SMEs collectively represent around 99% of all businesses. But what exactly are they?
Here at Mail Boxes Etc., we often use the term “SMEs” to describe our franchisees and the companies we work with. But what exactly does that mean? SMEs are Small and Medium-sized Enterprises, and they are the backbone of today’s global economy. These businesses play a crucial role in driving innovation, local economies, and entrepreneurship. SMEs are the heart of commerce—and the reason we do what we do at MBE.
Understanding SMEs
Businesses are categorized as SMEs when their revenues, assets, or employee numbers are below a certain threshold. A general rule of thumb that is used to define them is an independent firm with fewer than 50 employees. Although this value can vary from country to country, the upper range for most companies sits at around 250. In terms of revenue, an SME in Europe is considered as one with an annual turnover that is no more 50 million euro or a total annual balance sheet that is fewer than 43 million euro. If a company exceeds or falls short of these thresholds in two consecutive business years, it can acquire or lose SME status.
Importance of SMEs
While most larger companies focus on improving old products to increase production and maximize profits, SMEs prioritize innovation to create new products or services. Hence, they are more capable of quickly adapting to unexpected market changes and meeting niche demands. These innovations contribute to a stronger and healthier economy by stimulating competition in product design, price, and efficiency. Without these growing businesses, large corporations would monopolize the economy, limiting diversity and innovation. Their priorities lay in innovation, adaptability, and building closer relationships with their customers. Thanks to these qualities, many of the successful technological processes and innovations we see and use today are attributed to SMEs.
Challenges SMEs Face
Despite the significant role that small and medium-sized businesses play in the economy, they don’t go without facing challenges. One of the most notable hurdles that SMEs have to overcome are their limited access to financial resources. Without sufficient funding, it’s difficult for smaller companies to invest in crucial areas including marketing, product R&D, and employee salaries. This is one of the main reasons why SMEs in Europe are currently in stagnation, and it was highlighted in the latest EU SME Barometer, prompting a new approach towards sustainable finance for SMEs.
Another disadvantage faced by emerging enterprises is the challenges associated with building a strong and stable team. As the business grows, it becomes increasingly difficult for a business owner to handle all functions independently. Whether it’s handling sales, advertising, or customer service, SMEs often rely on a versatile team of skilled employees to ensure smooth operations. However, when operating on a tight budget, SMEs often struggle to offer competitive salaries, making it difficult to attract top talent.
How SMEs Support MBE
To overcome these challenges, SMEs rely on partnerships and networks that guide them every step of the way, offering hands-on support and practical solutions. This is why we, at MBE, choose to work with SMEs, providing them with tailored solutions, quality services, and expert guidance to allow their businesses to succeed and connect with a global audience. By bundling a variety of different services together, MBE supports businesses financially, offering cost-effective solutions that streamline operations while reducing overall expenses. By joining MBE’s international network, local companies gain access to proven tools, technologies, and business models that can help them scale efficiently, enhance customer satisfaction, and build long-term success in an increasingly competitive market.
FAQ
What does SME stand for?
SME stands for Small and Medium-sized Enterprise. These are businesses that fall below certain thresholds in terms of employees, revenue, and assets.
What is an SME in business?
An SME in business refers to a small or medium-sized company that operates independently and meets specific size criteria. SMEs represent around 99% of all businesses globally and are the backbone of the economy, driving innovation, local commerce, and entrepreneurship.
What qualifies as an SME?
A business qualifies as an SME when it meets these criteria:
- Employees: Fewer than 250 employees (though some countries use 50 as the threshold)
- Annual revenue: No more than €50 million (in Europe)
- Balance sheet: Total annual balance sheet of less than €43 million (in Europe)
If a company exceeds or falls short of these thresholds for two consecutive business years, it can lose SME status.
Is my business considered an SME?
Your business is considered an SME if it has:
- Fewer than 250 employees (or fewer than 50 in some definitions)
- Annual turnover under €50 million
- Total assets under €43 million
These thresholds can vary by country, but most SME definitions fall within this range. Check your local business classification standards for exact criteria in your region.
What is the difference between an SME and a large company?
The main differences are:
SMEs:
- Fewer than 250 employees
- More agile and adaptable to market changes
- Focus on innovation and creating new products/services
- Build closer relationships with customers
- Face challenges accessing financial resources
Large Companies:
- More than 250 employees
- Focus on improving existing products to maximize profits
- Greater access to capital and resources
- Can dominate markets but may lack flexibility
- More established infrastructure and processes
SMEs prioritize innovation, adaptability, and customer relationships, while large corporations focus on scale, efficiency, and market dominance.
What does the acronym SME mean?
The acronym SME means Small and Medium-sized Enterprises (or Enterprise in singular form). It’s a universal business classification used to describe independent firms operating below certain employee, revenue, and asset thresholds.
How many employees does an SME have?
An SME typically has fewer than 250 employees. However, this can vary:
- General definition: Fewer than 50 employees
- Upper range: Up to 250 employees (most common in Europe)
- The exact number depends on your country’s classification system
What are the employee limits for SMEs?
Employee limits for SMEs vary by region, but the general framework is:
- Micro-enterprise: Fewer than 10 employees
- Small enterprise: 10-49 employees
- Medium enterprise: 50-249 employees
Once a business exceeds 250 employees for two consecutive years, it typically loses its SME status and is classified as a large enterprise.
References
https://www.bayfor.org/en/eu-funding/our-services/sme-advisory-services/definition-of-sme.html