Under-reporting of Small Businesses

Solopreneurship is what most people think of as small business. A solopreneur is a one owner business. There is an unstated expectation that the owner is also the operator or worker of the of the single person firm. The firm may be a sole proprietor or a corporation. There is the mompreneur or working mother entrepreneur and the owner-operator business which seems inexplicably linked with truck driving. Another common perception of small business is the mom and pop shop.

Most people also agree that a characteristic of small business is the focus on local business and services. The local supplier includes local bakeries that provide cookies and muffins to local cafes and seamstress and tailoring services for a local dry cleaner or clothing establishment. Specialty small businesses aggregate talent as with repair services for home and car owners. Family businesses and coops don't raise any eyebrows when they are referenced as small business. Even the newer businesses that are associated with the latest communication technologies and their current social practices such as SEO consultants, web designers, and app developers are recognized as small business.

The average "Joe" does not consider a business with 150 people operating in 20 geographic areas with millions of dollars in revenue as a small business. In this scenario, the small business category is deriving its status from government tax and licensing organizations. The small business label acceptable for many US small businesses with 150 employees and millions of dollars in revenue. But this is not useful for small business b2b vendors who need to differentiate between the government's definition and the reality that holds the key to understanding the demand for products and services aimed at managing a small business.

Solopreneur businesses include doctor, dentist, chiropractor, martial art instructor, masseuse, tutor, health technician, accountant, lawyer, tax consultant and preparer, immigration lawyer, programmer, dog walker, landscaper, handyman, business coach, financial planner, etc. Each of these businesses require explaining hours, services, booking appointments, training opportunities or instructions on how to, providing options to customer's orders, rudimentry invoicing, periodic updates and reminders on business offerings, and telling the business "story". Lost in the fray is the freelancer solopreneur who has a more prevalent role in our information hungry society. But the freelancer is a hidden participant. There are far more small businesses then recorded because of the under reporting of freelancers who hold a business card and are 1099ed, paid under the table, or exist outside the country and become uncounted as a small business.

Recognizing the microbusiness entity, while somewhat vague, is also very helpful for defining another small business market. For the sake of this discussion, we will define a microbusiness as a firm with less than 20 employees. Keep in mind that microbusinesses with 9 or fewer employees constitute 95% of reported US businesses. Even if this figure represented a significantly smaller piece of the market, it would be an important distinction to understand that current government reporting is inaccurate and requires bifurcation of the data.

Microbusinesses can be technical such as a bioresearch firm or small manufacturing company (furniture, electronics or toy assembly) or manage disparate geographies, people, or resources as with a distribution company. Often these small businesses use the Internet to reach global customers or tie local customers and vendors with a disparate network using e-stores, carts that handle International currencies, project management reporting and Customer Resource Management (CRM) tools.

Another type of small business market that are unreported and declared non-business is the work group. This work group is not even considered to be a business for despite their purchase power of entrepreneurial products and services; we will refernce these as Very Small Business Units (VSBUs).I VSBUs are either pre-form or non-forms and are birthed as self-managed self-forming virtual cross-functional work groups or teams). VSBUs are sources of innovation and are often discussed in terms of the intrapreneurial processes. Some VSBUs are incubated by a parent company or companies and some spin-off into divisions of a larger businesses and even others as independent enterprises, often beginning as humble workgroups. Some VSBUs are purchased small businesses and integrated into a larger company.

Pre-forms are entrepreneurial hopefuls that entertain a host of business opportunities without declaring a business with the government. These hopefuls buy websites, pay for SEO consulting, retain lawyers, buy franchises, purchase inventory, sign contracts, and never execute. Failure rates of business do not begin to consider pre-forms yet these solopreneur or small partnerships certainly have a significant aggregate outlay of capital which is difficult if not impossible to estimate.

Non-forms include innovative work groups that operate within large organizations, or operate within Multi-level Marketing (MLM) organizations and social “meet-up” groups, engaging across normal business lines to self-form and self-govern often symbiotically. Non-forms buy coaching services and products such as sales training videos.

Government reporting does not identify most freelancers, newer online microbusiness phenomena, and VSBUs. For this reason, small businesses are highly underreported by US government agencies and underserved by US and global providers of small business products and services.