SME Blog

M class (continued…)

In a recent SME Blog post I stated that there are 26,000 medium-sized companies (or M’s) in the UK. Jyoti Banerjee in his recent post asks is this right?  I’ve taken my answer from UK government statistics.  Jyoti takes his from using a broader approach and his figure comes to 150,000. 

Jyoti and I use different definitions for an M and not surprisingly come up with different answers.   Malcolm McLelland contacted me from the US.  He believes that definitions are important.  He comments:

To me one of the most important outcomes of getting our business taxonomies right is that we never collect data until we define the business units for which we're collecting data. And without such data, we don't really know much of anything about certain classes of businesses (as you all suggest!). This means government policy and things like business credit policies might be less than economically efficient.

In the states we have data on revenues, wages, employee counts, and firm counts by "standard industrial code" (now "NAICS" code) by a finely graded series of *firm employee count sizes*; running from 1 employee to 1-4, 5-9, 10-19, 20-99, 100-499, and 500+. So in the states the only apparent problem is in the industrial coding of firms; i.e., how best to develop a taxonomy by economic characteristics such as production inputs, production functions, or production outputs.

His comment on the connection of government policy and data collected is particularly fascinating. Good management needs relevant, up to date information with which to make decisions and that must be the same for governments and policy making.

I recently met up with Paul Druckman (former Institute of Chartered Acountants in England & Wales president). Paul is clearly aware that there is a need for relevant data to seek to focus government attention on the challenges facing medium-sized businesses.  He and Jyoti are involved in the M Institute.  The M Institute is a new organisation, with the objective of being the trusted information source and support infrastructure for medium-sized businesses.

Why are M’s important?  This is one area I think both Jyoti and I agree.  M’s have superhero powers.  They pack a powerful economic punch and are invisible.  Unfortunately, being invisible is one superhero power M’s could do without.

Technorati Tags: small business medium sized business sme smb blogging accountants  sme-blog

Philip Woodgate

Getting paid

Forget your invoice terms, on average an SME will pay your bills in 60 days.  A large company is usually far worse, taking an average of 80 days to pay your bills.  If your invoice terms are 30 days that's 50 days extra credit.  Good for the large company cashflow, but terrible for yours.

Cashflow is the oxygen in which the small business breathes.  It's therefore vital that small businesses invest time in credit control.  Late payment and bad debts can and do kill otherwise good small businesses.

The source information comes from a survey of over 366,000 UK small businesses by Experian the credit reference agency.

Philip Woodgate

Technorati Tags: small business  medium sized business  sme  smb  blogging accountants

Small businesses are a big deal

Take a look at the UK's Small Business Service evidence report and you'll soon see why small businesses are a big deal. 

At the last measure (in 2002) businesses with less than 250 employees account for:

• over 99% of the UK’s 3.8 million businesses
• 56% of employment (12.6 million people)
• 52% of total UK business turnover (£1,100 billion)

That's a big percentage of the business market and it's a similar story in other countries.  It's easy to forget with large company promotions, branding and advertising, but SME's have a huge impact to the economy and our lives.

Philip Woodgate

Technorati Tags: small business  medium sized business  sme  smb  blogging accountants

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

Technorati Tags: small business  medium sized business  sme  smb  blogging accountants