Small and medium sized enterprises (SMEs) play a significant role in the global economy. They are typically entrepreneurial in nature, and contribute to economic growth by way of employment, taxation and capital investment. But how are SMEs measured? In fact, many countries have varying definitions of what constitutes a small and medium sized enterprise. It is not uncommon for a single firm to operate across a wide range of industries. Some of the more common categories include retail, manufacturing, services, and banking and finance.
The European Union has a formal definition of SME. According to the commission, an SME is an organization with fewer than 250 employees and with a turnover of less than EUR50 million. In the United States, the small business administration (SBA) defines a small business as one with fewer than 500 employees.
A micro-business on the other hand is a company with less than 10 employees. There are several other definitions for the small business, such as a small home office, small retail operation, and so on. Interestingly, the Small Business Administration estimates that 44% of the American workforce is employed by a small company. Regardless of what a small company consists of, it is the smaller firms that have a higher GDP per capita than their larger counterparts. This statistic illustrates the important role that small companies play in the U.S., and in other economies around the world. Despite the numerous tax breaks and other incentives offered by government agencies, the smallest businesses are the hardest to keep afloat.
However, to determine the best way to measure the size of a small or medium sized business is to consider more than just the number of employees. Other factors include the number of assets, total revenue and the industry where the firm operates. While these parameters can be used to establish the size of a specific company, the aforementioned criteria are not always met. For example, a real estate developer in China may be a small business by U.S. standards, but may be considered a large enterprise by the Chinese government.
Lastly, the UK government has been busy in recent years, launching a slew of initiatives designed to boost the fortunes of smaller companies. One of the more notable ones is a plan to support more than a million SMEs by 2020. Although these schemes are a good start, the most effective way to make the most of a large pool of talent is to foster the right conditions, which includes giving the SMEs the tools to succeed.