Small and medium-sized enterprises

Small and medium enterprises (also SMEs, small and medium businesses, SMBs, and variations thereof) are companies whose headcount or turnover falls below certain limits.

International usage

The abbreviation "SME" occurs commonly in the European Union and in international organizations, such as the World Bank, the United Nations, and the WTO. The term "small and medium businesses" or "SMBs" is predominantly used in the USA.

EU Member States traditionally have their own definition of what constitutes an SME, for example the traditional definition in Germany had a limit of 255 employees, while, for example, in Belgium it could have been 100. But now the EU has started to standardize the concept. Its current definition categorizes companies with fewer than 10 employees as "micro", those with fewer than 50 employees as "small", and those with fewer than 250 as "medium". In the United States, by contrast, the Small Business Administration sets small business criteria based on industry, ownership structure, revenue, and number of employees, which in some circumstances may be as high as 1500 though is typically capped at 500.

Both the US and the EU generally use the same threshold of fewer than 10 employees for small offices (SOHO). In July 2011, the European Commission said that it would open a consultation on the definition of SMEs in 2012. In Europe, currently there are three broad parameters which define SMEs — micro-entities are companies with up to 10 employees; small companies employ up to 50 workers, whilst medium-sized enterprises contain up to 250 employees.

In most economies, smaller enterprises are much greater in number. In many sectors, SMEs are also responsible for driving innovation and competition.

In India,

i. A micro enterprise is an enterprise where investment in plant and machinery [original cost excluding land and building and the items specified by the Ministry of Small Scale Industries vide its notification No. S.O. 1722(E) dated October 5, 2006 does not exceed Rs. 25 lakh;

ii. A small enterprise is an enterprise where the investment in plant and machinery [original cost excluding land and building and the items specified by the Ministry of Small Scale Industries vide its notification No. S.O. 1722(E) dated October 5, 2006] is more than Rs.25 lakh but does not exceed Rs.5 crore; and

iii. A medium enterprise is an enterprise where the investment in plant and machinery (original cost excluding land and building and the items specified by the Ministry of Small Scale Industries vide its notification No. S.O. 1722(E) dated October 5, 2006) is more than Rs.5 crore but does not exceed Rs.10 crore.

The definition of MSMEs under the services sector is as below:

     i. A micro enterprise is an enterprise where the investment in equipment does not exceed Rs.10 lakh;

     ii. A small enterprise is an enterprise where the investment in equipment is more than Rs.10 lakh but does not exceed Rs.2 crore; and

     iii. A medium enterprise is an enterprise where the investment in equipment is more than Rs.2 crore but does not exceed Rs.5 crore.

The Indian Micro and Small Enterprises (MSEs) sector plays a pivotal role in the overall industrial economy of the country. It is estimated that in terms of value, the sector accounts for about 39% of the manufacturing output and around 33% of the total export of the country. Further, in recent years the MSE sector has consistently registered higher growth rate compared to the overall industrial sector. The major advantage of the sector is its employment potential at low capital cost. As per available statistics, this sector employs an estimated 31 million persons spread over 12.8 million enterprises and the labour intensity in the MSE sector is estimated to be almost 4 times higher than the large enterprises.

In South Africa the term is SMME for Small, Medium and Micro Enterprises. Elsewhere in Africa, MSME is used for Micro, Small and Medium Enterprises.

Industry Canada defines a small business as one that has fewer than 100 employees (if the business is a goods-producing business) or fewer than 50 employees (if the business is a service-based business), and a medium-sized business as fewer than 500. In New Zealand a SME has to be 19 people or fewer.

See also

• Small business
• Small and medium enterprises in Mexico