Small Talk

Access to capital solves about 75 percent of the problems faced by microentrepreneurs, says Dan Horvath, president of Community Equity Investments Inc., a microlending and assistance organization in Pensacola, Florida. The other 25 percent is, essentially, ignorance. That's why organizations like Horvath's offer training in business skills, such as marketing and business planning, and technical assistance in bookkeeping and accounting.

Microborrowers are often required to attend training classes as a condition of receiving a loan. Classes may be offered through a microlending organization or through a local Small Business Development Center or community college. They typically consist of a few months' worth of twice-weekly sessions and wind up with the microentrepreneur receiving a foundational understanding of bookkeeping, taxes, marketing and other skills. One central goal is the creation of a business plan to guide the firm's operation and to present to potential lenders. "We put the reality back into the process," says Peten. "We let them know it's not about being the next Bill Gates. All they have to do is start a business."

Microentrepreneurs often clear up some critical misconceptions during the training process. For instance, JJ&G Electric's founders, after getting started with no more financing than some personal savings and trade credit at a local electrical supply house, had expected to obtain bank financing simply by showing a banker a contract for a project they had signed. "I found out from BiGAUSTIN that wasn't true," says Jim Thompson. "There were several things we thought were true that weren't."

Fast Forward
Many microbusinesses are small by the owner's choice and are intended to remain that way. "We do not plan on expanding," says Adam Makela, owner of Parkside Elder Care, a five-bed home for the elderly in Plainview, Minnesota, that employs only himself and his wife. "Bigger is not better in this business, and it's important for us to feel good about the services we provide." Makela plans to keep running the business as it is for another 15 to 30 years and invest profits in real estate to provide for a secure retirement.

But not all microbusinesses stay small. The Thompsons today employ 20 people. Some microbusinesses grow even larger. One of Horvath's clients, a metal stamping firm, started with a $25,000 loan and three employees and today has 40 employees and sales of $2.5 million.

And in some cases, breakthrough microbusinesses exceed their owners' expectations by a wide margin. One of Peten's clients began a postal services retail operation after being laid off. Though his only intention was to replace lost income, before long, he was entertaining buyout offers from a national postal franchise. Another started with a $10,000 loan and a dream of building a profitable business he could sell to become financially independent. Four years later, he sold his company to a multinational conglomerate for a sizable sum.

One blessing of microenterprise is that it gives people a taste for entrepreneurship; many like the life so much, they go on to run a string of small but successful enterprises. Makela began his first elder-care center in Grand Rapids, Minnesota, and operated it for five years. Then he and his wife decided business ownership had lost its luster and sold the center. But after only a year or so, they found they missed the flexibility and independence of running their own show and found an existing center they could take over.

"This type of business is certainly not for everyone," says Makela. "We both work almost every day for at least part of the day. But, at the same time, we have a lot more time and money for our hobbies, recreation and our [children] than most people do." Those attractions are what keep microbusiness blooming despite the obstacles.

And microentrepreneurs say the view from the other side of those obstacles makes getting there well worth the trouble. "If you believe you have the talent to make a difference in whatever business you choose to pursue, you should go for it and not be fearful of the outcome," says Nicholas. "A lot of people have great talent and vision, but they're so fearful of failure that they don't step out and try. But the worst that can happen is, you try again."

Mark Henricks writes about business and technology for leading publications and is the author of Not Just a Living.

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This article was originally published in the October 2003 print edition of Entrepreneur's StartUps with the headline: Small Talk.