A label often handles:
- recording/mixing/mastering
- promotion
- distribution
- clout (being that they already have ‘known’ artists for you to coat tail or bolster name recognition)
- touring/booking
The problem with really small labels is that they aren’t going to cough up $20k for a studio, their ‘promotion’ budget tends to be minimal (FB posts, website, etc), they’ll put your shit on bandcamp and then link it on their site, and they likely don’t have contacts or manpower to book you a legit tour, and they probably won’t pay for it if they do. Often, the best you can hope for is that there’s some similar artists for you to network with who will promote you. But they’re the labels that will take almost anyone, because there’s minimal risk or cost involved.
We live in an age where people just click on things and listen to it, and where 90% of the nuts-n-bolts stuff that labels traditionally handled can be done by the artist, at least on a small scale. Nobody needs to have money fronted for CD pressings anymore, or distro deals with Hastings and Camalot to get front row parking in the store. So much of what labels used to do are now outmodded concepts, and many parts they do handle, you can just do yourself.
The problem is that a ‘real’ label (decent sized indie labels) are businesses, and they’re in the business of moving music and taking a cut. They look long and hard at demos, and they weigh the investment risks. That sounds cut throat, but it’s exactly what you want - someone that knows a lot more than you about the boring and difficult parts of music promotion. That’s the tier to punch - you’re not getting on a big label without already having a name, and the small ones will charge you to do what you can already do (probably better).
tldr - Well established indie labels are the way to go.