Global Themes

On Globalization & Venture Capital

On micro-entrepreneurs and micro-enterprises…

Fellow blogger Swaroop recently wrote a post on a dosa seller in Bengaluru that had me thinking.

Swaroop’s dosa-seller is someone whom I would call a micro-entrepreneur. A micro-entrepreneur is usually involved in an activity that manages to support his/her family’s basic needs.

A good micro-enterprise will generate profits that would be larger than most average jobs.

Needless to say, these profits are more “riskier” than a regular monthly income (salary) – especially if your regular monthly income comes from the government.

So who exactly is a micro-entrepreneur and what qualifies as a micro-enterprise?

Before I attempt an answer to this question, an important caveat: I am talking about India, not USA.

Another caveat…Not everyone who we think is a “micro-entrepreneur” may be so out of choice…Some of them may be forced entrepreneurs – forced to eke out a living doing what they are doing, either because they could not find a job they liked OR because what they are doing seemed to be the most natural thing to do (e.g. managing your parents’ micro-enterprise).

Note that micro-enterprises typically lack scalability (that elusive trait which VCs seek) and may not be particularly “innovative”. Having said that, their contribution cannot be dismissed. At the very least they provide an alternative to unemployment (and the consequent frustration and disillusionment that accompanies it); At best, they have the capacity to transform a family’s fortunes (think of all the famous “halwais” who started small…)

Back to the main point: who exactly is a micro-entrepreneur and what qualifies as a micro-enterprise?

Here is my (proposed) definition:

A micro-entrepreneur is anyone who manages a micro-enterprise.

A micro-enterprise is any business that:

  • has start-up costs of less than Rs 50,000/-
  • employs less than 5 people (typically in a single location)
  • has annual revenues of less than Rs 12 Lakhs (or monthly revenues of less than Rs 1 Lakh)

…and has uneven cash-flow, problems in employee retention and suffers from bureaucratic burdens (but these are hardly unique to micro-enterprises!)

What do you think? Comments/ thoughts very welcome.

Next post in the series: Why this sudden interest in micro-entrepreneurs?

Related Post: A nation of shopkeepers?…or entrepreneurs?

July 27th, 2009 Posted by | Entrepreneurship, Miscellaneous | 2 comments