<p>Contrary to the widely held belief that informal small enterprises underperform and lack growth potential, emerging research suggests that some can be productive and contribute to economic development. The key challenge is identifying these high-potential enterprises and understanding the factors that drive their performance to inform targeted policy interventions. Drawing on firm-level data from 305 informal microenterprises in Malawi’s baobab sector, we employed structural equation modelling to examine the influence of entrepreneurial motivation (necessity versus opportunity) and business practices on firm performance. The results reveal that opportunity motivation has a significant positive effect on firm performance, measured by annual net profit, and that this effect is partly explained by the adoption of business practices such as marketing, financial planning, costing, and record-keeping. In contrast, necessity motivation exhibits no significant relationship with firm performance. These findings contribute to the identification of informal microenterprises with growth potential, offering insights for entrepreneurs and policymakers on factors that enhance performance while advancing literature on entrepreneurial motivation and firm success in the informal sector.</p>