What are Small and Mid-Sized Enterprises (SMEs)?

//What are Small and Mid-Sized Enterprises (SMEs)?
What are Small and Mid-Sized Enterprises (SMEs)? 2017-10-10T07:02:08+00:00

Definition: Small and Mid-Sized Enterprises (SMEs) are companies that have less than a specified number of employees, dollar value of assets, or level of revenues.

What Does SMEs Mean?

What is the definition of small and medium-sized enterprises?SMEs are companies that fit certain size thresholds. These thresholds are country or region dependent. For instance, the European Union defines medium-sized company as a business that has less than 250 employees and annual revenues of €50 million or less. They define small-size enterprises as companies with less than 50 employees and annual revenues of €10 million or less.

These thresholds are not the same for US companies, however. US companies with less than $10M in assets are typically considers small companies. Companies with less than $50M in assets are typically considered medium size companies.

Globally, SMEs are considered to be economic growth drivers. In developed countries, they are considered to be the engine of the economy and they account for the most number of registered companies. They employ more people than any other group and they contribute more to tax revenues to the government. In developing countries, SMEs are known to contribute as much as 70% to the nation’s GDP.

SMEs can also adapt to changing economic conditions because of their flexibility. They are able to withstand cyclical economic downturns because of their sizes. They also help with income distribution in the economy since most of their employees are average or middleclass income earners.

Two of the main problems these companies face is access to capital and credit facilities. Others lack adequate knowledge or technology to compete.

Let’s look at an example.

Example

Forbes published a list of SMEs in the United States making massive contributions to the economy. First on the list was a company called Ebt Electronics, a single location electronics retailer. Over the past year, they accrued almost $400 million in revenues.

Another company on the list was Afterburner, a consultancy firm in Atlanta, Georgia, with just 21 employees. Over the 2016 financial year, they made $9 million in revenues.

Summary Definition

Define Small and Mid-Sized Companies: SMEs means companies with revenue and employment numbers below a certain threshold.