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What is an SME? Defining small business In The 21st century

We take a look at the dynamic and vibrant small business sector and ask what makes small businesses different.

 

The rise of the SME

According to figures there are larger numbers of small to medium enterprise type businesses now than in the past. And there are also indications that many young people today see themselves as future entrepreneurs.

In the 1980s the phrase ‘small is beautiful’ was ubiquitous in describing SMEs – especially during the boom years of the latter part of the decade.

But then for various possible reasons this seemed to give way to an era of bigger business being the ‘in thing’.

These days it’s all different – the business and economic ecosystems have changed beyond all recognition since those days.

And while there are still the mighty corporations like Apple and others, a lot of the time they rely on other types of business for certain things.

Just think of the app store – how many successful apps will have been developed by cottage (or garage) industry self-starters?

The amount of stories in the tech press about successful app developers would definitely suggest that many are self-employed, or perhaps even running a nano-business outside the hours of their 9 to 5.

Businessman Hand Write Virtual Blank Buttons

 

Defining SMEs

The current accepted definition of an SME within the UK purely relates to the number of employees the business has – which of course means that the cut-off point is slightly arbitrary.

Fewer than 250 people and you’re an SME, more than that and your business is included into another category.

So you’d imagine that many businesses must pass that magic number overnight without really even being aware of it. Or have someone leave and go from being a bigger business to a SME when a staff member leaves.

All of which makes some recent comment on SME classification all the more interesting.  The UK site Growth Business recently had an opinion piece on the above-mentioned ‘arbitrary’ nature of classification.

And they pointed out that there are micro-businesses out there whose needs vary vastly from that of a 250-strong workforce supported organisation.

Growth Business’s suggestion was that the bigger-end SMEs should be seen as growth enterprise while micro-businesses, many of whom would be unlikely to require things a bigger business might, such as big funding or apprenticeships.

One big difference between the smaller and more highly populated workforce end of the scale SME is the access to resources available for each.

The larger business is more likely to have a human resources person (or team) while in the smaller business that responsibility may belong to someone in the team while not actually being their principal role.

According to a recent PwC study which was published during the summer, the cost of sickness absence to UK industry is £29 billion a year, and with the difference in resources available to SMEs, the cost can be a burden.

Small business health insurance (click here for info specifically for SME).

 

 

Image courtesy of noomhh at FreeDigitalPhotos.net

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