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Mini but Mighty: New Zealand’s Micro Business Boom

Published August 3, 2023 (last updated on April 10, 2024) | Adam Wyatt - Copywriter and Content Creator

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When you read the word micro, you probably think of something microscopic. Something so small you can hardly even see it. Don’t be fooled though, you’ll never struggle to see a micro business. They’re everywhere you look these days.

Micro businesses serve your morning coffee, sell you handmade birthday gifts on Instagram, or even build a website to help launch your micro business. They do everything other businesses do, just on a much smaller scale.

What Kiwi micro businesses lack in size, they make up for with some pretty impressive numbers:

• New Zealand has over 546,000 SMEs, representing 97% of the nation’s businesses.

• These companies account for 29.3% of employment and provide over 25% of New Zealand’s gross domestic product (GDP).

• Micro businesses make up 79% of all Kiwi SMEs.

What’s the difference between a micro business and a small business?

If you’re wondering what the difference between a micro business and a small business is, it’s easiest to think of micro businesses as a subset of small businesses.

According to the Ministry of Business, Innovation and Employment (MBIE), a small business consists of fewer than 20 employees. In financial terms, Inland Revenue defines a small business as a company with an annual GST turnover of $1 million -$30 million.

Micro businesses fall under the same category as these businesses. They’re just the smallest of the small. The MBIE defines a micro business as having 5 or less employees, including sole proprietorships that are run by a single person with no employees.

How is a micro business different to a side hustle?

A side hustle is a business venture that a person performs outside of the hours of their permanent job. Side hustles are hugely popular because they allow people to monetise their passions and supplement their regular income. On the other hand, running a micro business is likely to a person’s primary form of employment.

If a side hustle proves to be profitable enough, there’s always the possibility that it can replace a person’s day job completely. The success of countless Kiwi side hustles has helped drive the growth of the micro business economy in recent years.

Examples of micro businesses

You’re likely to encounter a range of micro businesses just by browsing the internet or going for a walk on your local high street. Some of the most common micro business types include:

  • Freelance services: Freelance micro businesses offer a range of services and are normally paid for a short-term contract or on a per-project basis. This normally involves providing a specialist skillset, such as graphic design or web development. Micro businesses also provide freelance consultancy services, such as giving clients advice on their social media marketing strategies.

  • Ecommerce stores: Online retail stores can be operated with minimal staff and overheads, making them a perfect fit for micro business owners. Micro businesses in the ecommerce space sell everything from vintage clothing and handmade jewelry, to antiques and home decor. By selling online, micro retailers are able to tap into a global market for their products.

  • Independently owned small retailers: There’s a good chance that many of the restaurants, coffee shops and retail stores in your neighborhood qualify as micro businesses. In decades past, consumers often favoured the bigger brands they knew and trusted. These days, many people prefer buying from independent retailers who put their own unique twist on things. Shopping with independent stores is also viewed as more ethical and customers are voting with their wallets.

  • Private practices: Qualified professionals such as doctors, dentists, accountants and lawyers will often operate private practices that are small enough to be classified as micro businesses. Much like freelancers, these micro businesses revolve around a highly trained professional offering a specialist skillset and service.

The rise of micro businesses

The lockdowns created the perfect conditions for the growth of the micro business economy. Millions of workers were either furloughed or laid off and searching for new ways to earn money. This led to a spike in micro businesses and side hustles being established by ‘necessity entrepreneurs’.

According to a survey by freelance services marketplace Fiverr, 58% of the platform’s users set up their businesses during the 2020 and 2021 lockdowns.

The pandemic also led to a stronger consumer sentiment toward shopping locally, with Forbes reporting that 59% of shoppers switched to buying from small businesses in their community. This gave local micro businesses the best possible chance to survive and thrive.

The advantages of micro businesses

Because micro businesses require less initial investment, they’re often a good option for people without much money to use as start-up capital. This means owners can test out their business ideas without taking on heavy financial risks.

Micro businesses also tend to be more agile than larger companies. Because they’re small, they’re light on their feet. With simplified operational structures and decision-making processes, a micro business can quickly make tweaks to its products or services. For example, a small coffee shop can introduce a new latte flavor at a moment’s notice. On the other hand, a coffee shop chain might have to undergo a process of research to test for customer demand before making any changes.

The challenges of being a micro business owner

Starting a small business and turning a personal passion into something bigger is a dream for many Kiwis. Being your own boss and building something from the ground up can be incredibly rewarding, but it’s not always smooth sailing. Being a micro business owner comes with some big challenges:

Raising start-up capital: Even though micro business start-up costs are relatively low, getting a company up and running still requires at least a basic level of financing. Traditional lenders might be reluctant to approve loans in response to a micro business plan, meaning entrepreneurs often have to save their own capital or use personal loans and credit facilities.

Budgeting with limited cash flow: Because micro businesses have less cash flow, something as simple as paying employee wages or store rent can prove difficult, particularly if the business has had a slow month. Every business needs to budget, but it’s especially important in a smaller business where every cent counts.

Getting products to market: Reduced working capital can also mean the process of getting new products to market is a huge challenge. Once a product has been launched, marketing it to potential customers is also costly. Many micro businesses rely on social media marketing and word of mouth to raise brand awareness and stimulate demand.

The aim of every micro business is to grow. If you suddenly find your micro business isn’t so micro, you may need help with employee contracts, wages and pay, and navigating employment law.

At Employsure, we support over 6,000 Kiwi companies with workplace health & safety and employment relations. Call our FREE Advice Line today on 0800 365 517 to get all the help you need to build a better business.

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