31 October 2008

What is an SME

If you ask different people on a same question you might get different answers. Same goes with the definition of a small and medium-sized enterprise or SME.

Ask the European Commission and you will get a definition based on number of employees, annual turnover, annual balance sheet total and level of autonomy.

Ask the UK Government's Small Business Service and it defines a small business as a business with fewer than 50 employees and a medium size businesses as those with 50 to 249 employees.

In the US, the United States Small Business Administration takes into account industry type and recognises a firm of a given size could be small in relation to one sector, but large in another. For example, a small manufacturing business is one with less than 500 employees and a small wholesale trade business is one with less than 100 employees.

However, to me, there is no clean cut definition of SMEs.
Overall, a SME tends to be an independent, managed by its owner or part-owners and has a small market share.

Businesses may be a sole proprietorship, partnership, corporation, or any other legal form. The majority of these type of businesses are not incorporated companies, but are owned and managed by self-employed people either on their own or in partnership.

In Malaysia, the definition of SME is based on two criterias, namely the number of people the business is employing, or revenue it makes.

In short, a business can be called an SME if it meets either one of the two criterias. Within the SME itself, there are also terms that are used to describe if an SME is a Micro Enterprise, Small Enterprise or Medium Enterprise, and again this depends on the criterias.

The unclear definition posed confusion especially when an entrepreneur is looking to get assistance from the SME related bodies and financial institutions.

However in 2005, the National SME Development Council announced the official and standardised definition of SME. The definition is used across various sectors, and adopted by the government ministries, agencies and financial institutions which are involved in the development program of the SMEs.

1 comment:

Louis said...

It's great to know what SME is. Thanks a lot for sharing your insights about it.

business consultant