A small to mid-sized enterprise (SME) refers to a type of business that has profits, assets, or the number of employees who do not exceed a certain amount. The criteria used to determine an SME are different among countries and, sometimes, within industries.
Here are a few illustrations of what SMEs are, the roles they play within the economic system, and the way in which different nations differ on their definitions.
What Are SMEs?
There isn’t a defined term for SME that is universally applicable. Every country is able to define its own definition of SME, and it can also choose to define specific limitations for certain sectors. For instance that within the European Union (EU), an enterprise with less than 250 employees is deemed an SME In the United States, an SME can have up to 1.200 people. 1 2
But, there is an agreed-upon goal in the definition of an SME, in that it is designed to distinguish small – and medium-sized enterprises from large corporations.
Small- and mid-sized businesses comprise the majority of companies in the majority of countries. As per the Small Business Administration (SBA), 99.9% of U.S. companies in 2018 were small companies. 3 The SBA also states that small-sized businesses contributed to around 44 percent of U.S. GDP in 2014 (the last year for which information was accessible). 4 While this is an increase in the share of GDP in the past decade it is are still an essential factor in economic expansion, innovation, and diversification.
SMEs are usually provided with incentives like help to obtain finance as well as favorable tax rates however the type of assistance and how much SMEs receive assistance varies depending on the nation.
SMEs are able to be found in any sector, however, due to their nature, certain firms are more likely to be SMEs in comparison to other. For example, legal offices as well as trucking companies as well as personal care services restaurants, dentists, and bars typically have very only a few employees.
How SMEs Work
To understand better the way SMEs function, it might be best to look at their operations on a basis of the country to country.
SMEs in the U.S.
The SBA keeps a list of small businesses size requirements. These standards establish the upper limit for a company to be eligible to receive favorable government contracts as well as targeted funding. Based on the type of business and the business, these limits can be tied to revenues, or to the number of employees.
The limits could further divide an industry according to the product. For instance, manufacturing companies in wet milling is considered to be a smaller company if it has less than 1250 employees, whereas an enterprise manufacturing small size that involves rice milling cannot employ more than 500 people. 1 The limitations for all forms of agriculture, on the contrary, have been set to a cap of $1 million, rather than based on the number of employees. 5
SMEs in Canada
Innovation, Science and Economic Development Canada (ISED) employs”SME” to refer to businesses with less than 500 employees. SME to describe firms with less than 500 people. 6 ISED defines a small-sized business as having less than 100 workers. A micro-business is one that has less than 5 employees.
Similar to Canada, as in the U.S., the vast majority of Canadian companies are SMEs. In December 2017, (the most recent information is available), 99.8% of Canadian businesses had less than 500 people. 7
SMEs in the European Union
In the EU an enterprise that has a count of less than 250 is considered a small-medium enterprise. 2 A business that has a staff of fewer than 50 employees is classified as small and a company with less than 10 is considered to be a micro-business. This European system also has a EUR43 million threshold for the SME’s balance account total (as opposed to restricting the total revenue).
SMEs in China
Like in America, in the U.S., the definition of an SME in China is different according to business. 8 The upper limit for employees in an SME could be as low as 200 or as high as 1,000.