.
I took those numbers to my financial advisor. I thought I would be able to come away with a solid game plan.
I was wrong.
He calculated our profit margin. He asked me what I wanted to pay myself as a CEO. He then calculated how much the business would need to make in order for me to pay myself that salary. The business would need to make close to a million dollars in revenue.
I almost fell over.
It’s not an insurmountable amount of money but the work it would take would burn me out.
The reality of your numbers is your absolute number one tool for success
Different businesses will have different overheads. The biggest problem I have seen is the visibility of those numbers. When a business starts to take off, we need to support that growth with resources. The delicate balance between those resources and our profit is where a business owner needs to spend the majority of their brain juices. Here’s some of my hard-earned lessons in the numbers space…
- Get very familiar with the difference between profit and revenue. If you have to, write the definitions on a pretty piece of paper and stick them up on your wall. Your revenue is what your business generates. Your profit is what you have left at the end of the day to either re-invest in the business or pay yourself.
- Track every last detail of your overheads. Especially your time! Use a tool like toggl and make sure your whole team also uses this tool. There are a lot of different tracking capabilities for toggl. I use it to track time. As a service-based business, time is extremely valuable to me. I need to know exactly how long things take to execute. This includes my own marketing. In fact, I’m toggling writing this piece right now. When you’re using a time tracker make sure to properly label and organise everything in your tracker properly. You don’t want to end up with a jumble of confusing information.
- Have a game-plan to increase your prices. Increasing prices is one of the scariest things any business owner can do. It’s one of the main concerns I hear from micro and small business owners. They know they’re not charging enough. But they don’t have the confidence to ask for what they want to get paid. If you’re producing great results and reaching capacity, increase your prices. If you’re consistently selling out of a product, increase your prices. A word of warning; make sure you have a strong case for increasing your prices and always respect your long-term customers.
- Find opportunities to increase productivity. I have a mountain of SOPs in my company. I look at Toggl and if something is taking longer than it should I either will cut that service or I’ll investigate what the problem is. Most of the time, something takes a long time to execute because the person executing doesn’t understand the task. Create SOP’s and use Loom videos to support those SOPs. You’ll make your business scalable and you’ll increase your profits.
- Invest in your business. Ever come across a guru’s amazing business growth story that seemed too good to be true? That’s because it’s not true. The thing these gurus won’t tell you is about their trust funds. Do choose to invest in your business but invest wisely. You cannot circumvent marketing tactics. Good marketing takes skill and knowledge. It’s not a plug and play scenario. If you don’t have years to spend understanding the intricacies of buyer psychology accept that it will take time to get your marketing right. These days, digital marketing changes so rapidly that I don’t see how a business has the chance of survival without a marketing expert on the team.
- Do invest in a bookkeeper or get very good at your own bookkeeping. Pay your service providers on time. If you can’t pay your service providers on time there’s something very wrong. If you don’t pay them consistently you’re going to end up losing them. Respect the work they’re doing just as you’d like them to respect you.
- Look for places to shave costs. You want to be so familiar with the numbers that you know the exact impact a $60 per month subscription will have on the business. Anything I invest in has to return a profit of some type. I’m not spending money for the sake of it. If I have a subscription that I’m not using every month, I don’t need it. There are alternatives to all of your costs but I often find cheaper in money doesn’t mean less time to execute. Sometimes you have to pay a little more for a better quality product. But if you want to cut corners on cost somewhere, back that up with a well documented SOP so you’re keeping time-commitement to an absolute minimum.
It’s tough out there for micro and business owners. And right now it’s exceptionally difficult. So many micro and small business owners saw an increase to their revenue during Covid only to have it dissapear right before their eyes two years later.
Are you feeding a starving crowd?
If you don’t have a market desperate for your product, you’re journey will take work. Most businesses don’t have a starving crowd. For a business to survive it needs a strong and capable leader that’s completely aware of their numbers and ready to make intelligent investment decisions.
If you’re feeling overwhelmed, you’re not alone. You really aren’t. But there’s ways to move past that as well. I do recommend Alex Hormozi’s book. I prefer the hard copy because I write notes and use post-its but it’s available in audio-book as well. Get familiar with your numbers. Understand where your revenue comes from. Make informed decisions on where to invest back into the business. Never be the smartest person in the room.
There will be ebbs and flows. There will be failures. There will be frustrations. So many frustrations. But trust yourself. And remember, you started your business for a reason. If that reason still rings true for you, your business still has a chance to become the success you know it should be.
