Virtual Micro-Business?

Can your micro-business become a virtual corporation? The virtual business model may make sense for many micro-businesses.

A micro-business has a core competency, limited finances, and operates as a bare-bones organization where a few people wear many hats. There are few resources available for building up inventory, developing new markets, and expanding production in case of increasing demand.

Forging temporary alliances with suppliers, distributors, and complementary no-fat operations enables a micro-business to offer products and services that it would not otherwise be able to afford. This flexible working alliance is based on trust as there is usually no formal agreement.

Virtual corporations have been around for many years. They have been analyzed in academia and praised by business organizations as the organizational model that could propel American business into the next century.

If there has been handwringing and angst, it has been because virtual corporations have the promise of bringing extreme changes to industry as we knew it.

On the other hand, micro-businesses are proliferating because a changing business climate has already ended long-term employment as it once existed. The sad fact is, that traditional corporations, like dinosaurs, are already in the decline.

Employment security is an anachronistic concept. We can be terminated at will for cause, or no cause. You can hope that your employer, Titanic, Inc., will make it safely through the year, closing your eyes to the lack of common sense in the top echelon. or you can bite the bullet and go into business for yourself.

If you choose to row your own boat, you are in for an interesting ride. Financing for most micro-businesses is done with credit cards and equity loans on homes. As a micro-business, your business plan is usually so far out of the box that a banker, and your best friends, will go cross-eyed when you explain how you are going to make money. Save your breath and use your credit cards wisely. That is the way most micro-busnesses make it.

It also forces you to forego long development programs. As a micro-business, you must do the following to survive:

Think up a product or service based on your observation of what people need and want and will pay for and produce it very quickly. Get it into people’s hands, collect the money and repeat the cycle as quickly as possible.

If you don’t have what you need, you must network with your suppliers and your resellers and everyone else you know. You must find equipment to borrow or rent, people you can subcontract work out to, and space to work in or store things in. You have to be creative to succeed.

I found an article last night about a micro-business soup manufacturer who has negotiated the use of restaurant kitchens during their off-hours to produce his specialty soups which he prepares and delivers daily. (I will post the link when I find it again.)

We do not work in a vacuum. The strength of a small company lies in its ability to develop close relationships with customers and suppliers. It is crucial to expand this networking effort to find and develop resources that an be tapped when necessary.

If there is equipment or help that you need only occasionally, it is better to arrange some sort of collaborative effort to use it as needed rather than have it sitting around unused. In a micro-business, everything has to pull its weight on a 24×7 basis, if possible.

Farming out work to other companies may not be optimum, but it lets you meet your commitments and provides a safety net that benefits both companies. A virtual corporation can leverage the power of aligned organizations to produce results that could not be achieved otherwise.

Sounds like a no-brainer for the self-employed entrepreneur. It has its risks, but certainly makes the game more interesting for all involved.

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0 Responses to Virtual Micro-Business?

  1. Myke Myers says:

    I’m a self-employed entrepreneur with a micro-business. Three years ago I incorporated (S Corp) on the advice of a CPA. Now the paperwork burden of federal, state, and local taxes, fees, and registrations is a real pain. Is there any consensus about which organizational structure is best for micro-businesses?

  2. Lloyd says:

    In my experience, choosing the organizational structure can be a complicated decision which takes into consideration your exposure to liability, your income level, your balance sheet, your tax bracket, the number of employees you have, as well as, personal considerations. In my case, incorporation was an important adjunct to my solo status. Before I incorporated, I actually had larger corporations decline my services because I was a sole proprietor. The corporate status gave me a new level of legitimacy, and made me less of a risk factor.

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