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What is an SME?

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Discover what an SME is and how these companies are classified in Canada and other places around the world.

If you run a small to medium-sized business or SME, you may already be familiar with this term. 

You may have questions, however, about what exactly defines an SME, what makes a small business different from a medium-sized one, and what makes the latter different from a large-scale enterprise.

In this article, we’ll provide a clear definition of what the term SME stands for, what defines it, and what distinguishes the various types of businesses from one another. 

 

What is a small to medium enterprise?

An SME is a business that is generally characterized by having a smaller number of people it employs, yearly revenue it earns, or assets it owns, compared to its larger counterparties.

What defines an SME can differ depending on the location or country in which it operates.

Small and medium-sized businesses make up the majority of companies in almost every country, making them a vital component of a country’s economic development and financial stability. They also provide most of the citizens in a country with jobs.

 

What defines a small business?

Here you’ll see exactly what A small business needs to operate. The specific number of employees, the yearly revenue needed to generate, or the total assets owned.

Small businesses are defined differently by the country or continent in which they operate. 

For example:

  • In the United States, a small business is an establishment or company that has 500 employees or less. This standard is set by the Small Business Administration (SBA)
  • In Canada, small businesses are defined as companies with 100 employees or less. The specific qualifications for these are set by Statistics Canada under SME Research and Statistics
  • In Europe, a small business has less than 50 employees. The qualifications for these businesses in Europe are set by the European Commission

Furthermore, what qualifies as a small business can differ by industry or sector. For example, a small business in the USA typically has 500 employees or less. However, according to Investopedia, a U.S. manufacturing business can have up to 1,500 employees and still be considered a small enterprise.

Some examples of small businesses can include restaurants, bars, doctors’ offices, gyms, single-location stores, and pharmacies.

 

What defines a medium-sized business?

A medium-sized business is a type of business that has more employees and revenue than a small-sized business but less than a large-sized enterprise. 

Similar to their smaller counterparts, medium-sized enterprises differ depending on the country in which they operate. For example:

  • In the United States, medium businesses must employ more than 500 people but have fewer than 1,000 employees
  • Medium enterprises in Canada employ between 100 and 500 people
  • In Europe, a medium enterprise employs between 50 and 250 employees

Medium-sized businesses don’t play as large a role in the economy of most countries as small businesses. While the medium-sized business model employs more people per individual local, small businesses employ more people overall, and typically makeup around 99% of businesses; combined, micro, small, and medium businesses outnumber large businesses significantly.

An aerial view of an open concept office with women and men during a business meeting.

 

FAQs About SMEs & Larger Businesses

What is a micro-enterprise? 

A microenterprise or a micro business is an enterprise or business that operates with fewer than 10 people.

What defines a large business?

A large business is a business that employs over 1,000 people in the USA, 500 in Canada, and 250 employees in Europe.

What are the differences between a small business and a medium-sized business?

An SMB differs from a medium-sized business in the number of people it employs, the number of assets it owns, and the amount of revenue it earns.

Final Thoughts: Learn More About SMEs

There’s no doubt that small and medium-sized establishments play a vital role in our economy and culture. Yet, all too often, these enterprises are underserved and put on the back burner.

Cubeler is aiming to bridge this gap by giving small and medium-sized businesses access to financing, networking, advertising, and market data so that more businesses can compete with major corporations.

Visit our blog for more helpful SME information and resources or sign up for our newsletter to keep up on all the latest from Cubeler.

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