Just what is a SME?

If you ask different people the same question you can get different answers.  It's the same with the definition of a small and medium-sized enterprise (SME). 

Ask the European Commission and you will get a definition based on number of employees, annual turnover, annual balance sheet total and level of autonomy. 

Ask the UK Government's Small Business Service and it defines a small business as a business with fewer than 50 employees and a medium size businesses as those with 50 to 249 employees. 

In the US the United States Small Business Administration takes into account industry type and recognises a firm of a given size could be small in relation to one sector, but large in another.  For example, a small manufacturing business is one with less than 500 employees and a small wholesale trade business is one with less than 100 employees.

All the above the businesses may be a sole proprietorship, partnership, corporation, or any other legal form.  Significantly, in the UK at least, the majority of businesses are not incorporated companies, but are owned and managed by self-employed people either on their own or in partnership.

Overall, a SME tends to be an independent, managed by its owner or part-owners and has a small market share.

Philip Woodgate

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Comments

[David Terrar]

It's important to define the SME in the way you have, and it highlight that there isn't a definitive formula - but I thought you might be interested to hear that The National Campaign, the goverrment's initiative to help OMBs, related to their Small Business Service that you reference, even manages to come up with different words for SME, which they describe as “Small and medium sized entities"!

The definitions on their website (http://www.thenationalcampaign.co.uk/) add the category of micro-business, and match up with the figures you quoted. They are as follows:

“Micro” businesses are defined as having 0-9 employees,
“Small” businesses as having 10-49 employees,
“Medium” sized businesses as having 40-249 employees,
and “Large” businesses as having 250 or more employees.

All those businesses with less than 250 employees are collectively defined as SMEs (“Small and medium sized entities”).

There are 7,000 large businesses and 3.8 million SMEs in the UK.

Of those SMEs, 3.6 million are micro businesses, 167,000 are small and 27,000 are medium sized.

However, although I wish they hadn't tried to confuse the SME acronym, the rest of the site is full of good information for the OMB.

[David Terrar]

I got one part of my preious post wrong, and it highlights how you need to take care on making assumnptions. I'd assumed the National Campaign was government sponsored from the way the website was worded, but it isn't. It's a not-for-profit initiative, but sponsored by various commercial enterprises including the AVN. Some useful information there though.

[Philip Woodgate]

David, thanks for the extra information it certainly confirms that there is neither a definitive formula or description. There will never be a fixed formula, but I'm sure every reader here actually knows what an SME is regardless of the above definitions.

[Rustie]

I think your site is very good and complete, but the information you have here

[Philip Woodgate]

Thanks Rustie, that's very kind of you. It looks like we are missing the end of your comment though.

[Asia Business Advisor]

Those 3.6 million micro businesses alone in the UK, are the fastest growing market for services globally. Typically shoestring and virtual, they can operate globally with basically no fixed costs, and are reaping tremendous profits from small amounts of revenue. Based on the sheer volume of this Micro-section, I would expand and divide it to several sub-categories. Any thoughts for sub-classification?

[Philip Woodgate]

The issue with the SME categorisation is that in many ways it is too broad. A micro business has many different challenges to a medium-sized business. Therefore it is a good idea from an online knowledge guide perspective to split out by sized and focus on the different groups.

All the groups including micro business can themselves be split out into separate classifications. Typically by industry type.